2019 (1) TMI 978 - AT - Service Tax

Quantum of Penalty u/s 78 of FA - Commercial Training or Coaching Centre Service - non-payment of service tax - Held that - Section 11AC of Central Excise Act is relevant for the purpose. The same can be read in view of Section 83 of the Finance Act. The perusal thereof makes it clear that whenever excise duty of the service tax has not been paid which is the admitted fact of the present Appeal the person who is liable to pay the tax shall be liable to pay the penalty as well at such rates as mentioned in the respective Sections i.e. 76-78 of the Finance Act 1994 - The further perusal of Section 11AC makes it clear that the penalty so described under said Sections can be reduced to nil in case the duty /tax so demanded is paid even prior the issuance of the SCN. It stands reduced to 25% only in the case where the payment of the tax is made within 30 days of the issuance of the SCN. In the present case though the adjudicating authority failed to mention the entitlements of the assessee to the benefit of reduced penalty but the fact remains is that when appellant herein is not entitled to the benefit of reduced penalty being not paid within 30 days of SCN hence no mention of this benefit in Order-in-Appeal is not relevant - penalty has already been reduced to 50% - appeal dismissed - decided against appellant.

Summary

Issues:
1. Confirmation of demand of service tax and penalty imposition.
2. Reduction of penalty amount.
3. Applicability of Section 11AC of Central Excise Act.
4. Benefit of reduced penalty and its entitlement.

Analysis:
1. The case involved the confirmation of a demand of service tax against the appellants, who were engaged in taxable activities but had not paid the requisite duty. The demand was proposed in a show cause notice (SCN) and confirmed in subsequent orders. The appellant challenged the penalty imposed along with the interest, seeking a reduction in the penalty amount.

2. The appellant argued that the duty liability was not disputed, but the penalty amount was contested. The original adjudicating authority did not mention the benefit of reduced penalty, which was reduced to 50% by the Commissioner (Appeals). The appellant sought a further reduction to 25% of the recoverable service tax, citing relevant case laws and a CBEC Circular to support their appeal.

3. The Tribunal considered the provisions of Section 11AC of the Central Excise Act, which states that a person liable to pay tax shall also pay a penalty if the tax is not paid. The penalty rates are specified in Sections 76-78 of the Finance Act, 1994. Section 11AC allows for a reduction in penalty to nil if the tax is paid before the issuance of the SCN, and to 25% if paid within 30 days of the SCN.

4. The Tribunal noted that the appellant did not fall under the circumstances for reduced penalty as per Section 11AC. Despite arguments for a reasonable cause for not paying the penalty within 30 days, the provisions did not allow for discretion in other cases. The case laws cited by the appellant were deemed inapplicable, as the appellant was not entitled to the benefit of reduced penalty due to the delayed payment. Thus, the Tribunal upheld the order reducing the penalty to 50% and dismissed the appeal.

In conclusion, the Tribunal affirmed the decision to reduce the penalty to 50% and found no infirmity in the order. The appeal was consequently dismissed.