2017 (8) TMI 465 - AT - Central Excise

Penalty u/s 78 - payment of tax with interest in being pointed out - Held that - the situation in the present case is of a Revenue neutrality. It has been held consistently by the Tribunal and Courts that in case of revenue neutrality, intention of evasion of duty cannot be alleged as neither there is a gain/loss to the revenue or to the assesee. In the present case, the appellants have made out a fit case for waiver of penalty, as no suppression of fact is coming out from the overall circumstances available in the case. We, therefore, set aside the penalty imposed under Section 78, remaining part of the order is upheld. Appeal allowed - decided partly in favor of appellant.

Summary

Issues involved:
1. Waiver of penalty under Section 78 of the Finance Act, 1994 for failure to discharge service tax on GTA service.

Analysis:

Issue 1: Waiver of penalty under Section 78 of the Finance Act, 1994
The case involved the appellants, engaged in sugar manufacturing, who failed to discharge service tax on GTA service from October 2006 to April 2008. The appellants paid the service tax along with interest before the issuance of the show-cause notice. The main contention was the waiver of penalty under Section 78. The appellant argued that there was no intention to evade tax, as the tax was paid before the notice. They also claimed revenue neutrality as the entire service tax was available as Cenvat Credit. The appellant cited relevant case laws to support their arguments. On the other hand, the Revenue contended that the appellants suppressed facts by not declaring the service tax liability in their returns, justifying the penalty imposition under Section 78. The Tribunal analyzed the submissions and facts, noting that the demand was for a normal period and the appellants had paid the tax in full before the notice. It was confirmed that the appellants were entitled to Cenvat Credit. The Tribunal held that in cases of revenue neutrality, the intention to evade duty cannot be alleged. Considering the circumstances and lack of suppression of facts, the Tribunal found a fit case for waiving the penalty under Section 78, upholding the remaining part of the order. The appeal was partly allowed, and the penalty was set aside.

This judgment highlights the importance of timely tax payment, the concept of revenue neutrality, and the significance of Cenvat Credit in tax matters. It clarifies the conditions under which penalties under Section 78 can be waived and emphasizes the need to consider individual case facts for penalty imposition.