Whether the appellant is liable to pay penalty either under Section 76 or under Section 78 of the Finance Act, 1994?

PJ/CASE LAW/2014-15/2510

Case:- Professional Investment Corporation Versus C.C.E. (Appeals), Madurai

Citation:- 2014 (36) S.T.R. 59 (Mad.)

Brief fact:-The respondent herein has issued a show cause notice dated 15-10-2009, wherein a specific demand has been made to the effect that the appellant/assessee should pay service tax, interest together with penalty under Sections 76 and 78 of the Finance Act, 1994. The demand made in the show cause notice has been accepted by way of passing Order-in-Original No. 13/ADC/ST/2010, dated 5-5-2010. The Order-in-Original has been challenged before the Commissioner of Central Excise (Appeals), Madurai. The Commissioner of Central Excise (Appeals), Madurai has found that the assessee is liable to pay penalty under Section 78 of the said Act. The same has been challenged before the CESTAT. The CESTAT after hearing both sides has rejected the Appeal preferred by the assessee by way of holding that assessee is liable to pay penalty under Section 76. Against the order passed by the CESTAT, the present Civil Miscellaneous Appeal has been preferred by the assessee as an appellant.
Before considering the rival submissions made on either side, narration of the following facts is very much essential. It is an admitted fact that the appellant is liable to pay service tax. It is also a settled principle of law that as per Sections 76 and 70 of the Finance Act, 1994, the Department is entitled to levy penalty as well as interest under the circumstances mentioned therein. In the instant case, in the show cause notice dated 15-10-2009, demand of interest and penalty have been demanded under Sections 76 and 78 of the said Act. The Commissioner of Appeals has decided that the appellant/assessee is liable to pay penalty under Section 78. But the Appellate Tribunal has held that the assessee is liable to pay tax under Section 76.

Appellant’s contention:- The learned counsel appearing for the appellant has contended that since in the Order-in-Original it has been specifically found to the effect that the assessee is liable to pay tax under Section 78 and confirmed by the Commissioner of Central Excise (Appeals), the appellate Tribunal has no power to decide that the assessee is liable to pay penalty under Section 76 and further the assesses has already paid service tax together with interest and for invoking Section 80 of the said Act, the Appellate Tribunal has not given any opportunity and further in Section 80 of the said Act, it has been specifically stated to the effect that if any assessee has shown sufficient reason, penalty cannot be imposed. Under the said circumstances, the entire order passed by the Appellate Tribunal is erroneous and the same is liable to be set aside.

Respondent’s contention:- The learned counsel appearing for the respondent/department has contended that even though in the Order-in-Original as well as in the order passed by the Commissioner of Appeals it has been specifically found that, the assessee .is liable to pay penalty under Section 78, the appellate Tribunal has rightly held that the assesses is liable to pay penalty under Section 76 by way of invoking its inherent powers and further a submission has been made on the side of the assessee to that effect before the Appellate Tribunal. Under the said circumstances, the order passed by the Appellate Tribunal does not require any interference.

Reasoning of judgment:- The Appellate Tribunal has categorically held that the appellant/assesses is liable to pay penalty under Section 76.
As rightly pointed out on the side of the appellant/assesses, against the order passed in Original as well against the order passed by the Commissioner of Appeals, no appeal has been preferred by the Department by way of saying that proper section applicable to the present case is only [Section] 76 and not Section 78.
Even though the Department has not preferred any Appeal so as to decide relevant section, as per Section 35C of the Central Excise Act, 1944, the Appellate Tribunal is having enormous powers to pass suitable order and therefore, the first point urged on the side of the appellant cannot be accepted.
Now the Court has to look into the second point raised on the side of the appellant/assessee. The second point is that as per Section 80 of the Finance Act, 1994, if sufficient reason has been shown by an assessee, he is not bound to pay penalty.
As rightly pointed out on the side of the appellant/assessee, such opportunity has not been given by the Appellate Tribunal for coming to a conclusion as to whether the appellant/assessee is entitled to get such kind of benefit/exemption. Since sufficient opportunity has not been given for getting such kind of exemption, this Court is of the view to set aside the final order passed by the CESTAT and remit the matter to its file.
In fine, this Civil Miscellaneous Appeal is allowed without cost. The Final Order No. 241/2012 in Appeal No. ST/221/2011 passed by the CESTAT, Chennai is set aside and the matter is remitted to the file of Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai for considering the second point urged on the side of the appellant/assessee.

Decision:- Appeal allowed.

Comment:- The analogy of the case is that the assessee is liable for penalty either under section 76 or section 78 of the Finance Act, 1994. If penalty imposed under section 78 then penalty under section cannot be imposed. Section 78 provided that if the penalty is payable under this section, the provisions of section 76 shall not apply. According to section 80 of Finance Act, 1994, no penalty shall be imposable on the assessee for any failure referred to in provisions of section 76[sec. 77 or proviso to sub- section (1) of section 78], if the assessee proves that there was reasonable cause for the said failure. The Appellate Tribunal has not given any opportunity for getting such kind of exemption. Hence, appellant is not liable to pay any penalty.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2510

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