In any event, once penalty is imposed under Section 78 of the Finance Act, 1994 no penalty can be imposed under Section 76 of the Act since failure to pay tax cannot once again be subjected to penalty under Section 78 of the Act which is specifically in respect of penalty for intention to evade payment of service tax or suppression or concealment of the value of taxable services or for furnishing inaccurate value of services. Finance Act, 2007 had inserted a proviso in section 78 w.e.f. 10.05.2008 to the effect that if the penalty is payable under section 78, the provision of section 76 shall not apply. Also, in cases where no tax liability arises, the question of levy of any of the penalties in question would not arise.
Hon’ble Tribunal in the Opus Media & Entertainment vs CCE, Jaipur (2007 -TMI - 2921 - CESTAT, NEW DELHI) and The Financers vs CCE, Jaipur (2008 -TMI - 4599 - CESTAT, NEW DELHI) has been very clearly held that cases in which penalty are imposed under Section 78 cannot fall in respect of the same service tax evaded under Section 76. There is no scope for imposing double penalty, both under Sections 76 and 78 for the same offence. It has to fall either under Section 76 or 78 and mens rea will have to be proved Levy of penalties u/s 76 and 78 is contrary to the statutory provisions.
The penalty cannot be imposed both under Section 76 and 78 of the Finance Act as it is the clear intention of the legislature that they do not want penalty to be imposed under both the Sections. It is stated that the proviso to Section 78 of the Act, as introduced vide Finance Act, 2008 w.e.f. 10.05.2008, clearly provides that penalty under Section 76 shall not be imposed if it has been imposed under Section 78.
In CCE v.First Flight courier Ltd. (2011) 22 STR 622 (P & H), High Court held that penalty u/s 76 is not justified if penalty under section 78 is imposed. It held, thus as under 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. Mis. 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."
It has been held in Desert Inn Ltd. v. CCE, Jaipur (2011) 23 STR 234 (Cestat, New Delhi) that once penalty under section 78 has been imposed, penalty under section 76 further is not maintainable. [Also see K.P. Pouches Pvt. Ltd. v. Union of India (2008 -TMI - 30328 – (HIGH COURT OF DELHI)].
In CCE, Chandigarh v. Krishna Automobiles (2011) 23 STR 54 (Cestat, Delhi), it was held that since section 58 w.e.f 10.5.2008 provide expressly that penalties under sections 76 and 78 are not imposable at same time for same offence, there was no reason to impose both penalties, even for period prior to 10.5.2008. [Also see Ideal Security v. CCE, Allahabad (2011) 23 STR 66 (Cestat, Delhi); CCE, Aurangabad v. Pendharkar Constructions (2011) 23 STR 75 (Cestat, Mumbai); CCE, Trichy v. Home Fashion International (2011) 22 STR 653 (Cestat, Chennai)].
Reliance can also be placed on the following cases wherein it is held that imposition of penalty under Section 76 and 78 would amount to double penalty:
(i) Assistant Commissioner of Central Excise v. Krishna Poduval, 2005 -TMI - 75949 – (Kerala High Court)
(ii) Opus Media and Entertainment v. Commissioner of Central Excise, Jaipur, 2007 -TMI - 2921 – (CESTAT, NEW DELHI)
(iii) Real Mathematic Classes v. Commissioner of Central Excise, Jaipur, 2008 -TMI - 4417 – (CESTAT NEW DELHI)
(iv) Commissioner of Central Excise v. Planners India Pvt. Ltd., 2006 (4) STR (Cestat, Delhi)The Financers v. Commissioner of Central Excise, Jaipur, 2007 (8) STR 7 (Cestat, Delhi)
(v) Remac Marketing Pvt Ltd v. Commissioner of Service Tax, Kolkata, 2008 -TMI - 32394 – (CESTAT, KOLKATA)
(vi) M/s AR AS PV PV Motors Erode (P) Ltd. v. CCE, Salem, 2010 -TMI - 77459 – (CESTAT, CHENNAI)
(vii) The Financers v. Commissioner of Central Excise, Jaipur, 2007 (8) STR 7 (Cestat, Delhi)
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By: Dr. Sanjiv Agarwal - September 30, 2011