Whether simultaneous imposition of penalties under section 76 and 78 is proper?

PJ-Case law-2012/13-1568

Case:- COMMISSIONER OF CENTRAL EXCISE, MEERUT VERSUS MERINO INDUSTRIES LTD.

Citation:-2013 (30) S.T.R. 413 (Tri.- Del.)

Issue:- Whether simultaneous imposition of penalties under section 76 and 78 is proper?

Brief Facts:-The respondents are manufacturers of excisable goods which they export. They have been using the service of foreign commission agent for selling their product. During investigation by Revenue officers, it was noticed that they had not paid service tax on the amounts paid to their foreign agents. When this issue was pointed out to them they paid service tax along with interest before issue of Show Cause Notice. However, Revenue was of the view that they should have paid penalty also. Accordingly, proceedings were initiated and service tax of Rs. 3,85,323/- was confirmed and penalties of Rs. 2,42,554/- each were imposed under Section 76 and 78 of the Finance Act, 1994. In appeal filed before Commissioner (Appeal), penalty under Section 76 was set aside for the reason that simultaneous penalties under Section 76 and Section 78 were not warranted. Aggrieved by the order of Commissioner (Appeals), Revenue has filed this appeal for restoration of penalty under section 76.

Appellant’s Contention:-The Appellant submits that Section 76 and 78 provides penalties for different reasons and the Hon’ble Kerala High Court in the case of Assistant Commissioner of Central Excise v. Krishna Poduval -2006 (1) S.T.R.185 (Ker.) has held that such separate penalties can be imposed and therefore ld. AR pleads that the Commissioner (Appeals) erred in dropping the penalty imposed under Section 76.

Respondent’s Contention:-The Respondent submits that the Punjab & Haryana High Court in the case of CCE v. City Motors- 2010 (19) S.T.R. 486 (P & H) has held that once penalty under Section 78 is imposed there is no justification for imposing separate penalty under Section 76. The Counsel also quoted a few decisions of the Tribunal holding the same view. He also point out that from 10-5-2008, Section 78 has been amended to the effect that penalties under both sections should not be imposed simultaneously.

Reasoning of Judgment:- We have considered the submissions from both the parties and perused the record, we find that the demand is for the period 2004-05 to 2007-08. For the period prior to 18-4-2006 there has been decision of the Bombay High Court in the case of Indian National Shinpowner Assosiation v. UOL -2009 (13) S.T.R. 235 to the effect that service tax need not paid by recipient of service for services provided by persons located abroad. In this case the respondent has voluntarily paid the tax when the omission was pointed out to them without contesting the issue and he has also paid the penalty under Section 78. In these circumstances, Tribunal finds it proper to follow the decision of order of Punjab & Haryana High Court which is the jurisdictional High Court. So the Tribunal uphold the order of Commissioner (Appeals), thereby rejecting the appeal filed by the Revenue.

Decision:- Appeal filed by revenue is rejected.

Comment:-The crux of this case is simultaneous penalty under section 76 & 78 is neither warranted not justifiable and so the appeal filed by the Revenue was bound to be rejected. Moreover, there has been amendment in section 78 that no penalty is imposable under section 76 if penalty has been imposed under section 78 and many high courts have even held that such amendment has retrospective application and is clarificatory in nature.

Comments

PJ-Case law-2012/13-1568

Post a Comment

Query