2010 (2) TMI 201 - AT - Service Tax

Tribunal rules penalty under Finance Act not applicable. Amendments render penalties under Sections 76 & 78 mutually exclusive.

The tribunal found that Section 73(3) of the Finance Act did not apply as only part of the tax was paid before the notice, leading to the imposition of a ... Penalty of late deposit of service tax – service tax amount deposited partly before before issue of the show-cause notice and partly before conclusion of the adjudication proceedings – interest was not deposited – penalty under section 76 was confirmed – penalty u/s 78 waived Issues:1. Application of Section 73(3) of the Finance Act, 19942. Imposition of penalty under Sections 76 & 78 of the Finance Act, 1994Analysis:1. The advocate for the appellants argued that the service tax amount had been partly paid before the show-cause notice and the remaining during adjudication proceedings. He contended that Section 73(3) should apply, and no penalty should be imposed. The advocate also agreed to pay the interest immediately. On the other hand, the department representative stated that since the full amount was not paid before the notice, Section 73(3) benefit should not be allowed, and penalties under Sections 76 & 78 were justified. The tribunal found that only part of the tax was paid before the notice, and the interest remained unpaid. Consequently, Section 73(3) could not apply. However, the tribunal deemed that a penalty under Section 76 was appropriate in the circumstances, while no separate penalty under Section 78 was necessary. The tribunal noted that the subsequent amendment made penalties under Sections 76 & 78 mutually exclusive, setting aside the penalty under Section 78 and directing the appellants to pay the interest promptly as promised by the advocate.2. The tribunal allowed the appeal based on the above findings, emphasizing the imposition of a penalty under Section 76 and the setting aside of the penalty under Section 78. The decision was dictated and pronounced in open court by the Technical Member, Dr. Chittaranjan Satapathy.