2018 (5) TMI 1528 - AT - Service Tax

Penalty - assessee collected service tax on them from their customers but failed to deposit the same with the Government - Held that - the appellant cannot claim ignorance that they are liable to pay service tax on the services rendered by them. They have collected service tax wilfully and not paid the same to the Government, hence the demand of service tax as confirmed is sustainable. Penalty under section 77(2) of Finance Act 1944 is imposable on the appellant due to failure to submit ST-3 returns. Penalty u/s 76 and 78 - Held that - the proviso of sub section 2 of Section 78 was introduced on 10.05.2008 stating that no penalty is imposable under section 76, when a penalty is imposed under section 78 - As it is now settled law, penalty cannot be imposed under section 76 of Finance Act, 1944 if it is imposed under section 78. The Order-in-Appeal is upheld with the modification that the service tax liability with interest and penalty under sections 77 & 78 is also upheld while the penalty under section 76 is set aside - appeal disposed off.

Issues:
1. Appellant's liability for non-payment of service tax and related penalties.
2. Applicability of penalties under sections 76 and 78 of the Finance Act, 1994.
3. Adjustment of excess payment of Education Cess.

Issue 1: Appellant's liability for non-payment of service tax and related penalties:
The appeal was filed against an Order-in-Appeal confirming the demand of service tax, interest, and penalties imposed on the appellant for failing to pay service tax to the Government despite collecting it from clients. The original adjudicating authority upheld the demand, and the Commissioner (Appeals) modified it to allow CENVAT credit. The appellant's subsequent appeals were dismissed for noncompliance until the High Court directed the restoration of the appeal. The Tribunal found that the appellant had collected service tax willfully but failed to deposit it, making the demand and penalties sustainable. The appellant's argument of overlap in show cause notice entries and excess payment of Cess was dismissed for lack of evidence. The penalty under section 77(2) for failure to submit ST-3 returns was also upheld.

Issue 2: Applicability of penalties under sections 76 and 78 of the Finance Act, 1994:
The appellant argued that the penalty imposed under section 76 should be set aside as a penalty was already imposed under section 78. The Tribunal referred to judgments stating that no penalty under section 76 should be imposed when a penalty is imposed under section 78. The Tribunal noted that penalties under sections 76 and 78 are mutually exclusive, and the proviso introduced clarified that no further penalty could be levied under section 76 if a penalty was imposed under section 78. As per settled law, penalty cannot be imposed under section 76 if already imposed under section 78. Therefore, the Tribunal set aside the penalty under section 76 while upholding the service tax liability, interest, and penalties under sections 77 & 78.

Issue 3: Adjustment of excess payment of Education Cess:
The appellant requested an adjustment for the excess payment of Education Cess made against the confirmed demand. However, the Tribunal found this request beyond the scope of the appeal and not supported by facts. The Tribunal upheld the demand and penalties as per the original adjudicating authority's decision, emphasizing the appellant's liability for non-payment of service tax and willful collection from clients.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT HYDERABAD highlights the issues of the appellant's liability for non-payment of service tax, the applicability of penalties under sections 76 and 78 of the Finance Act, 1994, and the adjustment of excess payment of Education Cess. The Tribunal upheld the demand, interest, and penalties under sections 77 & 78 while setting aside the penalty under section 76 based on legal precedents and settled law.

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