TaxTMI 
TaxTMI 
2011 (8) TMI 423
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....lting into two proceedings giving rise to two appeals. Otherwise issues are common in both the appeals which are admitted on the following substantial questions of law:- 1. Whether the Tribunal erred while upholding the penalty under Section 76 and reducing the penalty to 25% of the Service Tax demand under Section 78 of the Finance Act, 1994 when in the backdrop of the facts of the matter, the present case is fully covered within the ambit of the provisions of Section 80 of the Finance Act, 1994? 2. Whether the Tribunal miserably failed to appreciate the fact that in both the cases, the service tax was immediately paid upon issuance of show cause notice and before passing the adjudication order with heavy interest of Rs. 29.00 lacs and Rs. 18.00 lacs respectively showing the bona fide of the appellant herein? 3. Whether the Amendment in Section 78 by the Finance Act, 2008 operate retrospectively being a beneficial peace of legislation which provides that in case where penalty for suppressing the value of taxable service under Section 78 is imposed, penalty for failure to service tax under Section 76 shall not apply, therefore, in another word....
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....cause notice, the appellant was asked to show as to why:- (i) the service tax amounting to Rs. 86,02,849/- and Education Cess amounting to Rs. 64,029/- payable for the period April, 2000 to March, 2005 should not be recovered from them under Section 68 and Section 73 of the Chapter V of the Finance Act, 1994 read with Section 11-D of the Central Excise Act, 1944. (ii) Interest at the applicable rates on the service tax and education cess recoverable should not be recovered from them under Section 75 of the Act. (iii) Penalty should not be imposed upon them for suppression of the taxable value for payment of service tax under Section 78 for failure to pay service tax under Section 76 and for filing of prescribed ST-3 returns improperly and with incorrect details under Section 77 of the Act. 4. The appellant submitted a detailed written reply dated 17th November, 2005. The defence was that it was paying service tax as per its bona fide understanding that the service tax was to be paid on the commission retained by the appellant. It was pleaded that the matter of calculation was not clear to it. Therefore, it had been filing its service tax returns on the....
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....ls vide impugned orders dated 19th June, 2006. It was found by the Tribunal that the appellant was actually paying the service tax at the prevailing rate under Section 66 on the net commission instead of on the gross commission. That had resulted in short payment of tax. While doing so, in the ST-3 returns, instead of showing the gross and net commission and calculation of service tax on that basis, the tax payment shown was as if it was on the 'basic fare' shown in the ST-3 returns was not the actual 'basic fare'. Those were much lower amount which was being determined by the back calculation so that the tax on the same at the rate mentioned in Rule 6 (7) matches the service tax paid by the appellant on the net commission at the normal rate. The difference between the basic fare declared and the actual basic fare on which the tax was to be paid at the rate prescribed under Rule 6 (7) was to the tune of about Rs. 213 crores in aggregate. Since in the ST-3 returns, the tax payment was being done on basic fare basis under Rule 6 (7), though no formal declaration of option in this regard had been made, the Commissioner had rightly held that the appellant had opted to pay tax on the "b....
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....n of measure of levy. However, going by that fact that service tax as determined under Section 73 (2) of the Act alongwith interest and penalty was paid within 30 days from the date of the communication of the order, having regard to the first and second proviso to Section 78 of the Act, the penalty would be 25% of the service tax. Thus, while upholding the penalty under Section 78 of the Act, the Tribunal has reduced the same to 25% of the service tax. The position is summed up by the Tribunal in para 18 of its order which reads as under:- "(18). On the basis of our above observations and findings, we, therefore, hold as under:- (i) The service tax demand alongwith interest in both the cases is upheld. (ii) while the penalty under Section 77 of the Act is set aside, imposition of penalty under Section 76 of the Act is upheld. (iii) In appeal case No. ST/440/06, the penalty under Section 76 of the Act is reduced from Rs. 200/- per day to Rs. 100/- per day while in the appeal case No. ST/111/06, the imposition of penalty at Rs. 100/- under Section 76 of the Act per day is upheld. (iv) As regards penalty under Section 78 while holdin....
