100% Penalty Not Imposable if Duty, Interest & 25% Penalty Already Paid

In the case of Network Vs Commissioner of Central Excise, CESTAT Chandigarh has ruled that imposing a 100% penalty is not justifiable when the duty liability, along with interest and 25% of the penalty, has already been paid upon receipt of the order. The appellants, who were cable TV operators providing internet/cable connections, were issued a Show Cause Notice for non-payment of Service Tax. The Original Authority confirmed the Service Tax and imposed penalties, which were later reduced by the Appellate Authority. The tribunal considered the issue of penalty, taking into account the Punjab & Haryana High Court’s decision in the case of Pannu Property Dealers, Ludhiana (ST/13/2020), and concluded that penalty under Sections 76 and 78 can be seen as mutually exclusive even before the relevant amendment. Moreover, the appellants were granted the benefit of Section 80 of the Finance Act, 1994, as they proved reasonable cause for their failure to discharge the applicable Service Tax.

CESTAT considered the fact that the main cable operator M/s SIFY had discharged Service Tax on the entire amount collected from the customers, so,  there are reasons to believe that there were sufficient reasons for the appellant in not discharging the applicable Service Tax.

As a result, the penalties imposed were set aside, while the Service Tax paid with interest was confirmed.