Custom, Excise & Service Tax Tribunal
Anupam Mhi Industries Ltd vs C.C.E. & S.T. Vadodara-I on 13 April, 2018
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.ST/10684/2018-DB [Arising out of VAD-EXCUS-001-APP-352-2017-18 dated 29.08.2017 passed by the C.C.E.(A) Vadodara-i] Anupam Mhi Industries Ltd. Appellant Vs C.C.E. & S.T. Vadodara-I Respondent
Represented by:
For Appellant: Mr. Saurabh Dixit (Advocate) For Respondent: Mrs. Nitina Nagori (AR) CORAM:
HONBLE Mr. DEVENDER SINGH, MEMBER (TECHNICAL) Date of Hearing/Decision:13.04.2018 Final Order No. A / 10673 /2018 Per: Devender Singh Brief facts of the case are that the appellant is having Service Tax Registration under the Service tax law and as a service receiver under the category of Consulting Engineering Service they had made payments to M/s Mitsubishi heavy industries, Japan, therefore, under the reverse charge mechanism, the appellants were required to pay service tax. There was a delay in payment of service tax in respect of 4 invoices and service tax was paid on these invoices by the appellants on their own ascertainment with a delay of 6 months to 3 years. When the department when conducted an audit on 4.01.2016 to 12.01.2016 it found that the appellant had delayed the payment of service tax under reverse charge mechanism but the interest amouting to Rs. 24,87,141/- due thereon had not been discharged by the assesse, at the behest of the department, the appellant later on paid full interest liability on 18.06.2016. A SHOW CAUSE NOTICE was issued to the appellant on 02.01.2017 demanding Service tax of Rs. 8,81,082/- and interest of Rs. 24,87,141/- already paid by assesse and proposing penalty on the appellant under Section 78 of the Finance Act, 1994. The matter was adjudicated and the demand of service tax and interest thereon were confirmed under Section 73(2) and Section 75 respectively of the Finance Act, 1994. The adjudicating authority also imposed penalty equivalent to 50% of the amount of service tax confirmed under Section 78 of the Finance Act. Aggrieved from the same, the appellant filed this appeal.
2. Ld. Advocate for the appellant submits at the outset that they are not contesting the demand of service tax as well as demand of interest, which has been paid by them well before the issuance of show cause notice. He further submits that are only contesting the penalty imposed under Section 78. The contention is that they had paid the service tax on their own ascertainment voluntarily and also paid the interest thereon as pointed out by the department, at the time of audit before the issuance of the show cause notice. He further pleads that the ingredients of Section 78 of the Finance Act are not there as they have paid the service tax by themselves. He further pleads that the situation is Revenue neutral for them because they have availed the CENVAT Credit on the service tax paid by them. He relied on the following case laws:
* Arcgate vs CCEJaipur-II 2017 (5) GSTL (281) (Tri. Del.) * Gujarat Borosil Ltd. vs CCE&ST Surat 2014 (36) STR 808 (Tri. Amd.) * CCE& ST, LTU Bang. Vs ADECCO Flexino Workforce Solutions Ltd. 2012 (26) STR 3 (kar.) * Kalbhor Construction Co. vs CCE Pune-I 2016 (45) STR 338 (Tri. Mum) * Modern Woolens vs CCE, Jaipur-II 2017 (52) STR 288 (Tri. Del).
3. He also relied on the order of the Honble Supreme Court upholding the order of the Tribunal in the case of Jet Airways (India) Ltd. 2017 (7) GSTL J35(SC).
4. Ld. AR for the Revenue submits that there was long gap in payment of duty and the delayed payment was made repeatedly. She also pleads that the Ld. Adjudicating authority has given sufficient relief in penalty as per law under Section 78. She also pleaded that the interest was paid at the behest of the department. Ld. AR relied on the judgment of Honble Supreme Court in UOI vs Rajashtan Spinning & Weaving Mills 2009 (238) ELT 3 (SC).
5. Heard both the sides and perused the records.
6. I find that the admitted facts are that the appellants had made delayed payment of duty on 4 occasions but at all the times, the delayed payment was made by them on their own ascertainment. The late payment was discovered by the Revenue during audit and when the appellant was asked to pay the interest for delayed payment, the appellant paid interest on the delayed payment. Both the amount of service tax due and interest amount were admittedly made before issuance of show cause notice which was issued 7 months after all dues have been cleared. The show cause notice alleges intention late payment of duty but the intent to evade is merely grounded on non-payment of interest. The Ld. Commissioner (Appeals) has also referred to a recent Boards Instruction No. 1080/11/DLA/CC Conference/2016 dated 08.07.2016 and taken the ground the specious that since the appellant had not availed the benefit of pre-show-cause consultation, the imposition of penalty is justified.
