Whether simultaneous penalties under Sec 76 and Sec 78 be imposed and whether option to pay reduced mandatory penalty under Sect 78 be given?

PJ/Case Law /2016-17/3329

Case-BSL LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II
Citation-2016(44) S.T.R. 419(Tri.-Del.)
Brief Facts-Appeal had been filed against Order-in-Appeal dated 29-10-2009 which upheld the Order-in-Original dated 13-2-2009, in terms of which service tax demand of Rs. 7,93,750/- was confirmed along with interest on the ground that the appellant paid commission to the overseas agents but did not pay service tax under Business Auxiliary Service (BAS) under reverse charge mechanism. Penalties under Sections 76, 77 and 78 of the Finance Act, 1994 were also imposed.
Appellant’s Contention-The appellant has fairly conceded that the issue was covered against it in its own case vide CESTAT Order No. ST/A/53824/2015-CU (DB), dated 11-9-2015, but pleaded that the penalty under Section 76 ibid should be waived in view of the fact that penalty under Section 78 ibid has been imposed and option to pay reduced mandatory penalty under Section 78 ibid should be given (as it had not been given by lower authorities) as was done in the above-referred CESTAT order.

Respondent’s Contention-Ld. Departmental Representative pleaded that during the relevant period, penalty under Section 76 and Section 78 ibid was imposable simultaneously. He also pleaded that in the case of Pr. CST-II v. Top Security Ltd. [2015-TIOL-2751-HC-DEL-ST = 2016 (41) S.T.R. 612 (Del.)], Delhi High Court has held that option to pay 25% (reduced) mandatory penalty cannot be extended at the CESTAT level.

