Whether both the penalties of section 76 and 78 can be leviable if different offences are committed in course of same transaction.

PJ/Case Laws/2010-11/1113

Prepared By:
CA. Rajani Thanvi,
Bharat Rathore &
Parag Ghate

Case: Assistant Commissioner Of Central Excise vs Krishna Poduval

Citation: 2006-TIOL-77-HC-KERALA-ST

Issue:

Whether both the penalties of section 76 and 78 can be leviable if different offences are committed in course of same transaction.

Brief Facts:
The matter relates to payment of service tax, interest and penalty under the Finance Act, 1994, by the respondent in each of the two appeals. The Revenue is the appellant in both the appeals. Notices were issued to the respondents in these two appeals demanding service tax along with interest as applicable under Section 75, and penalty under Sections 76 and 78 of the Finance Act, 1994. The respondents in these appeals challenged the same in appeals before the Commissioner of Central Excise (Appeals). However, the appeals were dismissed since the same were filed beyond the period prescribed under Sub-section 3 of Section 85 of the Finance Act, 1994 and the Commissioner (Appeals) did not have power to condone delay beyond the maximum period prescribed under the said Section. Although the respondents have a further right of appeal before the Appellate Tribunal, they chose to file the writ petitions, the judgments in which are under challenge in these Writ Appeals, probably realizing that the Appellate Tribunal also cannot consider the appeal on merits, their first appeal having been dismissed as time barred with no provision to condone delay beyond the period prescribed under Section 85 of the Finance Act.

The Writ Petitions were filed challenging Sub-section 3 of Section 85 of the Finance Act, 1994 which prescribes a maximum period of three months as the period during which the Commissioner (Appeals) could condone the delay in filing the appeals. They also challenge, inter alia, the imposition of penalty under Section 76 of the Act. On those grounds the respondents prayed for quashing of Exts. P8 and P9 orders in appeal passed by the Commissioner of Central Excise (Appeals).
The learned Single Judge by the impugned judgments in each of the writ petitions, confirmed the demand for service tax and interest under Section 75, as also penalty under Section 78 of the Finance Act, 1994. However, the learned Single Judge directed the first appellant herein to modify the demand by withdrawing the penalty under Section 76. The Revenue is aggrieved by that part of the judgment of the learned Single Judge directing the 1st appellant to withdraw the penalty levied under Section 76.

Appellants Contention:
Appellant contended that the imposition of penalty under Sections 76 and 78 of the Act is for non-payment of service tax and suppression of value of taxable service, respectively which are two distinct and separate offences attracting separate penalties and therefore both are imposable against the respondents in the two appeals.

Respondents Contention:
On the other hand, the respondents submitted that the offences alleged against the respondents arose from the same transaction constituting only one offence and therefore imposition of penalty under both the sections are unwarranted and unsustainable. Respondent have contented that they had not taken up the original orders imposing penalty in appeals before the appellate authority within the maximum period prescribed under Section 85(3) of the Finance Act, 1994, they cannot get the appeals revived and heard on merits by resorting to the discretionary remedy before this Court under Article 226 of the Constitution of India. Once the period of limitation has run itself out and the appellate authority does not have power to condone the delay in filing the appeals beyond the maximum period prescribed under the Act, the remedies of the appellants come to an end just like in the case of a time barred suit and the respondents cannot, by invoking the discretionary remedy under the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India, resurrect their unenforceable cause of action and require this Court to consider their contentions against the original orders on merit. That would amount to defeating the very law of limitation which respondents are not expected to do under Article 226. And If they are to entertain the contentions of the respondents on merits, than that would amount to negating the law of limitation which respondents have no jurisdiction to do under Article 226 and which may even lead no anomalous results. Respondents are not satisfied that the jurisdiction of this Court under Article 226 of the Constitution of India is so wide as to resurrect a cause of action which has become unenforceable on account of the law of limitation. Further, firm opinion that the jurisdiction under Article 226 of the Constitution of India cannot be invoked against express statutory provisions, however harsh the effect of the provisions may be on an assessee or litigant.
Respondents relied upon the following decision: -

Maheswary Fire Work Industries v. Commercial Tax Officer
Commissioner of Sales Tax, Uttar Pradesh v. Parson Tools and Plants, Kanpur

Reasoning of Judgment:
After listening both the sides, High Court came upon the decision that, the penalty imposable under Section 76 is for failure to pay service tax by the person liable to pay the same in accordance with the provisions of Section 68 and the Rules made thereunder, whereas Section 78 relates to penalty for suppression of the value of taxable service. Of course these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But they are of opinion that the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences. There can be a situation where even without suppressing value of taxable service; the person liable to pay service tax fails to pay. Therefore, penalty can certainly be imposed on erring persons under both the above Sections, especially since the ingredients of the two offences are distinct and separate. Perhaps invoking powers under Section 80 of the Finance Act, the appropriate authority could have decided not to impose penalty on the assessee if the assessee proved that there was reasonable cause for the said failure in respect of one or both of the offences. However, no circumstances are either pleaded or proved for invocation of the said Section also. In any event they are not satisfied that an assessee who is guilty of suppression deserves such sympathy. As such, that the learned Single Judge was not correct in directing the 1st appellant to modify the demand withdrawing penalty under Section.

Judgment:

Petitions dismissed.

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