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M/s RAVAL TRADING COMPANY Versus COMMISSIONER OF SERVICE TAX

2016 (2) TMI 172 - GUJARAT HIGH COURT

Levy of penalty u/s 78 - delayed payment of service tax due to financial hardship - Extended period of limitation - Held that:- The explanation offered by the assessee was not accepted. It was the case of the assessee that unaware of the tax liability, the service tax was not deposited with the department. Had this been the case, the assessee would have surely pleaded that such service tax was never collected from the service recipient. The defence that due to financial hardship such service tax .....

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AND MR. MOHINDER PAL, JJ. FOR THE APPELLANT : MR GUPTA WITH MR PARESH M DAVE, ADVOCATE FOR THE OPPONENT : MR YN RAVANI, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This appeal is filed by the assessee who has been saddled with penalties under Sections 76 and 78 of the Finance Act, 1994. At the time of admission of tax appeal, the Court had framed the following question of law. Whether the authority below committed substantial error of law in issuing notice alleging viol .....

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owever, at the time of hearing of this appeal, learned advocate Shri Gupta for the assessee raised additional contention that it was not open for the department to impose simultaneous penalties under Sections 76 and 78 of the Finance Act, 1994. Being satisfied that such a question does arise out of the impugned order of the Tribunal, we would frame additional question of law as under: Whether it was open for the adjudicating authority to impose simultaneous penalties upon the assessee both under .....

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that the assessee in November 2006 paid the tax with interest. 3.2 On 09.05.2007 the adjudicating authority issued a showcausenotice to the assessee calling upon it to state why the duties already deposited not be appropriated towards the service tax liability and interest and penalties under various provisions of the Finance Act, 1994, be not imposed. In particular, the assessee was called upon to state why the penalties under Sections 76 and 78 of the Finance Act, 1994 not be levied. 3.3 The a .....

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ous penalties including under Sections 76 and 78 of the Finance Act, 1994. It was observed that the assessee was covered within the definition of auxiliary service. The assessee had agreed and admitted in his statement recorded by the preventive officer of service tax that the business activities being handled by them is covered under the category of business auxiliary services and therefore they were liable to pay service tax on the commission received despite which the registration of the firm .....

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ailure to make the payment of service tax payable by them within the stipulated time. As the actual amount of penalty could be depending on actual date of payment of service tax, however, as per section 76 of the Finance Act, 1994 penalty will be restricted to their service tax liability. I impose a penalty of ₹ 3,48,387/( Three lacs forty eight thousand three hundred eighty seven only) under Section 78 of the Finance Act, 1994 for suppressing and not disclosing the value of the said taxab .....

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benefits under the guise of unawareness about law provisions. There was no confusion so far as taxability of, and exemptions to, activities of the commission agent. The appellants could have approached the department for clarification in case of any confusion. Instead, they preferred to decide the applicability of service tax as per their belief and did not pay service tax deliberately upto the period under dispute. This also indicates the intention of the appellants to avoid payment of service .....

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s imposed for such contravention and suppression under Sections 76, 77 and 78 of the Act are just and right. 3.6 The assessee carried the matter before the Customs Excise and Service Tax Appellate Tribunal, Ahmedabad. Such appeal came to be dismissed by the impugned judgment and order dated 30.04.2010. The Tribunal observed as under: I find considerable force in the arguments advanced by the learned DR. Further, in Camlin Ltd. Vs. CCE Mumbai reported in 2009(239) ELT 346 (Tri. Mumbai) it was hel .....

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d separate and penalties can be imposed under both the sections. In view of the facts and circumstances discussed above, and judicial precedence cited by the learned DR, I find no merits in the appeal and accordingly reject the same. 4. Learned counsel Mr.Gupta contended that there was no willful misstatement or suppression of fact on the part of the assessee so as to invite penalty under Section 78 of the Finance Act, 1994. The authorities below committed an error in imposing such penalty. Mr.G .....

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in question in the present case, various High Courts have held that this amendment is merely clarificatory in nature and would therefore apply to the cases arising prior in time also. 5. On the other hand, learned counsel Mr.Ravani for the department opposed the appeal. He contended that there was clear suppression on part of assessee and contravention of the provisions of the Act with a view to evade the payment of service tax. The penalty under Section 78 was therefore rightly imposed. He furt .....

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hat the assessee who was not a small firm and was liable to pay service tax as was admitted by its partner in a written statement, had not deposited the same with the revenue authorities. The explanation offered by the assessee was not accepted. It was the case of the assessee that unaware of the tax liability, the service tax was not deposited with the department. Had this been the case, the assessee would have surely pleaded that such service tax was never collected from the service recipient. .....