Reasoning Of Judgement-they considered the contentions of both sides. The appellant had conceded the demand along with interest and it is only pleading for waiver of penalty under Section 76 ibid as penalty under Section 78 ibid has been imposed and for an option to pay 25% (reduced) mandatory penalty under Section 78 ibid as the option was not given at the lower levels. As regards the imposition of penalty under Sections 76 and 78 ibid simultaneously and option for reduced (25%) mandatory penalty under Section 78, CESTAT in the appellant’s own case vide order dated 11-9-2015 (supra) held as under :-
“3. We have considered the contentions of the appellant. There is no doubt that the commission paid to overseas agents by the appellant was liable to service tax under BAS and the appellant is not contesting the same. However, regarding the contention of the appellant that it should not have been imposed penalty under Section 76 ibid, we find that in the case of Jubiliant Enpro (P) Ltd. v. CCE, Noida [2015-TIOL-2535-CESTAT-DEL], CESTAT has held as under :-
“12. The appellants have argued that once penalty under Section 78 has been imposed, penalty under Section 76 of Finance Act, 1994 should not be imposed. We find that Punjab & Haryana High Court in several cases (viz. CCE v. First Flight Couriers Ltd. - 2011-TIOL-67-HC-P7H-ST, CCE, Chandigar-I v. M/s. Cool Tech Corporation - 2011-TIOL-23-HC-P&H-ST, CCE v. Pannu Property Dealers, Ludhiana - 2010-TIOL-874- HC-P&H-ST) has held that even if at the relevant time the penalties under Sections 76 & 78 were not mutually exclusive, once penalty under Section 78 has been imposed, penalty under Section 76 ibid may not be justified. We also have no difficulty in agreeing with the appellants that maximum penalty under Section 77 was only Rs. 1000/-.”
In the light of the said judicial pronouncement, we are inclined to accept the contention of the appellant with regard to the penalty under Section 76 ibid. We also find that none of the lower authorities expressly gave the appellant option to reduced mandatory penalty under Section 78 ibid. In terms of the decision of Gujarat High Court in the case of Ratnamani Metals & Tubes [2013-TIOL-1124-HC-AHM-CX], such an option can be given even at the level of CESTAT.”
Thus, in the appellant’s own case involving similar demand, penalty under Section 76 ibid was set aside and option to pay reduced (25%) mandatory penalty was extended. At this juncture, it is pertinent to mention that the appellant is located in Rajasthan, which is neither under the jurisdiction of Gujarat High Court nor under the jurisdiction of Delhi High Court. Therefore, notwithstanding the judgment of Delhi High Court in the case of Pr. CST-II v. Top Security Ltd. (supra), the Tribunal would have been inclined to follow the judgment of Gujarat High Court in the case of Ratnamani Metals & Tubes (supra) [2013 (296) E.L.T. 327 (Guj.)], more so because it has already been followed in respect of a similar demand in the appellant’s own case and given an option to pay reduced (25%) reduced mandatory penalty. However, the Tribunal found that Delhi High Court in the case of Pr. CST-II v. Top Security Ltd. (supra), took note of the Gujarat High Court judgement in the case of Ratnamani Metals & Tubes (supra), and differed therefrom. We agree that that would not render Gujarat High Court order invalid as one High Court cannot overrule judgment of another High Court. But in the case of CCE, Surat v. Rajeshree Dyg. & Ptg. Mills (P) Ltd. [2014 (305) E.L.T. 442 (Guj.)] passed by Gujarat High Court after the judgment in the case of Ratnamani Metals & Tubes (supra). Gujarat High Court itself changed its view and in effect held a view similar to that held by Delhi High Court in the case of Pr. CST-II v. Top Security Ltd. (supra). Review petition against the said judgment was dismissed by the Supreme Court as reported in E.L.T. quoted below :-
“Penalty - Tribunal not justify in extending benefit of reduced penalty of 25% when duty, interest and penalty not deposited either before raising of demand or within 30 day of adjudication order.
The Supreme Court Bench comprising Hon’ble Mr. Justice Anil R. Dave and Hon’ble Mr. Justice Adarsh Kumar Goel on 3-12-2015 dismissed the Review Petition (Civil) No. 3536 of 2015 in Civil Appeal No. 36137 of 2013 filed by Rajshree Dyg. & Pt. Mills (P) Ltd. against Order and Judgment dated 18-9-2015 passed in Petition for Special Leave to Appeal (C) No. 36137 of 2013 as reported in 2016 (331) E.L.T. A132 (S.C.) (Rajashree Dyg. & Ptg. Mills Ltd. v. Commissioner). While dismissing the petition, the Supreme Court passed the following order :
“Application for oral hearing is rejected.
We have perused the Review Petition and record of the Special Leave Petition and are convinced that the judgment of which review has been sought does not suffer from any error apparent warranting its reconsideration.
The Review Petition is, accordingly, dismissed.”
The Supreme Court in its impugned order had dismissed Special Leave Petition filed against the order of the Gujarat High Court reported in 2014 (305) E.L.T. 442 (Guj.), wherein it was held that the benefit of reduced penalty of 25% imposed under Section 11AC of the Central Excise Act, 1944 could not be extended by the Tribunal inasmuch as the assessee had neither paid duty, interest along with penalty prior to raising demand nor within 30 days of finalisation of demand by the adjudicating authority. Even after passing of order by the Commissioner (Appeals), who confirmed the demand and interest, the assessee did not pay any amount.
[Rajshree Dyg. & Ptg. Mills (P) Ltd. v. Commissioner - 2016 (332) E.L.T. A41 (S.C.)].”
In the foregoing circumstances, Gujarat High Court judgment in the case of Ratnamani Metals & Tubes(supra), no longer remains good law and therefore, can no longer be followed while the law laid down by Gujarat High Court in the case of Rajshree Dyg. & Ptg. Mills (P) Ltd.v. Commissioner (supra), and Delhi High Court in the case of Pr. CST-II v. Top Security Ltd. (supra), becomes good and binding law to be followed.
In the light of the foregoing, the Tribunal upheld the impugned order except for penalty under Section 76 ibid. Thus, the appeal was allowed only to the extent that penalty under Section 76 ibid is set aside.

Decision-Appeal partly allowed.
Comment-The gist of the case is that simultaneous penalties under Section 76 as well as Section 78 of Finance Act, 1994 cannot be imposed. Further the benefit of reduced penalty of 25% imposed under 11AC of the Central Excise Act, 1944 could not be extended in as much as the assessee had neither paid duty, interest along with penalty prior to raising demand nor within 30 days of finalisation of demand by the adjudicating authority in accordance withSection 78 of Finance Act, 1994.

Prepared By- Praniti Lalwani

Comments

PJ/Case Law /2016-17/3329

Post a Comment

Query