Custom, Excise & Service Tax Tribunal
M/S Memco Associates (India) Pvt. Ltd vs The Commissioner Of Service Tax, ... on 21 September, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: ST/23040/2014-SM [Arising out of Order-in-Appeal No. 462/2014 dated 25.06.2014 passed by Commissioner of Central Excise (Appeals-II), Bangalore] For approval and signature: HON'BLE SHRI S. S. GARG, JUDICIAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s Memco Associates (India) Pvt. Ltd. Appellant(s) No. 849, 100 Ft Road, Mennamangala, Indiranagar First Stage, Bangalore 560 038. Versus The Commissioner of Service Tax, Bangalore Respondent(s)
Transit BMTC, Domlur, Bangalore 560 071.
Appearance:
Mr. C. Narendra Kumar, Adv. For the Appellant Mr. Parashiva Murthy, A.R. For the Respondent Date of Hearing: 19/09/2016 Date of Decision: 21/09/2016 CORAM :
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER FINAL ORDER No. 20807/2016 The present appeal is directed against the ex-parte order passed by the Commissioner (Appeals) vide Order-in-Appeal No. 462/2014 dated 25.06.2014 wherein the Commissioner (Appeals) has held that penalty under Section 78 of the Finance Act, 1994 is applicable by setting aside the Order-in-Original but without quantification of the penalty amount.
2. Briefly, the facts of the present case are that the appellants are engaged in the business of as sole distributors for M/s Mitsubishi Company in Japan and registered under the category of maintenance or repair service with effect from 07/01/2005. The Audit Wing of Service Tax Commissionerate, Bangalore undertook the audit of records of the appellant during the period from October 2004 to September 2009 and during the audit, it was observed that the appellant has not discharged service tax on the invoices raised in respect of Annual Maintenance Contracts (AMC) on their customers during the period between October 2004 to January 2005. On being brought to the notice by the audit team, the appellant immediately discharged the service tax liability of Rs. 5,28,149/- and interest of Rs. 3,47,059/- to the Service Tax Department. Further the audit team brought to the notice of the appellant regarding service tax was not discharged in respect of supply, installation, testing of UPS systems supplied and installed by the appellant between January 2005 to December 2008. When it was brought to the notice of the appellant, immediately the appellant discharged the service tax liability of Rs. 9,59,575/- and interest of Rs. 3,59,703/-. Thereafter, a show-cause notice was issued to the appellant alleging contravention of the provisions of Finance Act, 1994. The appellant filed reply to the show-cause notice and submitted that annual maintenance or repair of service was brought under service tax net with effect from 10.9.2004 and it had not collected service tax from customers/clients in respect of AMC between October 2004 to January 2005. Thereafter, the adjudicating authority passed the impugned order on 15.3.2011 vide which the adjudicating authority after considering the facts that the appellant had paid all the dues with interest before issue of show-cause notice, applying the provisions of Section 80 of the Finance Act, refrained from imposing any penalty on them under Sections 76, 77 & 78 of the Finance Act.
3. In the meantime, the appellant shifted their registered office from HAL Second Stage, Indira Nagar to Binnamangala, Indira Nagar First Stage and the same was intimated to the Commissioner of Service Tax on 17.10.2012 and the same was acknowledged by the Department. Aggrieved by the Order-in-Original, Revenue filed an appeal before the Commissioner (Appeals) with prayer to modify the order of the original authority and to impose penalty under Section 78 of the Finance Act, 1994. The Commissioner (Appeals) vide order dated 25.6.2014 allowed the appeal of the Revenue ex-parte and held that the lower authority had erred in not imposing mandatory penalty as per Section 78 of the Act. Aggrieved by the said order of the Commissioner (Appeals), the appellant has filed the present appeal.
4. Heard both the parties and perused the records.
5. The learned counsel for the appellant submitted that the appellant was under bonafide belief that the services of Annual Maintenance Contract (AMC) does not attract the provisions of Finance Act, 1994 and, therefore, did not register under the Service Tax under this category. He also submitted that service tax on Annual Maintenance Contract (AMC) came into effect from 10.09.2004 and the service tax is in the initial stage and the appellant was ignorant about the said provisions. He further submitted that the appellant was under bonafide belief that supply of UPS systems attracts only VAT and not service tax. The appellant was also under bonafide belief that it was either VAT or service tax and not both in case of erection, commissioning and testing of UPS and, therefore, the appellant was not registered or collected service tax under this category. He further submitted that the impugned order has been passed in violation of principles of Natural Justice in spite of the fact that the appellant had informed the Service Tax Department regarding the change of their address of the registered office on 17.10.2012 and the same was acknowledged by the Department. In spite of this, personal hearing notice was not sent to the appellants new address and hence, the appellant could not appear before the Commissioner (Appeals). He also submitted that the original authority on the basis of evidence on records came to the conclusion that there was justifiable reason for the appellant not to deposit the service tax and interest and immediately on being pointed out by the audit team, the appellant paid the entire service tax due along with interest before issue of show-cause notice. In support of this submission, he relied upon the decision of this Tribunal in the case of South India Paper Mills Ltd. Vs. C.C.E. & S.T. reported in 2016-TIOL-2294-CESTAT-BANG wherein in the similar facts and circumstances, penalty under Section 78 of the Finance Act was dropped in toto. He also relied upon the following case laws :
(i) C.C.E. & S.T., LTU, Bangalore Vs. Adeco Flexione Workforce Solutions Ltd. [2012 (26) S.T.R. 3 (Kar.)]
(ii) Tamilnadu Housing Board vs. C.C.E., Madras [1994 (74) E.L.T. 9 (S.C.)]
(iii) C.C.E., Bangalore-I vs. Geneva Fine Punch Enclosures Ltd. [2011 (267) E.L.T. 481 (Kar.)]
(iv) Prince Thermal India P. Ltd. vs. c.C.E., Nagpur [2013 (30) S.T.R. 394 (Tri.-Mumbai)]
(v) JCT Electricals vs. CCE, Mangalore [2015 (39) S.T.R. 131 (Tri.-Bang.)
(vi) C.C., C.Ex. & S.T., Guntur vs. OTS Advertising P. Ltd.
[2013 (32) S.T.R. 303 (Tri.-Bang.)]
6. On the other hand, the learned A.R. for the Revenue reiterated the findings of the Commissioner (Appeals). In support of his submission, he relied upon the decision of the Tribunal in the case of United Udyog vs. Commissioner of C. Ex., Haldia [2015 (39) S.T.R. 148 (Tri.-Kolkata)].
7. After considering the submissions by both the parties and perusal of the provisions of Sections 73, 76 & 78 of the Finance Act, 1994 and the judgements relied upon by the appellant cited supra, I find that Section 73(3) is very clear as it says that if tax is paid along with interest before issuance of show-cause notice, then in that case, show-cause notice shall not be issued. In this case, I find that the contention of the appellant that he bonafide believed that he is not liable to pay service tax but during the audit, the audit party informed him that he is liable to pay service tax, then he immediately paid the entire service tax along with interest. Except mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression and concealment of facts to evade payment of tax. Consequently, in my opinion, the imposition of penalty under Section 78 of the Act is not justified and bad in law. Moreover, in the impugned order, the learned Commissioner (Appeals) has not recorded any finding on suppression of facts by the appellant with an intention to evade tax. In view of the above discussion, I set aside the impugned order by allowing the appeal of the appellant.
(Pronounced in the open court on 21/09/2016) (S. S. GARG) JUDICIAL MEMBER /vc/