Penalty under Section 78 of the Finance Act is not imposable when the same is not liable to be imposed?

PJ/Case Laws/2012-13/1246

Case: - COMMR. OF C.EX, CUS. & S.T., SILIGURI VERSUS RIDDHI SIDHHI OIL INDUSTRIES

Citation: - 2012 (27) S.T.R. 482 (Tri- Kolkata)

Brief fact: - The Respondent (Riddhi Siddhi Oil Industries) received the goods transported by "Goods Transport Agency" by road. On scrutiny, the Department found that the respondent did not observe the conditions prescribed under Notification No. 12/2003-S.T., dated 20-6-2003 read with Notification No. 2/2006-S.T., dated 1-3-2006. Accordingly, the proceedings were initiated against them for recovery of the service tax and a proposal for imposition of penalty. The lower adjudicating authority confirmed the demand of service tax of Rs. 38,057/- out of total demand of Rs. 7,01,082/- and imposed penalty of Rs. 5,000/- under Section 77 and equal amount of penalty under Section 78 and also imposed penalty under Section 76 of the Finance Act, 1994.
Aggrieved by the same, the respondent has filed the appeal before the Commissioner (Appeals). Ld. Commissioner (Appeals) upheld the lower adjudicating authority's order, however, he dropped the penalty imposed under Section 78 of the Finance Act, 1994.
Aggrieved by the same, Revenue is in Appeal here.

Appellant Contention: - The contention of the Revenue is that the service tax of Rs. 7,38,392/- is liable to be confirmed and the ld. A.R. for the Department submitted that the penalty under Section 78 of the Finance Act, 1994 is wrongly dropped and the same should be upheld. The ld. A.R. did not have any answer or any evidence that they have challenged the said order of the Lower Adjudicating Authority dropping the demand in excess of RS 38,057/-.
Respondent Contention:- The contention of the respondent is that the order of the Id. Commissioner (Appeals) should be upheld. They have also filed counter styled as Cross Objection.

Reasoning of Judgment: The Tribunal held that as regard imposition of penalty under Section 78 is concerned, the Id. Commissioner (Appeals) in his order has found that the ingredients of Section 78, viz, suppression of facts, willful mis-statement or violation of provisions of law with intent to evade tax did not exist in the instant case. He has also found that no evidence has been adduced that there was deliberate attempt on the part of the respondent to evade service tax. The respondent did not pay the service tax as confirmed in the impugned order on the premise that the same might have been paid by the transporter and he accordingly set aside the penalty under Section 78.

The Department failed to produce evidence contrary to the same. In so far as the Cross Objection is concerned, the relief prayed only to dismiss the appeal filed by the Department and to allow consequential benefit to the respondent and there is no challenge to any other findings of the Id. Commissioner (Appeals). In view of the above, the order of the Commissioner (Appeals) is upheld and Revenue's appeal, which, is devoid of merit, is dismissed. Cross objection is also accordingly, disposed of.

Decision:- Appeal dismissed

Comments:- It is not that the penalty has to be waived under Section 80 of service tax act. But when the ingredients of the penal action are absent then it is not liable to be imposed at all. The instant decision has underlines this point very well.

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PJ/Case Laws/2012-13/1246

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