Custom, Excise & Service Tax Tribunal
Cce, Kolhapur (Appeal No. St/625/11) vs M/S Sumitra Constructions (Appeal No. ... on 24 September, 2014
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. IV APPEAL NO. ST/625 & 630/2011-Mum (Arising out of Order-in-Appeal No. P II/VSGRAO/61/2011 dated 29.07.2011 passed by the Commissioner of Central Excise (Appeals-II), Pune-I.) For approval and signature: Honble Shri Anil Choudhary, Member (Judicial) =====================================================
1. Whether Press Reporters may be allowed to see : No
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 : Yes CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy : Seen
of the order?
4. Whether order is to be circulated to the Departmental : Yes
authorities?
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CCE, Kolhapur (Appeal No. ST/625/11)
M/s Sumitra Constructions (Appeal No. ST/630/11)
: Appellant
Versus
M/s Sumitra Constructions (Appeal No. ST/625/11)
CCE, Kolhapur (Appeal No. ST/630/11)
: Respondent
Appearance
Shri B.K. Iyer, Superintendent (A.R.)
: For Revenue
Shri Prashant K. Pandit, Consultant
: For Assessee
CORAM:
HONBLE SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL)
Date of Hearing : 24.09.2014 Date of Decision: .2015
ORDER NO.......................................................
Per: Anil Choudhary:
Both the assessee and the Revenue are in appeal against the order of the Commissioner (Appeals) dated 29/07/2011. The assessee is in appeal seeking setting aside of the penalties imposed and/or retained by the Commissioner (Appeals) and the Revenue is in appeal against the reduction of the quantum of penalty under Section 78.
2. The brief facts are that the appellant is a proprietory concern and is engaged in providing industrial construction, repairs and maintenance, erection commissioning and installation services and registered with the Service Tax Department under the category repairs and maintenance, commissioning and installation services with effect from 16/11/2006. The appellant was depositing service tax and also filing the periodical returns. The appellant is mainly engaged in the installation and repairs of wind turbines. An accident took place at the construction site on 30/3/2007 in which a workman died. Due to the accident the work almost came to a stand still. Due to dislocation of business, the cash flow was also affected and as such the appellant was unable to deposit the service tax on the due dates and also did not file the returns. The Revenue inspected the premises of the appellant sometime in October, 2008 and found that the assessee have failed to pay or short paid the service tax amounting to Rs. 39,76,647/- for the period from October, 2004 to September, 2009, and further failed to pay interest on the amount of service tax, not paid within the stipulated time and further failed to file the prescribed returns for the respective half years ending.
3. A show-cause notice dated 10/12/2009 was issued for the service tax short paid for the period 200405 to 200809, as it appeared that the assessee has not disclosed the material facts regarding providing of taxable services, recovery of service value and service tax from various customers, to the Revenue. It could be known to the Revenue only after the inspection and enquiries conducted, which proves the act of suppression of material facts on the part of the assessee with intention to evade service tax, thereby extended period was invoked under Section 73 of the Finance Act. The appellant was required to show-cause as to why the service tax amount of Rs. 39,76,647/- for the period October, 2004 to September, 2009 should not be demanded and recovered and the amount already deposited Rs. 32,98,874/- be not appropriated and further why not interest be demanded and be appropriated to the extent already deposited and further penalty was proposed under Section 76, 77 and 78.
