Customs, Excise and Gold Tribunal - Mumbai
Mr. R.B. Bahutule, Pharma Chem ... vs Commissioner Of Central Excise, ... on 6 February, 2004
Equivalent citations: 2004(166)ELT233(TRI-MUMBAI), 2006[3]S.T.R.240, [2007]8STT286
ORDER Shri C. Satapathy, Member (T)
1. In respect of Appeal No. ST/2/2003, penalty of Rs. 4,500/- has been imposed under Section 77 of the Finance Act, 1994 (F.A. 94) for late filing of the returns. The amounts have been determined as Rs. 2,000/- in the first case for delay of 153 days and Rs. 500/- in the 2nd case for delay of 61 days and Rs. 2,000/- in the 3 rd case for delay of 213 days. In addition, a penalty of Rs. 34,500/- has been imposed for late payment of the service tax under Section 76 of F.A. 94. The amount has been calculated apparently in an adhoc manner and not on the basis of the number of days of delay. Shri K.P. Chaudhary, learned Chartered Accountant appearing for the appellants challenges the penalty on the ground that no Show Cause Notice was issued under Section 76 of F.A. 94 and only a notice was issued mentioning Section 77 of F.A, 94. He also states that the impugned order in appeal has been passed ex-parte without granting an opportunity of hearing. He also states that penalty imposed under Section 76 can only be imposed on a person who has not paid the tax but; not on a person who has paid the tax after some delay.
2. In respect of Appeal No. ST/23/03, penalty of Rs. 500/- has been imposed under Section 75A of F.A. 94 for failure to take registration in addition to penalty of Rs. 27,194/- under Section 76 of F.A. 94 for failure to pay service tax and penalty of Rs. 1,000/- under Section 77 for failure to file the return. The appellants mainly challenge the penalty of Rs. 27,194/- which has been imposed on the basis of Rs. 100/- per day of delay limited to the amount of tax. Shri D.D. Gwalani, learned Advocate appearing for the appellant states that the lower authorities have taken the minimum penalty under Section 76 to be of Rs. 100/- per day whereas the statute provides a minimum penalty of Rs. 100/- only. He also cites the decision of the Tribunal in the case of C.C.E. Jaipur v. Milan Tent Palace - 2001 (1.31) E.L.T. 274 to claim that since this is a new tax, no penalty should have been imposed. He also states that the penalty prescribed are discretionary and the lower authorities should not have imposed the penalty at the prescribed rate without exercising discretion.
3. In respect of Appeal No. ST/41/03-MUM, a penalty of Rs. 1,28,903/- has been imposed under Section 76 of F.A. 94 for delay in payment or service tax. The amount has been calculated at the rate of Rs. 100/- per day of delay and limited to the service tax amount. In addition, penalty of Rs. 4,000/- has been levied under Section 77 of F.A. 94 for late filing of the return at the rate of Rs. 1000/- per return. Shri Bakul B. Modi, learned C.A. appearing for the appellants mainly challenges the penalty imposed for delay in payment of the service tax. He states that the appellants were unaware of their tax liability and that after they were informed of their liability, they have promptly paid the tax amount with interest. He also cites the Tribunal decision in the case of Smita Shetty and Ors. v. C.C.E. Bangalore - 2003 (57) R.L.T. 543 to say that no penalty should have been imposed taking the relevant provision to be mandatory and that the Adjudicating Authority should have exercised the discretion in the facts of the case. He also submits that decision of the Tribunal in the case of Supreme Freight Services and Anr. v. C.C.E. Bangalore-I - 2004 (60) R.L.T. 181 has held that the minimum penalty under Section 76 is Rs. 100/- only.
4. In respect of Appeal No. ST/43/03-MUM, none appeared for the appellants. Shri Bidhan Chandra, learned J.D.R. appears for the Department. In this case, penalty of Rs. 500/- was imposed by the Original Authority for delay in filing return for each half of the year under Section 77 of F.A. 94 which has been reduced to Rs. 500/- only by the Commissioner (Appeals). In addition, there is penalty of Rs. 24,176/- under Section 76 of F.A. 94 for delay in payment of service tax of Rs. 24,176/-.
