Appellate Tribunal CESTAT decision: Service tax upheld, penalty under Section 76 improper, case remanded for proper computation.

The Appellate Tribunal CESTAT NEW DELHI upheld the service tax demand and interest but deemed the penalty imposition under Section 76 of the Finance Act, 1994 improper. The case was remanded for the proper computation of the penalty amount under the un-amended provisions of Section 76, as an equal amount of penalty was not specifically provided for by the statute. The appeal was disposed of, with the original authority instructed to revisit and accurately quantify the penalty amount.

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Issues: Service tax liability non-payment, interest and penalty imposition, proper computation of penalty

In the judgment delivered by the Appellate Tribunal CESTAT NEW DELHI, the appeal was directed against an order upholding the service tax demand, interest, and penalty confirmed by the Commissioner (Appeals). The appellant failed to pay service tax dues for a specific period, leading to the confirmed demand. The appellant argued that due to inadvertence, it did not reverse its Cenvat account within the stipulated time for discharging the tax liability, asserting that the available Cenvat credit balance should suffice. The Revenue, on the other hand, supported the findings of the impugned order.

Upon examination, it was found that the service tax liability was not discharged within the prescribed time, resulting in automatic interest liability as per Rule 6 of the Service Tax Rules, 1994. The confirmation of interest liability was deemed in accordance with statutory provisions. However, the imposition of an equal amount of penalty under Section 76 of the Finance Act, 1994 was deemed improper. The statute mandates penalties for non-payment of service tax within the stipulated time, with specific criteria for penalty calculation. As there was no specific provision allowing for an equal amount of penalty, the order imposing such a penalty was considered unsustainable. The case was remanded back to the original authority for the proper computation of the penalty amount under the un-amended provisions of Section 76.

Consequently, the impugned order was confirmed regarding the service tax demand and interest, but the computation of the penalty under Section 76 was deemed necessary to be revisited by the original authority for accurate quantification. The appeal was disposed of accordingly, with the matter referred back for the precise determination of the penalty amount.

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