3.1 The assessee contested the show-cause notice by filing reply, inter alia stating that they have paid the service tax and part of the interest thereon, before issuance of this show-cause notice dated 10/12/2009 by self assessing the tax liability. They also paid an amount of Rs. 5,00,506/- towards service tax, which is not been considered in the show-cause notice. It also stated that they have paid interest on 4/10/2010 after issuance of show-cause notice but before the adjudication and filed the copy of challan. It was further stated that the assessee have prepared the worksheet and computed the tax liability based on the bank statement, which is correct, as the Revenue have considered wrong figures for the working of the tax liability. Even the loan credited, hand loan received, which are not taxable receipts, have been considered by the Revenue in the gross amount while working of the liability to service tax. Further erroneous huge tax liability is computed. Further as per the show-cause notice, in the amount demanded, as the abatement of 67% in respect of some works in respect of Industrial Construction is not considered also led to the raising of erroneous tax liability. It was further stated that in fact excess payment of service tax have been made. The statement was submitted showing the calculation of tax liability. As regards the allegation of omission and suppression of facts from the Revenue, it was urged that there is no such suppression as the assessee was paying service tax & filing of returns till September, 2006, on the date of inspection, 15/10/2008, the assessee had already deposited Rs. 8 lakhs towards service tax. During the course of investigation also the proprietor of assessee appeared before the authority and submitted the relevant copies of bank statements, copy of IT returns, duty paid/due prior to September, 2006 along with balance sheets. The relevant information was furnished to the Revenue. That there was no intention of the assessee to suppress any information or facts in order to evade the tax liability. Even at the time of inspection and on other dates, when the statement of the proprietor - Mr P. B. Nagda was recorded, it was stated that service tax was paid regularly upto September, 2006 but from October, 2006 after the fatal accident, there being dislocation in the business, the assessee could not pay service tax regularly on due dates from October, 2006. The appellant was fully occupied in the legal work including attending the Court. This resulted in dislocation of business and depletion in the cash flow. That the default occurred due to circumstances out of control of the assessee. That there is no case of any deliberate default, or any Act of suppression with intent to evade payment of service tax. Further tax liability as calculated by the assessee was admitted, with further assurance to deposit the same in the near future and paid before issue of show-cause notice. Under the facts and circumstances there was reasonable cause for the unintentional default in payment of tax, in filing of returns, and accordingly the appellant prayed for non-imposition of penalty, as proposed under Section 76, 77 and 78 of the Finance Act. It was also stated that the father of the proprietor of the assessee is suffering from cancer and this pre-occupation for treatment have further resulted in lack of proper compliance with the provisions of tax law. It was also urged that in view of Section 73(3) of the Finance Act which provides that no penalty shall be imposed where service tax along with interest has been paid before issuance of the show-cause notice by the Revenue, no penalty be imposed.
3.2 The show-cause notice was adjudicated vide Order-in-Original dated 20/12/2010. As regards the claim of the demand being on non-taxable receipts, like the loan amount, and hand loan etc. and further non-consideration of tax deposited Rs. 5,00,506/-, the contention of assessee was found sustainable. It is further found that the show-cause notice does not show bifurcation of the demands for the 2 categories of taxable services namely, maintenance and repair and industrial construction services, rendered by the assessee. Wherein it was further found that abatement of 67% have not been given in respect of industrial construction service which involves the usage of materials. After allowing abatement of 67% on the gross amount received for industrial construction and deletion of non-taxable receipts from the gross amount, the tax liability was recalculated at Rs. 37,22,585/. Further the claim of tax already deposited but not taken into consideration in the show-cause notice Rs. 5,00,506/- was also found correct and accepted. On the question of penalty the adjudicating authority recorded finding that subsequent to March, 2006 the assessee neither paid the service tax nor filed the prescribed returns. Also observed that the proprietor of the assessee have admitted and filed worksheet to the effect that gross value of Rs. 8,54,427/- received during the period April, 2005 to September, 2008 in respect of repairs and maintenance on which the tax liability is Rs. 1,01,173/- was not paid and escaped payment of service tax, and further seen that the assessee have discharged the service tax liability short paid, only after initiation of the investigation. As regards the reasonable cause pleaded by the appellant-assessee it was found that the reason stated for dislocation of business is not sufficient as it appeared that the assessee have carried on some business and also filed income tax returns but have failed to file the service tax compliances during the relevant period. During the period, although the assessee have collected service tax on the bills raised from time to time, but have failed to deposit the same with the Revenue. Accordingly the modified demand of Rs. 37,22,585/- was confirmed and was appropriated against the amount of tax already deposited Rs. 37,99,380/- and further interest was levied (not quantified), and an amount of Rs. 3,05,152/- already paid was appropriated and penalty was imposed @ Rs. 200/- per day or 2% per month of the tax starting from the due date till 9/5/ 2008 under Section 76 and further penalty of Rs. 500/- and Rs. 2000/- was imposed for every contravention due to non-filing of the ST-3 return during the period upto 9/5/2008 and from 10/5/2008 onwards, respectively under Section 77(2) of the Finance Act and further equal amount of penalty was imposed under Section 78. Being aggrieved the assessee preferred appeal before the Commissioner (Appeals).
