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TMI Blog2016 (2) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... THE APPELLANT : MR GUPTA WITH MR PARESH M DAVE, ADVOCATE FOR THE OPPONENT : MR YN RAVANI, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This appeal is filed by the assessee who has been saddled with penalties under Sections 76 and 78 of the Finance Act, 1994. At the time of admission of tax appeal, the Court had framed the following question of law. Whether the authority below committed substantial error of law in issuing notice alleging violation under Section 73Q of the Finance Act, 1994 beyond the period of one year, in the absence of any finding as regards fraud, collusion, willful misstatement, suppression of fact or contravention of any provision of the Chapter or Rules made thereunder, with intent to evade payment of service tax. 2. The perusal of the question would suggest that the challenge of the assessee is against imposition of penalties on the grounds of fraud, collusion, willful misstatement, suppression of fact etc. However, at the time of hearing of this appeal, learned advocate Shri Gupta for the assessee raised additional contention that it was not open for the department to impose simultaneous penalties under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not detected by the intelligence wing and the assessee was not summoned, service tax would not have been paid. The relevant part of the operative portion of the order of the adjudicating authority reads as under: I impose penalty of ₹ 200 (Rupees two hundred only) per day or at the rate of 2% of the service tax amount per month upon them under Section 76 of the Finance Act, 1994, whichever is higher, for failure to make the payment of service tax payable by them within the stipulated time. As the actual amount of penalty could be depending on actual date of payment of service tax, however, as per section 76 of the Finance Act, 1994 penalty will be restricted to their service tax liability. I impose a penalty of ₹ 3,48,387/( Three lacs forty eight thousand three hundred eighty seven only) under Section 78 of the Finance Act, 1994 for suppressing and not disclosing the value of the said taxable services provided by them before the department within an intent to evade payment of service tax amounting to ₹ 3,48,387/. However, the amount of penalty shall be reduced to 25% of the amount of service tax, if amount of penalty is paid within 30 days of the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned DR, I find no merits in the appeal and accordingly reject the same. 4. Learned counsel Mr.Gupta contended that there was no willful misstatement or suppression of fact on the part of the assessee so as to invite penalty under Section 78 of the Finance Act, 1994. The authorities below committed an error in imposing such penalty. Mr.Gupta, however, focused greater attention on the second question of law, and contended that, in any case the authority could not have imposed simultaneous penalties under Sections 76 and 78 of the Act. He pointed out that, by amendment in Section 78, which was brought into effect from 16.05.2008, a further proviso was added providing that if the penalty is payable under Section 78, the provision of Section 76 shall not apply. Counsel submitted that though this amendment was made, post the period in question in the present case, various High Courts have held that this amendment is merely clarificatory in nature and would therefore apply to the cases arising prior in time also. 5. On the other hand, learned counsel Mr.Ravani for the department opposed the appeal. He contended that there was clear suppression on part of assessee and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: Further provided that if the penalties is payable under this section, the provisions of Section 76 shall not apply. 8. Section 76 of the Finance Act, 1994, pertains to penalty for failure to pay service tax. As it stood at the relevant time this provision provided that any person who is liable to pay service tax in accordance with the provisions of Section 68 or the Rules made under Chapter 5, but fails to pay such tax, shall pay, in addition to such tax and the interest on that tax in accordance with the provisions of Section 75, a penalty which shall not be less than one hundred rupees for every day during which such failure continues or at the rate of one per cent of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax. The proviso to Section 76 provided that the total amount of the penalty payable in terms of the said provision shall not exceed fifty per cent of the service tax payable. This Section 76 of the Finance Act, 1994, has been substantially amended with effect from 14.05.2015 to which we would make a reference at later stage. 9. It can thus be see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion, willful misstatement, suppression of facts or contravention of any of the provisions of the said Chapter or the rules made thereunder with the intent to evade payment of service tax since legislature had already provided for penalty in Section 78 in such situations. Thus further proviso to Section 78 made it explicit which was till then implicit. 12. Section 76 of the Finance Act, 1994, as is now amended with effect from 14.05.2015 gives further credence to this argument. Section 76(1) as it stands after the said amendment provides that where service tax was not levied or not paid or having been shortlevied or shortpaid, or erroneously refunded for any reason, other than the reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 or the rules made thereunder with an intent to evade the payment of service tax, the person liable shall in addition to service tax and interest also be liable to pay penalty not exceeding ten per cent of the amount of such service tax. Thus, by way of this amendment, the statute has ensured that Sections 76 and 78 of the Finance Act, 1994, apply in mutually exclusive ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time. 14. The Karnataka High Court has also taken a similar view in the case of Commissioner of Service Tax, Bangalore Vs. Motor World [ 2012(27) S.T.R.225 (Kar.) ] in which in paras 17, 18 and 19 it was observed as under: 17. This decision of the Tribunal has been affirmed by this Court in the case of CCE v. Sunitha Shetty reported in 2006 (3) S.T.R. 404 (Kar.) = 2004 (174) E.L.T. 313 (Kar.), which has been followed by this court in the case of Commissioner of Central Excise v. Royal Agencies in CEA No.4 of 2004 disposed of on 26022008. Similar views have been taken by various other High Courts. Therefore, this penalty provision being penal in nature has to be strictly considered. If two views are possible, it is that view which is beneficial to the assessee which is to be preferred. That is what has been done by the Tribunal as well as by this Court. Therefore, it is not possible to accept the contention of the revenue that less than one hundred rupees has to be considered as less than one hundred rupees for everyday. 18. Prob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this effect. Going by the nature of the amendment, it also cannot be said that this amendment is only clarificatory in nature. We may mention that Punjab and Haryana High Court in its decision dated 12th July, 2010 in STA 13/2010, entitled Commissioner of Central Excise v. M/s. Pannu Property Dealers, Ludhiana [ 2011(24) S.T.R. 173 (P*H) has taken the view that even if the scope of two sections of the Act may be different, the fact that penalty has been levied under Section 78 could be taken into account for levying or not levying penalty under Section 76 of the Act. However, that was a case where the appellate authority had exercised its discretion not to levy the penalty under Section 76 of the Act, when the larger penalty had already been imposed under Section 78 of the Act. In this scenario, the appeal of the Revenue against the said view taken by the appellate authority was dismissed holding that appellate authority was within its jurisdiction not to levy the penalty under Section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under Section 78 of the Act. This thinking was also in consonance with the amendment now incorpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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