Appeal partly allowed, appellant can discharge 25% penalty under Finance Act, 1994. Upheld penalty for failure to pay service tax.

The appeal was partly allowed, granting the appellant the opportunity to discharge 25% of the penalty under Section 78 of the Finance Act, 1994, upon fulfilling specified conditions. The Tribunal upheld the penalty for failure to pay service tax despite providing taxable services and not disclosing them to the tax authorities. The appellant's prompt payment after being informed was considered, leading to the modification of the order to allow the appellant to avail the 25% penalty discharge benefit.

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Issues:
1. Liability of penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appeal was filed against the order-in-appeal passed by the Commissioner of Central Excise (Appeals), Pune-II. The main issue in this case was whether the appellant was liable to penalty under Section 78 of the Finance Act, 1994. The appellant provided services under the taxable category of 'supply of tangible goods for use of services' by supplying dozers and tippers to clients but failed to pay service tax amounting to Rs. 16,43,785/- for the period from 16.5.2008 to 31.3.2011. The appellant paid the service tax along with interest after it was pointed out. The appellant argued that since they had paid the entire service tax with interest, penalty under Section 78 should not be imposed.

The appellant did not dispute the applicability of service tax but contested the imposition of penalty equivalent to the service tax under Section 78 of the Finance Act, 1994. The appellant claimed they were unaware of the applicability of service tax for the provided services and paid the outstanding amount promptly after being informed. The Revenue argued that the continuous non-payment of service tax for three years without disclosure cannot be considered bona fide, justifying the penalty imposition. However, the Revenue acknowledged that the appellant was not granted the benefit of discharging 25% of the penalty by the authorities below.

The Tribunal found that the appellant indeed failed to discharge the service tax during the relevant period, despite providing taxable services. The appellant did not disclose the provision of services to the department or register with the Service Tax department. Consequently, the Tribunal upheld the penalty under Section 78 of the Finance Act, 1994. However, the Tribunal allowed the appellant to discharge 25% of the penalty, subject to fulfilling the conditions laid down in the Act. The impugned order was modified to permit the appellant to avail this benefit, resulting in the partial allowance of the appeal.

In conclusion, the appeal was partly allowed, and the appellant was granted the opportunity to discharge 25% of the penalty under Section 78 of the Finance Act, 1994, upon meeting the specified conditions.

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