Customs, Excise and Gold Tribunal - Delhi
Eta Engineering Ltd. vs Commissioner Of Central Excise on 18 October, 2004
Equivalent citations: 2005(98)ECC771, 2004(174)ELT19(TRI-DEL), 2006[3]S.T.R.429, [2007]8STT61
ORDER K.C. Mamgain, Member (T)
1. This case was referred to the Larger Bench by South Zonal Bench at Chennai for resolving the conflict in the views expressed by the Two Co-ordinate benches of the Tribunal on the issue of imposition of penalty under Section 76 of the Finance Act 1994 for failure to collect or pay service tax.
2. The appellants are engaged in manufacture and installation of air conditioning systems. It was alleged that during the period from October, 1998 to 2001, they provided services as Consulting Engineers but they did not got registered with the Department and pay Service tax as Consulting Engineer. Show Cause notice was issued to them by the department demanding Rs. 1,28,217/-towards service tax on services provided by them during the aforesaid period. Penalty was also proposed on the appellants under Sections 76, 77 & 78 of the Finance Act, 1994 and interest on the tax not paid. On adjudication the original authority confirmed the demand of the tax with interest thereon and imposed a penalty of Rs. 100/- per day subject to maximum of Rs. 1,28,217/- under Section 76 ibid. Penalty of Rs. 1,000/- was also imposed under Section 77. On appeal, before the Commissioner (Appeals), the order of the original authority was upheld.
3. Appeal against the order of Commissioner (Appeals) was heard by Member (J) of the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench at Chennai and he referred the matter to the Larger Bench to decide whether penalty shall be Rs. 100/- per day in absolute terms or it should be Rs. 100/- per day.
4. Shri N. Venkataraman, ld. Advocate for the appellants pleaded that the appellants are not contesting demand of service tax in this case. They are contesting the penalty under Section 76 of the Finance Act 1994. He pleaded that Section 76 did not authorise levy of penalty of Rs. 100/- per day for the period of default of payment of service tax. He pleaded that it was Rs. 100/- in absolute terms subject to maximum of Rs. 200/- per day. He relied upon the following decisions of the Tribunal:
(1) Smitha Shetty v. CCE, Bangalore [2003 (156) E.L.T. 84 (Tri. - Bang.)]. Wherein it was held that, in the absence of comma after the words 'rupees one hundred' it cannot be presumed that section prescribes minimum penalty of Rs. 100/- per day.
(2) R.B. Bahutule v. CCE, Mumbai [2004 (166) E.L.T. 233 (Tri. - Mumbai)] Wherein it was held that minimum penalty prescribed under Section 76 of Finance Act, 1994 is Rs. 100/- only and not Rs. 100/- for everyday of delay.
He, therefore, pleaded that Section 76 of the Finance Act, 1994 prescribes minimum penalty as Rs. 100/- only subject to maximum of Rs. 200/- per day. In support of his pleadings he also referred to amendment proposed in Section 76 by Finance Bill 2004-2005 to the following effect:
"in Section 76 for the words "one hundred rupees" the words "one hundred rupees for every day during which such failure continues" shall be substituted"
and stated that this amendment shows that earlier penalty of Rs. 100/- was absolute. He also pleaded that Section 80 of the Finance Act 1994 gives authority for not imposing any penalty on the assessee under Section 76, 77, 78 or 79 or any failure referred to in the said provisions if the assessee proves that there was reasonable cause for such failure. It was pleaded that the appellants are engaged in the manufacture of Air Conditioning Systems and levy of service tax was new tax. They were not clear about the scope of Consulting Engineer and were of the view that they are not covered by the definition of Consulting Engineer. The period of dispute in this case is from October, 1998 to March, 2001. The nonpayment of tax was neither wilful nor deliberate but due to confusion prevailing about the categories of people coming under the ambit of Consulting Engineer. He also pleaded that the appellants have fully cooperated with the department during investigation and paid the service tax and not contested the levy of tax, therefore, there is a reasonable ground for the failure on their part for non-submission of service tax returns and delay in crediting the tax. Under the provisions of Section 80 of the Finance Act, they are entitled for waiver of the penalty imposed by the lower authorities.
5. Shri R.C. Sankhla, ld. SDR appearing for the Revenue pleaded that under Section 76 of the Finance Act 1994, any person who fails to pay service tax, shall be liable to a penalty which shall not be less than one hundred rupees but which may extend to two hundred rupees for everyday during which such failure continues. In Section 76, there is no comma after the words one hundred rupees, therefore, everyday qualifies both one hundred rupees but which may extend to two hundred rupees. He referred to page-133 of the Book, Statutory Interpretation by the Late Sir Rupert Cross (IIIrd Edition) which reads as under: -
"Punctuation forms part of the statute and, even if the reader has to be wary of older Acts, in which punctuation was inserted after enactment by the printer, the punctuation of modern statutes must be given the significance it has to the ordinary user of the English language. As Lord Lowry put it:
"I consider that not to take account of punctuation disregards the reality that literate people, such as Parliamentary draftsmen, punctuate what they write, if not identically, at least in accordance with grammatical principles. Why should not other literate people, such as judges, look at the punctuation in order to interpret the meaning of the legislation as accepted by Parliament?"
Or, as Thornton more trenchantly observes :
'It is a curious paradox that judges, whose entire reading is punctuated, should, in carefully punctuated judgments, consider themselves obliged to proclaim that the punctuation in carefully punctuated statutes is no part of the law.' While older dicta suggested that the punctuation should not be regarded as decisive of meaning this does not represent the modern view. All the same, the judge may in some cases be compelled to correct errors in punctuation, a course which the courts are prepared to adopt more readily than amendment of the working of the statute."
