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2015 (5) TMI 145 - MADRAS HIGH COURT

2015 (5) TMI 145 - MADRAS HIGH COURT - 2015 (39) S.T.R. 366 (Mad.) - Wilful suppression of the value of taxable services - Simultaneous Penalty u/s 76 & 78 - Held that:- Even when penalty under Section 76 of the Finance Act, 1994 has been imposed, penalty under Section 78 of the Finance Act, 1994 is also imposable. - Tribunal has come to an erroneous conclusion that once penalty is imposed under Section 76 of the Finance Act, 1994, there is no necessity for imposition of penalty under Section 78 .....

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peal filed by the the assessee, the appellant/Revenue is before this Court by filing the present appeal. This Court, vide order dated 12.4.2011, while admitting the appeal, framed the following substantial questions of law for consideration :- "1) Whether the Hon'ble Tribunal is legal and correct in setting aside the penalty imposed under Section 78 of the Finance Act, 1994, when there was wilful suppression of facts with an intent to evade service tax, as vividly brought out in the sho .....

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show cause notice was issued, which was agitated and a demand for service tax of ₹ 4,04,132/- was passed together with education cess of ₹ 2,317/- totalling to ₹ 4,06,449/- for the period June, 2001 to December, 2005 under proviso to Section 73 (1) of the Finance Act, 1994. In addition to the above, penalty of ₹ 4,06,449/- under Section 78; penalty of ₹ 100/- per day from the date on which service tax for the amount of June, 2001 was ought to have been paid till th .....

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the appeal upholding the order of the adjudicating authority. 3. Aggrieved against the said order of the Commissioner (Appeals), the assessee filed appeal before the Tribunal and the Tribunal, while set aside the penalty imposed under Section 78 of the Finance Act, however, directed the assessee to pay interest on the delayed payment of tax forthwith. Aggrieved by the said order of the Tribunal, the appellant/Revenue is before this Court by filing the present appeal. 4. Heard the learned standin .....

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rder of the original authority, imposing penalty, is extracted hereinbelow :- "12. From the above it is also seen that Joe Transport have intentionally suppressed the taxable services provided by them to the organizations like CPCL, GAIL, etc., with an intention to evade payment of service tax. The taxable services provided by Joe Transport were brought to light only by the investigations conducted by the department. Hence, the amount of ₹ 4,06,449/- (Service Tax : ₹ 4,04,312/- .....

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ce Act, 1994. 13. Inasmuch as the service provided has wilfully suppressed the value of taxable services rendered by him and did not pay service tax, they are liable to penal action under Section 78 and Section 76 of the Finance Act, 1994. Further, they registered with the department only in 2003 and did not file the statutory returns in terms of Section 70 of the Finance Act, 1994. For the above contraventions, I find that Joe Transport are liable to penal action under erstwhile Section 75A and .....

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ayable for the period from June, 2001 to December, 2005, on Joe Transport, Nagapattinam, under proviso to erstwhile Section 73 (a)/Section 73 (1) (a)/ present Section 73 (1) of the Chapter V of the Finance Act, 1994; ii. I appropriate an amount of ₹ 4,06,449/- out of the total amount of ₹ 5,89,971/- already paid by them, against the service tax due as in (i) above; iii. I confirm the demand of ₹ 1,77,296/- (Rupees One Lakh Seventy Seven Thousand Two Hundred and Ninety Six only) .....

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Four Lakhs Six Thousand Four Hundred and Forty Nine only) on Joe Transport, under Section 78 of the Finance Act, 1994; vi. I appropriate the balance amount of ₹ 6,227/- (Rupees Six Thousand Two Hundred and Twenty Seven only) out of the amount of ₹ 5,89,971/- already paid by them, towards the penalty due in (v) above; vii. I impose a penalty of ₹ 100/- (Rupees Hundred only) per day, from the date on which service tax for the amount of June, 2001 is ought to have been paid till .....

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It is the further submission of the Department that once the wilful suppression on the part of the assessee stands proved, the Department is empowered to impose penalty under Section 76 as well as under Section 78 of the Finance Act, 1994, and that the imposition of penalty is mandatory and is not at the discretion of the authority. 7. The question of imposition of penalty has been decided by the Larger Bench decision of the Supreme Court in Union of India and others v. Dharamendra Textile Proce .....

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y penalty. In the Notes on Clauses also the similar indication has been given. 27. Above being the position, the plea that the Rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff's case (supra) was not correctly decided but Chairman, SEBI's case (Supra) has analysed the legal position in the correct perspectives. The reference is answered...." 8. Similar view was taken by the Supreme Court in Union of India v. Rajasthan Spinning & Weaving M .....

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