2016 (3) TMI 671 - AT - Service Tax

Imposition of penalties for the period 2007-08 to 2010-11 - Sections 76 & 78 of the Finance Act, 1994 - Respondents paid almost the entire amount of service tax due before issuance of show cause notice - Held that - the legislature in its wisdom has also amended the provisions of Section 78, albeit from 01.4.2011, that the penalty under Section 78 may be reduced to 50% when true and complete details of the transactions are available in the specified records. In view of the same, the equivalent penalty imposed on the Respondents under Section 78 of the Finance Act, 1994, is to be reduced to 50% of the same in respect of the first show cause notice. Also the penalty can not be imposed under Section 76 because the same is not imposable after 10.05.2008 as per the provisions itself. Therefore, in view of the Tribunal decision in case of Jivant Enterprise vs. Commissioner of Service Tax, Ahmedabad 2012 (7) TMI 164 - CESTAT, AHMEDABAD , if the show cause notices are issued after the date of amendment, penalties under Section 76 and 78 simultaneously cannot be imposed and hence setting aside the penalty under Section 76 is uninterferable. - Decided partly in favour of the Revenue

Summary

Issues:
- Appeal against setting aside penalties under Sections 76 and 78 of the Finance Act, 1994.

Analysis:
1. The case involves a service provider, registered under "Technical Testing and Analysis Services," who did not file ST-3 returns or remit service tax collected to the government, except for a small sum adjusted through cenvat credit. The adjudicating authority confirmed the demand of service tax and imposed penalties under Sections 76 and 78. The Commissioner (Appeals) upheld the demand of service tax but set aside the penalties. The Revenue appealed against this decision.

2. The Revenue argued that the service tax liability for the period 2007-08 to 2010-11 amounted to a specific sum, which the Respondents had not fully paid until after the investigation began. They contended that the Respondents, being aware of their obligations as registered service tax assessees, intentionally avoided paying the due amount, justifying penalties under Sections 76 and 78.

3. The Respondents did not contest the service tax liability but argued against the imposition of penalties, citing financial constraints and the difficulty in collecting outstanding payments from customers. They claimed no intention to evade tax, as amounts were reflected in their accounts, and payments were made periodically. They also invoked Section 80 and argued against simultaneous penalties under Sections 76 and 78.

4. The Tribunal found that the Respondents, despite being aware of their obligations, had paid most of the service tax before the show cause notice. Considering the circumstances and the amendment to Section 78 allowing a reduction in penalties, the Tribunal reduced the penalty under Section 78 to 50% of the amount demanded, provided payment was made within thirty days. Regarding the penalty under Section 76, it was held not imposable post-amendment and in line with previous Tribunal decisions.

5. The Tribunal upheld the Commissioner (Appeals) order with modifications, reducing the penalty under Section 78 and confirming the absence of penalty under Section 76 post-amendment. The Revenue's appeal was allowed based on these terms.