2018 (9) TMI 1366 - AT - Service Tax

Appellate Tribunal remands case for penalty reassessment under Section 78 Finance Act 1994, stresses fair hearing

The Appellate Tribunal remanded the case to the Commissioner (Appeals) for reconsideration of the penalty imposition under Section 78 of the Finance Act, ... Construction of Residential Complex Service - non-payment of service tax - Penalty - Held that:- The learned Commissioner (Appeals) has recorded the fact regarding payment of service tax amount along with interest by the respondent. Thus, he should have considered the aspect only with regard to imposition of penalty. However, in the order portion, the learned Commissioner (Appeals) has set aside the whole adjudication order and has also granted consequential relief to the respondent. Further, the learned Commissioner (Appeals) has not specifically recorded any findings with regard to invocation of the provision of Section 78 for imposition of penalty under the facts and circumstances of the case - thus, the matter should go back to the learned Commissioner (Appeals) for passing a reasoned and speaking order considering the aspect whether the penalty can be imposed on the appellant on the circumstances of the case - appeal allowed by way of remand. Issues:1. Whether the imposition of penalty under Section 78 of the Finance Act, 1994 on the appellant is justified.2. Whether the adjudication order dated 11.07.2014 confirming the service tax demand can be set aside in its entirety.Analysis:Issue 1: The respondent, engaged in providing 'Construction of Residential Complex Service,' faced proceedings for not paying the service tax. The respondent later deposited the service tax amount with interest. The department then initiated show-cause proceedings resulting in an order confirming the service tax demand and imposing a penalty under Section 78 of the Finance Act, 1994. The respondent appealed to the Commissioner (Appeals), who set aside the adjudication order. The Revenue argued that setting aside the entire order was improper since the liability to pay service tax was accepted. The Appellate Tribunal found that the Commissioner (Appeals) failed to consider only the penalty aspect, setting aside the entire order without specific findings on the penalty imposition. The matter was remanded to the Commissioner (Appeals) to pass a reasoned order on whether the penalty should be imposed, and if the adjudication order confirming the service tax demand can be set aside.Issue 2: The Appellate Tribunal noted that the Commissioner (Appeals) did not provide specific findings on the invocation of Section 78 for penalty imposition. The Tribunal opined that the matter should be reconsidered by the Commissioner (Appeals) to determine whether the penalty is justified under the circumstances. Additionally, the Tribunal raised the question of whether setting aside the adjudication order in its entirety, when the service tax demand was confirmed, was appropriate. The appeal by the Revenue was allowed for remand to the Commissioner (Appeals) to reevaluate the case, ensuring a fair hearing for the respondent before reaching a decision.In conclusion, the Appellate Tribunal directed a reconsideration of the penalty imposition under Section 78 and the setting aside of the adjudication order confirming the service tax demand. The case was remanded to the Commissioner (Appeals) for a fresh decision in line with the observations made, emphasizing the need for a fair hearing for the respondent in the process.