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....ng for the Department countered the aforesaid submissions of Mr. Patwalia. His thrust was that it was not a case of bona fide error on the part of the appellant who had in fact collected the service tax from the customers but did not deposit the same. He highlighted the facts that as per the scrutiny, following position emerged in respect of the appellant's Branch Office at New Delhi: Period: April 2000 to March, 2005 Details of Basic fare Value of basic fare of International tickets (in Rs.) Basic fare declared as per ST-3 returns 1,30,77,36,056.00 Basic fare as per records resumed from the notice or IATA-BSP 2,58,62,84,429.00 Difference 1,27,85,48,373.00 He further emphasized that the investigation revealed that the appellant was passing on a portion of the commission received to their customers and were calculating the Service Tax payable on the commission retained by them. However, in the ST-3 returns they were showing the Service Tax payable by 'basic fare' method by back calculating the basic fare from the service tax already calculated on commission retained by them. Further, on perusal of the sale bills issued by them, it is cle....
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....ustified. 13. We have given our due considerations to the aforesaid submissions made by the learned counsel for both the parties. The service tax was introduced by the Finance Act, 1994 and the relevant provisions are contained in Chapter-V of the said Act, Section 66 is the charging Section and Section 67 provides the manner of valuation of taxable services for charging service tax. Section 68 of the Act, cast an obligation on every person providing taxable service to any person to collect the service tax at the rate specified in Section 66 of the Act. From Section 76 to Section 80 of the Act, different kinds of penalties are provided for varying default/failure on the part of those who are liable to pay service tax. Since in the instance case the penalties are levied under Section 76 and 78 of the Act, we reproduce these two Sections hereunder:- "76. Section 76- Penalty for failure to pay service tax.-Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, in addition to such tax and the interest on that tax amount in accordance with the provisions of section 75, a pena....
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....al or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of service tax so increased, the interest payable thereon and twenty five per cent of the consequential increase of penalty have also been paid within thirty days of communication of the order by which such increase in service tax takes effect." A perusal of the provisions would show that Section 76 provides for penalty for failure to pay service tax. In such a case, in addition to the tax and interest on that tax amount to be calculated in accordance with the provision of Section 75, penalty is also leviable on the defaulter which shall not be less than Rs. 200 for every day during which such failure continues or at the rate of two per cent of such tax per month whichever is higher. There is, however, a cap on this penalty stipulated in the proviso to this Section which states that penalty payable is not to exceed the service tax payable. 14. On the other hand, as per Section 78, penalty can be imposed for suppressing the value of taxable service. This provision applies where the service tax has not been levied or paid or where it has been shor....
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....id that this amendment is only clarificatory in nature. We may mention that Punjab and Haryana High Court in CCE v. Pannu Property Dealers [2010] 29 STT 180 has taken the view that even if the scope of two sections of the Act may be different, 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. However, that was a case where the appellate authority had exercised its discretion not to levy the penalty under Section 76 of the Act, when the larger penalty had already been imposed under Section 78 of the Act. In this scenario, the appeal of the Revenue against the said view taken by the appellate authority was dismissed holding that "appellate authority was within its jurisdiction not to levy the 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. Moreover, the amount involved is Rs. 51,026/- only." The Court, thus, chose not to interfere with the a....
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....ax than required under the provisions of the Act. If the appellant can show that the manner in which he was making the deposits of the service tax was bona fide i.e. in good faith, it would amount to 'reasonable cause'. Bona fide implies in the absence of fraud or unfair dealing. The equivalent of this phrase is "honestly". The correct province of this phrase is, therefore, to qualify things or actions that have relation to the mind or motive of the individual. Chambers 20th Century Dictionary defines bona fide mean 'in good faith: genuine'. The word 'genuine' means 'natural: not spurious; real; pure; sincere'. In Law Dictionary Mozley and Whitley define bona fide to mean 'good faith, without fraud or deceit'. Thus the term bona fide or genuinely refers to a state of mind. 21. We are of the opinion that in the instant case, the appellant has been able to prove its bona fides. Explanation of the appellant for short-payment was, as already pointed out above, that it was paying the service tax as per its bona fide understanding that it was required to pay the same on the commission retained by it and that the method of calculation was not clear to the appellant. This explanation ga....