Simultaneous imposition of penalty under section 76 & 78 prior to 10.05.2008.

PJ/Case law/2013-14/1871

Case:-COMMISSIONER OF C.EX. & CUS. AURANGABAD VERSUS VIJAY BHAMRAO DOLAS

Citation:-2013(31) S.T.R. 490 (Tri.-Mumbai)

Brief Facts:-This is a departmental appeal filed against the order-in-appeal No. AGS(43)30 /2010, dated 17-3-2010 passed by the Commissioner (Appeals) of Central Excise, Aurangabad.
The respondent in this case, Shri Vijay Bhimrao Dolas, is engaged in providing taxable services under the category of construction of residential complexes. On the basis of intelligence that the respondent was providing taxable services and not discharging Service tax liability thereon, an inquiry was initiated and the records maintained by the party were called for. On going through the records received, it was noticed that the respondent assessee has provided taxable services for a value of Rs. 9,80,250/- during the year 2007-08 and similarly for the period 2008-09 (upto February-09) the assessee received a consideration of Rs. 17,61,000/- for taxable services of construction of residential complexes. After taking into account, the small scale exemption available to the assessee, the duty liability was determined for an amount of Rs. 1,15,206/- and the assessee was informed accordingly and the assessee discharged the duty liability along with the interest vide Challan dated 9-3-2009 for the period 2007-08 and vide Challan dated 12-8-2009 for the period 2008-09. A show-cause notice dated 5-5-2009 was issued to the assessee proposing to recover Service tax for an amount of Rs. 1,15,206/- under the proviso to Section 73 of Finance Act, 1994 along with interest thereon of Section 75 of the said Finance Act and also proposing to impose penalties under Section 76, 77 and 78 of the Act. The case was adjudicated by the Jurisdictional Asst. Commissioner who vide an order dated 11-12-2009 confirmed the Service tax demand of Rs. 1,15,206/- and appropriated an amount of Rs. 1,15,123/- paid by the respondent assessee in March and August, 2009. The adjudicating authority confirmed the interest liability under Section 75 of the Finance Act and appropriated the interest of Rs. 2,578/- paid vide Challan dated 9-3-2009. He further imposed a penalty of Rs. 1,15,206/- under Section 76 of the Finance Act, 1994 and further penalty for the same amount under Section 78 of the Finance Act. He also imposed penalties of Rs. 5,000/- under Section 77 and ordered for payment of late fee of Rs. 2,000/- for non filing of S.T.-3 returns. The assessee preferred an appeal before the Commissioner (Appeals) who vide the impugned order upheld the demand for Service tax and interest thereon. The appellate authority however reduced the penalty under Section 78 by Rs. 1,15,123/- which has also been paid by the assessee and he also set aside the penalty under Section 76 of the Finance Act, 1994 on the ground that the penalties both under Sections 76 and 78 are not warranted and cannot be imposed after 10-5-2008.

Appellant Contentions:-The department is in appeal against the said reduction of penalty by the Commissioner (Appeals). The ground urged in the appeal memorandum is that the Commissioner's (Appeals) order is bad in law for the reason that he had set aside the penalty imposed under Section 76 of the Finance Act. The amendment to the Finance Act, 1994 with regard to imposition of penalty was made on 10-5-2008 as per which penalty cannot be imposed both under Sections 76 and 78.Therefore, for the period prior to 10-5-2008 penalty was imposable under both the Sections and, therefore, the appellate Commissioner should have upheld the imposition of penalty both under Sections 76 and 78 for the period prior to 10-5- 2008. It has been further urged that the assessee discharged the Service tax liability only after the case was detected by the department and, therefore the provisions of Section 73(3) of the Finance Act, 1994 are not applicable in this case.

Reasoning of Judgment: We have considered the submissions made by the department. The assessee in this case is a small scale service provider and it is obvious from the records that he did not get registered and discharged Service tax liability as he was not aware of the provisions of law. As soon as the omission on his part was brought to his notice, he discharged the Service tax liability. For the year 2007-08 he discharged the duty liability in March, 2009 and for the period 2008-09 he discharged the liability in August, 2009 in respect of demand. He also discharged liability of interest in March 2009 itself. Therefore, this is not a case of non payment of Service tax on account of fraud, collusion, suppression, willful misstatement or contravention of provision of law with an intend to evade payment of duty. This is a simple case of non-payment of Service tax and non-observation of procedure of Service tax law out of ignorance. The assessee being a small scale service provider, it is quite possible that he did not discharge duty liability on account of ignorance. As soon as the proceedings were initiated and he was asked to produce records, he submitted all records and gave details of payment which he received for the services he provided. He also discharged Service tax liability as soon as the same was quantified and intimated to him. Therefore, it was a fit case for waiver of penalty under Section 80 of the said Finance Act which the adjudicating authority failed to do by taking into consideration the facts of the case which the appellate authority has done. He reduced the amount of penalty to the extent to Service tax paid by the respondent assessee. At least the appellate authority has exercised the discretion to some extent even though he could have waived the entire penalty under Section 80 of the Finance Act, 1994 which provides for complete waiver of penalty when there was a reasonable cause for failure on assessee's part in non payment of Service Tax. Thus, Tribunal finds that there is no infirmity in the order passed by the lower appellate authority. Accordingly Tribunal dismissed the department's appeal as devoid of merits.
Decision:- Appeal dismissed.

Comment:-The significance of this case is that as the assessee was not having knowledge about the provisions of the Finance Act, he did not get registration and not paid service tax, there was no fraud, collusion, suppression, willful misstatement or contravention of provision of law with an intend to evade payment of duty. Accordingly, waiver of penalty under section 78 by invoking the provisions of section 80 was justifiable and proper. Moreover, the penalties both under Sections 76 and 78 are not warranted and cannot be imposed after 10-5-2008.

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