He also referred to principles of Statutory Interpretation by Guru Prasanna Singh, Seventh Edition 1999 (page 136) wherein it is mentioned when a statute is carefully punctuated and there is doubt about its meaning, a weight should undoubtedly given to punctuation.
He also pleaded that at the relevant time, the provisions of Sections 76 and 77 were as under :
"76. Penalty for failure to collector or pay service tax. - Any person, liable to pay service tax in accordance with the provision of Section 68 or the rules made thereunder, who fails to pay such tax shall pay in addition to paying such tax, and interest on that tax in accordance with the provisions of Section 75, a penalty which shall not be less than one hundred rupees but which may extend to two hundred rupees for everyday during which such failure continues, so, however, that the penalty under this clause shall not exceed the amount of service tax that he failed to pay.
77. Penalty for failure to furnish prescribed return. - If a person fails to furnish in due time the return which he is required to furnish under subsection (1) of Section 70 or by notice given under Sub-section (2) of that section, he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees for every day during which the failure continues."
He pleaded that at the relevant time if Sections 76 and 77 are compared, then it is seen that there was a comma after the words, "one hundred rupees" in Section 77 and the other words were identical to Section 76 for imposing penalty. However in Section 76 of the Act, there was no comma after the words, "one hundred rupees". Thus, it is clear that legislature wanted to impose a penalty of Rs. 100/- for everyday failure under Section 76 and it cannot be said that Rs. 100/- was the penalty in absolute terms. He also referred to the Trade Notice No. 20/2002 dated 20-3-2002 of Delhi-II Commissionerate wherein in reply to Question No. 16, it is clearly mentioned that failure to pay service tax in time - penalty - Rs. 100/- to Rs. 200/- per day subject to the maximum amount of the tax paid. He stated that the amendment proposed in Section 76 by Finance Bill 2004-2005 to the effect that in Section 76 for the word, "one hundred rupees for every day" during which such failure continues shall be substituted is only clarificatory in nature as explained in the Explanatory Memorandum to the Finance Bill. Therefore, the penalty was always Rs. 100/- per day subject to maximum of Rs. 200/-per day and not Rs. 100/- in absolute terms.
6. On careful consideration, we find that there are orders passed by the Tribunal on this issue where conflicting opinions have been expressed. In case of Harilal and Co. v. CCE, Mumbai-I [2000 (115) E.L.T. 375], it was held that minimum penalty is Rs. 100/- for each day of delay. Same view was taken in CCE, Jaipur v. Milan Tent Palace [2000 (131) E.L.T. 274]. There are contrary decisions also as relied upon by the appellant. On careful examination of the provisions of Section 76, which is as under : -
"76. Penalty for failure to collect or pay service tax. - Any person, liable to pay service tax in accordance with the provisions of Section 68 or the rule made thereunder, who fails to pay such tax shall pay in addition to paying such tax, and interest on that tax in accordance with the provisions of Section 75, a penalty which shall not be less than one hundred rupees but which may extend to two hundred rupees for everyday during which such failure continues, so, however, that the penalty under this clause shall not exceed the amount of service tax that he failed to pay."
We find that in Section 76, there is no comma after one hundred rupees. Therefore, the word, 'for everyday during which such failure continues', qualify the words 'not less than one hundred rupees, but which may extend to two hundred rupees.' If the intention of the legislature was to impose a penalty of only Rs. 100/- then there would have been a comma after the word, 'rupees one hundred'. We also find that at the relevant time under Section 77 which reads as under :
"77. Penalty for failure to furnish prescribed return, - If a person fails to furnish in due time the return which he is required to furnish under subsection (1) of Section 70 or by notice given under Sub-section (2) of that section, he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees for every day during which the failure continues."
There is a comma after the word, 'one hundred rupees'. Therefore, the intention of legislature is quite clear that penalty of Rs. 100/- per day was required to be imposed in case of failure to pay the tax for everyday after the due date. Therefore, we are of the view that the correct interpretation is that the penalty shall not be less than 100/- per day but which may extend to Rs. 200/- for every day during which such failure continues.
7. Therefore, the reference is answered in favour of Revenue.
8. Since this appeal itself has been referred to the Larger Bench and we have heard the ld. Advocate for the appellants as well as ld. SDR for Revenue on merit, for imposition of penalty, we are deciding the issue of imposition of penalty under Sections 76 and 77 also. We find that under Section 80 which reads as under:
"80. Penalty not to be imposed in certain cases. - Notwithstanding anything contained in the provisions of Section 76, Section 77, Section 78 or Section 79, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure."
there is a provision for not imposing any penalty if the assessee proves that there was a reasonable cause for the said failure. We find that the appellants, in this case, are manufacturer of Air-conditioning System. The charge is that central excise officers on scrutiny of the various documents relating to job work orders undertaken by the appellants found that they provided assistance and review in basic design criteria, including design loads for all project components including engineering calculations, estimates of main equipment capacities and sizes to M/s. GCHPL and charged fees from the client. The lower authorities have held that the appellants have rendered drawing, design, technical, consultancy services and are covered by the scope of consulting engineer and accordingly, demanded service tax. The appellants have not contested the levy of service tax. They have cooperated with the Investigating officers. Since they were under the bona fide doubt regarding their activity whether covered by service tax or not, therefore, there was a reasonable cause on their part in not depositing the service tax in time. Therefore, we are of the view that notwithstanding anything contained in Sections 76 and 77 of the Finance Act, 1994, the appellants are entitled for the benefit of Section 80 of the Finance Act and accordingly, we hold that no penalty should be imposed on the appellants. Accordingly, we set aside the penalties imposed under Sections 76 and 77 and allow their appeal to this extent.