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Penalty u/s. 78 cannot be imposed when there is no discussion on the allegation of fraud, collusion, willful misstatement or suppression of facts in the Show Cause Notice.
Facts
During the course of audit it was observed by the departmental officers that there was a short payment of service tax. On being pointed out the Appellant paid up the entire demand along with interest. Thereafter a Show Cause Notice was issued proposing appropriation of amounts already paid and imposing penalty u/s. 78 of the Finance Act, 1994. It was argued that the entire demand along with interest was paid and there was no non-payment and therefore the SCN cannot survive u/s. 73(3) of the Finance Act, 1994.
Held
The Tribunal noted that the SCN is silent on the ingredients of suppression. The only allegation is that the “fact of nonpayment came to the notice of the department on account of audit” which is not sufficient for invocation of penalty u/s. 78. Penalty can be imposed only under the circumstances mentioned in section 78 which is not alleged in the SCN. Thus what is not alleged cannot be traversed at a later point of time in any proceedings. Therefore the penalty is unsustainable.
Note: Readers may note a similar decision in the case of Ishvarya Publicities P. Ltd vs. Commissioner of Service Tax [2016-TIOL-1409-CESTAT -MAD] and the decision of S. K. Poly Formulations P. Ltd vs. Commissioner of Service Tax, Mumbai-II [2016-TIOL-1407-CESTAT -MAD] where penalty imposed u/s. 76 was accordingly set aside.
