2015 (11) TMI 52 - AT - Service Tax

Tribunal clarifies penalty calculation for service tax, leaves Section 78 amendment issue open for future.

M/s. R.K. Enterprises Versus Commissioner of Service Tax, Cell Pune And Vice-Versa

The tribunal allowed the assessee's appeal, dismissing the Revenue's appeal. The tribunal clarified that the penalty should be 25% of the service tax ... Penalty u/s 78 - Adjustment of excess payment of service tax with penalty - Whether the adjudicating authority holding imposition of penalty of 25% of the penalty (50% of service tax amount) is correct and legal - Held that:- in the adjudication order the adjudicating authority has by mistake stated that 25% of the penalty (50% of the Service tax amount) whereas it is observed that there is no such provision under any statute for imposition of penalty of 25% of the penalty amount. - It is seen that against Revenue’s claim of ₹ 32,63,189/- the assessee has paid total amount of ₹ 35,33,189/- which is much higher than amount required to be paid. Only point is that assessee has paid excess amount of Service tax which in my considered view should be considered and adjusted against the short payment of penalty. However, Ld. Counsel has fairly agreed that they under take not to claim any refund if any amount found to be paid in excess. In view of the above position, I agree with the contention of the Ld. Counsel that the assessee has paid excess amount in to as compared to total amount required to be paid as per the revenue. Therefore, I do not find any reason to demand any further amount form the assessee. - Appeal disposed of. Issues Involved:1. Legality of the imposition of penalty of 25% of the penalty amount (50% of the service tax amount).2. Applicability of the amended provision of Section 78 for imposing a 50% penalty.3. Consideration of excess service tax payment against shortfall in penalty and interest.Detailed Analysis:1. Legality of the Imposition of Penalty of 25% of the Penalty Amount (50% of the Service Tax Amount):The adjudicating authority's order initially imposed a penalty of 25% of the penalty amount, which equates to 50% of the service tax amount. However, it was identified that there is no statutory provision for imposing a penalty of 25% of the penalty amount. The relevant provision under Section 78 of the Finance Act, 1994, stipulates that the penalty shall be 25% of the service tax amount, not the penalty amount. This was deemed an 'apparent error,' and the assessee could not benefit from this mistake. The correct interpretation should be 25% of the service tax amount, not the penalty.2. Applicability of the Amended Provision of Section 78 for Imposing a 50% Penalty:The adjudicating authority and the Commissioner (Appeals) invoked the amended provision of Section 78, which provides for a 50% penalty. The Revenue contended that the period of non-payment was prior to the amendment of Section 78, and thus, the unamended Section 78 should apply. According to the Revenue, the saving clause under Section 38A of the Central Excise Act should have been invoked, and a 100% penalty should have been imposed. However, the tribunal did not conclusively resolve whether the amended or unamended Section 78 should apply, leaving this issue open for future consideration.3. Consideration of Excess Service Tax Payment Against Shortfall in Penalty and Interest:The assessee argued that they had paid an excess amount of service tax, which should be adjusted against the shortfall in penalty and interest. The tribunal found that the assessee had indeed paid a total amount of Rs. 39,12,417/-, which exceeded the Revenue's claim of Rs. 35,33,189/-. The tribunal agreed that the excess payment should be considered and adjusted against the short payment of penalty. The assessee also undertook not to claim any refund for any excess amount paid. Consequently, the tribunal found no reason to demand any further amount from the assessee.Conclusion:The tribunal allowed the appeal of the assessee and dismissed the appeal of the Revenue, subject to verification by the adjudicating authority on the quantification of the amounts paid. If the data submitted by the assessee was found incorrect, the adjudicating authority was free to re-adjudicate the matter. The issue of whether the amended or unamended provisions of Section 78 should apply was left unresolved.Disposition:The appeals were disposed of in the above terms, allowing the appeal of the assessee and dismissing the appeal of the Revenue.