2009 (1) TMI 132 - AT - Service Tax

Service tax liability amount was paid by the appellant along with 25% of the service tax as penalty within 30 days of the issuance of the show cause notice - Section 73(1A) of the Finance Act, 1994 applicable - No any justification for imposition of penalties in terms of Section 76 & 77

Summary

Issues:
Imposition of penalties under Section 76 & 77 of the Finance Act, 1994.

Analysis:
The appeal in question challenged the imposition of penalties under Section 76 & 77 of the Finance Act, 1994. The Commissioner's order confirmed the demand of service tax, noting that the appellant had paid the service tax along with 25% of the amount within 30 days of the show cause notice. The Commissioner held that penalties under Section 78 would be waived to the extent of 75% as per Section 73(1A) but imposed penalties under Sections 76 & 77. The appellant argued citing Circular 137/167/2006-CX-4, which clarified that the conclusion of proceedings under Section 73(1A) and (3) implied the conclusion of all proceedings under the Finance Act, 1994. Based on this clarification, the Tribunal found no justification for imposing penalties under Sections 76 & 77 and set them aside, allowing the appeal in that regard.

This case hinged on the interpretation of the provisions of Section 73(1A) of the Finance Act, 1994, which provides for the conclusion of adjudication proceedings in cases where the taxpayer pays the service tax liability along with interest and a penalty equal to 25% of the service tax amount within one month of the show cause notice. The Circular cited by the appellant clarified that the conclusion of proceedings under Section 73(1A) and (3) would lead to the conclusion of all proceedings under the Finance Act, 1994. This interpretation was crucial in determining whether penalties under Sections 76 & 77 could be imposed despite compliance with Section 73(1A).

The Tribunal's decision was based on the understanding that the conclusion of proceedings under Section 73(1A) and (3) encompassed the conclusion of all proceedings under the Finance Act, 1994. Therefore, the Tribunal found no legal basis for imposing penalties under Sections 76 & 77 in this case. By setting aside the penalties under these sections, the Tribunal upheld the appellant's argument based on the interpretation provided in the circular, leading to a favorable outcome for the appellant in this appeal.