7. I find that from the spirit of the Board Instructions dated 08.07.2016 (supra), the intention was to encourage voluntary compliance and introduce the consultation process for evading issuance of show cause notice. In also find that the judgment of Rajasthan Spinning Mills (supra) is not applicable in the present case as the intention of the appellant was not malafide as they had paid the service tax on their own ascertainment voluntarily and paid interest on being pointed out before issuance of show cause notice. The ingredients of Section 78 like suppression or malafide intent to evade duty do not emerge from the facts of the case.
8. I find that in a similar scenario where the service tax as well as interest had been paid before the issuance of show cause notice, this Tribunal in the case of Arcgate vs CCE Jaipur-II (supra) had held that penalty was not justified and set is aside. Relevant findings of the Tribunal decision are extracted below:
4.?I have heard both the sides and perused the appeal records. The service tax liability is not disputed in the present case. The same has been discharged with applicable interest, for delayed payment, more than 4 months before the issue of notice. In the normal course the case gets closed without issue of notice in terms of provision of Section 73(3) of the Act. However, I note that the lower Authorities invoked the provision of Section 73(4) to hold that such closure or proceedings is not possible in the present case. I have perused the show cause notice issued. The show cause notice stated that the appellants did not get themselves registered nor filed returns or paid service tax liability. Hence, extended period was invoked. I find no justifiable reason has been recorded in the show cause notice other than such reasons mentioned above. It would appear that the closure under Section 73(3) was not considered, only on the ground that the service tax liability paid by the appellant was for period spread over more than three years. I find that as long as full service tax liability with interest is discharged by the assessee and the ingredients of Section 73(4) could not be brought out with supporting evidence, the case has to be closed under Section 73(3). Such closure is not barred only by the reason that the demand pertains to longer period. When the assessee admits the liability, irrespective of the duration and pay the same with interest, the case has to be closed. In the present case, the bar under Section 73(4) cannot operate, for the reasons pleaded by the appellant. I find no justifiable reasons recorded by the lower Authorities, for non-closure of case under Section 73(3). Accordingly, while upholding the tax liability of the appellant with interest, I find the penalty imposed based on the proceedings initiated is not justifiable. Accordingly, the same is set aside. The appeal is allowed to that extent only. The same view has been taken by the Tribunal in the case of Kalbhor Construction Co. (supra) and Gujrat Borosil (supra).
9. I also find that the situation in the present case is Revenue neutral as the duty was paid under reverse charge mechanism and the Cenvat credit would only be availed by the appellant himself. In such a situation, the Tribunal has held in the case of Modern Woolens (supra) that penalty was not justified.
10. By following the above judgments of this Tribunal, I am of the view that the imposition of penalty under Section 78 is not justified in the facts and circumstances of this case and the same is accordingly set aside while upholding the service tax and interest as not challenged. The appeal is disposed of in the above terms.
(Dictated and pronounced in the open court) (Mr. Devender Singh) Member (Technical) Neha the Tribunal has taken consistent view in such scenario where the service tax as well as interest has been paid within time, the issuance of SHOW CAUSE NOTICE was not necessary. In this regard, the following views taken by the Tribunal in the case of Arcgate vs CCE Jaipur-II (supra) pertinent and is reproduced below.
4.?I have heard both the sides and perused the appeal records. The service tax liability is not disputed in the present case. The same has been discharged with applicable interest, for delayed payment, more than 4 months before the issue of notice. In the normal course the case gets closed without issue of notice in terms of provision of Section 73(3) of the Act. However, I note that the lower Authorities invoked the provision of Section 73(4) to hold that such closure or proceedings is not possible in the present case. I have perused the show cause notice issued. The show cause notice stated that the appellants did not get themselves registered nor filed returns or paid service tax liability. Hence, extended period was invoked. I find no justifiable reason has been recorded in the show cause notice other than such reasons mentioned above. It would appear that the closure under Section 73(3) was not considered, only on the ground that the service tax liability paid by the appellant was for period spread over more than three years. I find that as long as full service tax liability with interest is discharged by the assessee and the ingredients of Section 73(4) could not be brought out with supporting evidence, the case has to be closed under Section 73(3). Such closure is not barred only by the reason that the demand pertains to longer period. When the assessee admits the liability, irrespective of the duration and pay the same with interest, the case has to be closed. In the present case, the bar under Section 73(4) cannot operate, for the reasons pleaded by the appellant. I find no justifiable reasons recorded by the lower Authorities, for non-closure of case under Section 73(3). Accordingly, while upholding the tax liability of the appellant with interest, I find the penalty imposed based on the proceedings initiated is not justifiable. Accordingly, the same is set aside. The appeal is allowed to that extent only. 6 | Page ST/10684/2018-SM