5. None is present on behalf of the appellant in respect of Appeal No. ST/48/03-MUM. Shri M.H. Sheikh, learned J.D.R. appears for the Department. In this case, the Commissioner (Appeals) has reduced the penalty of Rs. 21,250/- imposed under Section 76 of F.A. 94 to Rs. 10,000/- and he has reduced the penalty of Rs. 400/- imposed under Section 77 to Rs. 100/-. Initially the penalty Rs. 21,250/- was imposed at the rate equal to the service tax amount.
6. Heard both the learned D.R.s. They submit that the provision under Section 76 of the F.A. 94 should be interpreted to mean that the minimum penalty of Rs. 100/- for day of delay is imposable subject to the maximum of Rs. 200/- for day of delay but not exceeding the amount of service tax. They also state that in case Section 76 is interpreted to mean that the minimum penalty is Rs. 100/-, then also the orders passed by the lower authorities are justifiable since the amounts imposed are less than the maximum amounts prescribed under the law. The learned D.R.s also state that Section 76 provides for payment of penalty for delay in paying the service tax and therefore, the proposition that who has already paid the tax after some delay is not liable to penalty under the said section cannot be a valid interpretation of the law as it stands.
7. After hearing both sides and perusal of case records, I find that the penalties imposed in the above cases have been by and large calculated on the basis of Rs. 100/- per day of delay in paying the service tax subject to the maximum of the tax amount. It is apparent that the lower authorities are under the impression that the minimum penalty prescribed under Section 76 of the F.A. 94 is Rs. 100/- per day and that the same has to be mandatorily imposed in all cases. The main issues involved in these appeals are:-
1) Whether the minimum penalty prescribed under Section 76 of the F.A. 94 is Rs. 100/- per month or Rs. 100/- only.
2) Whether the minimum penalty prescribed under said Section 76 is to be mandatorily imposed or there is any discretion available with the Adjudicating authority to reduce or waive the same
3) Whether there is any discretion to impose penalty for delay in registration and delay in filing returns under Section 75A and 77 of F.A. 94.
4) Whether Section 76 of F.A, 94 is attracted at all in a case where service tax has already been paid after some delay.
8. I find that there are large number of decisions which have beer passed by the Tribunal on these issues. Some of the decisions are as follows:-
1) C.C.E. Calcutta v. B.L. Company - 1999 (105) E.L.T. 434 (Tribunal) - In this order dtd. 29/10/1998, it has been held that minimum penalty for not paying service tax is Rs. 100/- and not Rs. 100/- per day of delay.
2) Harilal and Co. v. C.C.E, Mumbai-I - 2000 (115) E.L.T. 375 (Tribunal) - In this order dtd. 01/10/1999, it has been held that the minimum penalty is Rs. 100/- for each day of delay and not Rs. 100/-. However, the penalty was reduced on the ground that service tax was freshly imposed and that the burden of tax stood dis-charged.
3) Vijaya Clearing and Forwarding Agency v. C,C,E, Mumbai-I - 200 (123) E.L.T. 930 (Tribunal) - In this order dtd. 04/11/1999, the penalty was reduced to Rs. 2000/- on the ground that the lax liability was already discharged.
4) Sundeep Goyal and Co. v. C.C.E. Calcutta-I - 2001 (133) E.L.T. 785 (Tri.Kolkata) - In this order dtd., 12/05/2000, penalty was reduced to Rs. 1,000/- on the ground that the assessee was new.
5) C.C.E. Jaipur v. Milan Tent Palace - 2001 (131) E.L.T. 274 (Tri-Del.) - In this order dtd. 02/02/2001, it is held that the minimum penalty was Rs. 100/- per day of delay but the same was not compulsory and in deserving cases it can be waived.
6) C.C.E. Jaipur-II v. Earth Tour Travels (P) Ltd. - 2001 (129) E.L.T. 754 (Tri.-Del.) - In this order dtd. 07/02/2001, it has been held that the penalties are mandatory and that the lower authorities has no discretion in reducing the penalty.
7) Palika Palace v. C.C.E. Chandigarh - 2001 (134) E.L.T. 677 (Tri.-Del.) - In this order dtd. 29/08/2001, it was decided to reduce the penalty of Rs. 5,000/- holding that no penalty was imposable if the assessee proved reasonable cause for non compliance under Section 80 of the F.A. 94.
8) Mohan Industrial Security Services v. C.C.E. New Delhi - 2002 (139) E.L.T. 722 (Tri.-Del.) - In this order dtd. 27/09/2001, penalty was reduced to Rs. 10,000/- holding that penalty is discretionary in view of Section 80 of the F.A, 94.
