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No Penalty in the absence of mens rea

Bimal Jain 
on 07 October 2014

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Dear professional college,

No Penalty in the absence of mens rea

We are sharing with you an important judgment of Hon’ble CESTAT, DELHI in the case of Mohan Poddar Vs. CCE, Raipur [2014 (9) TMI 782 - CESTAT NEW DELHI] on the following issue:

Issue:

Whether the penalty Under Section 78 of the Finance Act, 1994 can be invoked in the absence of mens rea?

Facts and background:

In the instant case, Mohan Poddar (“the Assessee”) was executing the works of construction of various categories of houses for Chhattisgarh Housing Board. The DGCEI conducted an investigation of the Assessee and it was observed that the services rendered by the Assessee were covered under the taxable category of Construction of Complex service. Further, during the period from July 2, 2005 to August 16, 2007, the Assessee was liable to pay Service tax amounting to Rs. 62,46,844/- after obtaining the benefit of abatement.

On being pointed out by the DGCEI, the Assessee took Service tax registration and discharged Service tax liability of Rs.40,99,354/- and Rs.35,24,663/- till March 25,2008 and August 22, 2008 respectively. The Department issued Show Cause Notice on June 5, 2008.

The Adjudicating Authority found that payment of Rs. 40,98,454/- only was made till the date of issuance of the Show Cause Notice as against the total demand of Rs. 62,46,844/-. Thus, an Order in Original (“OIO”) dated October 30,2008 was passed confirming balance Service tax demand along with interest and imposition of penalty under Section 77 and Section 78 of the Finance Act, 1994 (“the Finance Act”).

Aggrieved by the OIO, the Assessee filed an appeal before the Hon’ble Tribunal. The Assessee contended that there was no discussion/analysis with regard to the allegation of suppression in the Show cause notice.

Held:

The Hon’ble Tribunal in absence of any discussion with regard to mala fide intention and mens rea set aside the OIO to the extent it related to imposition of penalty under Section 78 of the Finance Act.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks & Best Regards

Bimal Jain

FCA, FCS, LLB, B.Com (Hons.)

Flat No. 34B, Ground Floor, Pocket-1,

Mayur Vihar, Phase–I, Delhi – 110091

Email: bimaljain@hotmail.com

Website: www.a2ztaxcorp.com

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.


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