ST - Since SCN was issued before enactment of FB, 2015 and order was passed after enactment, provisions of substituted s.76 come into play - as appellant had discharged entire ST prior to issuance of SCN, no penalty is imposable u/s 76 in view of s.78B(1)(b): CESTAT
By TIOL News Service
MUMBAI, MAR 25, 2016: Section 76 of the FA, 1994 was substituted by the Finance Act, 2015 to read (as extracted) below:
“Penalty for failure to pay service tax
"76. (1) Where service tax has not been levied or paid, or has been short-levied or short-paid, or erroneously refunded, for any reason, other than the reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person who has been served notice under sub-section (1) of section 73 shall, in addition to the service tax and interest specified in the notice, be also liable to pay a penalty not exceeding ten per cent. of the amount of such service tax:
Provided that where such service tax and interest is paid within a period of thirty days of-
(i) the date of service of notice under sub-section (1) of section 73 , no penalty shall be payable and proceedings in respect of such service tax and interest shall be deemed to be concluded;
(ii) the date of receipt of the order of the Central Excise Officer determining the amount of service tax under sub-section (2) of section 73 , the penalty payable shall be twenty-five per cent. of the penalty imposed in that order, only if such reduced penalty is also paid within such period.
The transitory provision s.78B as inserted by the FA, 2015 w.e.f 14.05.2015 is also extracted below -
“78B. (1) Where, in any case, -
(a) service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded and no notice has been served under sub-section (1) of section 73 or under the proviso thereto, before the date on which the Finance Bill, 2015 receives the assent of the President; or
(b) service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded and a notice has been served under sub-section (1) of section 73 or under the proviso thereto, but no order has been passed under sub-section (2) of section 73 , before the date on which the Finance Bill, 2015 receives the assent of the President , then, in respect of such cases, the provisions of section 76 or section 78, as the case may be, as amended by the Finance Act, 2015 shall be applicable.”
Facts of the case: By an order dated 18.08.2015, the Principal Commissioner of Service Tax, Mumbai-II, in addition to the confirmation of demand and interest and appropriation of an equal amount already paid by the appellant,a Penalty of Rs.40,65,620/- was also imposed u/s 76 of the FA, 1994.
The appellant is aggrieved with the penalty imposed and is in appeal before the CESTAT.
It is submitted that as per the transitory provision section 78B(1)(b) read with section 76(1) of FA, 1994, proviso clause (i) thereto, no penalty could have been imposed by the adjudicating authority.
The AR justified the order of the adjudicating authority.
The Bench took a closer look at the provisions cited by the appellant and observed -
“…On going through the above provision I find that if the show cause notice was served under Section 73(1) before the enactment of Finance Bill 2015 but no order has been passed before the date of enactment, the provision of amended Section 76 shall be applicable. As per amended Section 76 w.e.f. 14.5.2015, if the Service Tax and interest is paid within 30 days from the date of service of notice under Sub-section (1) of Section 73 of the Act, no penalty shall be payable and proceedings in respect of such service tax and interest shall be deemed to have been concluded. In the facts of the present case, the show cause notice was issued on 16.10.2014 and the adjudication order was passed on 18.8.2015 and the appellant have discharged the entire service tax along with interest prior to issuance of show cause notice as clearly appearing in the show cause notice itself. Therefore, in view of the aforesaid amended provision in terms of Section 78B(1)(b) read with Section 76 (1) proviso clause (i), the appellant is not liable to penalty under Section 76 of the Act….”
The penalty imposed u/s 76 of FA, 1994 was set aside and the appeal was allowed.
(See 2016-TIOL-710-CESTAT-MUM)
