2005 (10) TMI 279 - HC - Service Tax

Penalty - simultaneous penalty u/s 76 and 78 - Prior to amendment in section 78 vide Finance Act, 2008 - Held that The penalty imposable under section 76 is for failure to pay service-tax by the person liable to pay the same in accordance with the provisions of section 68 and the rules made thereunder, whereas section 78 relates to penalty for suppression of the value of taxable service. Of course these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But we are of opinion that the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences. There can be a situation where even without suppressing value of taxable service, the person liable to pay service-tax fails to pay. Therefore, penalty can certainly be imposed on erring persons under both the above sections, especially since the ingredients of the two offences are distinct and separate. Perhaps invoking powers under section 80 of the Finance Act, the appropriate authority could have decided not to impose penalty on the assessee if the assessee proved that there was reasonable cause for the said failure in respect of one or both of the offences. - penalties 76 and 78 can be imposed simultaneously.

Summary

Issues Involved:
1. Payment of service-tax, interest, and penalty under the Finance Act, 1994.
2. Validity of the imposition of penalties under sections 76 and 78 of the Finance Act, 1994.
3. Jurisdiction of the High Court under Article 226 of the Constitution of India to entertain appeals dismissed on the ground of limitation.

Issue-wise Detailed Analysis:

1. Payment of Service-Tax, Interest, and Penalty:
The matter pertains to the payment of service-tax, interest, and penalty under the Finance Act, 1994. The revenue issued show-cause notices to the respondents for non-payment of service-tax amounting to Rs. 27,425 and Rs. 33,450, respectively, along with applicable interest under section 75 and penalties under sections 76 and 78. The respondents' appeals were dismissed by the Commissioner (Appeals) due to being filed beyond the period prescribed under section 85(3) of the Finance Act, 1994, with no power to condone the delay. Consequently, the respondents filed writ petitions challenging the orders, which led to the present appeals.

2. Validity of the Imposition of Penalties under Sections 76 and 78:
The learned single Judge confirmed the demand for service-tax and interest under section 75, and the penalty under section 78, but directed the withdrawal of the penalty under section 76. The revenue argued that penalties under sections 76 and 78 are for distinct and separate offenses: non-payment of service-tax and suppression of the value of taxable service, respectively. The respondents contended that the offenses arose from the same transaction, constituting only one offense, making the imposition of both penalties unwarranted. The court rejected the respondents' argument, stating that the incidents of imposition of penalties are distinct and separate, and penalties under both sections are imposable even if arising from the same transaction.

3. Jurisdiction of the High Court under Article 226:
The court held that the respondents, having failed to file appeals within the prescribed period under section 85(3), could not revive their appeals through the discretionary remedy under Article 226 of the Constitution. The court emphasized that entertaining such contentions would negate the law of limitation. The court cited the Supreme Court's decision in CST v. Parson Tools & Plants, emphasizing that statutory periods of limitation must be adhered to and cannot be extended by the courts.

Conclusion:
The court concluded that the respondents could not challenge the imposition of penalties on merits due to the limitation prescribed under section 85(3). The judgment of the learned single Judge directing the withdrawal of the penalty under section 76 was set aside. The writ petitions were dismissed, and no order as to costs was made.