2017 (6) TMI 816 - AT - Service Tax

Penalty u/s 76 and 78 - the appellants have discharged a substantial portion of tax liability before the issue of notice, the notice itself as per Section 73(3) should have been limited to the unpaid tax - Held that - The Commissioner (Appeals) has given proper justification for dropping the penalty under Section 76 and 78 - appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against penalties under Section 76 and 78 of the Finance Act, 1994 for non-payment of service tax during a specific period.

Analysis:
The case involved an appeal filed by the Revenue challenging the order passed by the Commissioner (Appeals) setting aside penalties imposed under Section 76 and 78 of the Finance Act, 1994. The appellant, engaged in providing Construction of Residential Complex Services, had not registered under Section 69 of the Finance Act, 1994 for service tax collection and payment during the period from 16.06.2005 to 31.01.2006. The Additional Commissioner confirmed the demand of service tax, cess, and penalties. However, the Commissioner (Appeals) set aside the penalties under Section 76 and 78, noting that the appellant had paid a substantial portion of the tax liability before the notice was issued. The Revenue appealed this decision.

During the hearing, the Revenue argued that the penalties under Section 76 and 78 should not have been dropped, as the service tax demand was prior to 10.05.2008, and the extended period could be invoked due to the appellant's alleged suppression of facts. On the other hand, the respondent's counsel contended that there was no intention to evade duty, as the appellant had approached the Department for registration, paid a significant portion of the duty, and proper reasons were given by the Commissioner (Appeals) for not imposing penalties.

The Commissioner (Appeals) justified the dropping of penalties under Section 76 and 78 by highlighting that the appellant had sought registration, explained the reasons for non-payment of tax, and had remitted most of the tax due with interest before the notice was issued. The Commissioner found no evidence of deliberate suppression of facts and questioned the search conducted after the registration application. The Commissioner also noted that the appellant had not provided a correct computation of tax dues, making quantification of penalties impossible.

After considering the arguments and records, the Judicial Member upheld the Commissioner (Appeals) decision, stating that there was no infirmity in dropping the penalties under Section 76 and 78. The order was upheld, dismissing the Revenue's appeal. The judgment was pronounced in open court on a specified date in 2017.