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TMI Blog2014 (4) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... A agreed to transfer technology to the assessee for use in connection with the production of PHPG at Daurala, District Meerut. On 8 November 2004 followed by corrigendum dated 22 February 2006, a notice to show cause was issued to the assessee to explain why on the basis of the agreement between the assessee and KSA service tax should not be levied and recovered, treating the transfer of know how and technology as "scientific and technical consultancy service". On 28 December 2006 an order was passed by the Additional Commissioner (Adjudication), Central Excise, Meerut-I by which the proceedings were dropped. The adjudicating authority held that the transaction between the assessee and KSA was in the nature of sale or transfer of intangible property and did not constitute a 'scientific and technical consultancy service'. On 7 January 2008, a notice to show cause was issued to the assessee following an audit covering the period between 2004-05 and 2005-06 which found that the assessee had not got itself registered under the category of Intellectual Property Services and had failed to file returns and had suppressed information regarding payment of royalty to KSA. 'Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oto invoked his powers under section 84 of the Finance Act, 1994, as it then stood, and issued a notice to show cause proposing to revise the order of adjudication in so far as it dropped the penalty proceedings. The assessee filed its reply on 30 December 2010. On 17 February 2011, the Commissioner of Central Excise, in exercise of powers conferred by section 84, came to the conclusion that the assessee was liable to pay the following penalties for violation of sections 76, 77 and 78 of the Finance Act, 1994 :- "(a) Rs. 12,87,153/- (Rs. twelve lac eighty seven thousand one hundred fifty three only) upon M/s Daurala Organic Ltd., Daurala, Meerut under Section 76 of the Finance Act, 1994; (b) Rs. 1,000/- (Rs. one thousand only) upon M/s Daurala Organic Ltd., Daurala, Meerut under Section 77 of the Finance Act, 1994; (c) Rs. 14,98,776/- (Rs. fourteen lacs ninety eight thousand seven hundred seventy six only) upon M/s Daurala Organic Ltd., Daurala, Meerut under Section 78 of the Finance Act, 1994." The assessee filed an appeal which has been dismissed by the Tribunal by the impugned judgment and order. The Tribunal has held that once the extended period of limitation under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first day after due date till the date of actual payment of the outstanding amount of service tax: Provided that the total amount of the penalty payable in terms of this section shall not exceed the service tax payable." Section 77 is to the following effect:- "Whoever contravenes any of the provisions of this Chapter or any rules made thereunder for which no penalty is separately provided in this Chapter, shall be liable to a penalty which may extend to an amount not exceeding one thousand rupees." Section 78 provides as follows:- "78 - Penalty for suppressing value of taxable service- Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of-- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of service tax, all postulate that the assessee is guilty of such conduct or behaviour accompanied by an element of intent, designed to defeat the payment of service tax dues. Consequently, section 78 imposes a higher quantum of penalty since the penalty under section 78 can extend up to twice the amount of service tax which has not been levied or paid or short levied or short paid or erroneously refunded. Section 80 of the Finance Act, 1994 contains a non-obstante provision which begins with the words 'notwithstanding anything contained in the provisions of section 76, section 77 or section 78'. Under section 80, the burden is cast upon the assessee of proving that there was reasonable cause for the failure referred to in sections 76, 77 or 78, in which event no penalty would be imposable for the failure. The important point to note is that while enacting section 80, Parliament introduced an overriding non-obstante provision which operates even in relation to the provisions of section 78. Consequently, the provision envisages that notwithstanding what is contained in section 78, it is open to an assessee to prove that there was a reasonable cause for the failure attri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been amended to read as a reference to the first proviso to sub-section (1) of section 78. Consequently, after the amendment by the Finance Act, 2011, the opportunity which is granted to the assessee to establish a reasonable cause applies to a situation which is governed by the first proviso to section 78(1). This case, however, deals with a period prior thereto but we have adverted to the subsequent amendment only by way of illustration. In the present case, the adjudicating authority while deciding not to impose a penalty, had due regard to the fact that the assessee had obtained registration for the purposes of service tax in respect of 'Intellectual Property Right Services' on 30 September 2006; that the entire dues on account of service tax together with interest for the period from 10 September 2004 to 30 September 2007 had been paid on 10 December 2008 and there was compliance by the assessee thereafter. In this background the adjudicating authority held that there was some confusion in regard to the applicability of the service tax. This circumstance must be also coupled with the admitted circumstances in the present case which were that a notice which was issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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