Service Tax Default or Evasion –Relevant Aspects of Penalty under section 76

1. Section 76 of Finance Act,1994 : Penalty under section 76 of the Finance Act, 1994, as amended by the Finance Act,2015, w.e.f.14.05.2015, is to be levied in following circumstances where:

(a)			Service tax has not been levied or paid, or has been short-levied or short-paid, or erroneously refunded,
(b)			Such non-levy, non-payment, short-levy, short-payment or erroneous refund has occurred for any reason, other than the reason of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the Act or of the rules made thereunder with the intent to evade payment of service tax, and
(c)			The person has been served a notice under section 73 (1).

2. Maximum amount of penalty:-

A person who has been served a notice under section 73(1) would be liable to pay penalty under section 76, not excluding 10% of such amount as mentioned in notice .The penalty is in addition to service tax and interest thereon as specified in the notice. Further, the Adjudicating Authority may at his discretion to impose even lesser amount of penalty depending on the timing of the payment of service tax and interest and such lesser amount may be from nil to 25%as follows:

Shipping Co. earning income from slot charter is also entitled to benefits of 'Tonnage Tax Scheme'

Facts:

a. The assessee owned a qualifying ship and the income generated from the said qualifying ship was exigible to tax as per ‘Tonnage Tax Scheme. However, it also had 'slot charter' arrangements in other ships. The assessee had also included the income from such slot charter arrangements for the purpose of computation thereof under ‘Tonnage Tax Scheme’.

b) The AO was of the view that the income earned under slot charter arrangement did not qualify under ‘Tonnage Tax Scheme’ as this income was not generated by the assessee from its own ship, i.e., it is neither from the ship owned by the assessee nor from the entire ship chartered by the assessee.

c) He was of the view that in order to avail the benefit of ‘Tonnage Tax Scheme, the assessee was supposed to show that the ship operated by it was qualifying ship and for this purpose itwas incumbent upon the assessee to produce a 'valid certificate indicating its net tonnage' as provided in Section 115VX(1)(b).

d) The order of the AO was upheld by the CIT(A) and the ITAT. However, the High Court held in favour of assessee. Aggrieved revenue filed the instant appeal.

The Supreme Court held in favour of assessee as under: