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PJ/CASE LAW/2014-15/2558

Penalty under section 78 for short payment of service tax.

Case:- COMMISSIONER OF CENTRAL EXCISE, TIRUNELVELI VERSUS AIR KING TRAVELS
 
Citation:- 2014 (36) S.T.R. 992 (Mad.)
 
Brief facts:
- The impugned order, dated 1-8-2008 passed in Final Order No. 825 of 2008 in Appeal No. S/87/2005/MAS by the CESTAT is being challenged in the present Civil Miscellaneous Appeal.
The respondent herein has been acting as travel agent and bound to pay Service Tax. Under the said circumstances from 1-4-1999 to 30-6-2004 the respondent is bound to pay Service Tax, but they made only short payment. As per Section 78 of the Finance Act, 1994, the respondent is bound to pay penalty. Under the said circumstances, the concerned show cause notice has been issued. The demand made in the show cause notice has been upheld in Order-in-Original No. 23 of 2005, dated 20-4-2005 and the same has been challenged before the Commissioner of Appeals (Madurai) and the Commissioner of Appeals (Madurai) has set aside the order passed in Order-in-Original. Against the said order, the Department has preferred Appeal No. S/87/2005/MAS before the CESTAT.
The CESTAT, after hearing both sides, has dismissed the appeal. Against the order passed by the CESTAT, the present Civil Miscellaneous Appeal has been preferred.
At the time of admitting the present Civil Miscellaneous Appeal, the following substantial question of law has been settled for consideration : -
“Whether CESTAT is right in dismissing the Revenue’s Appeal without addressing the question of interpretation of statute, but placing reliance on a case citation, which is open for challenge on interpretation of words & phrases, when conflicting decisions on the subject in issue were pronounced by various forums/higher appellate authorities?”
Even though the respondent has been served with summons, appearance has not been made. Under the said circumstances, the present Civil Miscellaneous Appeal is disposed of on merits on the basis of the contentions put forth on the side of the appellant.
 
Appellant’s contention:- The learned counsel appearing for the appellant has sparingly contended that the respondent has candidly admitted about the short payment and since the respondent has paid only short payment as per Section 73 of the Finance Act, 1994, the respondent is liable to pay penalty. Under the said circumstances, the claim in question has been made, but both Commissioner of Appeals as well as CESTAT have erroneously found against the Department and therefore, the orders passed by the Commissioner of Appeals and CESTAT are liable to be interfered with.
In support of the contention put forth on the side of the appellant, the decision reported in 2011 (22)S.T.R.267 (Gujarat)-Commissioner v. Target Polymers Private Limited)is relied upon, wherein it has been clearly held that a penalty can be imposed under Section 78 of the Finance Act, 1994. In fact, Section 78 of the said Act deals with imposition of penalty for suppressing value of taxable service.
 
Respondent’s contention:- Respondent has not appeared.

Reasoning of judgment:- In the instant case, the main contention put forth on the side of the appellant is that the respondent has not paid Service Tax in respect of the service rendered by it and further, the respondent has made only short payment. Under the said circumstances, the claim made by the Department is in consonance with law and the same cannot be turned out, but both the Commissioner of Appeals as well as CESTAT without assigning proper reasons have rejected the demand, made by the Department and in view of the discussion made earlier, this Court has found considerable force in the contention put forth on the side of the appellant and the substantial question of law settled on the side of the appellant are having substance and altogether, the present Civil Miscellaneous Appeal is liable to be allowed.
In fine, this Civil Miscellaneous Appeal is allowed without costs and the orders passed by the Commissioner of Appeals and CESTAT are set aside.
 
Decision:- Appeal allowed.

Comment:-The analogy of the case is that as per section 78, Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, or
 collusion, or wilful mis-statement; or suppression of facts; or  contravention of any of the provisions  or the rules with intent to evade payment of service tax, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall be equal to the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded. In the present case assessee has paid short service tax. Hence assessee is liable to pay penalty under section 78.

Prepared by:- Monika Tak
 

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