9) Smita Shetty and Ors. v. C.C.E. Bangalore - 2003 (57) R.L.T. 543 (CEGAT-Ban.) - In this order dtd. 27/06/2003, it has been held that the minimum penalty under Section 76 of F.A. 94 IS Rs. 100/- (contrary headnote in E.LT. notwithstanding) and that the Adjudicating authority has the discretion to impose a penalty which is even less than the said minimum
10) Supreme Freight Services and Anr. v. C.C.E. Banglore-I - 2004 (60) E.L.T. 181 (CESTAT-Ban.) in this order dtd. 26/09/2003, the same bench that has passed the order at Sr.No. 9 above has held that the minimum penalty under Section 76 of the F.A. 94 is Rs. 100/- only.
9. Section 76 of the F.A. 94 as substituted by Finance (No. 2) Act, 1998 w.e.f. 18/10/1998 reads as under: -
"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 every day 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."
10. It has been argued on behalf of one of the appellants that Section 76 cannot be applied to a person who has paid the tax after some delay. This plea has been advanced on the basis that the said Section applies to a person "who fails to pay such tax". However, looking at the construction of the section including the fact that the maximum penalty is relatable to "every day during which such failure continues", it is not possible to accept the plea with the Section will not apply to a case where the tax has been paid after some delay. As such, I hold that the Section applies to persons who fail to pay service tax including persons who fail to pay such tax for any period of time beyond the due date.
11. All the appellants have contended that the minimum penalty prescribed in Section 76 of F.A. 94 is Rs. 100/- only and not Rs. 100/-for every day of delay. Some of the orders of the Tribunal referred to above have held that the minimum penalty under the said Section is Rs. 100/- per day of delay whereas some of the other orders have held the minimum penalty to be only Rs. 100/-. In view of such contradictory views expressed in the earlier decisions of the Tribunal, it has now become necessary to carefully examine the text of the said Section 76. It has several important components:-
1) Any person, liable to pay service tax, who fails to pay such tax shall pay in addition to paying such tax, and interest on that tax.
2) a penalty which shall not be less than one hundred rupees.
3) but which may extend to two hundred rupees for every day during which such failure continues,
4) so, however, the penalty shall not exceed the amount of service tax that he failed to pay.
12. The construction of Section 76, as has been interpreted by some of the Tribunal Benches, clearly requires that the penalty shall not be less than one hundred rupees. The law as such does not require the amount of penalty to be read as one hundred rupees for every day of delay. The language of the section does not warrant the expression "for every day during which such failure continues" to qualify one hundred rupees since such expression has been put only after the words "but which may extend to two hundred rupees." Since the said section provides for payment of tax as well as the interest to take care of any pecuniary advantage gained by the tax payer by delayed payment of tax, it is understandable that the minimum penalty prescribed is Rs. 100/- only and not Rs. 100/- per day which would be draconian in its effect. The rationale for prescribing a minimum penalty of Rs. 100/- is also understandable as a smaller amount than that would be a paltry amount not worth the effort of collecting it. I, therefore, hold that the minimum penalty prescribed under the said Section 76 of F.A.94 is Rs. 100/- only and not Rs. 100/- per day of delay.
13. Coming to the question whether there is a discretion with the Adjudicating authorities not to impose the minimum penalty under the said Section 76 for delay in paying the service tax and also for imposition of penalty for non registration and delay in filing return, I find that some of the earlier decisions of the Tribunal have looked at case laws relating to other legislations. I am of the view that such recourse is not necessary in view of Section 80 of the F.A. 94 which reads as under:-
"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."
This section clearly authorizes the Adjudicating authorities to exercise their discretion in not imposing any penalty for delay in payment in service tax and delay in filing return if the assessee proves that there was reasonable cause for the said failure. However, no such discretion has been allowed in respect of penalty for failure to make an application for registration under Section 75A for which a small amount Rs. 500/- has been prescribed. Accordingly, I hold that the Adjudicating authorities have discretion not to impose any penalty for delay inlaying service tax and for delay in furnishing return in terms of Section 80 of F.A. 94, but they have no such discretion for not imposing penalty for failure to apply for registration.
14. In view of my findings as above on various issues raised in these appeals, I set aside the impugned orders and remand these cases to the original authorities for re-decision in the light of the above finding after affording a reasonable opportunity of hearing to the appellants.
15. Appeals are allowed by way of remand.
(Dictated in court)