All penalties are waived if Section 80 is applicable

By | August 21, 2015

All penalties are waived if Section 80 is applicable

Q: When Section 8o is applicable i.e there was reasonable cause for failure , whether penalty can be imposed under any Section ?

Service Tax : Once section 80 is found applicable, entire penalties under sections 76 to 78 must be waived; Tribunal cannot pass an order waiving penalty under section 78 while retaining penalty under section 76

Note :-

Section 76 of the Act prescribes the penalty for failure to pay service tax.

Section 77 provides for penalty for contravention of rules and the provisions of the Act for which no penalty is specified elsewhere.

Section 78 prescribes the penalty for suppressing value of taxable service

HIGH COURT OF KERALA

Akbar Travels of India (P.) Ltd.

v.

Commissioner of Central Excise & Service Tax, Thiruvananthapuram

THOTTATHIL B. RADHAKRISHNAN AND P.B. SURESH KUMAR, JJ.

CENTRAL EXCISE APPEAL NO. 32 OF 2008

AUGUST  29, 2014

E.K. Nandakumar, K. John Mathai, P. Benny Thomas and Anil D. Nair, Advocates for the Appellant. Tojan J. Vathikulam and P. Gopinath Menon, SCS for the Respondent.

JUDGMENT

Thottathil B. Radhakrishnan, J. – This appeal is against orders of the Central Excise Customs and Service Tax Appellate Tribunal Akbar Travels of India (P.) Ltd. v. CC&CE [2008] 14 STT 909 (Bang. – CESTAT). Heard the learned counsel for the appellant and the learned counsel for the Department.

2. By the first among the relevant orders, the Tribunal specifically held that the appellant is entitled to the benefit of the provisions in Section 80 of the Finance Act, 1994, hereinafter, the ‘Act’. It was held that, on the facts and circumstances of the case, the Tribunal deems it proper to take a lenient view in the matter. The Tribunal was of the view that the provisions of Section 80 of the Act could have been invoked in the case. However, while issuing the final order dated 14-3-2008, what was set aside was “the penalties” imposed under Section 78 of the Act. The appellant, therefore, moved a rectification application pointing out that the penalty under Section 76 of the Act also ought to have been mentioned as vacated. Then, the Tribunal passed an order clarifying that what was vacated was only penalty under Section 78 and that the use of the word ‘penalties’ in plural, was a mistake.

3. As rightly pointed out by the learned counsel for the appellant, the aforesaid resoning is not sustainable in view of the clear terms of Section 80 of the Act and Section 76 of the Act prescribes the penalty for failure to pay service tax. Section 77 provides for penalty for contravention of rules and the provisions of the Act for which no penalty is specified elsewhere. Section 78 prescribes the penalty for suppressing value of taxable service. Section 80 opens with a non-obstante clause saying that notwithstanding anything contained in Section 76, Section 77 or Section 78, no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure.

4. Here and now, we note that the words “or Section 78” were introduced into Section 80 by the Finance Act of 2004, to exclude Section 79 from the net of Section 80. Therefore, once the assessee proves that there was reasonable cause for the failure. Section 80 starts to operate, insulating the imposition of any other penalties under Section 76, Section 77 or Section 78 of the Act. Insofar as the appellant is concerned, this is inexcusably applicable in law, having regard to the Tribunal’s findings noted in paragraph No. 2 above. In this view of the matter, this appeal is eligible to succeed.

5. In the result, this appeal is allowed, setting aside the impugned orders to the extent the benefit of Section 80 is not extended to the penalty imposed on the appellant under Section 76 of the Act. As a result, it is ordered that the penalty imposed on the appellant under Section 76 of the Act by the statutory authorities shall stand vacated. No costs.

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