Section 76 discourages right to litigate
MARCH 01, 2015
By Monarch Bhatt
THE Finance Minister has proposed to substitute section 76 wherein, a mandatory penalty of 10% has been proposed in different scenarios. The important point is to be noted here is that the penalty under section 76 will be attracted in a cases, where there is no fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provision of the Act or rules has not been made with the intent to evade payment of Service Tax.
The penalty under section 76 will not be levied, if the person who has been served with the show cause notice under section 73(1), discharges the service tax alongwith interest within 30 days from the serving of show cause notice.
In case the order has been passed by the central excise officer, the penalty under section 76 shall be 25% of the penalty imposed in the order, if service tax alongwith interest and reduced penalty is paid within 30 days of passing of the order.
Similarly, in case service tax amount is reduced by the order of the Commissioner (Appeals) or of the Appellate Tribunal or of the Court, the penalty payable under section 76 will be 25% of the penalty amount, if service tax alongwith interest and reduced penalty is paid within 30 days of passing of such order.
Therefore, as per the proposed amendment to section 76, if assessee does not challenge the show cause notice itself and discharges the service tax alongwith interest within 30 days, then only penalty will not be leviable. If assessee challenges the same and does not succeed, assessee has to pay mandatory amount of penalty under section 76.
The proposed section 76 overrides all the decided cases of Hon'ble Supreme Court wherein in a number of cases including the case of Pushpam Pharmaceuticals - 2002-TIOL-235-SC-CX , Cosmic Dye Chemical - 2002-TIOL-236-SC-CX-LB, Hindustan Steels Ltd. - 2002-TIOL-148-SC-CT-LB held that to impose the penalty there must be mala-fide intention with intent to evade payment of taxes. As per the proposed section 76, the penalty is leviable even though there is no mala-fide intension for evasion taxes.
In my view, it is threat to the assessee, to forgo the right of litigation and choose the option of making payment as per the show cause notice and get immunity from the penalty under section 76. Assessee can definitely challenge the same as it is legal right of the assessee and no law can be formed to discourage the assessee from claiming their rights.
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