Benefit of reduced penalty u/s. 78 of 25% under 4th proviso is not admissible if tax amount is reduced by Commissioner (A)

In this case, the Commissioner (Appeals) has reduced the tax amount and hence the respondents cannot take advantage of the provision under the fourth proviso to Section 78. Having not paid the penalty amount within one month from the date of the Order-in-Original even though the legal provision was clearly brought to the notice of the respondents by the original authority in para 14 of his order, the respondents cannot be given the benefit of paying 25% of the reduced penalty.

Hence the impugned order passed by the lower appellate authority is modified to that extent and it is held that the respondents are required to pay penalty of Rs.40,692/- (Rupees forty thousand six hundred ninety two only) equal to the reduced tax amount determined by the lower appellate authority. The Department’s appeal is allowed in the above terms.

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI

Appeal No. ST/458/2010

Arising out of Order-in-Appeal No. 49/2010 dated 31.3.2010
passed by the Commissioner of Central Excise (Appeals), Trichy

Date of decision : 08.04.2011

CCE, TRICHY

Vs

SBI, KUMBAKONAM

Appellant Rep by : Shri A.B. Niranjan Babu, SDR
Respondent: Rep by : Shri M. Kannan, Adv.

CORAM : Dr Chittaranjan Satapathy, Member (Technical)

FINAL ORDER NO. 516/11

Heard both sides.

2. The learned SDR appearing for the Department states that the Department’s appeal is in respect of reduction in the penalty by the lower appellate authority as well as in respect of not confirming the additional duty demand for the period prior to 19.4.2006. As rightly pointed out by the learned counsel for the respondents, in none of the grounds of appeal from para A to E and similar paragraphs in the Order-in-Revision passed by the Committee of Commissioners, there is any challenge to non-confirmation of additional duty demand for the period prior to 19.4.2006. As such, the Tribunal cannot go into this question in the absence of any ground taken in this regard in the Department’s appeal.

3. As regards the reduction in the penalty, I find that the original authority in para 14 of his order had clearly pointed out that if the tax amount, interest and penalty are paid within 30 days of his order, the penalty will stand reduced to 25%. His order is therefore in accordance with first and second proviso to Section 78 of the Finance Act, 1994. Admittedly, the respondents were required to deposit 25% of the penalty amount within one month of the original order to get the benefit of reduced penalty to the extent of 25%. The fourth proviso to the said Section 78 provides that the reduced penalty of 25% is available if the same is paid within 30 days of the order of the Commissioner (Appeals) but this proviso applies in the case where the Commissioner (Appeals) enhances the tax amount and not where he reduces the tax amount. In this case, the Commissioner (Appeals) has reduced the tax amount and hence the respondents cannot take advantage of the provision under the fourth proviso to Section 78. Having not paid the penalty amount within one month from the date of the Order-in-Original even though the legal provision was clearly brought to the notice of the respondents by the original authority in para 14 of his order, the respondents cannot be given the benefit of paying 25% of the reduced penalty. Hence the impugned order passed by the lower appellate authority is modified to that extent and it is held that the respondents are required to pay penalty of Rs.40,692/- (Rupees forty thousand six hundred ninety two only) equal to the reduced tax amount determined by the lower appellate authority. The Department’s appeal is allowed in the above terms.

(Dictated and pronounced in open court)

NF