2022 (12) TMI 1334 - AT - Service Tax

Tribunal overturns penalties under Finance Act, clarifies penalty application

Colour Boy Versus C.C.E. & S.T. -Rajkot

The Tribunal allowed the appeal, setting aside penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994. It was held that penalties under ... Imposition of penalty under Section 76,77 and 78 of the Finance Act, 1994 - benefit of Section 80 of FA - HELD THAT- It is seen that the Hon’ble High Court of Punjab & Haryana in the case of CCE VERSUS FIRST FLIGHT COURIER LTD. [2011 (1) TMI 52 - PUNJAB AND HARYANA HIGH COURT] has observed that Section 76 provides for penalty for failure to pay the amount while Section 78 provides for penalty for suppressing the taxable value. Section 78 is, thus, more comprehensive and provides for higher amount. Even if technically, the scope of sections 76 and 78 is different, penalty under Section 76 may not be justified if penalty had already been imposed under Section 78. In view of that penalty under both Section 76 and Section 78 cannot be imposed simultaneously. Moreover, it is seen that the penalty under section 77 has been imposed for an offence pertaining largely to period prior to removal of limit of Rs one thousand from Section 77 (w.e.f 10.05.2008. In view of this respect the penalty under section 77 is also not sustainable. It is also noticed that the appellant has paid service tax before issue of SCN. The issue of taxability of stadium under CICS The matter of dispute at the material time. Keeping in view the above facts invoking Section 80, the impugned penalty under section 76,77 and 78 are set aside - appeal allowed. Issues:Appeal against imposition of penalty under Sections 76, 77 & 78 of the Finance Act, 1994.Analysis:1. Imposition of Penalty under Sections 76, 77 & 78:The appellant, engaged in providing services in the category of CICS, contested the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant argued that the failure to pay service tax was due to ignorance and confusion, seeking relief under Section 80 of the Finance Act, 1994. The counsel highlighted that penalties under Sections 76 and 78 cannot be imposed simultaneously, citing a relevant High Court case. Additionally, the amendment to Section 77 post 10.05.2008 was discussed, questioning the sustainability of penalties imposed under this section for the period in dispute.2. Judicial Consideration:The Tribunal considered the rival submissions and noted that while the demand for service tax was confirmed, the lower authority was directed to grant the benefit of a specific notification, which was not challenged by the appellant. The appellant solely contested the imposition of penalties under Sections 76, 77, and 78. Referring to a High Court case, the Tribunal emphasized the distinction between penalties under Sections 76 and 78, stating that penalty under Section 76 may not be justified if penalty under Section 78 has already been imposed. The Tribunal dismissed the appeal, concluding that penalties under both Sections 76 and 78 cannot be imposed simultaneously.3. Sustainability of Penalty under Section 77:The Tribunal further analyzed the penalty imposed under Section 77, noting that it pertained largely to a period before the removal of the monetary limit from this section. Considering that the appellant had paid the service tax before the issuance of the show-cause notice and the issue of taxability of the stadium under CICS was in dispute, the Tribunal found the penalty under Section 77 unsustainable.4. Decision and Relief Granted:In light of the above considerations, invoking Section 80, the Tribunal set aside the penalties imposed under Sections 76, 77, and 78. The appeal was allowed to that extent, and the penalties were revoked. The judgment emphasized that penalties under Sections 76 and 78 cannot be imposed simultaneously, and the penalty under Section 77 was deemed unsustainable for the relevant period.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the imposition of penalties under various sections of the Finance Act, 1994.