2010 (2) TMI 467 - AT - Service Tax

Penalty - Service tax demand was confirmed against the assessee o the ground that it had made short payment of tax during the relevant period. Besides, equal amount of penalties were imposed u/s 76 and 78 and penalty u/s 77 was also imposed. Held that - SCN did not provide for clear nature of default for levying penalty under respective provisions of law. In such circumstances matter was to be remanded to Commissioner (Appeals) for his ategorical findings on quantum of penalty that would be levied under different provisions of law.

Summary

Issues:
1. Imposition of penalty under sections 76, 77, and 78 of the Finance Act, 1994 based on alleged defaults in service tax payments and compliance.

Analysis:
The appellant contested the penalty imposed for a service tax default amounting to Rs. 81,408 from April 2000 to March 2005, arguing that despite the initial oversight, they rectified the error promptly by complying with the law. The appellant challenged the penalties levied under sections 76, 77, and 78 of the Finance Act, 1994, emphasizing that the penalty should not be equal to the tax liability when there was an early compliance with the law. The appellant contended that the penalty imposition was unjustified as they had responded to show-cause notices, filed returns, and rectified the short payment of service tax. The appellant highlighted the preventable reasons for the non-compliance and urged that the penalties be reconsidered.

The revenue authority, on the other hand, argued that the appellant not only failed to cooperate by not responding to summons but also willfully breached the law by not paying the service tax despite receiving payments from service recipients. The revenue authority presented a detailed chart outlining the alleged breaches, emphasizing that the appellant was well aware of its legal obligations since seeking registration in 1999. The revenue authority maintained that there were no preventable reasons evident from the records that warranted a waiver of the penalties imposed.

Upon hearing both parties and examining the records, the Tribunal acknowledged the penalty quantum of Rs. 81,408 imposed under sections 76, 77, and 78 of the Finance Act, 1994. The Tribunal emphasized the necessity to assess the case based on the material facts available in the records to determine the applicability of the penalties under the respective sections of the Act. The Tribunal highlighted the different types of defaults identified against the appellant, including short payment and non-payment of service tax during various periods, and emphasized the need for a proper assessment to ascertain the periods requiring penalties under different sections.

The Tribunal observed that the show-cause notice and the lower authority's order did not clearly identify the specific defaults necessitating penalties under sections 76, 77, and 78 of the Finance Act, 1994. Stressing the quasi-criminal nature of penalty proceedings, the Tribunal emphasized the appellant's right to a fair trial and referenced the importance of clear findings on the nature of defaults for penalty imposition. Consequently, the matter was remanded to the Appellate Authority for a definitive determination on the quantum of penalties to be levied under different provisions of the law based on a thorough examination of the show-cause notice and relevant considerations. The Tribunal directed the Appellate Authority to provide the appellant with a hearing opportunity and consider the appellant's submissions within the legal framework provided under section 80 of the Finance Act, 1994.