Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, Pune vs M/S. Shrikrishna Associates on 9 February, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. ST/85152/14 [Arising out of Order-in- Appeal No. PUN-EXCUS-003-APP-265-13-14 dated 16/9/2013 passed by the Commissioner of Central Excise (Appeals) Pune] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental: Yes
authorities?
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Commissioner of Central Excise, Pune -1
:
Appellants
VS
M/s. Shrikrishna Associates
:
Respondent
Appearance
Shri. A.B. Kulgod, Asstt. Commissioner (A.R.) for the Appellants
None for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 9/2/2016
Date of decision: /2016
ORDER NO.
Per : Ramesh Nair
This Revenues appeal is directed against Order-in- Appeal No. PUN-EXCUS-003-APP-265-13-14 dated 16/9/2013 passed by the Commissioner of Central Excise (Appeals) Pune, wherein Ld. Commissioner (Appeals) rejected the appeal of the Revenue upholding Order-in-Original No. P-I/ADC/ST/60/2011 dated 28/12/2011.
2. The short issue involved in the present case is whether penalty equivalent to the service tax or 50% is imposable in terms of Section 78 keeping in view the amendment of Finance Act, 1994 effected on 8/4/2011.
3. Shri. A.B. Kulgod, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue appellant submits that panel provisions by which penalty under Section 78 is 50% of the Service tax amount if the transaction of services are recorded in the records of the assessee has come into force w.e.f. 8/4/2011. Though the adjudication was done after this date but offence of evasion of service tax has taken place prior to 8/4/2011 and accordingly unamended provisions of Section 78 according to which penalty equivalent to the service tax is imposable, shall apply.
4. None appeared on behalf of the respondent. It was observed that on the earlier occasion on 18/3/2015 and 11/1/2016, no one appeared nor any request for adjournment was found on record. This clearly shows that the respondent is not interested in pursuing their case. I, therefore, have no option except to decide the appeal on basis of records available.
5. On careful consideration of the grounds of appeal, submission made by Ld. A.R. and the findings of the impugned order , I find that the only issue to be decided by me is whether the unamended provision of Section 78 according to which 100% penalty or amended provision of Section 78 according to which 50% penalty is applicable in case the where transactions are recorded in the books of the assessee, when the offence was taken place during the period of unameded Section 78. I find that in this issue Ld. Commissioner(Appeals) has given detailed findings which is reproduced below:-
6.I have carefully gone though the Appeal Memorandum and the case records. As the Appellant has filed this Appeal only in respect of quantum of penalty imposed under Section 78 of the Act, therefore, the only issue to be decided in the present appeal is whether penalty has been correctly imposed by the Ld. Adjudicating authority under the substituted Section 78 of the Act in respect of the Manpower Recruitment or Supply Services and Security Agent Services provided by the Respondent.
7.Not declaring the supply of said services and not paying the Service Tax payable thereon during the period covered by the Show Cause Notice/Order-in-Original clearly proves the Respondents intent to evade Service Tax thereon. Their payment of a small portion of the Service Tax, further confirms their intent to evade Service Tax. Thus, I agree that the Respondent are liable for penalty under Section 78 of the Act, especially because the Respondent were operating under Self-Assessment regime of Service Tax and the entire onus of discharging correct Service Tax liability was on the Respondent. I have noticed that it is not disputed by the appellant that the transactions on the basis of which Service Tax liability gas been ascertained/demanded by the records of the Respondent. Thus only question left in this Appeal is whether provisions of Section 78 of the Act, as they existed on the date of passing of the Order-in-Original would be applicable or the provisions of erstwhile Section 78 of the Act would be applicable in the present case as they existed during the period 2005-06 to 2009-10 (upto December, 2009) when the said services were received. Section 78 of the Act was substituted w.e.f. 8/4/2011. The appellant has relied upon Section 38A of the Central Excise Act, 1944, read with Section 83 of the Act, in their Grounds of Appeals.
