Applicability of Section 73 (4A)

[Mehul Pandya]

Sir,

w.e.f. 14.05.15 section 73 (4A) for penalty is omitted. My query is audit team is demanding penalty under the same section for the duty demand pending from 2011 to 31.03.2015. We have paid entire duty along with interest on 03.07.15 that is after 14.05.15. Can department still demand penalty u/s 73(4A) ?

[Rajagopalan Ranganathan]

Sir,

Omission of Section 73 (4A) was with effect from 14.5.2015. Therefore for the period prior to 14.5.2015 the provisions of the Section can be enforced since it was not omitted with retrospective effect.

[Vijay kumar]

Please refer to transitory provisions under Section 78B. Where no SCN has been issued as on 14.5.2015, all such cases are covered by the new penal provisions. No penalty can be collected during audit after 14.5.2015, without issuing a show cause notice under the new provisions.

[B. Naga Rami Reddy]

Sir,

Payment of 1% of ST as penalty per month under erstwhile Section 73(4A) of the FA,1994 is applicable only in cases involving suppression of facts, willful misstatement etc. If these elements are not there, payment of ST with interest should suffice under Section 73(3),not to issue SCN even if the point is detected by the Audit . The applicability of erstwhile Section 73(4A) for past cases will depend on whether or not suppression of facts, willful misstatement etc are present in audit objection.

With due respects to Mr. Vijay Kumar, learned expert, it is opined that as per Section 78B, in the circumstances covered in erstwhile Section 73(4A). if the compliance by way of payment of ST, interest and 1% of ST per month penalty is not made by the service provider for the past period , he can be issued with an SCN in which case maximum penalty of 50% of ST could be imposed.

[B. Naga Rami Reddy]

Sir,

I stand corrected. I agree with the views of Mr. Vijay Kumar learned expert, that no penalty under erstwhile Section 73(4A) of FA 1944 could be collected without issue of SCN after 14.5.2015. The difference in interpretation is due to slight changes made in the provisions of Section 78B from the Finance Bill,2015 to Finance Act 2015, which I missed. Inconvenience caused is regretted.

AI Summary

Penalty under Section 73(4A) removed; old penalties non retroactive and require an SCN under transitory law.
Omission of the erstwhile penalty provision took effect prospectively; the old penalty applies only to pre omission periods if its elements (suppression or willful misstatement) are present. Section 78B's transitory scheme makes cases without an issued show cause notice on the cut off subject to the new penal regime, and no penalty under the former provision may be collected after the omission date without initiation of proceedings under the revised provisions.