2023 (5) TMI 524 - AT - Service Tax

Levy / waiver of penalty - duty liability along with interest and also 25% of the penalty paid on receipt of the communication of the Original Authority - requirement to pay the balance penalty - HELD THAT - The Hon ble High Court in COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. PANNU PROPERTY DEALERS, LUDHIANA 2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT did not categorically hold that the imposition of penalty under Section 76 and Section 78 separately is not mutually exclusive prior to 10.05.2008, Hon ble High Court has certainly held that the Appellate Authority was within its right to hold that the penalty is mutually exclusive and in the spirit of the amendment. While the amount involved in the above case was Rs.51,026/-, the amount involved in the instant case is about half that amount. Therefore, in deference to the jurisdictional High Court s order, we find that penalty under Section 76 and 78 can be seen to be mutually exclusive even before the amendment. In the facts and circumstances of the case and looking into the fast changes that were coming in the Service Tax law during the relevant period, it can be concluded that the appellant being a small operator had no wherewithal to keep track of the law and thus, the applicability of the Service Tax to him, more so looking into the fact that the main cable operator M/s SIFY had discharged Service Tax on the entire amount collected from the customers, there are reasons to believe that there were sufficient reasons for the appellant in not discharging the applicable Service Tax. Looking into the conduct of the appellants in depositing the tax with interest and 25% penalty the provisions of Section 80 are invited and the benefits of Section 80 can be extended to the appellants. The appeal is partly allowed by setting aside the penalties imposed.

Summary

Issues involved:
The issues involved in the judgment are the liability of cable TV operators to pay Service Tax under 'Business Auxiliary Service' and the imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994.

Issue 1: Liability to pay Service Tax and Penalties
The Department concluded that cable TV operators, acting as agents of a company, were required to pay Service Tax under 'Business Auxiliary Service'. The Original Authority confirmed Service Tax and imposed penalties under Section 76, 77, and 78. The Appellate Authority upheld the order but reduced the penalty to the extent of the penalty already deposited by the appellants.

Issue 2: Applicability of Penalties and Amendments
The Counsel for the appellants argued that the company had already paid the Service Tax liability, small scale exemption applied, and penalties should not be imposed as they had deposited the tax, interest, and 25% of the penalty. Reference was made to a case where it was held that penalties under Section 76 and 78 cannot be imposed separately. The Revenue representative reiterated the findings and mentioned a previous case where the Department's contentions were upheld.

Issue 3: Interpretation of Penalties and Legislative Intent
The Tribunal considered whether the appellants should pay the balance of penalty when they had already paid the duty liability, interest, and a portion of the penalty. The Tribunal noted that penalties under Sections 76 and 78 were confirmed due to a 2008 amendment making the sections mutually exclusive and not retrospective. Reference was made to a High Court case where it was held that penalties under Sections 76 and 78 could be seen as mutually exclusive even before the amendment.

Issue 4: Application of Section 80 of the Finance Act, 1994
The appellants argued that Section 80 of the Finance Act, 1994, which provides for penalty exemption in certain cases, should apply to them due to reasonable cause for the failure to pay Service Tax. Considering the changes in Service Tax law during the relevant period and the conduct of the appellants in depositing tax with interest and partial penalty, the Tribunal extended the benefits of Section 80 to the appellants, concluding that the penalties imposed were not sustainable.

In conclusion, the Tribunal partly allowed the appeal by setting aside the penalties imposed while confirming the Service Tax paid along with interest.