By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Benefit of reduced penalty – non-paymeny of penalty along with service tax and interest – 2nd proviso to section 78 applicable – directed to pay only 25% of the penalty.
Facts:
The respondent was a cable operator unregistered with the service tax department. After a search was conducted, the respondent deposited the entire amount of service tax with interest thereon before the issue of show cause notice. The adjudicating authority demanded tax along with interest and penalties and the Commissioner (Appeals) set aside penalties. On appeal, the Hon. Tribunal directed the respondent to pay penalty of 25% of the service tax demanded, relying upon J.R. Fabrics 2009 (238) ELT 209 and Bajaj Travels 2011 (21) STR 497 (P&H). The revenue appealed against the said order of the Hon. Tribunal contending that the benefit of reduced penalty of 25% can be availed only if the respondent had deposited the said amount within 30 days of the order.
Held:
Relying upon the decisions of the Delhi High Court in K.P. Pouches 2008 (228) ELT 31 and J. R. Fabrics (supra), the Hon. High Court allowed the appeal and held that the respondent was required to be informed to avail the benefit of reduced penalty. Such option only could have satisfied the purpose of insertion of such benefit in the Act. Since the amount of tax was already deposited before the issue of SCN, the direction of the Hon. Tribunal was fair, reasonable and met the ends of justice.
