Service tax – Benefit of reduced penalty of 25% in appeal cases

Service tax – Benefit of reduced penalty of 25% applicable only in cases where the tax amount is increased by the Commissioner (Appeals)

CCE, Trichy Vs. SBI, Kumbakonam (CESTAT Chennani) – 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 Commissioner (Appeals) but this proviso applies in the case where the Commissioner (Appeals) enhances the penalty and not where he reduces the penalty. In this case, the Commissioner (Appeals) has reduced the penalty and hence the respondents cannot take advantage to the provision under the fourth proviso to Section 78.

IN THE CUSTOMS, EXCISE & 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)
CCE, Trichy Vs. SBI, Kumbakonam

CORAM

Hon’ble Dr. Chittaranjan Satapathy, Technical Member

Date of Hearing:   08.04.2011

Date of Decision:  08.04.2011

Final Order No.  ____________

Heard both sides.

2. The learned SDR appearing for the Department states that the Departments 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 Departments 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 Commissioner (Appeals) but this proviso applies in the case where the Commissioner (Appeals) enhances the penalty and not where he reduces the penalty. In this case, the Commissioner (Appeals) has reduced the penalty and hence the respondents cannot take advantage to 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 Departments appeal is allowed in the above terms.

(Dictated and pronounced in open court)

(Dr. Chittaranjan Satapathy)

Technical Member