• Nov
  • 25
  • 2012

Service Tax Penalty cannot be imposed u/s. 76 and 78 simultaneously

CESTAT, KOLKATA BENCH

Commissioner of Central Excise

Versus

Mittal Technopack (P.) Ltd.

ORDER NO. A-531/KOL./2012

APPEAL NO. ST/113 OF 2011

JULY 27, 2012

ORDER

1. This is an appeal filed against the order in appeal No.18/ST/RA/HAL/2010 dated 19.01.2011.

2. Briefly stated facts of the case are that the appellant had rendered services under the heading ‘Business Auxiliary Service’ but failed to discharge the Service Tax during the period from 1/4/07 to 31/3/2008. Consequently a show cause notice was issued to them for recovery of S. Tax amounting to Rs.61,566/-, Ed.Cess Rs.1,231/- and S&HEd. Cess Rs.615/-. Besides, penalty has been proposed under Section 76 and 78 of the Finance Act, 1994. The entire amount of Service Tax has been paid by the applicant before issuance of show cause notice i.e. on 13/2/2009. The show cause notice was issued to them on 28/10/2009. The Adjudicating Authority confirmed the demand and imposed penalty equivalent to Service Tax under Section 78 of the Finance Act 1994 only. Aggrieved, the Revenue filed the appeal before the Commissioner of Central Excise (Appeals) for non imposition of penalty under 76 of the Finance Act. The Ld. Commissioner (Appeal) dismissed the appeal filed by the Revenue and upheld the order in original of the Lower Authority. Hence the present appeal.

3. Ld. A.R. for the Revenue has submitted that both the Lower authorities has erred in not imposing the penalty under 76 of the Finance Act even though the same was invoked in the impugned notice. The Ld. A.R. has referred to the judgment of the Hon’ble Kerala High Court in the case of Asstt. CCE v. Krishna Poduval [2006] 3 STT 96.

4. Ld. Consultant appearing for the Respondent has submitted that both the Lower Authorities has rightly not imposed penalty under Section 76 once penalty under 78 of Finance Act was imposed. The Ld. Consultant submitted that the said concept of imposition of penalty both under Section 76 and 78 has been done away with by amending the respective provisions w.e.f. 10th May, 2008. This conforms the view taken by the Tribunal in a number of cases that penalty cannot be imposed under both these sections. In this connection, he has referred to the recent judgment of Hon’ble Punjab and Haryana High Court in the case of CCE v. First Flight Courier Ltd. [2011] 22 STR 622 (Punj. & Har.).

5. Heard both sides and perused the records. The limited issue in this case is to determine as to whether penalty under Section 76 ought to be imposed in the facts and circumstances of the case besides penalty under Section 78 which has been imposed by the adjudicating Authority and upheld by the Ld. Commr.(Appeal). In support of his order, the Ld. Commr.(Appeal) had recorded the reasoning as below:

“I have carefully gone through the case records and considering the gravity of the case I decide to dispose off the appeal on the basis of available documents without giving further hearing in the case. The moot issue to be decided in the instant appeal is as to whether imposition of penalty under Section 76 of the Act is mandatory when penalty under Section 78 of the Act is there in the Order in Original? Section 76 of the Act provides imposition of penalty for failure of service tax in respect of SCN issued within stipulated one year time and section 78 of the Act provides imposition of penalty for SCN invoking extended period alleging fraud, suppression on the part of the assessee. In this regard I put reliance on Hon’ble Tribunal’s judgment in the case of The Financers v. CCE [2007] 8 STR 7 (T) = (2007-TIOL- 1778-CESTAT-DEL) wherein it has been held that “Double penalty under section 76 not impassable in cases where penalty imposed under section 78 ibid for suppression”. The present case is no different Therefore, I find that simultaneous imposition of both penalties is double punishment to the appellant and thus not justified”

6. I find that the law has been amended w.e.f. 10/5/2008. In a recent judgment, Hon’ble High Court of Punjab and Haryana in the case of First Flight Courier Ltd. (supra) taking into consideration the amending provision, has specifically answered whether penalty under sec. 76 as well as sec. 78 can be imposed simultaneously for the period prior to the amendment of said provisions. Their Lordships held at para 5 as follows:

“We are unable to accept the submission. Section 76 provides for penalty for failure to pay the amount while Section 78 provides for penalty for suppressing the taxable value. Section 78 is, thus, more comprehensive and provides for higher amount Even if technical, the scope of Sections 76 and 78 is different, penalty under Section 76 may not be justified if penalty had already been imposed under Section 78. The matter was considered by this Court in STA No. 13 of 2010 (Commissioner of Central Excise v. M/s. Pannu Property Dealers, Ludhiana) decided on 12/7/2010 wherein it was observed:-

“We are of the view that even if technically, scope of sections 76 and 78 of the Act may be different, as submitted on behalf of the revenue, the fact that penalty has been levied under section 78 could be taken into account for levying or not levying penalty under section 76 of the Act. In such situation, even if reasoning given by the appellate authority that if penalty under section 78 of the Act was imposed, penalty under section 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty under section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under section 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time.”

In view of the above, I find there is no merit in the appeal filed by the Revenue and accordingly the same is dismissed. Appeal is dismissed.


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