2009 (8) TMI 408 - AT - Service Tax

Commissioner to Reconsider Penalties for Fair Decision

The Tribunal directed the Commissioner to consider limiting the penalty under section 78 of the Finance Act, 1994, in line with previous decisions and ... Penalty- Suppression- The appellant deposited service tax with interest before issuance of Show cause Notice. Held that- remanding the matter to the Commissioner (Appeals) for re-examination on the quantum of penalty. Issues:1. Penalty under section 78 of the Finance Act, 1994 for non-disputed service tax liability.2. Quantum of penalty under section 76 of the Finance Act, 1994.Analysis:1. The appellant contended that they had paid the service tax with interest before the show-cause notice was issued, thus arguing against a harsh penalty under section 78 of the Finance Act, 1994. The appellant did not dispute the service tax liability. The Tribunal acknowledged the appellant's hardship and referred to a previous court decision in the case of K.P. Pouches (P.) Ltd. v. Union of India, highlighting the applicability of the decision's ratio under section 78 of the Finance Act, 1994. The Tribunal emphasized the need for the Commissioner to consider granting an appropriate option under the law to limit the penalty, similar to the provisions of section 11AC of the Central Excise Act, 1944, to mitigate the appellant's hardship. The Tribunal cited its own previous decision in Bajaj Travels v. CCE, supporting the approach based on the Delhi High Court's ruling in the K.P. Pouches case, and directed the Commissioner to consider limiting the penalty under section 78 accordingly.2. Regarding the grievance of the appellant concerning penalty under section 76 of the Finance Act, 1994, the Tribunal refrained from expressing an opinion at that stage. The matter was remanded to the learned Commissioner (Appeals) for re-examination of the quantum of penalty under section 76. The Commissioner was instructed to determine the necessity of imposing a penalty under section 76, ensuring the appellant's right to a fair hearing and a reasoned order. The Tribunal specified that the remand was limited to the issue of penalty under section 76, indicating that a thorough re-examination was required to reach a just outcome.