100% Penalty not Imposable as Duty along with Interest & 25% Penalty Paid within Receipt of Order: CESTAT [Read Order]

The Chandigarh bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the 100% penalty is not imposable as duty along with interest and 25% penalty paid when the order was received.

M/s Network, the appellants were providing internet/cable connections to the general public as agents of M/s SIFY. The Department concluded that these cable TV operators like the appellant were required to pay Service Tax under ‘Business Auxiliary Service’ and were not paying the same.

A show cause notice was issued seeking to confirm the Service Tax of Rs.55,641/- along with penalties under Sections 76,77 and 78 of the Finance Act, 1994. The Original Authority confirmed a Service Tax of Rs.34,572/- and imposed a penalty under Section 76; the penalty of Rs.34,572/- under Section 78 and a penalty of Rs.1000/- under Section 77 of the Finance Act. The Appellate Authority upheld the order but reduced the penalty to the extent of the penalty deposited by the appellants. 

It was submitted that M/s SIFY has already discharged Service Tax liability on the gross amount charged to the customer a small-scale exemption applies to them. The appellants have deposited the tax payable along with interest and 25% of the penalty and no further penalty should be imposed or payable by them. It was argued that Tribunal in many cases held that even before 10.05.2008, separate penalties under Sections 76 and 78 cannot be imposed…

A two-member bench comprising Mr S S Garg, (Judicial) and Mr P Anjani Kumar, (Technical) concluded that the appellant being a small operator had no wherewithal to keep track of the law. Since the main cable operator M/s SIFY had discharged Service Tax on the entire amount collected from the customers, there are reasons to believe that there were sufficient reasons for the appellant not to discharge the applicable Service Tax.

While allowing the appeal, the Tribunal held that the benefits of Section 80 can be extended to the appellants and set aside the penalties imposed.

To Read the full text of the Order CLICK HERE

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