2016 (8) TMI 1259 - AT - Service Tax

Penalties u/s 78 - Held that - The declarant has paid the full amount that was computed by the adjudicating authority. The second and final instalment pertaining to the original declaration was made by legal heirs of the declarant. Penalty under Section 78 of Finance Act 1994 like all other penalties in tax statutes is personal to the alleged offender. It is well-settled that penalties cannot be visited upon a person who has ceased to exist. The declarant had expired when the adjudicating authority decided the matter and penalty was not liable to be imposed at that stage - appeal is allowed by setting aside penalty - decided in favor of appellant.

Summary

Issues:
Non-acceptance of declaration under Voluntary Compliance Encouragement Scheme, 2013 leading to demand of tax, interest, and penalties.

Detailed Analysis:

1. The appeal was filed against the order-in-original of the Commissioner of Central Excise, Customs & Service Tax, Aurangabad, regarding the non-acceptance of a declaration made under the Voluntary Compliance Encouragement Scheme, 2013. The appellant, a Chartered Accountant firm, declared undisclosed receipts but had a discrepancy in the amount claimed to be discharged as tax liability. The tax, interest, and penalty were confirmed by the adjudicating authority.

2. The notice was issued to the declarant, but before the matter could be adjudicated, the declarant passed away. The legal heirs of the deceased then handled the case. The shortfall in the declaration was informed to the declarant, and the amount was remitted before the adjudication.

3. The appellant did not appear during the proceedings, and despite a request for adjournment, the matter was taken up for disposal due to peculiar circumstances. The declarant, a Chartered Accountant, had declared and partially paid the undisclosed amount under the scheme. The remaining amount was also paid before the final date under the scheme.

4. The Authorized Representative argued that the declarant had attempted to avoid full disclosure as mandated by the scheme. However, the full amount computed by the adjudicating authority was paid by the declarant and later by the legal heirs. It was highlighted that penalties, including under Section 78 of the Finance Act, 1994, are personal to the offender and cannot be imposed posthumously.

5. The Tribunal allowed the appeal by setting aside the penalty imposed under Section 78 of the Finance Act, 1994, considering the circumstances of the case and the fact that the declarant had passed away before the penalty was decided.