8.Section 38A of the CEA saves a legal provision contained in a rule, notification or order made or issued under CEA or a notification or order issued under such rule, unless a different intention appears. Thus, for the purpose of Section 38A, the intention behind the change in the legal provision has to be examined first. Whenever any legislation is introduced in the Parliament, the intention behind introducing the said legislation is given in the Statement of Objects which is also placed before the Parliament. In the case of changes in Central Excise Act, 1944 and Finance Act, 1994 dealing with Central Excise & Service Tax matter, the legislative changes are contained in the Finance Act which is introduced every year. When the Finance Act is introduced in the Lok Sabha by the Honble Finance Minster, it is done alongwith a Budget Speech by the Honble Finance Minister which explains the intention behind introducing the changes in the Central Excise Act, 1944 and the Finance Act, 1994. The said intention & rationale is reflected in the Budget Speech of Honble Finance Minister made in Lok Sabha on 28/2/2011, as contained in Para 192 of the Budget Speech, which is reproduced as below:
192. In keeping with our thrust to encourage voluntary compliance, the penal provisions for Service Tax are being rationalised. A key component of this strategy would be to treat less harshly those who have maintained truthful records but have fallen short of discharging their tax liability. Simultaneously, deliberate evaders with unrecorded business transactions will be dealt with more severely. Similar changes are being carried out in Central Excise and Customs laws. The details of the provisions are in the Finance Bill. Along with presentation of Budget in Lok Sabha by Honble Finance Minister, Simultaneously, the joint Secretary (TRU) in the Ministry of Finance issues a D.O. letter which also explains the rationale and intentions between the legislative changes introduced through the Finance Bill. In respect of amendment made vide Finance Act, 2011, which had substituted Section 78 of the Act w.e.f. 08.04.2011, the intention can be understood in detail from the letter D.O.F. no. 334/3/2011-TRU dated 28.2.2011 of J.S. TRU-II, wherein the rationale behind the substituted Section 78 of the Act has been explained as under :
4. Compliance Mechanism:
4.1 The existing scheme relating to compliance has been proposed for a revamp with a view to strike a healthy balance between the interests of revenue and legitimate business and to promote voluntary compliance.
4.2 As a result a number of changes have been proposed with the following philosophy: (i) Improve voluntary compliance by encouraging self-correction, wherever the deviations are unintentional omissions;
(ii) Reduced penalties may be imposed if the transactions are captured fully and truthfully in records and further abated if timely admission and payment is made;
(iii)Intentional and unrecorded violations should be dealt with severely with no concession whatsoever.
4.3 Thus the undue advantage obtained by carrying on surreptious activities at the cost of law-abiding business is sought to be neutralized. The revised system also encourages informed decision-making by the taxpayers at the early stages of investigation or 3 verification by the Department. Changes proposed in the compliance mechanism are given in the following paragraphs.
4.4 The maximum penalty for delay in filing of return under section 70 is proposed to be increased from Rs.2,000/- to Rs.20,000/-. However, the existing rate of penalty is being retained under rule 7C of the Service Tax Rules, 1994. The maximum penalty is presently reached after a delay of 40 days. The new limit will impact only those who delay filing of return for longer durations.
4.5 The provisions of section 73 (1A) and both the Provisos of section 73 (2) are proposed for deletion. As a result, the benefit of reduced penalty shall not be available in cases of fraud, mis-statement, suppression, collusion etc. in the ordinary course. However, revised benefit will be available under the new sub-section 4A of section 73 in situations where the true and complete account of transactions is otherwise available in the specified records and the assessee during the course of audit, verification or investigation pays the tax dues, together with interest and the reduced penalty. It is clarified that the assessee can also avail this benefit on his own also. The extent of penalty is being further reduced to 1% per month of the tax amount for the duration of default, with an upper ceiling of 25% of the tax amount.
4.6 Interest rate for delayed payment of service tax is being increased to 18% per annum, effective 01.04.2011 (Notification 15/2011-ST). A concession of 3% has been proposed in the Bill for tax-payers whose turnover during any of the years covered in the notice or the preceding financial year is below Rs 60 lakh.
4.7 Penalty for failure to pay tax under section 76 is being halved.
4.8 The maximum penalty under section 77 for contravention of various provisions is proposed to be increased from Rs.5000/- to Rs.10000/-. However, the daily rate of penalty, wherever applicable, is being retained.
4.9 Penalty under Section 78 is being altered from upto twice the amount of tax to an amount equal to the tax. Moreover, in situations where the taxpayer has captured the true and complete information in the specified records, penalty shall be 50% of the tax amount. The latter penalty (only) shall be further reduced to 25% if the tax dues are paid within a period of one month together with interest and reduced penalty. For assessees with turnover upto Rs.60 lakh the period of one month shall be increased to ninety days.
4.10 Section 80 is being amended by substituting section 78 with the words proviso to section 78 and thus the power to waive penalty shall be available only in cases where the information is captured properly in the specified records.
