Custom, Excise & Service Tax Tribunal
The Commissioner Of Service Tax vs M/S. Gowri Computers (P) Ltd on 28 September, 2011
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT BANGALORE COURT - I Cross Objection & Appeal No: ST/CO/27/2011 in ST/721/2010 (Arising out of Order-in-Appeal No.3/2009 ST dt.5.1.2010 passed by the Commissioner of Central Excise, Bangalore.) Date of Hearing: 28.09.2011 Date of decision: 28.09.2011 1. Whether Press Reporters may be allowed to see 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 Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? The Commissioner of Service Tax Bangalore. Appellant Vs. M/s. Gowri Computers (P) Ltd. Respondent
Appearance For the appellants : Ms. Sabrina Cano, DR for the department.
For the respondents : Mr. Pradyumna G.H, Advocate for the assessee CORAM SHRI P. G. CHACKO, HONBLE MEMBER (JUDICIAL) FINAL ORDER No._______________________2011 In the appeal filed by the department, the short question to be considered is whether the lower appellate authority is right in having set aside the penalties imposed on the assessee by the original authority under Sections 76 and 78 of the Finance Act, 1994. The assessee (respondent in the Revenues appeal) has filed a counter styled as Cross Objection and inappropriately registered by the registry. I have examined the grounds of the appeal and the submissions of the respondent and have also heard both sides.
2. There was a dispute between the assessee and the department as to whether the former was liable to pay Service Tax under the head Commercial Training and Coaching Service over a period including the period from 27.9.2004 to 8.3.2005. The assessee had not paid Service Tax even after collecting it from the students (service recipients) during the said period, nor had they filed Service Tax returns. However, during the course of investigations launched by the department, the party paid Service Tax with interest thereon for the period from 27.9.2004 to 8.3.2005. This payment was made on 13.8.2005. The department issued a show-cause notice on 9.1.2006 for appropriating this payment under Sections 73 and 75 of the Finance Act, 1994 and imposing penalties on the party under Sections 76 to 78 of the Act. The proposal to impose penalties was contested. The Assistant Commissioner (adjudicating authority) confirmed the demand of Service Tax of Rs.1,95,436/- and interest of Rs.8,254/- against the assessee under Sections 73 and 75 respectively and appropriated the payment towards the demand. He imposed a penalty of Rs.100 per day on them under Section 76 and a penalty equal to Service Tax under Section 78 of the Act. In an appeal filed by the assessee, learned Commissioner (Appeals) set aside both the penalties by relying on the Boards Circular No.137/167/2006-CX-4 dated 3.10.2007. The decision of the Commissioner (Appeals) was reviewed in the department. Hence the present appeal.
3. Learned DR submits that the Boards circular is not applicable to this case as this case involves suppression of facts and contravention of Rules by the assessee with intent to evade payment of Service Tax. It is submitted that this case is governed by Section 73(1A) of the Act and that the provisions of Section 73(3) of the Act are not applicable. Learned DR has also claimed the benefit of the following decisions :
(i) Kedia Business Centre Vs. CCE, Mumbai-I - 2009 (15) STR 550 (Tri.-Mumbai)
(ii) Global Telecom Vs. CST, Mumbai - 2009 (15) STR 553 (Tri.-Mumbai)
4. Learned counsel for the respondent submits that any suppression of taxable value of the service was not alleged in the show-cause notice and also that a major part of the demand of Service Tax is within the normal period of limitation as reckoned from the due date of filing Service Tax returns. In this connection, reliance is placed on Ashpra Textiles Pvt. Ltd. Vs. CCE, Mumbai-II - 2010 (253) ELT 138 (Tri.-Mumbai). Therefore, according to the learned counsel, the show-cause notice cannot be considered to have been issued under the proviso to Section 73(1) of the Finance Act, 1994 and consequently there can be no penalty on the respondent under Section 78 of the Act. It is also argued that the respondent cannot be penalized under Section 76 in view of the Boards circular. Finally, it is urged that the appeal of the Revenue be dismissed.
