2008 (10) TMI 232 - HC - Service Tax

Tribunal upholds penalty under Finance Act, Revisional Authority's decision affirmed by High Court

The appeal was dismissed as the Tribunal upheld the decision regarding penalty enhancement under Section 76 of the Finance Act, 1994. The Tribunal found ... Quantum of penalty – section 76 – cestat set aside the revision order for enhancing the penalty – department contended that there was no reasonable cause of waiver of penalty under section 80 – held that - It is not disputed that under Section 76 of the Finance Act, 1994, penalty for delay in service tax cannot exceed the amount of service tax which the assessee is liable to pay - the view taken by the Revisional Authority is the only possible view - No substantial question arises for consideration – revenue appeal dismissed Issues:1. Appeal under Section 35(G) of the Central Excise Act, 1944 against the order passed by the Customs Excise & Service Tax Appellate Tribunal2. Imposition of penalty for delay in payment of service tax exceeding the amount of tax3. Interpretation of Section 76 of the Finance Act, 1994 regarding the maximum penalty for failure to collect or pay service taxAnalysis:1. The appeal was filed by the Revenue against the order of the Customs Excise & Service Tax Appellate Tribunal, challenging the setting aside of the penalty enhancement under Section 76 of the Finance Act, 1994. The Tribunal dismissed the appeal based on the judgment of the Karnataka High Court in a similar case. The Tribunal's decision was upheld, stating that no reasonable cause for waiver of penalty under Section 80 of the Finance Act, 1994, was presented by the respondent. The Revenue's appeal was subsequently dismissed.2. The case involved an assessee liable for service tax on insurance and auxiliary services. A show cause notice was issued due to a delay in tax payment, resulting in the imposition of a penalty exceeding the tax amount. The Adjudicating Authority imposed a penalty of Rs. 200 per day, which was deemed excessive as it surpassed the tax amount. The Revisional Authority reduced the penalty to Rs. 10,167 for a 129-day delay, equivalent to 100% of the service tax. The Tribunal's decision was based on the principle that the penalty for delay in service tax cannot exceed the actual tax amount, as per Section 76 of the Finance Act, 1994.3. Section 76 of the Finance Act, 1994, specifies the penalty for failure to collect or pay service tax, capping the penalty at the amount of service tax unpaid. The Revisional Authority's decision aligns with this provision, as confirmed by the High Court. The judgment emphasized that the penalty imposed must not exceed the service tax liability. Therefore, the Tribunal's reliance on the Karnataka High Court's judgment was considered appropriate, and no substantial question for consideration arose. Consequently, the appeal was dismissed, affirming the Revisional Authority's decision and the interpretation of Section 76 of the Finance Act, 1994.