Whether waiver of penalty under Section 80 of the Finance Act can be invoked when assessee is well aware of his legal obligations??

PJ/Case Laws/2011-12/1136

Prepared by
CA Rajani Thanvi
Bharat Rathore

Case:Commissioner of C.Ex. Madurai Vs Ayya Communication

Citation: 2011(22) S.T.R. 12 (Tri.-Chennai)

Issue: Whether waiver of penalty under Section 80 of the Finance Act can be invoked when assessee is well aware of his legal obligations??

Brief Facts: The respondent is service provider and registered as a service tax assessee. The Respondent received commission and from a firm and not paid service tax on the same as well as not file Service Tax return. The appellant (Revenue) imposed penalty under Section 76, 77 and 78 by order. The Respondent filed appeal against said order before commissioner appeal. The Commissioner (appeals) was waiving the penalty under Section 80 of Finance act. Aggrieved by this order appellants were file appeal before Tribunal.

Appellant’s Contention: The appellant submit that Section 80 is not applicable in this case. The respondent had obtained registration and they had paid service tax of last quarter. But for the impugned period they have neither paid any service tax not filed any service tax return. Only after investigation by us it was confirmed that respondent received commission from a firm and not paid service tax on the same.

The appellant further submit that respondent were not new assessees. The respondent very well knew the provisions and their tax liability and therefore the lower appellate authority has erred in waiving the penalty imposed.

Respondent’s contention:- The respondent submit that we are a small assessees and we only received commissioner charges and not the tax amount. But once we known about liabilities we have paid the tax amount out of our own pocket. Hence, Section 80 has been rightly applied in this case.

Reasoning of Judgment: - The hon’ble Tribunal heard both side and considered that the respondent were not new assessee. They were registered as service tax assessee. The respondents were not produce any valid reason for non filing of service tax return. The respondent was also not provide any evidence that they did not receive the tax amount from the firm and if they were so, they could have opted for cum-tax price assessment claiming the amount received to be inclusive of tax. But there are no such arguments adanced by the respondents at any stage of the case. The appellant was already registered with the department and paid tas and filed returns for the earlier periods. Hence, the provision of Section 80 cannot be invoked in this case. As such, the penalties imposed under Section 76 and 77 of the Finance act, 1994 should be imposed on the respondent.

The hon’ble Tribunal also considered that penalty under section 78, equal to the tax amount not paid imposed under Section 76 is adequate and no separte penaly is necessary to be imposed under section 78 of the act. The Tribunal also take not of the fact that the service tax law has been amended subsequently making the penalties under Section 76 and 78 mutually exclusive.

Judgment: Appeal allowed in the above terms.

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