TaxTMI 
TaxTMI 
2009 (4) TMI 106
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....d statements of various persons. On completion of investigations it was noted by authorities that respondent had short paid service tax for the period April 2001 to August 2006. Show cause cum demand notices were issued to respondent directing them to show cause as to why service tax amount of Rs. 11.06 crores (collectively) be not demanded from them and why penalties be not imposed under section 76 and 78, interest at appropriate rate under section 75 of the Finance Act, 1994. Respondent resisted the allegations in the show cause notice on various grounds, contesting that the service tax amount calculated is erroneous and that their consultant misled them and that they should be given the benefits of Cenvat credit on input stage services utilized by them. Adjudicating authority after considering the submissions made by the respondent came to the conclusion that respondent has short paid service tax for the relevant period and penalty has to be imposed on them. 3. The adjudicating authority confirmed a demand of Rs. 7.67 crores, appropriated the amount already paid, ordered interest thereof and imposed penalties under Section 76 and 78 of the Finance Act, 1994. Revenue is aggrieve....
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....uting the amount of service tax calculated. He would submit that the amount determinable by the adjudicating authority on the date of passing of the impugned order was 'nil' and hence provisions of section 78 does not, get attracted. It was submitted that there was a reasonable cause for failure. He would submit that respondent has 20 branches all over India doing the same volume of business. It is his submission that out 20 branches, only in two branches there is a failure, that also for the first time and that they have unblemished record. It is his submission that they had not taken credit of the service tax paid by them on the input services utilized by them during the relevant period. He would submit that if input stage credit were allowed then the service tax liability would be reduced. He submits that this fact should have been considered by the adjudicating authority for invoking provisions of section 80 of the Finance Act, 1994 and should not have imposed penalties. He submitted that their cross objections be also considered. 6. We have considered the oral and written submissions and also perused the records. It is undisputed that respondent is registered with the service....
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....ndent under section 76 of the Finance Act, 1994, we find that in this case, it is attracted. Accordingly we uphold the penalty imposed on respondent under section 76 of the Finance Act, 1994 limiting it as is imposed by the Adjudicating authority. 10. As regards the penalty imposed on respondent under Section 78 of the Finance Act, 1994, we find that penalty is imposable under this section also as we have already upheld that the respondents have short paid the service tax during the relevant period. The learned counsel for respondent submitted that no penalty is imposable under this section as the service tax liability was already determined. It is seen from the adjudication order that service tax liability is determined in accordance with law. Be that as it may, we find that it is undisputed that respondent has 20 branches all over India, and that they are discharging the service tax liability in all the branches. There is nothing on record to show that there was any short payment of service tax in respect of other branches of respondent except in this case in Mumbai. It is also on record that this is the first time such an infraction has been noticed by the authorities against r....
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.... latest decision in the case of Dharamendra Textile Processors - 2008 (231) E.L.T. 3 (S.C.) held that "when the statute provides that the penalty shall not be lesser means that thus minimum amount of penalty which is imposable". It makes no difference if part of amount is paid prior to show cause notice or after that. However I do agree that unlike Customs Act and Central Excise Act there is a power under Section 80 of the Finance Act, 1994 wherein the amount of penalty can be reduced or no penalty need be imposed. The provisions of Section 80 read as under:- "Notwithstanding anything contained in the provisions of Section 76, Section 77 or Section 78, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure." 14. Thus in the circumstance under which the penalty may not be imposed is when the assessee proves that there was reasonable cause for the said failure. The Tribunal had occasion to discuss the meaning of reasonable cause in the case of Real Malhematic Classes v. CCE, Jaipur - 2008 (10) S.T.R. 570 (Tri.-Del.) wherein it was held as under:- "Reasonable cause ....
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....duction before the Commissioner and therefore Revenue has come up in appeal before the Tribunal stating that the amount demanded in the show cause notice was the correct amount as these deduction already stand allowed while calculating duty liability. This has also been conceded by the assessee before the Tribunal and it transpired that the facts were misstated before Commissioner. In these sequence of events there are no acts done by the assessee from which it can be inferred that there was a reasonable cause for him in failing to determine the correct taxable value. Mere fact that such offence has been detected only in one branch and Head Office compared to 20 branches does not mean that there was reasonable cause for failure to pay the correct service tax amount once this was deliberately done with intent to evade tax. I, therefore, hold that the penalty under Section 78 is rightly imposed by the Commissioner and there is no cause for any reduction by exercising the power of Section 80. 16. Since my views are different from the view of Member (Judicial) the matter may be placed before the Hon'ble President for referring the matter to 3rd Member. &....
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....Section (2) of Section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall not be less than, but which shall not exceed twice, the amount of service tax so not levied or paid or short levied or short paid or erroneously refunded." As is seen from the above, if the assessee is held liable for penalty in terms of above Section, the quantum of the same shall not be less than the amount of service tax so not levied or paid by the assessee. The said section also lay down maximum limit of penalty, which shall not exceed twice the amount of service tax so not levied or paid. As such, it is seen that the minimum quantum of penalty to he imposed under the said Section is equivalent to the service tax not levied or paid and maximum limit is to the extent of double the said amount of tax. Learned Member (Judicial) has invoked the provisions of Section 80 for reducing the quantum of penalty imposed upon the assessee. For better appreciation, the provisions of the Section are also reproduced:- "SECTION 80. Penalty not to be imposed in certain cases.- Notwithstanding anything contained in the provisions of Section....
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....lue for the purpose of payment of tax and by wrongfully claiming the deduction. As the dispute is in respect of present branch, the fact that other branches have not indulged in such evasion of duty, cannot be made a justifiable cause for reduction of penalty. In fact, the said fact would go against the respondents inasmuch as they were expected to know the law being followed in respect of the other branches, whereas the same was not being adhered to in the present branch. 23. Similarly, the fact that it was the first time infraction by the assessee can also not advance their case for reduction of penalty quantum. The dispute in the present appeal relates to the period from April 2000 to March 2004 and the investigations were initiated by the department in or around July 2004. During the course of such investigation, show cause notice was issued to the assessees on 22-9-2005. Subsequently, on receipt of further intelligence, investigations were conducted for the subsequent period also and another show cause notice was issued on 17-10-2006 for the period September 2001 to August 2006. The differential demand of tax for the said period stands confirmed by both the learned Members. A....