4.11 The revised position relating to penalties and their mitigation or waiver is summed up in the following table (portion in italics being the changes):
Situation Position in records Penalty & Provision Mitigation Complete Waiver No fraud, suppression etc. Captured 1% of tax or Rs 100 per day upto 50% of tax amount: Sec 76 Totally mitigated if tax and interest paid before issue of notice: Section 73(3) On showing reasonable cause under section 80 Cases of fraud, suppression etc. Captured true & complete position in records 50% of tax amount: Proviso to Section 78
(a) 1% per month; max of 25% if all dues paid before notice: Sec 73(4A); (b) 25% of tax if all dues paid within 30 days (90 days for small assesses): Provisos to Section 78
-do-
Not so captured Equal amount: Section 78 No mitigation at all Not possible From the above explanation, the intention of the new Section 78 clearly emerges, which is to bring a qualitative change in the regime of imposition of penalty on service tax evaders by differentiating between (i) those who had not paid service tax under a mistake bonafide belief that no service tax is payable or incorrect interpretation of provisions of law but had recorded and captured the relevant transactions in their specified records; and (ii) those persons who were liable to pay service tax but had not willfully not paid the same by indulging in fraude, mis-statement, suppression, collusion etc. and by not recording and capturing the relevant transactions in their specified records.
9. Thus, in the context of Section 38A of Central Excise Act, 1944, it is clear that when Section 78 of the Finance Act, 1994 was substituted w.e.f. 8/4/2011, the intention in respect of the mechanism for ensuring compliance, by way of imposition of penalty under the provisions of Section 78 of the Act, was different from the intention or rationale as was contained in the said Section 78, as it existed prior to 8/4/2011. Therefore the saving provisions under the said Section 38A of the CEA are not capable of saving the provisions of erstwhile Section 78 of the Act, as they existed prior to their substitution w.e.f. 08.04.2011.
10. In addition, I have also noticed that what can be saved under Section 38A of the CEA can only be any Rule, Notification or Order made or issued under the Central Excise Act, 1944 or any notification or Order issued under any Rules which are issued under the Central excise Act, 1944. Since the relevant Section of the Act(i.e. Section 78) has itself been substituted, this substitution goes out of the purview of said Section 38A which is not applicable in respect of any Section of the Act or any Section of the CEA. In other words, Section 38A of the CEA enables saving of only the delegated legislation (vizz.,Rule, Notification, Order) and is not capable of saving any action under any Section of the CEA or any action under the Act. The present Appeal has lost sight of the fact that the scope of Section 38A is very limited and the said Section 38A can be pressed into service only when a rule, notification or order made or issued under the Central Excise Act or any Notification or Order issued under such rule is amended, repealed, superseded or rescinded. In the present case, any Rule, Notification or Order made or issued under the CEA or any Notification or Order issued under any Rule has not been applied by the Ld. Adjudicating Authority, but Section 78 of the Act, as substituted w.e.f. 8.4.2011 has been applied by the Ld. Adjudicating authority while passing the impugned Order-in-Original dated 14/12/2011. Thus, I find that the present Appeal is based on erroneous reading of the provisions contained in Section 38A of the Central Excise Act, 1944. If Provisions of any section are intended to be saved, then the law usually provides for such specific provision, as seen in the case of Sub-Section (5) of Section 73 of the Act, which was substituted w.e.f. 10.9.2004. The said Sub-Section (5) reads as under:
(5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th of May, 2003. I find no similar saving provision was inserted in Section 78 of the Act, when it was substituted w.e.f. 8/4/2011, as also reflected in the intension behind substitution of Section 78, as explained above.
11I have also noticed that since Section 78 of the Act has not been amended, but has been substituted. Therefore, the provisions of Section 78 as they existed prior to 8/4/2011 cannot be applied while imposing penalty under Section 78 of the Act after 8/4/2011. It is settled law that when a new penal provision substitutes an earlier provision, and the offence remains the same, then the earlier legal provision is obliterated.
