ST - Penalty - proviso inserted in s.78 has prospective effect - Penalties under Ss 76 and 78 are imposable simultaneously for failure to pay service tax for period prior to 10.05.2008 although SCNs were issued in year 2010/2011: CESTAT
By TIOL News Service
AHMEDABAD, MAY 30, 2014: THERE are five appeals filed by the Revenue against the orders passed by the Commissioner (Appeals).
The short facts of the Revenue appeals are that the respondents were held liable to pay Service Tax for the financial year 2005-06 to 2009-10 by the adjudicating authority but he imposed penalty only under section 78 of the FA, 1994. The penalty imposition under s.76 was avoided by citing the following case laws viz. First Flight Couriers Ltd. 2011-TIOL-67-HC-P&H-ST, Motor World, Bangalore 2012-TIOL-418-HC-KAR-ST..
The Revenue filed unsuccessful appeals with the Commissioner (Appeals) praying for imposition of penalty on the respondents under Section 76 of the Act for the period up to 09.05.2008 in addition to penalty imposed under Section 78.
In another case, the original adjudicating authority imposed penalties on the assessee u/s 76 as well as u/s 78 of the FA, 1994, but on appeal by the assessee the Commissioner (Appeals) set aside the penalty imposed Section 76 by following the above cited decisions.
So, the Revenue is before the CESTAT against all these five orders passed by the Commissioner(A).
The Revenue representative submitted that the amendment made in Section 78 of FA, 1994 by way of insertion of the proviso with effect from 10.05.2008,laying down that that if the penalty is payable under this section the provisions of section 76 shall not apply, has only prospective effect.
Inasmuch as imposition of penalty u/s 76 was mandatory for failure to pay service tax for the period prior to 10.05.2008 and that penalties could be imposed on the respondents simultaneously under Section 76 as well as under Section 78 for the period prior to 10.05.2008, as ingredients of both the sections were present in the cases under consideration. The following case laws were cited in support, namely, Krishna Poduval 2006-TIOL-77-HC-KERALA-ST, Cadbury India Limited 2008-TIOL-1986-CESTAT-MUM-LB; andBajaj Travels Ltd. 2011-TIOL-896-HC-DEL-ST.
One of the respondents in their cross objection submitted that in view of the CBEC Circular/letter F. No. 390/Misc./163/2010-JC dated 17.08.2011 directing the field formations not to file appeals before the CESTAT where the amount involved is up to five lakh rupees, the appeal filed in their case concerning a penalty of Rs.30,696/- is not maintainable. Reliance is placed on the decisions in Stovec Industries Ltd. 2013-TIOL-214-HC-AHM-CX andRangdhara Polymers 2012-TIOL-1076-HC-AHM-CX to justify their submission. Also, it is submitted that the Board Circulars are binding on the departmental officers and, therefore, no appeal should have been filed by the Revenue in their case. The apex court decision in Paper Products Ltd. 2002-TIOL-84-SC-CX is cited in support. It is also submitted that simultaneous penalties cannot be imposed u/s 76 & 78 in view of the decisions cited by the original authority.
The Tribunal noted that the issues to be decided in these appeals are:
(I) Whether the following proviso inserted in Section 78 of the Finance Act, 1994 on 10.05.2008 had retrospective operation?
"Provided also that if the penalty is payable under this section, the provisions of section 76 shall not apply."
(II) Whether penalties under Sections 76 and 78 were imposable simultaneously on the respondents for failure to pay service tax for the period prior to 10.05.2008 where show cause notices were issued to them in the year 2010/2011?
(III) Whether the Revenues appeals, where service tax evasion involved in litigation is up to five lac rupees, are maintainable in view of Central Board of Excise & Customs Circular F. No. 390/ Misc./ 163/ 2010-JC dated 17.08.2011 directing the field formations not to file appeals before the CESTAT, where the service tax evaded is up to five lac rupees.
On the first issue, the Bench adverted to the decisions in ElgiEquipments Ltd. 2002-TIOL-781-SC-CX, M/s OTIS Elevator Co. (I) Ltd. 2010-TIOL-205-HC-MUM-CX, B ajaj Travels Ltd. 2011-TIOL-896-HC-DEL-ST and concluded that in view of the ratio of the aforesaid case laws which are squarely applicable to the case on hand, the proviso inserted in Section 78 with effect from 10.05.2008 has prospective operation.
As regards the second issue, the Bench relied on the decisions in Krishna Poduval 2006-TIOL-77-HC-KERALA-ST, Bajaj Travels Ltd. 2011-TIOL-896-HC-DEL-ST, and concluded that penalties under both Sections 76 and 78 were imposable simultaneously on the respondents for failure to pay service tax for the period prior to 10.05.2008 although show cause notices were issued to them in the year 2010/2011.
Regarding the third issue the CESTAT observed that out of the five appeals under consideration, only one appeal filed by the Revenue involves evasion of service tax of more than five lakh rupees (tax evasion Rs.5,64,345/-) and in the remaining cases, the amount of service tax evasion in each case is less than the monetary limit of five lakh rupees.
Noting that Appeals in thefour cases were filed by the Revenue on 05.12.2012 when the CBEC Circular F. No. 390/Misc./163/2010-JC dated 17.08.2011 was in force, which directed the field formations not to file appeals before the CESTAT where the amount involved is upto five lakh rupees and since the directions contained in the CBEC circulars are binding on departmental officers, the Revenue appeals filed where the amount is less than five lakhs were held to be not maintainable.
So, excepting one appeal filed by the Revenue, all the other appeals were dismissed.
In passing: See 2014-TIOL-710-CESTAT-MUM.
(See 2014-TIOL-894-CESTAT-AHM)
