2011 (6) TMI 406 - AT - Service Tax

Penalty u/s 78 - Held that - Original authority and the Commissioner (Appeals) have not given any option to pay reduced penalty inasmuch the entire Service Tax along with interest stands paid prior to issue of show cause notice the appellant is entitled to pay 25% of the penalty in terms of decision in the case of K.P. POUCHES (P) LTD. Versus UNION OF INDIA 2008 (1) TMI 296 - HIGH COURT OF DELHI . Appellant is entitled to pay a concessional penalty of Rs. 26, 492.50 within 30 days from today if they have not already paid.

Summary

Issues: Dispute over penalty imposition and entitlement to pay reduced penalty under Section 78 of the Finance Act.

Paragraph 2 of the judgment states that there is no dispute regarding the Service Tax and interest liability being paid before the show cause notice was issued. The original authority imposed a penalty of Rs.1,05,970 under Section 78, which was upheld by the Commissioner (Appeals).

Paragraph 3 outlines the argument made by the advocate for the appellants, highlighting that neither the original authority nor the Commissioner (Appeals) provided the option to pay a reduced penalty as per the proviso to Section 78 of the Finance Act. The advocate refers to a decision of the Hon'ble High Court of Delhi and a Board instruction, emphasizing the need to grant the appellant the opportunity to pay the reduced penalty. It is noted that 25% of the penalty imposed was already paid by the appellants.

In response, as per paragraph 4, the learned DR argues that the case justifies a penalty equal to the Service Tax demanded under Section 78 of the Finance Act. However, the DR acknowledges the payment of 25% of the penalty, subject to verification.

The judgment, as per paragraph 5, reflects the consideration of submissions from both sides. It is observed that since no option was given by the original authority or the Commissioner (Appeals) to pay a reduced penalty, and as the entire Service Tax and interest were paid before the show cause notice, the appellant is entitled to pay only 25% of the penalty. This entitlement is based on a decision of the Hon'ble High Court of Delhi in a specific case.

Consequently, paragraph 6 details the ruling that the appellant can pay a reduced penalty of Rs.26,492.50 within 30 days, provided it has not already been paid. Failure to pay within the stipulated time frame would result in the penalty reverting to the original amount of Rs.1,05,970.

Finally, paragraph 7 concludes the judgment by stating that the appeal is disposed of based on the terms outlined, granting the appellant the opportunity to pay the reduced penalty amount within the specified time frame to resolve the issue.