2017 (9) TMI 419 - AT - Service Tax

Tribunal modifies penalties for tax evasion, clarifies retrospective application, emphasizes appellate discretion

The Tribunal allowed the appeal partly, dropping the penalty under section 76 for evasion post 10.5.2008 but sustaining penalties under sections 76 and 78 ... Simultaneous Penalties u/s 76 and 78 - evasion of service tax conducted after 10.5.2008 - case of appellant is that the penalties under both Sections 76 and 78 cannot be imposed simultaneously for the period prior to 10.5.2008 when the amendment was made in the Section 78 of the Finance Act stating that where penalty is payable under Section 78, the provision of Section 76 shall not apply - Held that: - for the offence of evasion of service tax for the period after cut off date of 10.5.2008, only one penalty i.e. under section 78 can be imposed. Therefore, the penalty imposed under section 76 for the tax evaded for the period post 10.5.2008 only is hereby dropped but for the period prior to 10.5.2008 penalties imposed under both Sections 76 and 78 are sustained. As the facts do not make it clear that how much / what is exact quantification of the tax evaded separately for these two periods i.e. prior to 10.5.2008 and post 10.05.08, the matter is remanded to the original adjudicating authority for quantification of the tax demand for these two periods - appeal allowed by way of remand. Issues Involved:Appeal against service tax recovery, penalties under sections 76 and 78 of the Finance Act, imposition of penalties under both sections simultaneously, retrospective application of penalty provisions, quantification of tax evasion for different periods.Detailed Analysis:1. Service Tax Recovery and Penalties:The appellant, M/s. Babulal Parihar, appealed against an order confirming the recovery of service tax amounting to Rs. 23,81,774 along with interest, and the imposition of penalties under sections 76 and 78 of the Finance Act. The Department found that the appellant was providing services not included in their registered services, leading to the demand for service tax on services like commercial or industrial construction service and supply of tangible goods service. The appellant contested mainly the penalties imposed, arguing that penalties under both sections cannot be imposed simultaneously for the period before 10.5.2008. The Tribunal considered the submissions and relevant legal precedents to address this issue.2. Imposition of Penalties under Sections 76 and 78:The appellant argued that penalties under both sections 76 and 78 of the Finance Act cannot be imposed simultaneously for the period before 10.5.2008, citing the amendment in Section 78 post that date. The Tribunal referred to decisions by the High Courts of Kerala and Delhi, which held that penalties under both sections could be imposed separately even if offenses arise from the same transaction. However, the Tribunal noted that post the amendment, only one penalty under section 78 could be imposed for evasion of service tax after 10.5.2008. Thus, the penalty under section 76 for evasion post that date was dropped, while penalties under both sections were sustained for the period before 10.5.2008.3. Retrospective Application of Penalty Provisions:The Tribunal clarified that the amendment barring simultaneous penalties under sections 76 and 78 from 10.5.2008 operated prospectively. It emphasized that the nature of the amendment did not allow retrospective application. The Tribunal highlighted a case where the appellate authority had discretion not to levy penalty under section 76 when a larger penalty was imposed under section 78, indicating the application of penalties based on specific circumstances and legal provisions.4. Quantification of Tax Evasion for Different Periods:As the exact quantification of tax evaded for the periods before and after 10.5.2008 was not clear from the facts presented, the matter was remanded to the original adjudicating authority. The Tribunal directed the authority to quantify the tax demand for these two periods separately after providing the appellant with a personal hearing. The decision modified the impugned order accordingly and allowed the appeal partly with the remand for quantification of penalties.In conclusion, the Tribunal's judgment addressed the issues of service tax recovery, imposition of penalties under sections 76 and 78, retrospective application of penalty provisions, and the quantification of tax evasion for different periods, providing a detailed analysis based on legal arguments and precedents.