2013 (3) TMI 313 - HC - Service Tax

Liability to pay the penalty in view of the Section 117 of the Finance Act, 2000 - Recovery of refund post M/s Laghu Udyog Bharati Vs. Union of India 1999 (7) TMI 1 - SUPREME COURT OF INDIA to refund the tax collected. - Held that - As per Sec 117 Validation of certain action taken under Service Tax Rules no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force. There is provision of levy of interest only and there is no provision for levy of penalty. Commissioner (Appeals), Customs and Central Excise, Ranchi as well as the Tribunal were right in holding that penalty cannot be imposed upon the assessee. There is no merit in the Tax Case - in favour of assessee.

Summary

Issues:
1. Challenge against the order of Customs, Excise & Service Tax Appellate Tribunal
2. Interpretation of the Explanation under Section 117 of the Finance Act, 2000
3. Imposition of penalty under Section 76 and 77 of the Finance Act, 1994
4. Validity of the Finance Act, 2000 and its provisions
5. Decision on the imposition of penalty by the Commissioner (Appeals) and the Tribunal

The judgment concerns a challenge against the order of the Customs, Excise & Service Tax Appellate Tribunal, Eastern Bench, Kolkata (CESTAT) by the petitioner. The CESTAT upheld the Commissioner of Central Excise (Appeals), Ranchi's decision that the assessee is not liable to pay the penalty based on the Explanation under Section 117 of the Finance Act, 2000. The Explanation states that no act or omission shall be punishable as an offense if it would not have been so punishable without the enactment of this Section. The imposition of service tax was previously challenged before the Supreme Court, which declared certain provisions of the Service Tax Rules, 1994 as ultra vires and directed tax refunds. To counter the Supreme Court's decision, the Finance Act, 2000 was enacted retrospectively reviving the liability. Section 117 of this Act mandated the refund of tax amounts within 30 days of the Act's assent, with interest payable at 24% if not refunded timely. The Revenue sought to levy a penalty under Sections 76 and 77 of the Finance Act, 1994, totaling Rs. 14,571, which the Tribunal and Commissioner deemed inappropriate due to the Explanation under Section 117.

The judgment emphasizes that the Finance Act, 2000 provides a comprehensive procedure in Section 117, validating certain actions under the Service Tax Rules, 1994. This section deems specific provisions of the Rules as valid and always in force, even before the amendment in 1998. It allows for the recovery of service tax refunded due to court orders within 30 days of the Act's assent, with interest payable at 24% for delays. Notably, the Explanation under Section 117 clarifies that no act or omission shall be punishable unless it would have been so without the Act coming into force. The Act only provides for the levy of interest and not penalties, as highlighted in the judgment.

Ultimately, the Court concluded that the Commissioner (Appeals) and the Tribunal were correct in their decision that the penalty cannot be imposed on the assessee. The judgment dismissed the Tax Case, affirming that there was no merit in challenging the decision regarding the imposition of penalties. The ruling upheld the interpretation and application of the Finance Act, 2000, particularly Section 117, in determining the liability for penalties under the Finance Act, 1994.