Imposition of simultaneous Penalty under Section 76 & 78

PJ/Case Laws/2010-11/1067

Case: Commissioner of Central Excise, Commissionerate v/s M/s First Flight Courier Ltd

Citation: 2011-TIOL-67-HC-P&H-ST

Issue:- The penalty under Section 76 cannot be imposed if the penalty under Section 78 is imposed.

Brief Facts:- Respondent-assessee is a service provider liable to pay service tax under the provisions of Finance Act, 1994.

Proceedings were initiated against the respondent on the ground that they had short paid service tax for the period from 01.04.2002 to 31.03.2005. Demand was confirmed and penalty under Section 76 and 78 were imposed.

On appeal, the demand of service tax was upheld but penalty under Section 78 was reduced to 25% on the ground that the amount was deposited within 1 month on receipt of order. Penalty under Section 76 was set aside on the ground that penalty under Section 78 as well as 76 could not have been imposed simultaneously. Revenue’s appeal to the Tribunal was dismissed.

Hence, Revenue is in appeal before the High Court.

Appellant’s Contentions:- Revenue have contended that after 10.05.2008, there is an amendment providing that penalty under Section 76 could not be levied if penalty under Section 78 has been levied for the period prior thereto, penalty could be levied under both Sections.

Reasoning of Judgment:- The High Court held that section 76 provides for penalty for failure to pay the amount while Section 78 provides for penalty for suppressing the taxable value. Section 78 is, thus, more comprehensive and provides for higher amount. Even if technically, the scope of Sections 76 and 78 is different, penalty under Section 76 may not be justified if penalty had already been imposed under Section 78.

The High Court noted that the matter was considered by this Court in the case of Commissioner of Central Excise v/s Pannu Property Dealers, Ludhiana [Final Order dated 12.07.2010 in STA No. 13 of 2010]. It was held therein that “Even if technically, the scope of Sections 76 and 78 is 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.” It was further held that “…the Appellate Authority was within its jurisdiction not to levy 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. This thinking is in consonance with the amendment incorporated though the said amendment may not have been applicable at the relevant time.

No substantial question of law arises.

Decision:- Appeal dismissed.

Comment:- Although the amendment is made in the penal provisions that the penalty under both the sections cannot be imposed but the litigation under old provisions continues. But this landmark judgement has clearly brought out that the penalty under Section 76 and Section 78 are mutually exclusive.

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PJ/Case Laws/2010-11/1067

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