3.3 The learned Commissioner (Appeals) recorded the finding that the assessee have not disputed the quantum of service tax adjudicated and is in appeal against Levy of penalty under Section 76, 77 and 78 of the Finance Act. It was further found that there has been negligence on the part of the appellant-assessee in depositing service tax and filing of returns for the period from April, 2006 to September, 2008. Although there was reasonable cause due to the fatal accident which led to dislocation in business and the cash flow. But the proprietor have accepted that short payment for the period prior to April, 2006 due to non disclosure of the gross amount received under the head repair and maintenance and industrial construction amounting to Rs. 1,01,173/- and Rs. 51,576/-. Further the statement of service tax payable/paid also indicated that the assessee was defaulting in timely payment of service tax and further not paid the service tax for the period April, 2006 to September, 2008. The learned Commissioner also noted from the copy of order dated 17/7/2007 passed by the Labour Court, at Satara, regarding distribution of compensation deposited by the assessee and found that the assessee have been paying service tax regularly, although in some case(s) it was paid belatedly prior to May, 2006. Further during the period June, 2006 to September, 2008 the appellant had deposited an amount of Rs. 8 83,378/-, before the visit of the Revenue Officers. Hence it was concluded that there is no suppression with intention to evade tax for the purposes of Section 78. The learned Commissioner further found that the tax involved for the period October, 2008 to September, 2009, amounting to Rs. 6,62,981/- cannot be deemed to have been suppressed. Further nothing have come out in the investigation to show that the assessee have suppressed the value of services, except failed to deposit tax timely and the periodical returns. It was further found that the transactions of business were found properly recorded in the books of accounts and financial statements maintained in the ordinary course of business. The learned Commissioner further observed that save and except suppression of service tax of Rs. 1,01,173/- on repairs and maintenance for the period April, 2005 to September, 2008 and Rs. 51,576/- in respect of industrial construction for the same period, no other suppression can be attributed. Accordingly the learned Commissioner was pleased to allow the appeal in part by confirming the penalty under Section 76 and Section 77, but reduced the penalty under Section 78 to Rs. 1,52,749/. Further as regards the amount of Rs. 76,795/- being excess payment towards service tax, the same was directed to be adjusted towards the penalty sustained. Being aggrieved the appellant and Revenue are in appeal before this Tribunal.
3.4 The appellant is against the confirmation of penalty under Section 76 and 77 as well as part penalty sustained under Section 78, whereas the Revenue is in appeal against reduction of penalty under Section 78.
4. The Counsel for the assessee urges that the learned Commissioner appreciated the reasonable cause for failure to comply and timely deposit of the tax during the period March, 2006 to September, 2008, as recorded in para-12 of the impugned order, but have erred in confirming the penalty under Section 76, 77 and in part under Section 78. It nowhere came on record that in respect of the amount confirmed under Section 78, Rs. 1,52,749/- there was any suppression of facts with intent to evade tax. The said amount of tax also includes for the disturbed period and the same have escaped due to inadvertence, which does not amount to suppression or misstatement. In view of the reasonable cause pleaded, since the date of inspection and the same have been found to be true, the imposition and/or retention of the penalty is bad and fit to be set aside.
5. On the other hand the learned A.R. for the Revenue contends that under the facts and circumstances the learned Commissioner was not justified in reducing the penalty under Section 78 and the same is fit to be restored and the appeal of the assessee be dismissed. It is further urged that during the course of investigation it was found that the assessee was having one more bank account with Canara Bank, which fact was not disclosed to the Revenue. The same came to light only on 11/11/2009 in the course of inquiry proceedings. It is further stated that the assessee have taken his own sweet time and finally submitted documents like balance-sheet, the statement of contract receipts, ledger account etc. on 11/11/2009. Further the ruling relied upon by the learned Commissioner in the case of Krishna Automobiles Vs. CCE 2011 (23) STR 57 (Tri. Del.) is not applicable in the facts of the present case.
6. Having considered the rival contentions, I find that the learned Commissioner recorded and accepted the reasonable cause for default in filing of returns and payment of service tax. It is also an admitted fact that the appellant-assessee had deposited the full service tax, short paid, in the course of investigation/inquiry and had rather deposited more amounts, as well as the amount of interest partly before issue of show-cause notice and partly after issue of show-cause notice but before the adjudication order. Further the appellant-assessee have co-operated with the Revenue and have accepted the admitted tax liability and deposited the same. In the course of hearing the learned Counsel for the appellant also produced copies of balance sheets for the relevant period. As per the balance sheet as on 31/3/2006, service tax liability have been shown that Rs. 4,43,343/-. It is further evident from the order of the Labour Court that the appellant had to pay an amount of Rs. 2,25,782/- to the legal heirs of deceased employee. The appellant further filed the copy of medical certificate with respect to ailment of his daughter. On the facts on record and the circumstances of default, I hold that there was reasonable cause for default and the appellant-assessee is not guilty of suppression with intent to evade payment of tax or any other contumacious conduct. However there is default in filing the returns. Thus, the appeal of the assessee is allowed in part, the penalty under Section 76 and Section 78 are set aside. The quantum of penalty under Section 77 is reduced to Rs. 250/- for each default. The appeal of the Revenue is dismissed.
7. To sum up appeal No. ST/630/11 is allowed in part and appeal No. ST/625/11 is dismissed.
(Pronounced in Court on .............2015) (Anil Choudhary) Member (Judicial) Sp 11