Imposition of Penalty under Section 76 & 78 of the Finance Act, 1994

PJ/Case Laws/2011-12/1493

Case: M/s PUNJAB AUTOMOBILES VS CST, AHEMDABAD

Citation: 2012-TIOL-57-CESTAT-AHM

Issue:- Penalty under Section 76 & Section 78 of Finance Act, 1994 – imposition of - when assessee pays Service Tax as soon as advised. Whether waiver of penalty under Section 80 can be granted?

Brief Facts:- The Appellant is providing the service falling under the category of authorized service station for motor vehicle servicing or repair and also Business Auxiliary service. The Appellant has received certain amount as incentives from various insurance companies such as Bajaj Alliance, IFCO Tokyo. On the ground that the Appellant should have paid Service Tax on the incentives received from these companies, Investigation was taken up. As soon as the investigation was taken up and the Appellant was informed of the liability. The Appellant paid the Service tax and the Interest on 27.02.06 and 03.03.06. Thereafter proceeding was initiated by issue of show cause notice which resulted in confirmation of demand of Service Tax and appropriation of the amount paid by the appellant and also in imposition of penalty under Section78 of Finance Act, 1994. Appellant paid 25% of the service tax towards Penalty and thereby paid of all the dues resulting from the adjudication order passed by the Additional Commissioner. However, the Commissioner in exercise of his power under Section 84 of the Finance Act, 1994, proposed a revision of the order passed by the Additional Commissioner and this revision order is impugned before me wherein he is imposed penalty under Section 76 of the Finance Act, 1994 taking a view that the Additional Commissioner, the original Adjudicating Authority should have imposed penalty under Section 76 also.

Appellant’s Contention:- The Appellant relied upon the following decisions. 1. Fascel Ltd. Vs. CST [2010 (25) STT 6 (AHD-CESTAT)] = (2009- T1OL- 1910- CESTAT- AHM) 2. Haiku Motors (P) Ltd. Vs. CST Bangalore [2008 (17) STT 387 (Bang -CESTATJ 3. Namtech Electronic Devices Ltd, Vs. CST Bangalore [2010 (24) STT 222 (Bang - CESTATJ 4. P. Jani & Co. Vs. CST Ahmedabad [2011 (30) STT 15 (Ahd. - CESTATJ — (2010- TIOL- 1173- CESTAT-AHM) Further, the Appellant also contended that this is a case where even penalty under Section 78 was not payable. Even then the Appellant paid 25% of service tax towards penalty so that unnecessary litigation is avoided and dispute does not arise. The Appellant further submitted that there was a confusion in the minds of the operators of service stations up to 31.10.04 as to whether service tax was payable on this service or not since appellants had felt that they were commission agents. After the amendment of the law on 10.09.04, the service tax was being paid regularly by the appellant and the very fact that the dispute relates to the period from 01.07.03 to 31.10.04.

Reasoning of Judgment:- The Tribunal noticed in the records that appellants were addressed by the Assistant Commissioner, Service Tax on 24.11.05 informing them that they were required to pay service tax on commissions received from financial institutions/banks. On 30.11.05, appellants replied to the letter saying that they were paying service tax from September 2004. This correspondence coupled with the submissions made would show that appellants had a feeling that they were not liable to pay service tax prior to September 2004 and only after the department took up verification, they found that they were liable to pay service tax from 01.07.03. As soon as they were informed that they were liable to pay the service tax in 2006, the appellants paid the amounts of service tax & interest promptly. It was also submitted during the hearing that even the calculation of service tax liability and interest thereon was made by the appellants themselves and deposited without any special efforts by the officers of the Revenue. Further, the appellants also did not want to prolong the litigation and therefore paid 25% towards penalty also after the adjudication order was passed.

The Tribunal taken into consideration various case referred by the Appellant In the case of Haiku Motors Pvt. Ltd. a view was taken that during the period there was confusion as regards category of service and liability of service tax and therefore penalty under Section 80 was not leviable. In that case Commissioner had reviewed the order and imposed penalties. In the case of P. Jani & Co. also a view was taken that if an assessee pays the service tax as soon as advised to do so, it would show his bonafide belief and therefore provisions of Section 73(3) can be invoked and no penalty is imposable under Section 76 and Section 78 of Finance Act, 1994. Further, the circular issued by the Board on 03.10.07 also provides that where an assessee pays the service tax with interest, no further action need to be taken. The Tribunal found that Appellant has paid even the penalty and is not even challenging the same. Having regard to the facts and circumstances of this case and the approach adopted by the Appellant as seen from the records It was concluded that Appellant not intended to avoid litigation, to pay the service tax amount as per the advice given by the department and further they have also paid interest. Under these circumstances, the Tribunal found that this is a fit case for waiver of penalty imposed under Section 76 of Finance Act, 1994 by invoking the provisions of Section 80 of Finance Act, 1994 and accordingly the Impugned order is set aside and appeal is allowed by setting aside the penalty under Section 76 of the Finance Act, 1994

Decision:- Appeal allowed.

Comments

PJ/Case Laws/2011-12/1493

Post a Comment

Query