2021 (12) TMI 624 - AT - Service Tax

Levy of penalty u/s 78 of the Finance Act, 1994 - appellant had collected ocean freight charges from their clients at a marked up value - violation of Section 67 of the Finance Act, 1994 read with Rule 5 of the Valuation Rules, 2006 - extended period of limitation - HELD THAT - It is found from the documents placed on record that apart from merits, the appellant has also questioned the penalty, even on the ground of extended period of limitation. Further, it is also noticed that for the earlier period covering 2003-04 to 2007-08, a similar Show Cause Notice dated 24.04.2009 was issued proposing demand of Service Tax on the differential amount. The Show Cause Notice in the case on hand covering the period 2009-10 and 2010-11 was issued on 15.09.2014, which is clearly after invoking the larger period, alleging that the appellant had suppressed facts in its ST-3 returns to justify the invocation of extended period of limitation. The appellant has mainly pleaded that it was an interpretational issue and therefore, no penalty was exigible. The Hon ble Supreme Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT had dismissed the Revenue s appeal against the decision of the Hon ble Delhi High Court, wherein it was held that Rule 5 ibid. was ultra vires to Section 67 ibid. The Revenue has erred in levying penalty under Section 78 of the Finance Act, 1994 when there is neither deliberate evasion of duty nor is there any evasion per se - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appeal before the Appellate Tribunal challenged the penalty imposed under Section 78 of the Finance Act, 1994. The case involved a Show Cause Notice dated 15.09.2014 alleging violation of Section 67 of the Finance Act, 1994 read with Rule 5 of the Valuation Rules, 2006. The Order-in-Original confirmed a demand of &8377; 11,69,470/-, and the appellant appealed against the penalty under Section 78 only, not the demand itself. The appellant raised objections to the penalty, including the extended period of limitation. It was noted that a similar Show Cause Notice for an earlier period had been issued, questioning the suppression of facts in the appellant's returns. The appellant argued that the issue was interpretational, citing a Supreme Court case that held Rule 5 to be ultra vires to Section 67, thereby supporting the appellant's position that it was a bona fide interpretational error with no malicious intent.

The Tribunal found that there was no deliberate evasion of duty or evasion per se by the appellant. The Revenue was deemed to have erred in levying the penalty under Section 78 without evidence of intentional wrongdoing. The Tribunal set aside the impugned order and allowed the appeal in favor of the appellant. The judgment was pronounced in the open court on 14.12.2021.