Penalty under Section 76 &78 cannot be imposed simultaneously.

PJ/Case Laws/2012-13/1422

Case:- JIVANT ENTERPRISE VERSUS COMMISSIONER OF SERVICE TAX, AHMEDABAD

Citation:- 2012 (28) S.T.R. 582 (Tri.- Ahmd)

Issue:- Penalty under Section 76 &78 cannot be imposed simultaneously.

Brief Facts:-In this appeal, the appellant is charged with non-payment of service tax liability under the category of Management, Maintenance and Repair Services, for the material period 1-4-2004 to 31-3-2007. The demand is raised on the basis of inspection of document which were called from the assessee. The appellant before issuance of show-cause notice has paid the entire amount of service tax liability, interest and 25% of the penalty imposed under Section 78 of the Finance Act, 1994 within 30 days of issuance of the adjudication order. Assessee was aggrieved by the adjudication order for imposition of penalty under section 76 and hence took the matter in appeal. The first appellate authority also did not agree with the contentions raised by the appellant for imposition of penalty under Section 76 and confirmed the order the adjudicating authority and hence, this appeal.

Appellant’s Contentions:-The learned Chartered Accountant’s entire submission is that the provisions of Section 78 was amended from 10-5-2008, wherein an amendment is brought in indicating that, where penalties payable under Section 78, no penalty under the provision of Section 76 shall be attracted. It is his submission that the show cause notice to the appellant was issued on 18-6-2008 i.e. almost after a month of the amendment carried out to Section 78 and by virtue of this amendment, if the show cause notice is issued post amendment and as per the statue, no penalty is payable under Section 76. The appellant would rely upon the judgment of the Hon’ble High Court of Karnataka in the case of CCE v. Motor World – 2012- TIOL-418-HC-KAR-S.T. =2012 (27) S.T.R. (Kar.). And also in the case of First Flight Courier Limited – 2012 (22) S.T.R. 622 (P & H) and again in the case of United Communication Udupi – 2011-TIOL-802-HC-KAR-S.T. = 20121 (281) E.L.T. 168 (Kar.), for this proposition. It is also his submission that the Tribunal decision in the case of West Minister International P. Limited – (2007)11 STT 157 (New Delhi-CEGAT) = 2006 (2) S.T.R. 539 (Tri.-Del.) = 2002 (140) E.L.T. 244 (Tri.-Del.) would indicate that penalty can be imposed only under the provisions, which are in existence at the time of issuance of show cause notice.

Respondent’s Contentions:-On the Other hand the learned SDR would submit that the judgement of the Hon’ble Court of Delhi in the case of Bajaj Travels Limited [2012 (25) S.T.R. 417 (Del.)] would be applicable wherein their Lordships have held that, simultaneous penalties can be imposed under Sections 76 & 78 of the Finance Act,1994. He would specially draw my attention to paragraphs 16 & 17 of the said judgement in the case of Bajaj Travels Limited.

Reasoning of Judgment:-The Tribunal heard both the Parties and considered the submissions made by both sides and perused the records. On that factual matrix, they find that the amendment carried out to Section 78 on 10-5-2008, specially talks about non imposition of penalty under Section 76 if a penalty under Section 78 is imposed. The Hon’ble High Court of Karnataka in the case of Motor World (supra) has specifically considered the judgment of the Kerala High Court in the case of Krishna Poduval [2006 (1) S.T.R. 185 (Ker.)]. He said that when once the ingredients of Section 78 are established and there is no reasonable cause for failure, section 80 is not attracted. For the same reason the question of imposing penalty both under Section 76 and 78 would not arise. The penalty is to be imposed either under Section 76 or 78 and certainly not under both the provisions. The abovesaid ratio squarely covers the issue in favour of the assessee in this case. The facts of the current case before them are totally different in as much as, the show cause notice is issued to the appellants on 18-6-2008 and whereas the amendment to Section 78 was carried out on 10-05-2008.According to their view, the judgment of The Hon’ble High Court of Karnataka in the case of Motor World (supra) would be applicable in this case. Respectfully following the law as laid down by the Hon’ble High Court, Tribunal finds that the impugned order is not sustainable and is liable to be set aside.

Decision:-Appeal Allowed.

Comment:-The essence of this case is that imposition of simultaneous penalty under section 76 & 78 is neither legal nor warranted in view of amendment made in the section 78. Moreover, some High Courts have also held that penalty under both the sections is not imposable even prior to the said amendment as it is clarificatory in nature.

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PJ/Case Laws/2012-13/1422

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