In Service Tax Appeal No. 13997 of 2013 -CESTAT- CESTAT (Ahmedabad) rules against simultaneous imposition of penalties under Section 76 & Section 78 of the Finance Act
Members Ramesh Nair (Judicial) & C.L. Mahar (Technical) [18-08-2023]

Read Order: M D Engineers v. C.C.E. & S.T.-Vadodara-I

Chahat Varma

New Delhi, August 23, 2023: The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal has partially allowed the appeal filed by M D Engineers (appellant), ruling against the simultaneous imposition of penalties under Section 76 and Section 78 of the Finance Act, 1994.

In the matter at hand, the appeal pertained to a service tax demand and related penalties.

The two-member bench of Ramesh Nair (Judicial) and C.L. Mahar (Technical) noted that the service tax demand of Rs. 1,14,509 was based on loading and unloading charges. Referring to the contract, the bench held that it was clear that the appellant had provided manpower for shifting, loading, and unloading, making it qualify as Manpower Recruitment and Supply Agency Service, thereby sustaining the demand.

Regarding the demand of Rs. 51,126 for house rent charges, the bench observed that the appellant was obligated to provide various services, and as per the contract, the house rent charges were not mere reimbursements but a part of their service charges. Hence, the demand was also upheld.

For the demand of Rs. 73,053, the appellant claimed an incorrect calculation error. Although the appellant provided a reconciliation letter, their failure to submit supporting documents resulted in the demand being sustained.

In terms of penalties under Sections 76, 77, and 78, the bench held that the appellant had properly recorded the transaction and made payments, suggesting a lack of malicious intent. In these circumstances, the bench held that penalties under these sections were not warranted.

The bench also observed that the appellant had been subjected to penalties under both Sections 76 and 78 simultaneously. It referred to the case of Raval Trading Company v. Commissioner of Service Tax [LQ/GujHC/2016/59], where it was determined that simultaneous imposition of penalties under Section 76 and 78 was not permissible. Therefore, following this principle, the Tribunal concluded that imposition of penalty under Section 78 was not applicable.