2009 (11) TMI 247 - AT - Service Tax

Penalty- The Respondent was engaged in providing service of cable operator. The original Authority held that during the period from 1-4-2003 to 31-12-2005, the Respondent suppressed taxable value of Rs. 23,36,795 and evaded Service Tax amounting to Rs. 2,06,848. The amount of Service Tax was paid prior to issue of show-cause notice. The interest was paid on 21-2-2006 and 18-3-2008 in two instalments. The original Authority confirmed the Service tax demand and interest. He imposed a penalty of Rs. 2,06,848 under section 76 of the Act; he imposed penalty of Rs. 1,000 under section 77 of the Act and a penalty of Rs. 2,06,848 under section 78 of the Act. The Commissioner (Appeals) by impugned order taking note of the fact that the entire amount of Service tax and interest has been paid, set aside the penalty under section 76 holding that penalty under section 76 and penalty under section 78 are mutually exclusive. He also reduced the penalty under section 78 to 25 per cent of the Service Tax evaded. Held that- setting aside the penalty under section 76 by the Commissioner (Appeals) cannot be held to be unreasonable. Further, the Respondent has admittedly paid 25 per cent of the penalty within one month from the date of the order of the original Authority. Therefore, the waiver of penalty in excess of 25 per cent of the Service Tax evaded under section 78 is also justified and, therefore, order of the Commissioner (Appeals) calls for no interference. In view of the above, the Appeal by the Department is rejected.

Summary

Issues:
Appeal against Commissioner (Appeals) order - Service Tax evasion - Imposition of penalties under sections 76 and 78 - Dispute on taxability of service by cable operator - Application of section 80 of Finance Act.

Analysis:
The case involved an appeal by the Department against the Commissioner (Appeals) order regarding Service Tax evasion by a cable operator. The original Authority found that the operator had suppressed taxable value and evaded Service Tax, leading to the imposition of penalties under sections 76 and 78 of the Act. The Commissioner (Appeals) set aside the penalty under section 76, considering the payment of Service Tax and interest prior to the show-cause notice. The Department argued for the imposition of both penalties, citing non-payment of Service Tax knowingly by the operator. They relied on legal precedents to support their stance that penalties under sections 76 and 78 can apply simultaneously for the same transactions.

The Respondent, represented by their advocate, contended that there was a genuine dispute regarding the taxability of the service provided by cable operators. They highlighted that once the tax liability was clarified, they promptly paid the amount without any intent to evade tax. The Respondent also sought the benefit of section 80 of the Finance Act before the Commissioner (Appeals). They referenced tribunal decisions to support their argument that once a penalty under section 78 is imposed, no penalty should be levied under section 76. The Respondent emphasized the prompt payment of 25% of the penalty within a month of the original Authority's order.

Upon considering the submissions from both sides, the Tribunal noted that the tax liability was not in dispute, and the payment was made along with interest. The Tribunal referenced legal precedents and decisions to support the Commissioner (Appeals) ruling to set aside the penalty under section 76. They highlighted that the Respondent had paid 25% of the penalty promptly, justifying the waiver of the penalty exceeding this amount under section 78. The Tribunal concluded that the Commissioner (Appeals) decision was reasonable, and hence, rejected the Department's appeal.