whether penalty under section 76 and 78 of Finance Act can be imposed when department could not prove any suppression by assessee?

PJ/Case Laws/2011-12/1127

Prepared by
CA Rajani Thanvi
Bharat Rathore

Case: Morvi Export V/s Commissioner of Central Excise, Trichy

Citation: 2011 (22) S.T.R. 71 (Tri. Chennai)

Issue: whether penalty under section 76 and 78 of Finance Act can be imposed when department could not prove any suppression by assessee?

Brief Facts: The assessee were dealing with export consignments and they were under impression that such consignment were not liable to service tax and hence they were not registered with department and not paid service tax. But as they known about the tax liability they got themselves registered and started paying tax. But as per department the assessee know about their liability and they intendto evade payment of service tax. The department imposed penalty under the provisions of section 76, 77 and 78.

Appellant’s Contention: The appellant submit that they don’t know about there liability to pay service tax and once we came to know about our liability we got ourselves registered with the department and started paying tax regularly. Hence, they were not liable for panel action under section 76 & 78 of the Finance Act.

Respondent’s contention:-Respondent submit that the Appellant knew about their liability and appellant should be liable for panel action under section 76 & 78 of the Finance Act.

Reasoning of Judgment: - The hon’ble Tribunal held that the reasons given by the assessee before the authorities below for non registration and non payment of service tax on the services rendered by them is that they were dealing with export consignments and they were under the belief that such consignment were not liable to service tax and the moment they came to know about their liability they got themselves registered and started paying tax. Nothing is coming out from any statement of the appellant that they had knowledge of liability to pay and yet did not pay. The burden of proving that the assessee was guilty of suppression lies upon the Revenue. As the Burden has not been discharged, and this is fit case for setting aside the penalty and therefore, Penalties imposed under section 76 & 78 should be set aside and only the penalty under section 77 should be imposed.

Judgment:The appeals partly allowed and the penalty under section 76, 77 & 78 Penalty under section 77 imposed ibid has set aside.

Comment:From the above decision it is clear that the onus to prove guilty of suppression lies upon the revenue. If the revenue fails to do so then the penalties for such offences is not imposable.

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PJ/Case Laws/2011-12/1127

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