Monday, March 3, 2014

Both penalties under section 76 and 78 cannot be imposed simultaneously

At the time of issuing show cause notice, department propose and finally confirm both penalties under section 76 and 78 simultaneously. Penalty under section 76 is for the delay in payment of tax and 78 penalty is for concealment.

To avoid such double penalties, section 78 was amended on 10-05-2008 by inserting the following proviso:

PROVIDED FURTHER that if the penalty is payable under this section, the provisions of section 76 shall not apply

Department take the stand that the amendment in section 78 is only with effect from 10.05.2008 and therefore, for the period prior to 10.05.2008, both penalties can be levied.

However, the following court decisions are in favor of the tax payers which held that even prior to 10.05.2008, both penalties cannot be imposed.

1. Devendra Travels v. CCE, Vadodara [2013] 33 taxmann.com 204 (Ahmedabad - CESTAT)

2. CST, Service Tax Commissionerate v. Motor World [2012] 36 STT 48/22 taxmann.com 35 (Kar.)

3. Delhi HC decision in Bajaj Travels Ltd.[2012] 25 STR 417 [Del]

4. Financial Software Systems Pvt. Ltd v. Commissioner of Service Tax, Chennai 2014 (33) STR 393 [Tri. Chennai]

However, there is a Kerala HC decision which is against the tax payer. The case is given below:-

Assistant Commissioner of Central Excise v. Krishna Poduval reported in 2006 TIOL-77-HC-KERALA-ST