2021 (7) TMI 68 - HC - Service Tax

High Court orders fresh penalty review, stresses importance of detailed reasoning

The High Court remanded the case to the Assistant Commissioner for a fresh adjudication on the penalty issue, finding the decisions of the lower ... Validity of SCN - Levy of penalty - Extended Period of limitation - service tax collected but not paid - entire service tax along with interest was paid before issue of SCN - Penalty u/s 76, 77 and 78 - proviso to section 73(1) of Finance Act - HELD THAT:-The tribunal has affirmed the order passed by the Commissioner of Central Excise (Appeals) by a cryptic order, which reads as under: The impugned order passed by the Commissioner is justified because in this case the appellant has collected the service tax but did not deposit the same in the Govt Treasury which itself shows that there was malafide intention to evade payment of service tax. The appellant was registered with the Service Tax Department and was very well aware of their liability to pay service tax to the Govt. The appellant has not been able to give any reasonable explanation as to why the service tax was not deposited in the Govt. Treasury. It is evident that neither Commissioner of Central Excise (Appeals) nor the tribunal have considered the submissions made on behalf of the appellant and by a cryptic and cavalier manner have decided the appeals - the impugned orders passed by Assistant Commissioner, Commissioner of Central Excise (Appeals) and the tribunal therefore, cannot be sustained in the eye of law - the matter is remitted to the Assistant Commissioner to afford an opportunity of hearing to the appellant and to adjudicate the issue with regard to issue of penalty afresh. Appeal allowed by way of remand. Issues involved:1. Validity of show cause notice when service tax along with interest was paid before issuance of notice.2. Justification of penalties imposed under various sections of the Act.3. Imposition of penalty under sections 76 and 78 of the Act.4. Validity of show cause notice invoking extended period of limitation.Issue 1:The appellant contended that the show cause notice was invalid as the entire service tax along with interest had been paid before the notice was issued. The appellant argued that penalties should be waived as per Section 73(3) of the Finance Act, 1994. The Commissioner of Central Excise (Appeals) upheld the penalties, stating that the appellant had collected but not deposited the service tax, which was a serious offense. The tribunal affirmed this decision, emphasizing that the appellant's failure to deposit the tax showed an intent to evade payment. However, the High Court found the decisions of the lower authorities lacking in proper consideration of the appellant's submissions and remanded the matter to the Assistant Commissioner for a fresh adjudication on the issue of penalty.Issue 2:The penalties imposed under sections 76, 77, and 78 of the Act were challenged by the appellant. The Commissioner of Central Excise (Appeals) upheld the penalties, citing the appellant's collection of service tax without depositing it as a grave offense warranting penalties. The tribunal also supported this view, stating that the appellant's awareness of the tax liability and failure to deposit the tax indicated malafide intent. However, the High Court found the decisions lacking proper consideration of the appellant's arguments and remanded the matter for fresh adjudication on the penalty issue.Issue 3:The appellant argued that penalties under sections 76 and 78 of the Act should not be imposed. The Commissioner of Central Excise (Appeals) and the tribunal upheld the penalties, emphasizing the seriousness of the offense where service tax was collected but not paid. The High Court found the decisions lacking in detailed consideration of the appellant's submissions and remanded the matter for a fresh adjudication on the penalty issue, without definitively addressing the question of imposing penalties under sections 76 and 78.Issue 4:The validity of the show cause notice invoking the extended period of limitation under the proviso to section 73(1) of the Act was questioned. The appellant argued that the notice was invalid, while the respondent contended that the notice was justified due to the appellant's failure to deposit the service tax. The lower authorities upheld the validity of the notice, citing the appellant's collection of service tax without depositing it. However, the High Court found the decisions lacking in proper consideration of the appellant's arguments and remanded the matter for a fresh adjudication, without definitively addressing the validity of the notice.In conclusion, the High Court remanded the case to the Assistant Commissioner for a fresh adjudication on the penalty issue, as it found the decisions of the lower authorities lacking in detailed consideration of the appellant's submissions. The Court emphasized the importance of proper reasoning and consideration of all arguments in such matters, indicating that penalties should be imposed judiciously and in accordance with the law.