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Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

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PJ/Case Laws/2011-12/1427

Option to pay 25% of penalty in terms of second proviso to Section 78

Case: COMMISSIONER OF CENTRAL EXCISE, LUDHIANA Vs M/s CITY CABLES
 
Citation: 2011-TIOL-760-HC-P&H-ST
 
Issue:- Option to pay 25% of penalty in terms of second proviso to Section 78 is to be specifically written in order.
 
Brief Facts:- Respondent-assessee was working as cable operator as defined in Section 65(21) of the Finance Act, 1994 without taking any registration under Section 69 of the Act. He was liable to file quarterly service tax returns under Section 68 of the Act read with Rule 6 of the Service Tax Rules, 1994.
 
Search was conducted at the business as well as residential premises of assessee, but before a show cause notice could be served to the assessee as to why he has not paid duty under the aforesaid Act, the assessee deposited the entire amount of duty and interest thereon.
 
Show cause notice was issued and reply was filed by the respondent. The Adjudicating Authority confirmed the demand of service tax of Rs.11, 46,537/- along with interest. In addition to the penalties under Sections 75(A), 76, 77 & 78 of the Act, the Adjudicating Authority also imposed a penalty of the equivalent amount of the duty payable under Section 78 of the Act.
 
In appeal, the Commissioner (Appeals) set aside the order of imposing penalties. However, in Revenue’s appeal, the Tribunal gave an option to the assessee to deposit 25% of the penalty of the service tax demand in terms of second proviso to Section 78 of the Act relying upon two judgments of the High Court in CCE, Rohtak Vs. J.R.Fabrics [2009 (238) ELT 209] and CCE, Chandigarh Vs. Bajaj Travels [2010-TIOL-819-HC-P&H-ST].
 
Revenue has filed appeal before the High Court on the following question of law:
 
Whether penalty imposed under Section 78 of the Finance Act, 1994 can be reduced to 25% by invoking the provisions of first proviso to Section 78, when the assessee has not paid 25% of the penalty amount within 30 days of the order as required under the second proviso to Section 78 ibid?
 
Appellant’s Contention:- Revenue argued that the benefit of reduced penalty can be availed by the assessee, if he deposits the amount of penalty within 30 days of the order, but the Authorities under the Act are not competent to give option to the assessee to deposit such amount.
 
Reasoning of Judgment:- The High Court perused the provisions of Section 78 of the Finance Act. It was noted that the Delhi High Court in K.P.Pouches Vs. Union of India [2008 (228) ELT 31] has held that since the amount of duty was paid even before the show cause notice was issued, therefore, the assessee would be liable to pay only 25% of the duty amount as penalty.
 
It was noted that in J.R.Fabrics case again the assessee deposited the amount of duty before the show cause notice was issued. Similar is the view taken by another Division Bench of this Court.
 
The High Court is in respectful agreement with the view taken in the aforesaid judgments. It was held that an assessee is required to be informed to avail the benefit of second proviso so that he can deposit 25% of the penalty amount. Such option alone will satisfy the purpose of insertion of the proviso as it is a benefit, which is conferred on the assessee. The Adjudicating Authority has not given such option.
 
It was held that since the amount of duty was already paid even before issuance of show cause notice, the High Court finds that direction to deposit 25% of the penalty amount in terms of the second proviso to Section 78 is fair, reasonable and meets the ends of justice.
 
Decision:- Appeal dismissed.
 
Comment:- The decision of K.P. pouches has been followed in service tax matters also. But the appeal in such cases has been filed in Apex Court.

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