2020 (1) TMI 845 - HC - Service Tax

Appellant denied reduced penalty for late payment under Finance Act, 1994.

The High Court upheld the Customs, Excise and Service Tax Appellate Tribunal's decision, ruling that the appellant was not entitled to pay a reduced ... Benefit of reduced penalty u/s 78 - failure to pay within stipulated time - service tax and interest has already and duly been paid even before issuance of the show cause notice - Appellant had also sought option to pay 25% (reduced) mandatory penalty under Section 78 of the Act as the said option was not given to the appellant at the lower levels - HELD THAT:- In the present case, the appellant had failed to deposit 25% of the imposed penalty before the issuance of show cause notice or within 30 days of finalization of demand by the adjudicating authority - learned tribunal rightly came to the conclusion that appellant could not be granted option to pay 25% (reduced) mandatory penalty under Section 78 of the Act. Appeal dismissed. Issues:1. Challenge to order passed by Customs, Excise and Service Tax Appellate Tribunal.2. Imposition of penalty under Section 78 of the Finance Act, 1994.3. Relevance of previous decisions in the present case.4. Justification of imposing penalty under Section 78 of the Finance Act, 1994.Issue 1: Challenge to Tribunal's OrderThe appellant challenged the order dated 05.05.2016 passed by the Customs, Excise and Service Tax Appellate Tribunal. The substantial questions of law framed included the imposition of penalties under Section 78 of the Finance Act, 1994, even though the service tax and interest had been paid before the issuance of the show cause notice. The appellant contended that the penalty imposed under Sections 77 and 78 should be set aside due to timely payment of taxes.Issue 2: Imposition of PenaltyThe appellant had paid the service tax and interest for the disputed period before the show cause notice was issued. However, the respondent argued that the appellant failed to deposit 25% of the imposed penalty as required by Section 78 of the Act. The tribunal dismissed the appellant's claim for reduced penalty under Section 78 due to this failure, leading to the conclusion that the appellant was not entitled to the option of paying the reduced mandatory penalty.Issue 3: Relevance of Previous DecisionsThe appellant argued that the decisions cited by the tribunal were not relevant to the present case. However, the tribunal relied on precedents to support its decision regarding the imposition of penalties under the Finance Act, 1994. The judgments from the Gujarat High Court and the Allahabad High Court highlighted the requirement to pay penalties within the specified time frame to avail the benefit of reduced penalties.Issue 4: Justification of Penalty ImpositionThe tribunal examined the facts of the case, where the appellant had paid the service tax and interest for the disputed period but failed to deposit 25% of the penalty amount as required by law. Consequently, the tribunal upheld the decision to dismiss the appellant's claim for reduced penalty under Section 78 of the Act. The tribunal found that the appellant did not meet the conditions for availing the option of paying the reduced mandatory penalty.In conclusion, the High Court upheld the tribunal's decision, stating that the appellant could not be granted the option to pay the reduced penalty under Section 78 of the Finance Act, 1994, due to the failure to deposit the required percentage of the penalty amount within the specified time frame. The substantial questions of law were answered accordingly, and the appeal was dismissed.