2011 (2) TMI 419 - AT - Service Tax

Tribunal Upholds Service Tax Demand, Reduces Penalty, Stresses Statutory Compliance

CCE, PONDICHERRY Versus M/s AMMAA TRADERS

The Tribunal rejected the appeal, affirming the decision of the Commissioner (A) to uphold the service tax demand and interest, while setting aside ... Penalty - Reduced rate of penalty u/s 78 - Board in Circular No. 137/167/06-CX.4 dated 3.10.07 - The instruction of the Board dated 31.10.07, sought to be relied upon by the department, is in the context of concluding proceedings on payment of service tax, interest and 25% of the amount as penalty on issue of show cause notice - Proviso to Section 78 clearly provides for payment of concessional penalty if the duty and interest “determined” by the authorities are paid within 30 days - it is noticed that the original authority has not given the option to pay the reduced penalty - There is no specific prayer for restoration of penalty under Section 76 & 77 - Revenue appeal dismissed. Issues:Service tax demand confirmation, penalty imposition under different sections, applicability of concessional penalty, restoration of penalties under Sections 76 & 77, interpretation of relevant circulars and instructions, justification for separate penalties.Analysis:The judgment pertains to a case where the original authority confirmed a service tax demand of Rs.2,61,768/- with interest for a specific period and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant appealed to the Commissioner (A), who upheld the service tax demand and interest but set aside the penalties under Sections 76 & 77, reducing the penalty under Section 78 to 25% of the original amount imposed. The issue arose regarding the applicability of concessional penalty under proviso to Section 78 and the restoration of penalties under Sections 76 & 77.The appellant contended that they were entitled to the concessional penalty under Section 78 proviso, while the department argued that the benefit could not be extended due to non-payment within the stipulated time. The Circular No. 137/167/06-CX.4 was cited as providing guidelines on the implementation of relevant sections of the Finance Act, 1994. The Commissioner (A) decision was supported by the appellant's representative, emphasizing that imposition of penalties under different sections was unjustified.Upon careful consideration, the Tribunal noted that the original authority did not provide the option to pay the reduced penalty as per the proviso to Section 78. The decision of the Commissioner (A) to extend this option was deemed appropriate, citing the precedent of the Hon'ble High Court of Delhi in a similar case. The absence of a specific prayer for restoration of penalties under Sections 76 & 77 was highlighted, with the Tribunal finding no justification for a separate penalty under Section 76 when penalties under Section 78 were already imposed and upheld.Ultimately, the Tribunal rejected the appeal, affirming the decision of the Commissioner (A) and emphasizing the importance of following statutory provisions and relevant legal precedents in matters of penalty imposition and applicability of concessional penalties.(Order pronounced and dictated in the open Court)