2014 (12) TMI 457 - AT - Service Tax

Option to levy Simultaneous Penalty u/s 76 77 & 78 - Power of adjudicating authority - Intention to suppression of facts - Held that - During the relevant period penalty under Sections 76 and 78 of Finance Act 1994 were not mutually exclusive and therefore the Commissioner (Appeals ) is not correct in holding that the two penalties (under Sections 76 & Section 78) could not be imposed simultaneously. However it is seen that the Punjab and Haryana High Court in the case CCE Vs. First Flight courier 2 2011 (1) TMI 52 - High Court of Punjab and Haryana has observed that penalty under Section 76 may not be justified if penalty had already been imposed under Section 78. Even if it is not correct to say that penalty under Section 76 can never be imposed after penalty under Section 78 is imposed the appellate authority was within its jurisdiction not levy penalty under Section 76 having regard to the fact that penalty equal to service tax has already been imposed under Section 78 of the Finance Act 1994. Following decision of CCE Vs. Pannu Property Dealers Ludhiana 2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT . - Decided in favour of assessee. It is not enough to merely claim that they had bona fide belief that their services were not liable to service tax. It is to be demonstrated that they had taken reasonable steps to ascertain about the taxability of their services which evidently in this case they had not taken. Bona fide belief is an informed belief and the appellants have not been able to show as to on what basis they could harbour the belief that the impugned services were not taxable when they were providing such services on such a large scale. Seen in this light non-payment of service tax for such a long period clearly leads to a sustainable conclusion that it was an act which was wilfull for evading service tax. Therefore penalty under Section 78 ibid is clearly imposable. There is however force in the contention of the appellants that neither the original adjudicating authority nor the appellate authority gave than an option to pay (reduced) penalty of 25% of the Service Tax in terms of the proviso under Section 78. Following decision of CCE Chennai vs. Zen Systems and Maintenance Pvt. Ltd. 2013 (7) TMI 603-CESTAT (Chennai) appellants deserve to be given the benefit to pay 25% of the penalty under Section 78 ibid within a month of the receipt of this order. - Decided partly in favour of assessee.

Summary

Issues:
1. Penalty under Sections 76 and 78 of Finance Act, 1994 imposed simultaneously.
2. Intention of the appellants in evading service tax and imposition of penalty under Section 78.
3. Applicability of reduced penalty of 25% under Section 78 to the appellants.

Analysis:
1. The main issue in this judgment revolves around the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994. The Commissioner (Appeals) partially upheld the Order-in-Original, confirming a service tax demand along with penalties under Sections 77, 76, and 78. The Revenue appealed, arguing that penalties under Sections 76 and 78 were not mutually exclusive during the relevant period. The Tribunal acknowledged this but cited precedents where penalty under Section 76 was not imposed if penalty under Section 78 had already been levied. Consequently, the Revenue's appeal was rejected.

2. The second issue concerns the intention of the appellants in evading service tax and the imposition of penalty under Section 78. The appellants contended that they had no intention to suppress information and promptly registered for service tax upon realizing their liability. However, they failed to demonstrate taking reasonable steps to ascertain the taxability of their services, especially considering the substantial amount received for taxable services rendered. The Tribunal found the non-payment of service tax over a significant period as willful evasion, justifying the imposition of penalty under Section 78. Still, the appellants were granted the option to pay a reduced penalty of 25% within 30 days.

3. Lastly, the judgment addressed the applicability of the reduced penalty of 25% under Section 78 to the appellants. Citing a precedent, the Tribunal allowed the appellants to avail of the reduced penalty if paid within 30 days of receiving the order, provided the service tax demand along with interest was also paid within the same period. As a result, the Revenue's appeal was rejected, and the appellants were granted the opportunity to pay the reduced penalty within the specified timeframe, subject to fulfilling the conditions outlined in the judgment.