Imposition of Simultaneous penalties under Section 76 & 78 of Finance Act, 1994

PJ/Case Laws/2011-12/1525

Case: RAHUL TRADE LINKS v/s COMMISSIONER OF CENTRAL EXCISE, RAJKOT

Citation: 2012 (25) S.T.R. 178 (Tri.-Ahmd.)

Issue:- Whether separate penalties under Sections 76 and 78 of Finance Act, 1994 can be imposed for the same act of offence?

Brief Facts:- M/s. Rahul Trade Link, Sarviaya Street, Gundala Road are authorized distributors of M/s. Tata Teleservices Ltd. since December 2004 and have been earning commission. The obligation of payment of service tax however, was not discharged by them. Therefore a show cause notice was issued demanding duty of service tax of Rs. 93,827/- and Rs. 15,876/- being interest thereon. Penalties under Section 76, 77 & 78 of the Finance Act, 1944 were proposed. The adjudicating authority confirmed the demand and interest and imposed penalties under various sections. On appeal the Commissioner (Appeals) also confirmed the demand and penalty under Section 78. However he gave the benefit of reduced penalty under proviso to Section 78. He also imposed penalty under Section 76.

Appellant’s Contention:- The appellant contended that equivalent penalty under Section 78 was not attracted. He relied on the Hon'ble Supreme Court judgment in the case of M/s. Hindustan Steel Limited reported in 1978 (2) E.L.T. (J159) wherein the Hon'ble Supreme Court has held that penalty should not be imposed merely because it was lawful to do so. He also challenged the imposition of penalty @ 2% of the service tax amount per month under Section 76 as without jurisdiction, because the appellant could not have been penalized under different sections for the same alleged offence. The penalties on the appellant under different sections for the same offence are also a punishment more than once for the same alleged offence.

Reasoning of Judgment:- The Tribunal held that he order of the Hon'ble High Court, Kerala in the case of Assistant Commissioner of Central Excise v. Krishna Poduval reported in 2006 (1) S.T.R. 185 (Ker.) is relevant to the present case and is reproduced as the penalty imposable under S. 76 is for failure to pay service tax by the person liable to pay the same in accordance with the provisions of S. 68 and the Rules made there under, whereas S. 78 relates to penalty for suppression of the value of taxable service, Of course these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But in his opinion the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences. There can be a situation where even without suppressing value of taxable service, the person liable to pay service tax fails to pay. Therefore, penalty can certainly be imposed on erring persons under both the above Sections, especially since the ingredients of the two offences are distinct and separate.

It was held that perhaps invoking powers under S. 80 of the Finance Act, the appropriate authority could have decided not to impose penalty on the assessee if the assessee proved that there was reasonable cause for the said failure in respect of one or both of the offences. Therefore, there is no infirmity or illegality in imposing separate penalties under Sections 76 & 78. As argued by the appellant the duty, interest and 25% of the penalty were paid by them on their own. The Tribunal agrees that this act supports the bona fide impression on the part of the appellant. Commissioner (Appeals) has rightfully considered this fact and gave the benefit of reduced penalty under proviso to Section 78.

Decision:- Appeal dismissed.

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