TMI Blog2019 (1) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... re there is a possibility of payment of Service Tax. Moreover, there is a penalty under Section 76 for delayed payment. Therefore, invoking of Section 78 for delayed payment in itself is not acceptable. The penalty under Section 78 for the period 10/2002 to 8/2007 was either not proposed or dropped by Commissioner and for the period 5/2008 to 2/2009, penalty under Section 78 has not been proposed at all in the SCN. This being the situation, proposal and confirmation of penalty under Section 78 during the period 9/2007 to 10/2007 alone defies logic as there was no change in the circumstances or the procedure adopted by the appellants. The ingredients of Section 78 are not fulfilled as no suppression, fraud etc. can be alleged where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 76 and under Section 78 of Finance Act, 1994. The appellants are contesting the penalties on the grounds that: (i) Their customers were deducting TDS for Income Tax on the total remuneration including Service Tax and there was delay in getting Income Tax refunds which sometimes took as long as three to four years. (ii) The appellants were using the available resources for discharging previous month s liability along with interest for delay as they had cash flow constraints. (iii) As the Department was issuing continuous SCNs, it cannot be alleged that there is suppression of facts etc. with intent to evade payment of duty and therefore, the conditions for imposing penalty under Section 78 are not satisfied. (iv) As the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the records of the case. 6. We find that the appellant has been continuously defaulting the payment of Service Tax over the years and periodical SCNs have been issued. The Ld. Commissioner observed that the appellants lapse continuous to be a wilful default in paying the Service Tax. Since the default is deliberate with intent to evade payment of Service Tax, they are liable to pay penalty under Section 76. The appellants have admitted that they have already recovered the Service Tax but failed to remit the taxes . This clearly establishes the intent to evade payment of Service Tax . 6.1 We find that the appellants have submitted that the ingredients of Section 78 like (a) fraud; or (b) collusion; or (c) wilful mis- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at all in the SCN. This being the situation, proposal and confirmation of penalty under Section 78 during the period 9/2007 to 10/2007 alone defies logic as there was no change in the circumstances or the procedure adopted by the appellants. 6.4. We find that Hon ble High Court of Karnataka, in the case of Motor World, 2012 (27) S.T.R. 225 (Kar.), held as under: 33. In the light of the foregoing discussion and for the reasons stated above, we answer the substantial questions of law as under :- (1) The imposition of penalty under the Act is not automatic. The ingredients mentioned in the Section should exist. In respect of Sections 76, 77 and 78 of the Act, not only the ingredients of those Sections should exist, but also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraud etc. can be alleged where the Department is well aware of the practice adopted by the appellants and SCNs have been issued continuously. As discussed above, penalty under Section 78 was not even proposed in the subsequent SCNs. The Ld. AR has relied upon the decision of this Bench in appellant s own case (supra) and submitted that the Bench has dismissed the appeal of the appellants. We find that in the case cited by the Ld. AR, penalty under Section 78 was not proposed or confirmed by the impugned order. The Bench has thus upheld duty demanded and penalty under Section 76 only. Therefore, we hold that penalty under Section 78 is not imposable. To that extent, the appellants succeeds. However, due to continuous default in payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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