CA Bimal Jain
Penalty is levied only when any Service tax has not been paid by reason of fraud, etc., hence, when assessee’s activity is held to be not liable to Service tax, question of imposition of penalty cannot arise
Facts:
The Hon’ble Tribunal has set aside the demand of Service tax on ground that activity carried out by Jubilant Agri & Consumer Products Ltd. (the Appellant) amounted to ‘manufacture’, and therefore cannot be classified as a ‘Business Support Services’. However, no order was passed by the Hon’ble Tribunal on the issue of penalty imposed under Section 78 of the Finance Act. Thereafter, the Appellant filed a rectification application, but the Tribunal dismissed rectification application on ground that the Tribunal has no power to review its own Order.
Held:
The Hon’ble High Court of Allahabad held that the necessary ingredients for levy of penalty is where any Service tax has not been paid by reason of fraud, collusion, willful mis-statement, suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder with the intent to evade payment of Service tax. Hence, when no Service tax was payable or leviable upon the Appellant, the question of penalty or imposition of penalty under Section 78 of the Finance Act could not arise.
Our Comments:
There are plethoras of judgments wherein it has been held that penalty under Section 78 of the Finance Act cannot be levied in the absence of fraud, collusion, willful mis-statement, suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder with the intent to evade payment of Service tax:
- C. Electricals Vs. Commissioner of Central Excise, Mangalore [2015 (39) S.T.R. 131 (Tri. –Bang.)];
- Mohan Poddar Vs. CCE, Raipur [2015 (38) S.T.R. 980 (Tri.- Del.)];
- Commissioner of Central Excise Vs. CESTAT, Chennai [2014 (35) S.T.R. 32 (High Court of Madras)].
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