2017 (11) TMI 95 - AT - Service Tax

Reduction of penalty imposed u/s 78 to 25% - Held that - the assessee has not paid the service tax for the period from 1/2004 to 6/2007 but on being pointed out by the department, the assessee paid the service tax with interest much before the issue of SCN - the Commissioner (A) has given the benefit by relying upon the decision of Hon ble High Court of Kerala in the case of CCE vs. Oriental Steel Trunks Agrico Industries 2009 (3) TMI 617 - KERALA HIGH COURT wherein the Hon ble High Court has upheld the decision of the Tribunal waiving of the penalty by taking into account the voluntary payment of service tax with interest before issue of SCN - reduction of penalty justified - appeal dismissed - decided against Revenue.

Summary

Issues:
Reduction of penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appeal was filed by the Revenue against the impugned order passed by the Commissioner (A) upholding penalties under Sections 76 and 77 but reducing the penalty under Section 78 to 25%. The respondent-assessee, engaged in providing taxable services, was issued a show-cause notice for failure to pay service tax and file ST-3 Returns. The original authority confirmed the demand, appropriated the amount paid by the assessee, and imposed penalties under Sections 76, 77, and 78. The Commissioner (A) upheld the order but reduced the penalty under Section 78 to 25%, leading to the Revenue's appeal against this reduction.

Upon hearing both parties, the Judicial Member noted that the assessee had paid the service tax and interest before the show-cause notice was issued. The Revenue argued that the reduction of penalty to 25% under Section 78 was against legal principles. However, the Judicial Member found that the Commissioner (A) correctly reduced the penalty based on the second proviso to Section 78(1) of the Finance Act, 1994. The Judicial Member cited a judgment of the Hon'ble High Court of Kerala, which upheld the Tribunal's decision to waive penalty considering voluntary payment of service tax with interest before the show-cause notice. Concluding that there was no legal infirmity in the Commissioner (A)'s order, the Judicial Member upheld the Order-in-Appeal, dismissing the Revenue's appeal.

The judgment was delivered on 05/10/2017 by Shri S.S. Garg, Judicial Member at the Appellate Tribunal CESTAT Bangalore. Ms. Kavitha Podwal appeared for the Appellant, while no representation was made on behalf of the Respondent during the proceedings. The Judicial Member's detailed analysis considered the facts of the case, legal provisions, and precedents to determine the appropriateness of reducing the penalty under Section 78, ultimately affirming the Commissioner (A)'s decision.