2010 (3) TMI 507 - AT - Service Tax

Penalty - for failure to pay service tax. In revision, Commissioner imposed penalty u/s 76 on assessee at rate of Rs. 200 per day for default period or 2 percent of service tax liability, whichever is higher and also imposed penalty u/s 78. however records did not reveal as to whether case of assessee warranted imposition of penalty. Held that - matter was remanded to original authority to re-examine.

Summary

Issues:
1. Imposition of penalty under sections 76 and 78 of the Finance Act, 1994.
2. Stay application for the balance demand during the appeal.
3. Discharge of service tax before issuance of show-cause notice.
4. Applicability of First Proviso to section 78 for concessional penalty.
5. Re-examination of penalty imposition by the Adjudicating Authority.

Analysis:

1. The appellant challenged the revision order imposing penalties under sections 76 and 78 of the Finance Act, 1994. The penalties were calculated at Rs. 200 per day or 2% of the tax liability per month under section 76, and a penalty of Rs. 75,199 under section 78. The Revisionary Authority suggested equal penalties, considering the confirmed service tax and penalties imposed. The appellant's Chartered Accountant requested a stay on the balance demand pending appeal.

2. The learned DR argued that the Revisionary Authority's order was proper, citing the Supreme Court's decision in Union of India v. Dharmendra Textiles Processors. It was contended that the service tax was not paid before the show-cause notice, emphasizing the independent nature of liabilities under sections 76 and 78. The Adjudicating Authority was accused of a legal error, justifying the Revisionary Authority's decision.

3. After hearing both parties and reviewing the records, the Tribunal found it unnecessary to burden the registry with further proceedings. Following the law laid down in Union of India v. Rajasthan Spg. & Wvg. Mills and K.P. Pouches (P.) Ltd. v. Union of India, the Tribunal emphasized the importance of considering concessional penalties. The Tribunal stressed that the assessee should have the right to be heard on the issue of concessional penalties, especially when the imposition of penalties is under consideration.

4. Consequently, the Tribunal set aside the Revisionary order, remanding the matter to the Adjudicating Authority for a fair hearing and a proper decision on the penalty issue. The Adjudicating Authority was directed to re-examine whether penalties should be imposed and, if so, whether the assessee is entitled to concessional penalties under the relevant provisions and legal precedents.

This detailed analysis of the judgment highlights the key issues, arguments presented, legal principles applied, and the final decision of the Appellate Tribunal CESTAT, New Delhi.