2009 (12) TMI 473 - AT - Service Tax

Penalty - The appellants were providing security agency service to their clients. Assessee paid entire service tax demand along with interest and penalty in accordance with first proviso to section 78. Assesese sought waiver of requirement of pre deposit of penalty u/s 76 contending that it was a small service provider facing financial hardship, and simultaneously imposition of penalty u/s 76 and 78 was not correct. Held that - the plea of assesese not correct but due to financial hardship to waive some amount for pre deposit.

Summary

Issues:
1. Imposition of penalty under sections 76 and 78 of the Finance Act, 1994 simultaneously.

Analysis:
1. The appellants provided security agency services and received a show-cause notice for non-payment of service tax amounting to Rs. 58,617 along with interest for the period from December 2002 to March 2006. The Asstt. Commissioner confirmed the service tax demand along with interest and imposed penalties under sections 76, 77, and 78 of the Finance Act, 1994. The appellants paid the entire service tax demand, interest, and 25% of the penalty within 30 days but challenged the penalty under section 76 in an appeal to the Commissioner (Appeals).

2. The Commissioner (Appeals) upheld the penalty under section 76, citing the judgment of the Hon'ble Kerala High Court in the case of Asstt. CCE v. Krishna Poduval, which allowed simultaneous imposition of penalties under sections 76 and 78. The appellant appealed this decision, arguing financial hardship and relying on the Tribunal's judgment in Opus Media & Entertainment v. CCE, which waived the pre-deposit of penalty under section 76. The Departmental Representative contended that penalties under both sections 76 and 78 should be imposed based on legal precedents.

3. The Tribunal considered the legal position on simultaneous imposition of penalties under sections 76 and 78 in light of the judgments of the Hon'ble Kerala High Court and the Tribunal. While acknowledging the clarity in legal interpretation on this issue, the Tribunal directed the appellants to deposit Rs. 15,000 within six weeks due to the financial hardship raised. Upon this deposit, the remaining penalty under section 76 was waived, and recovery stayed. The Tribunal's decision balanced the legal precedent with the appellant's financial circumstances, providing a partial waiver of the penalty under section 76 based on the specific facts of the case.