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2024 (8) TMI 788 - AT - Service TaxLevy of penalty u/s 78 of the Finance Act, 1994 - simultaneous penalty u/s 76 and 78 were proposed to be imposed - applicability of decision of Hon ble Supreme Court in case of Nizam Sugar Factory 2006 (4) TMI 127 - SUPREME COURT - recurring SCN - HELD THAT - In view of the above judgment of jurisdictional High Court in Raval Trading Company 2016 (2) TMI 172 - GUJARAT HIGH COURT and Sai Consulting Engineering Pvt Ltd 2018 (5) TMI 1425 - GUJARAT HIGH COURT once the penalty was imposed under Section 76 no simultaneous penalty can be imposed under both section. For this reason, penalty under section 78 is not imposable. It is further found that this show cause notice in the present case was issued as recurring in nature, therefore, the judgment of Hon ble Supreme Court in case of Nizam Sugar Factory is clearly applicable. Consequently, the ingredient such as fraud, collusion, willful mis-statement, contravention of any provision or rules with intent to evade payment of duty does involve in the present case. The demand u/s 73 (1) can be made only when there is no fraud, collusion, willful mis-statement, contravention of any provision or rules with intent to evade payment of duty, if these ingredients exist then the demand should be raised under proviso to Section 73 (1). For this reason also for demanding the service tax, proviso was not invoked. Therefore, different yardstick for imposing penalty under Section 78 cannot be adopted by the Revenue. The Learned Commissioner has rightly refrained from imposing penalty under Section 78. The respondent is not liable for penalty under Section 78, therefore, the order of the Learned Commissioner so far he refrained from imposing penalty under Section 78 of Finance Act, 1994 is correct and legal - the revenue s appeal is not maintainable. The Revenue s appeal is dismissed.
Issues Involved:
1. Imposition of penalty under Section 78 of the Finance Act, 1994. 2. Applicability of judgments including Nizam Sugar Factory and Adani Gas Ltd. 3. Simultaneous imposition of penalties under Sections 76 and 78 of the Finance Act, 1994. Issue-wise Detailed Analysis: 1. Imposition of penalty under Section 78 of the Finance Act, 1994: The Revenue filed an appeal seeking the imposition of a penalty under Section 78 of the Finance Act, 1994. The learned Commissioner had confirmed the demand but did not impose the penalty under Section 78. The Revenue argued that the Adjudicating Authority's reliance on the judgment of Nizam Sugar Factory was erroneous. They contended that the service provider failed to provide necessary details and that there was a clear contravention of the provisions of the Finance Act with the intent to evade payment of service tax. Therefore, the Revenue sought the remand of the matter to the Adjudicating Authority for the imposition of the penalty under Section 78. 2. Applicability of judgments including Nizam Sugar Factory and Adani Gas Ltd: The Respondent argued that the demand arose as a recurring issue under a recurring show cause notice within the normal period of one year, negating any suppression of facts or contravention. They cited multiple judgments, including Adani Gas Ltd and Nizam Sugar Factory, to support their stance that penalties under Sections 76 and 78 cannot be imposed simultaneously. The Tribunal noted that the Gujarat High Court in the case of Raval Trading Company held that penalties under Sections 76 and 78 are mutually exclusive and cannot be imposed simultaneously. The Tribunal also referenced the judgment of the Hon'ble Supreme Court in Adani Gas Ltd., which supported the view that simultaneous penalties under both sections are not permissible. 3. Simultaneous imposition of penalties under Sections 76 and 78 of the Finance Act, 1994: The Tribunal found that the show cause notice proposed penalties under both Sections 76 and 78. However, the learned Commissioner imposed a penalty under Section 76 and refrained from imposing a penalty under Section 78, aligning with the judgment of Raval Trading Company. The Tribunal emphasized that Section 78 covers cases involving fraud, collusion, or willful misstatement, while Section 76 pertains to non-payment of tax on any grounds. The introduction of a further proviso to Section 78 clarified that if a penalty is payable under Section 78, the provisions of Section 76 shall not apply. This was seen as a clarificatory amendment, making explicit what was previously implicit. The Tribunal also noted that the show cause notice was recurring in nature, making the judgment of Nizam Sugar Factory applicable. The demand was confirmed under Section 73(1) of the Finance Act, which does not involve fraud, collusion, or willful misstatement. Therefore, the penalty under Section 78 was not justified. Conclusion: The Tribunal concluded that in the facts and circumstances of the case, the respondent was not liable for a penalty under Section 78. The learned Commissioner's decision to refrain from imposing the penalty under Section 78 was deemed correct and legal. Consequently, the Revenue's appeal was dismissed. The judgment was pronounced in the open court on 13.08.2024.
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