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ay pertains to simultaneous penalties under Sections 76 and 78 of the Finance Act, 1994. Section 78 of the Finance Act, 1994, provides for penalty where any service tax was not levied or not paid, or having shortlevied or shortpaid or erroneously refunded, by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 of the Finance Act or of the Rules made thereunder with the intent to evade payment of service tax. During t .....

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vided that any person who is liable to pay service tax in accordance with the provisions of Section 68 or the Rules made under Chapter 5, but fails to pay such tax, shall pay, in addition to such tax and the interest on that tax in accordance with the provisions of Section 75, a penalty which shall not be less than one hundred rupees for every day during which such failure continues or at the rate of one per cent of such tax, per month, whichever is higher, starting with the first day after the .....

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for penalty in cases of tax not being levied or paid, or shortlevied or shortpaid or erroneously refunded, by reason of fraud or collusion or willful misstatement etc., whereas Section 76 covered the cases of nonpayment of tax on any ground whatsoever. The penalty that authority could impose under Section 78 is hundred per cent of the amount of the service tax evaded. On the other hand, the penalty under Section 76 which could be imposed is at the fixed amount per day for the entire duration of .....

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sion etc. One plausible argument therefore could be that Section 76 would also cover such situations and permit the department to levy a further penalty for default as envisaged under Section 76 of the Act over and above the penalty imposed under Section 78 of the Finance Act, 1994. In order to clarify this position, a further proviso was introduced in Section 78 making it clear that, if the penalty is payable under Section 78, the provisions of Section 76 shall not apply. In other words, with t .....

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e entire plausible view was that the situation envisaged under Section 76 of the Finance Act, 1994, would exclude those cases covered under Section 78 of the Finance Act, 1994. In other words, Section 76 of the Finance Act, 1994, would cover only the cases of nonpayment of service tax which are not related to fraud, collusion, willful misstatement, suppression of facts or contravention of any of the provisions of the said Chapter or the rules made thereunder with the intent to evade payment of s .....

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her than the reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 or the rules made thereunder with an intent to evade the payment of service tax, the person liable shall in addition to service tax and interest also be liable to pay penalty not exceeding ten per cent of the amount of such service tax. Thus, by way of this amendment, the statute has ensured that Sections 76 and 78 of the Finance Act, 1994, apply in mut .....

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[ 2011(22) S.T.R. 622 (P&H) in which in para 4 and 5 it was held and observed as under: 4. Only point which has been urged by learned counsel for the appellant is that after 10052008, there is an amendment providing that penalty under Section 76 could not be levied if penalty under Section 78 has been levied but for the period prior thereto, penalty could be levied under both Sections. The Commissioner (Appeals) as well as the Tribunal erred in deleting the penalty under Section 76 by assumi .....

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ed under Section 78. The matter was considered by this Court in STA No.13 of 2010 (Commissioner of Central Excise Vs. M/s. Pannu Property Dealers, Ludhiana decided on 1272010, 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 sit .....

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endment may not have been applicable at the relevant time. 14. The Karnataka High Court has also taken a similar view in the case of Commissioner of Service Tax, Bangalore Vs. Motor World [ 2012(27) S.T.R.225 (Kar.) ] in which in paras 17, 18 and 19 it was observed as under: 17. This decision of the Tribunal has been affirmed by this Court in the case of CCE v. Sunitha Shetty reported in 2006 (3) S.T.R. 404 (Kar.) = 2004 (174) E.L.T. 313 (Kar.), which has been followed by this court in the case .....

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an one hundred rupees has to be considered as less than one hundred rupees for everyday. 18. Probably, noticing this loophole, the Legislature taking note of the judicial pronouncement, from 1842006 amended the law so as to include every day after the words one hundred rupees. Therefore, till such amendment, the interpretation placed by the Judicial authorities has been accepted by the Government. That is the cause for amendment. Therefore, the minimum penalty leviable under Section 76 is one hu .....

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rson has registered himself under the Act and failed to file the prescribed return and in such return filed, he has suppressed or concealed the value of taxable service or has furnished inaccurate value of such taxable service. Therefore, it is clear that Section 78 operates in an altogether differed field. But, even if as a matter of fact, it is established that the assessee has suppressed or concealed the value of taxable service and has furnished inaccurate value of such taxable service, the .....

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ent provides that in case where penalty for suppressing the value of taxable service under Section 78 is imposed, the penalty for failure to pay service tax under Section 76 shall not apply. With this amendment the legal position now is that simultaneous penalties under both Section 76 and 78 of the Act would not be levied. However, since this amendment has come into force w.e.f. 16th May, 2008, it cannot have retrospective operation in the absence of any specific stipulation to this effect. Goi .....

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