5. Neither of the rival arguments can be accepted in toto. The show-cause notice in this case was issued on 9.1.2006 principally for confirming demand of Service Tax against the assessee for the period from 27.9.2004 to 8.3.2005. The demand for the said period barring a few days (27th to 30th September 2004) was within the normal period of limitation as reckoned from the due date of filing Service Tax returns. This fact is not in dispute. Though, in the show-cause notice, there was a proposal to impose penalty under Section 78 of the Act for willful suppression of the value of taxable services rendered by them, there was no allegation of any such suppression elsewhere in the notice in the context of demanding / appropriating Service Tax. Nowhere in the show-cause notice was there any specific allegation of suppression of taxable value, nor was it stated as to how much of the taxable value was suppressed. The show-cause notice also did not allege any of the other ingredients of the proviso to Section 73 (1) of the Act for invoking the extended period of limitation. In this scenario, it can hardly be inferred that the show-cause notice invoked the proviso to Section 73(1) of the Act. Mere mention of the proviso to Section 73(1) of the Act in the operative part of the show-cause notice would not suffice. It has, therefore, to be held that the proviso was not invoked by the department. Consequently the appellants prayer for imposing penalty on the respondent under Section 78 is not acceptable.
6. The Boards circular dated 3.10.2007 deals with two situations. In one situation, Section 73(1A) of the Finance Act, 1994 (which proviso is no more in the statute book today) is invoked in the show-cause notice and the noticee pays Service Tax with interest thereon along with penalty equal to 25% of the Service Tax within 30 days of receipt of the notice. In such a situation, as per the Boards clarification, the payments so made by the party should conclude the adjudication proceedings. In other words, the party will have no further liability including penalty. In the second situation, a person liable to pay Service Tax self-determines it and pays it up before service of show-cause notice on him. Alternatively, he makes the payment as determined by a Central Excise Officer before issue of show-cause notice. In either case, the payment is made under intimation to the Central Excise Officer whereupon no show-cause notice shall be served on the party in respect of the amount paid. According to the Boards circular, such payments made by the party should conclude all proceedings against them.
7. Neither sub-section (1A) nor sub-section (3) of Section 73 is applicable to the facts of this case and, therefore, the Boards clarification is irrelevant. This apart, the Boards clarification under Section 73(3) of the Act seems to be incorrect inasmuch as this provision only prohibits issue/service of show-cause notice under sub-section (1) in respect of the amount paid by the party. The amount paid by the party is an amount of Service Tax. As per Section 73(3), there shall be no show-cause notice under sub-section (1) of Section 73 in respect of the Service Tax already paid by the party. There is no bar to issuance of a show-cause notice for imposing a penalty. The Boards clarification on the point, therefore, does not disclose the correct legal position.
8. Reverting to the penal issue, I have, now, to consider the question whether the respondent is liable to be penalized under Section 76 of the Act. Default of payment of Service Tax from 27.9.2004 to 8.3.2004 is an admitted fact. The Service Tax for that period was paid only in August 2005. Such default in payment of Service Tax would per se invite Section 76 as rightly found by the original authority. Indeed, nobody has argued before me that Section 76 is not applicable to cases involving default of payment of Service Tax. Therefore the decision of the lower appellate authority in relation to Section 76 of the Finance Act, 1994 cannot be accepted. The original authority imposed penalty at the rate of Rs.100 per day in terms of Section 76, which is correct in law.
9. In the result, the Revenues appeal is partly allowed by restoring the penalty imposed by the original authority under Section 76 of the Finance Act, 1994. The respondent shall pay this penalty without unreasonable delay. The Cross Objection is also disposed of for the records.
(Pronounced and dictated in Open Court) (P. G. CHACKO) Member (Judicial) rv ??
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