COMMISSIONER OF CENTRAL EXCISE Vs. MERINO INDUSTRIES LTD.

JUDGEMENT

(1.) THE respondents are manufacturers of excisable goods which they export. They have been using the services of foreign commission agent for selling their products. During investigation by Revenue officers, it was noticed that they had not paid service tax on the amounts paid to their foreign agents. When this issue was pointed out to them they paid service tax along with interest before issue of Show Cause Notice. However, Revenue was of the view that they should have paid penalty also. Accordingly, proceedings were initiated and in adjudication proceeding service tax of Rs. 3,85,323/ - was confirmed and penalties of Rs. 2,42,554/ - each were imposed under Sections 76 and 78 of the Finance Act, 1994. In appeal filed before Commissioner (Appeals) he set aside penalty under Section 76 for the reason that simultaneous penalties under Section 76 and Section 78 were not warranted. Aggrieved by the order of Commissioner (Appeals), Revenue has filed this appeal for restoration of penalty under Section 76. Ld. AR for Revenue submits that Sections 76 and 78 provides penalties for different reasons and the Hon'ble Kerala High Court in the case of Assistant Commissioner of Central Excise v. Krishna Poduval - : 2006 (1) S.T.R. 185 (Ker.) has held that such separate penalties can be imposed and therefore ld. AR pleads that the Commissioner (Appeals) erred in dropping the penalty imposed under Section 76.

(2.) Ld. Counsel for the respondent submits that the Punjab & Haryana High Court in the case of CCE v. City Motors - : 2010 (19) S.T.R. 486 (P&H) has held that once penalty under Section 78 is imposed there is no justification for imposing separate penalty under Section 76. The Counsel also quoted a few decisions of the Tribunal holding the same view. He also point out that from 10 -5 -2008 Section 78 has been amended to the effect that penalties under both sections should not be imposed simultaneously.

(3.) I have considered arguments on both the sides. I find that the demand is for the period 2004 -05 to 2007 -08. For the period prior to 18 -4 -2006 there has been decision of the Bombay High Court in the case of Indian National Shipowner Association v. UOI - : 2009 (13) S.T.R. 235 to the effect that service tax need not be paid by recipient of service for services provided by persons located abroad. In this case the respondent has voluntarily paid the tax when the omission was pointed out to them without contesting the issue and he has also paid the penalty under Section 78. In these circumstances, I find it proper to follow the decision of the order of Punjab & Haryana High Court which is the jurisdictional High Court. So I uphold the order of the Commissioner (Appeals) rejecting the appeal filed by Revenue.