Service Tax penalty under Section 76 may not be justified if penalty had already been imposed under Section 78

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 technically, 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 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.

IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH

STA No. 48 of 2010

COMMISSIONER OF CENTRAL EXCISE, COMMISSIONER ATE

Vs

M/s FIRST FLIGHT COURIER LTD.

Dated: January 28, 2011

JUDGEMENT

Per: Adarsh Kumar Geol:

1. This appeal has been preferred by the revenue under Section 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 (in short “the Act”) against order dated 25.5.2010 passed by the Customs Excise and Service Tax Appellate Tribunal, claiming following substantial questions of law:-

“i) Whether the judgment and order passed by the Ld. CESTAT New Delhi is proper and legal?

ii) Whether the Ld. CESTAT was right in not imposing penalty under section 76 of the Finance Act, 1994 for the period prior to 10.5.2008 by holding that penalty under Section 76 & 78 of the Act is not imposable simultaneously, particularly when these sections became mutually exclusive from 10.5.2008 after amendment of section 78 of the Finance Act, 1994?”

2. The assessee is a service provider liable to pay service tax under the provisions of the Act. According to the department, there was short payment of service tax to the extent of Rs.44,858/- for the period from 1.4.2002 to 31.3.2005 and on that account after issuing show cause notice, demand for tax was confirmed and penalty under Sections 76 and 78 of the Act was imposed. On appeal, while the demand of service tax was upheld, penalty under Section 78 was reduced to 25% on the ground that the amount was deposited within one month on receipt of order. Penalty under Section 76 was set aside on the ground that penalty under Section 76 as well as 78 could not have been imposed simultaneously. The appeal of the department against the order of the Commissioner (Appeals) has been dismissed by the Tribunal.

3. We have heard learned counsel for the revenue.

4. Only point which has been urged by learned counsel for the appellant is that after 10.5.2008, there is an amendment providing that penalty under Section 76 could not be levied if penalty under Section 78 has been levied but for the period prior thereto, penalty could be levied under both Sections. The Commissioner (Appeals) as well as the Tribunal erred in deleting the penalty under Section 76 by assuming that simultaneously penalty under both the provisions could not be levied for the period in dispute.

5. 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 technically, 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.”

6. In view of the above, no substantial question of law arises.

The appeal is dismissed.