12.Further, I find that in the present case, the Rule of beneficial construction is also applicable. In the present case, it is fact that the offence has remained the same, but the effect of the substituted provisions of law has a beneficial effect and in fact that is the ground of the present appeal. The Rule of the Beneficial Construction was upheld by the Honble Supreme Court, in respect of the effect of amendment of law, in the case of T. Barai V/s. Henry Ah Hoe[(1983)-1-SSC-177] the relevant portion of which is reproduced as under:
22.It is only retroactive criminal legislation that is prohibited under Art. 20(1). The prohibition contained in Article 20(1) is that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence prohibits nor shall he be subjected to a penalty greater than which might have been inflicted under the law in force at the time of the commission of the offence. It is quite clear that in so far as the Central Amendment Act creates new offences or enhances punishment for a particular type of offence no person can be convicted by such ex post fact law nor can the enhanced punishment prescribed by the amendment be applicable. But insofar as the Central Amendment Act reduces the punishment for an offence punishable under Section 16(1)(a) of the Act, there is no reason why the accused should not have the benefit of such reduced punishment. The rule of beneficial construction requires that even ex post facto law of such a type should be applied to mitigate the rigour of the law. The Principle is based both on sound reason and common sense. This finds support in the following passage from Craies on Statute Law, 7th Edn. At pp. 387-88:
A retrospective statute is different from an ex post facto statute, Every ex post facto law..Chase J. in the American case of Calder Vs. Bull must necessarily be retrospective, but every retrospective law is not an ex post facto law. Every law that takes away or impairs rights vested agreeably to existing laws is retrospective, and is generally unjust and may be oppressive; it is a good general rule that a law should have no retrospect, but in cases in which the laws may justly and for the benefit of the community and also of individuals relate to a time antecedent to their commencement; as statutes of oblivion or of pardon. They are certainly retrospective, and literally both concerning and after the facts committed. But I do not consider any law ex post facto within the prohibition that mollifies the rigour of the criminal law, but only those that create or aggravate the crime, or increase the punishment or change the rules of evidence for the purpose of conviction..There is a great and apparent difference between making an unlawful act lawful and the making an innocent action criminal and punishing it as a crime.
23.To illustrate, if parliament were to re-enact Section 302 of the Indian Penal Code, 1860 and provide that the punishment for an offence of murder shall be sentence for imprisonment for life, instead of the present sentence of death or imprisonment for life, then it cannot be that the Courts would still award a sentence of death even in pending cases.
24.In Rattan Lal Vs. The State of Punjab, [AIR 1965 SC 444], the question that fell for consideration was whether an appellate court can extend the benefit of Probation of Offenders Act, 1958 which had come into force after the accused had been convicted of a criminal offence. The court by majority of 2:1 answered the question in affirmative. Subha Rao, J. who delivered a majority opinion, concluded that in considering the question, the rule of beneficial construction required that even ex post facto law of the type involved in that case should be applied to reduce the punishment.
25.It is settled both on authority and principle that when a later statute again describes an offence created by an earlier statute and imposes a different punishment, or varies the procedure, the earlier statute is repealed by implication. In Michell Vs. Brown [(1958) 120 SCR 676} Lord Cambel put the matter thus:
It is well settled rule of construction that, if a later statute again describes an offence created by a former statute and affixes a different punishment, varying the procedure, the earlier statute is repealed by the later statue see also Smith Vs. Benabo[(1937 1 All ER 523].
In Regina Vs. Youle, [1961) 158 ER 311] Martin B. said in the oft quoted passage;
If a statute deals with a particular class of offences, and a subsequent Act is passed which deals with precisely the same offences, and a different punishment is imposed by the later Act, I think that, in effect, the legislature has declared that the new Act shall be substituted for the earlier Act.
The rule is however subject to the limitation contained in Art.20(1) against ex post facto law providing for a greater punishment and has also no application where the offence described in the later Act is not the same as in the earlier Act i.e. when the essential ingredients of the two offences are different.
13.In view of the above discussion it clearly emerges that neither there was any intention to save the tougher provisions of Section 78 of the Act after 8/4/2011, nor Seciton 38A of the CEA is legally capable of saving the provisions of erstwhile Section 78 of the Act, as Seciton 78 is not piece of the delegated legislation. Further, the erstwhile Section 78 of the Act does not exist after 8/4/2011 in view of its substitution by new Section 78 of the Act. Further in the present case, the Principle of Beneficial Construction also does not allow imposition of higher penalty under the provisions of erstwhile Section 78 of the Act. Thus, in the present case, the imposition of penalty equal to 50% of the Service Tax amount not paid, i.e. Penalty of Rs. 12,15,924/- is found legal and proper.
From the above detail findings of the Ld. Commissioner(Appeals), I find that it was held that there is no saving clause in Section 38A of the Central Excise Act, for saving erstwhile Section 78 of the Finance Act, nor even anything provided in the amended Section 78 regarding the non applicability of the amended provisions in the case pertaining to the period prior to amendment. In such situation amended Section 78 shall clearly apply at the time of Adjudication of the show cause notice. I therefore, do not find any infirmity in the impugned order hence the same is upheld. Revenues appeal is dismissed.
(Order Pronounced in court on_______________) Ramesh Nair Member (Judicial) sk 14 ST/85152/14