2017 (6) TMI 638 - AT - Service Tax

Penalty u/s 77 and 78 of FA - short payment of tax - Architecture Services - Interior Decorator Service - Held that - the Appellant, though registered themselves with the Service Tax Department way back in 1998, however, the Appellant failed to pay the Service Tax even though the value of service rendered has been collected during the relevant period. Therefore, the penalty u/s 78 of the FA, 1994 equal to the Service Tax evaded i.e. ₹ 11,16,373/- has been rightly been confirmed by the learned Commissioner in the adjudicating order - the Appellants are eligible to discharge 25% of the penalty imposed u/s 78 of Finance Act, 1994 on fulfillment of the conditions laid down thereunder - simultaneous penalty u/s 76 and 78 of FA, 1994 cannot be imposed - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Sections 76 and 78 of the Finance Act, 1994 simultaneously.
2. Justification for penalty imposition under Section 78 of the Finance Act, 1994.

Analysis:
1. The case involved appeals against impugned orders regarding the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994. The Appellant provided architectural and interior decorator services from August 2003 to March 2008 but had short paid Service Tax amounting to ?11,16,373. Initially, a penalty of ?4,77,000 was imposed under Section 78, with an option to pay 25% of the penalty amount and ?11,000 under Section 77. The penalty under Section 76 was dropped. The Appellant challenged the penalties under Sections 77 and 78 before the Commissioner (Appeals), who upheld the decision. Subsequently, a Show Cause Notice was issued for enhancing the penalty under Section 78 to the total evaded amount and imposing a penalty under Section 76. The Commissioner then imposed penalties under both sections, leading to the Appellant filing another appeal.

2. The Appellant argued that simultaneous penalties under Sections 76 and 78 were unlawful, citing a judgment of the Hon'ble Gujarat High Court. They contended that their actions were bona fide, with no intention to evade Service Tax. The Appellant also claimed entitlement to pay 25% of the penalty under Section 78. The Revenue representative, however, highlighted that the Appellant had not disclosed total receipts from architectural services to the Department despite maintaining separate accounts. It was noted that the Appellant, despite being registered with the Service Tax Department since 1998, had not paid any Service Tax during the relevant period, justifying the penalties imposed.

3. Upon review, the Tribunal found that simultaneous penalties under Sections 76 and 78 were impermissible based on the precedent set by the Hon'ble Gujarat High Court. Regarding the penalty under Section 78, it was established that the Appellant failed to pay Service Tax despite collecting the service fees during the period, justifying the penalty equal to the evaded tax amount. The Tribunal modified the impugned orders, upholding the penalty under Section 78 but allowing the Appellants to discharge 25% of the imposed penalty as per the prescribed conditions.

This judgment clarifies the legal stance on simultaneous penalties under different sections of the Finance Act, 1994 and underscores the importance of fulfilling tax obligations to avoid penalties under the law.