2010 (7) TMI 255 - HC - Service Tax

Deletion of s.76 penalty upheld where identical s.78 penalty already imposed; s.78 levy may inform s.76 decision

Commissioner of Central Excise Versus M/s. Pannu Property Dealers, Ludhiana

P&H HC upheld deletion of penalty under s.76 where an equal penalty under s.78 had already been imposed, reasoning that the existence of a s.78 penalty ... Deletion of penalty u/s 76 and 78 - amendment to section 78 by Finance Act, 2008 w.e.f 10.5.2008 adding a Proviso to the effect that if penalty is payable under section 78 of the Act, provision of Section 76 of the Act will not apply - Held that:- The fact that penalty has been levied under section 78 could be taken into account for levying or not levying penalty under section 76 of the Act. In such situation, even if reasoning given by the appellate authority that if penalty under section 78 of the Act was imposed, penalty under section 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty under section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under section 78 of the Act - This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time Issues:1. Deletion of penalty by the Customs, Excise and Services Tax Appellate Tribunal under section 76 of the Finance Act, 1994.2. Imposition of penalty under sections 76, 77, and 78 of the Act on the respondent-assessee.3. Interpretation of penalty provisions under sections 76, 77, and 78 of the Act.4. Effect of the amendment to section 78 by Finance Act, 2008 on the imposition of penalties.Analysis:1. The appeal was filed by the revenue against the deletion of penalty by the Tribunal under section 76 of the Finance Act, 1994. The respondent-assessee, a property dealer and service provider, was alleged to have failed to file returns and pay service tax for the period from 2001-02 to 2003-04. The original order levied penalties under sections 76, 77, and 78 of the Act. On appeal, the Tribunal upheld the penalty under section 78 for suppression but deleted penalties under sections 76 and 77, stating that penalties under these sections cannot be imposed in addition to penalty under section 78.2. The revenue contended that penalties under sections 76 and 77 are distinct from the penalty under section 78, citing a judgment of the Kerala High Court. The assessee argued that an amendment in 2008 to section 78 indicated the legislative intent to avoid double penalties. The Court noted that while technically the scope of penalties under sections 76 and 78 may differ, the imposition of penalty under section 78 could influence the decision on imposing penalty under section 76. The Court held that the appellate authority was justified in not imposing penalty under section 76 considering the penalty under section 78 had already been levied, even though the amendment was not applicable at the relevant time.3. The Court emphasized that despite the difference in the technical scope of penalties under sections 76 and 78, the penalty under section 78 could be a factor in deciding whether to impose penalty under section 76. The Court found that the reasoning of the appellate authority, though not entirely correct, was within jurisdiction given that penalty equal to service tax had been imposed under section 78. The Court also considered the minimal amount involved, which was Rs.51026/-, and concluded that no substantial question of law arose for appeal under the relevant provisions.4. Ultimately, the Court dismissed the appeal, affirming the decision of the Tribunal to delete the penalty under section 76 while upholding the penalty under section 78. The judgment highlighted the interplay between different penalty provisions and the significance of legislative amendments in interpreting and applying penalty provisions under the Act.