2011 (5) TMI 805 - AT - Service Tax

CESTAT overturns penalty under Section 76

The Appellate Tribunal CESTAT, Kolkata set aside the penalty imposed under Section 76 of the Finance Act, 1994, in a case where the appellant had already ... Imposition of multiple penalties under mutually exclusive statutory provisions - penalty under Section 76 of the Finance Act, 1994 - penalty under Section 78 of the Finance Act, 1994 - prospective operation of statutory amendment - payment of service tax with interest and penalty as a bar to a second penaltyPenalty under Section 76 of the Finance Act, 1994 - penalty under Section 78 of the Finance Act, 1994 - imposition of multiple penalties under mutually exclusive statutory provisions - Validity of imposing penalty under Section 76 where service tax with interest and penalty under Section 78 have already been paid - HELD THAT: - The Tribunal noted that the appellants had paid the service tax with interest and the penalty imposed under Section 78. Although the Department contended that, during the relevant period, penalties under both Sections 76 and 78 could be imposed and that the 2008 amendment making the provisions mutually exclusive operated only prospectively, the appellate bench observed an established practice of taking a lenient view by upholding only one of the two penalties. The Court held that where tax, interest and a penalty under one provision have been paid, imposing a second penalty is unnecessary; one penalty suffices and is adequately deterrent. Applying that reasoning, the penalty imposed under Section 76 was set aside while the penalty under Section 78, already paid by the appellants, was left intact.Penalty under Section 76 set aside; penalty under Section 78 sustained as already paid.Final Conclusion: Appeal allowed in part: penalty under Section 76 of the Finance Act, 1994 is set aside as a second penalty where service tax with interest and the penalty under Section 78 have been paid; the payment under Section 78 remains effective. Issues: Challenge on second penalty imposed under Section 76 of the Finance Act, 1994.In this judgment by the Appellate Tribunal CESTAT, Kolkata, the issue at hand was the challenge on the second penalty imposed under Section 76 of the Finance Act, 1994. The appellant had paid the Service Tax, interest, and penalty under Section 78, with the appeal limited to contesting the penalty under Section 76. The appellant argued that penalties under Sections 76 and 78 had become mutually exclusive from 2008 onwards, hence the penalty under Section 76 should be set aside. On the other hand, the Departmental Representative contended that during the relevant period, penalties under both Sections 76 and 78 could be imposed, and the 2008 amendment was prospective, not applicable to the previous period.The presiding judge, Dr. Chittaranjan Satapathy, considered the arguments from both sides and noted the Tribunal's past practice of confirming penalties under one of the two Sections, especially in light of subsequent legislative changes. Dr. Satapathy opined that imposing a penalty under one of the Sections would suffice as a deterrent for the appellants. Given that the appellants had already settled the Service Tax, interest, and penalty under Section 78, Dr. Satapathy decided to set aside the penalty imposed under Section 76, thereby allowing the appeal. This decision was pronounced and dictated in the open court.