9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (12) TMI 443 - HC - Service TaxExtension of time for making reduced penalty - Was the CESTAT justified in granting to the Respondent the benefit of payment of reduced penalty to the extent of 25% in terms of the 3rd proviso to Section 78 (1) of the Finance Act 1994 (as it stood prior to its substitution by the Finance Act 2015) within 30 days from the date of the order of the CESTAT - Held that - It appears to the Court that the very object of extending to an Assessee the option of availing the benefit of payment of reduced penalty in terms of the second proviso to Section 78 (1) of the Finance Act 1994 was to provide an incentive for prompt payment of the service tax and interest that is due. When an Assessee does not wish to contest the service tax liability or even when it wishes to contest such liability, but is prepared to pay upfront the service tax and interest without prejudice to its rights and contentions, the statute provides an option of payment of reduced penalty to the extent of 25% of the service tax. This is, of course, subject to payment of not only the service tax and interest but also the reduced penalty within 30 days of the communication of the order of the adjudicating authority. The SCN issued to an Assessee invariably mentions the statutory provisions under which the demand for service tax, interest and penalty is proposed to be raised. There can be no question, therefore, of the Assessee being unaware of the provisions of the statute. It is also very likely that in the adjudication proceedings the Assessee, who invariably has an authorised representative to put across its case to the adjudicating authority, will make a reference to the statutory provisions. In particular if the submission relates to penalty it is unlikely that an Assessee will not even refer to the relevant statutory provisions. The question of an Assessee, therefore, pleading ignorance of the law governing the adjudication proceedings cannot arise. There is no statutory requirement that the adjudication order itself should remind the Assessee of the option available of paying a reduced penalty in terms of the second and third proviso to Section 78 (1) of the Finance Act 1994. In the instant case, the CESTAT could not have permitted the Respondent to pay the reduced penalty amount in terms of the second proviso to Section 78 (1) of the Finance Act, 1994 within thirty days from the date of the impugned order of the CESTAT. Such a direction was contrary to the third proviso to Section 78 (1) of the Finance Act, 1994 and therefore legally unsustainable. - CESTAT could not have, in terms of the third proviso to Section 78 (1) of the Finance Act, 1994 (as it stood prior to its substitution by the Finance Act 2015) read with Section 83 thereof, extend the time for the Respondent to pay the reduced penalty within 30 days from the date of the order of the CESTAT. - Decided in favour of Revenue.
Issues Involved:
1. Justification of CESTAT's decision to grant the benefit of reduced penalty under the third proviso to Section 78(1) of the Finance Act, 1994. 2. Compliance with the 30-day period for payment of reduced penalty as per the third proviso to Section 78(1) of the Finance Act, 1994. 3. Applicability of Section 11AC of the Central Excise Act to the interpretation of Section 78 of the Finance Act, 1994. 4. Obligation of adjudicating authorities to inform the assessee of the option to pay reduced penalties. Detailed Analysis: 1. Justification of CESTAT's Decision: The appeal by the Principal Commissioner of Service Tax, Delhi, challenges the CESTAT's order dated 18th November 2014, which allowed the respondent the benefit of paying a reduced penalty of 25% under the third proviso to Section 78(1) of the Finance Act, 1994. The High Court examined whether the CESTAT was justified in extending this benefit beyond the statutory period of 30 days from the date of the adjudicating authority's order. 2. Compliance with the 30-Day Period: The High Court noted that the respondent did not comply with the CESTAT's order to pay the reduced penalty within 30 days. The Court emphasized that the statute explicitly requires payment of service tax, interest, and reduced penalty within 30 days from the date of communication of the adjudication order. The Court ruled that the CESTAT could not extend this period, as it would contravene the third proviso to Section 78(1) of the Finance Act, 1994. 3. Applicability of Section 11AC of the Central Excise Act: The Court discussed the inapplicability of Section 11AC of the Central Excise Act to the Finance Act, 1994, noting that circulars and judicial decisions interpreting Section 11AC do not automatically apply to Section 78 of the Finance Act, 1994. The Court reviewed various judicial precedents, including K.P. Pouches (P) Ltd. v. Union of India and Sri Sai Enterprises v. Commissioner of Central Excise, to highlight differences in the interpretation and application of penalty provisions under the two statutes. 4. Obligation to Inform the Assessee: The Court observed that there is no statutory requirement for the adjudicating authority to inform the assessee of the option to pay a reduced penalty in the adjudication order. The Court cited the Bombay High Court's decision in CCE, Raigad v. Castrol India Ltd., which held that the absence of such a mention does not render the adjudication order invalid or allow the appellate authority to extend the option at the appellate stage. Conclusion: The High Court concluded that the CESTAT's direction to allow the respondent to pay the reduced penalty within 30 days from the date of its order was legally unsustainable. The statute mandates that the reduced penalty must be paid within 30 days from the date of communication of the adjudication order. Consequently, the Court answered the question of law in favor of the Department, holding that the CESTAT could not extend the time for payment of the reduced penalty. The appeal was allowed, with no orders as to costs.
|
