2014 (6) TMI 276 - AT - Service Tax

Prospective Application of Finance Act Proviso: Penalties Imposable Simultaneously

The Tribunal held that the proviso in Section 78 of the Finance Act, 1994, had prospective operation only, penalties under Sections 76 and 78 could be ... Levy of penalty simultaneously under Section 76 and as well as under Section 78 - amendment in Section 78 by way of insertion of the proviso with effect from 10.05.2008 - Held that:- Section 78 of the Act has been amended by the Finance Act, 2008 and the amendment provides that in case where penalty for suppressing the value of taxable service under Section 78 is imposed, the penalty for failure to pay service tax under Section 76 shall not apply. With this amendment the legal position now is that simultaneous penalties under both Section 76 and 78 of the Act would not be levied. However, since this amendment has come into force w.e.f. 16th May, 2008, it cannot have retrospective operation in the absence of any specific stipulation to this effect. Going by the nature of the amendment, it also cannot be said that this amendment is only clarificatory in nature. - penalties under both Sections 76 and 78 were imposable simultaneously on the respondents for failure to pay service tax for the period prior to 10.05.2008 although show cause notices were issued to them in the year 2010/2011. - Decided in favor of revenue. Regarding monetary limit for filing appeal - Held that:- Amount of service tax evasion in each case is less than the monetary limit of five lac rupees. Appeals in these four cases were filed by the Revenue on 05.12.2012 when the CBEC Circular F. No. 390/ Misc./ 163/ 2010-JC dated 17.08.2011 was in force, which directed the field formations not to file appeals before the CESTAT where the amount involved is up to five lac rupees. Obviously, the Revenue should not have filed any appeal against these four persons, as the directions contained in CBEC circulars are binding on Departmental Officers - Decided against the revenue. Issues Involved:1. Retrospective operation of the proviso inserted in Section 78 of the Finance Act, 1994.2. Simultaneous imposition of penalties under Sections 76 and 78 for failure to pay service tax for the period prior to 10.05.2008.3. Maintainability of Revenue's appeals involving service tax evasion up to five lakh rupees in view of CBEC Circular F. No. 390/ Misc./ 163/ 2010-JC dated 17.08.2011.Issue-wise Detailed Analysis:Issue I: Retrospective Operation of Proviso in Section 78The question was whether the proviso inserted in Section 78 of the Finance Act, 1994, effective from 10.05.2008, had retrospective operation. The judgment referenced the Supreme Court's decision in Commissioner of Central Excise Vs. Elgi Equipments Ltd. [2001 (128) ELT 52 (S.C.)], which held that Section 11AC of the Central Excise Act, 1944, was prospective in operation and could not be applied to penalties for actions committed prior to its enactment. Similarly, the Bombay High Court in Commissioner of Central Excise, Mumbai-V Vs. M/s OTIS Elevator Co. (I) Ltd. held that Section 11AC being a penal provision could not have retrospective operation. The Delhi High Court in Bajaj Travels Ltd. Vs. Commissioner of Service Tax [2012 (25) STR 417 (Del.)] also held that the amendment to Section 78 was not retrospective. Based on these precedents, the Tribunal concluded that the proviso in Section 78 had prospective operation only.Issue II: Simultaneous Penalties under Sections 76 and 78The Tribunal examined whether penalties under Sections 76 and 78 could be imposed simultaneously for failure to pay service tax for the period prior to 10.05.2008. The Kerala High Court in Assistant Commissioner Vs. Krishna Poduval [2006 (1) STR 184 (Ker.)] held that penalties under Sections 76 and 78 were for distinct and separate offences and could be imposed simultaneously. The Delhi High Court in Bajaj Travels Ltd. Vs. Commissioner of Service Tax [2012 (25) STR 417 (Del.)] concurred, stating that Sections 76 and 78 operated in different fields and penalties under both sections were permissible. Consequently, the Tribunal held that simultaneous penalties under Sections 76 and 78 were imposable for the period prior to 10.05.2008.Issue III: Maintainability of Revenue's AppealsThe Tribunal addressed the maintainability of Revenue's appeals in cases where the service tax evasion involved was up to five lakh rupees, in light of the CBEC Circular F. No. 390/ Misc./ 163/ 2010-JC dated 17.08.2011. This circular directed field formations not to file appeals where the amount involved was up to five lakh rupees. The Tribunal noted that out of the five appeals under consideration, only one involved evasion exceeding five lakh rupees. The remaining four appeals, where the evasion was less than five lakh rupees, were filed when the circular was in force. The Tribunal cited the binding nature of CBEC circulars on Departmental officers and referenced its own decision in CST Ahmedabad vs. Gala Gymkhana Pvt Ltd (Appeal No. ST/34/2011), holding that the appeals in these four cases were not maintainable.Conclusion:The Tribunal allowed Appeal No. ST/ 512/ 2012 and dismissed Appeal Nos. ST/ 441/ 2012, ST/ 440/ 2012, ST/ 439/ 2012, and ST/ 438/ 2012, based on the above observations.