Custom, Excise & Service Tax Tribunal
M/S Checkmate Industries Services vs Commissioner Of Central Excise, ... on 18 July, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. ST/80 & 81/07 (Arising out of Order-in-Original No. 30/CEX/STC/COMMR/2006 dated 16.3.2007 passed by the Commissioner of Central Excise & Customs, Pune-III). For approval and signature: Honble Shri P.R. Chandrasekharan, Member (Technical) 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? ====================================================== M/s Checkmate Industries Services Shri Gurdeep Singh Arora Appellants Vs. Commissioner of Central Excise, Pune-III Respondent Appearance: Shri S.R. Dixit, Advocate for Appellant Shri P.N. Das, Commissioner (AR) for Respondent CORAM: SHRI P.R. CHANDRASEKHARAN, MEMBER (TECHNICAL) SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL) Date of Hearing: 18.07.2013 Date of Decision: .2013 ORDER NO. Per: P.R. Chandrasekharan
The appeals are directed against Order-in-Original No. 30/CEX/STC/COMMR/2006 dated 16.3.2007 passed by the Commissioner of Central Excise & Customs, Pune-III.
2. Acting on intelligence, the officers of DGCEI, Vadodara initiated investigation regarding the Service Tax payments made by the appellant M/s Checkmate Industries Services, Pune in respect of security services provided by the said firm. Comparison of the figures declared by the said unit for the purpose of Service Tax payments in the ST-3 Returns filed by them with the Bank statements and Bill-Registers of the appellant firm, revealed that the appellant had grossly undeclared the value of taxable services rendered by them. The statement of Shri G.S. Arora, Managing Director was recorded under Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994, wherein he categorically admitted that the appellant firm had deliberately not declared the correct value of security services. In their ST-3 Returns much lesser value was declared on which the appellant paid the tax. After the commencement of the investigation, the appellant firm paid a sum of Rs.87,91,156/- towards the Service Tax liability. On completion of the investigation, a show-cause notice dated 13.7.2006 was issued to the appellant demanding the Service Tax of Rs.1,46,88,455/- for the period April, 2001 to March, 2006 as detailed in Annexure-A to the notice along with interest thereon. The show-cause notice also proposed to appropriate the amount of Rs.1,12,13,143/- deposited by the appellant towards part payment of the Service Tax liabilities and also an amount of Rs.8,21,356/- deposited by them towards interest on delayed payment of Service Tax. The said notice was adjudicated vide the impugned order wherein the Service Tax demand of Rs.1,46,88,455/- was confirmed along with interest thereon and the amounts already deposited were appropriated. Penalty at the rate of Rs.100/- per day from the date the tax is payable till the date it is paid was imposed under Section 76 of the Finance Act, 1994. A penalty of Rs.1,45,20,096/- each was imposed on the appellant firm as also on its Managing Director under the provisions of Section 78 of the Finance Act, 1994. In the impugned order, the learned adjudicating authority had also directed the appellant to furnish detailed calculation sheets to the Superintendent-in-charge of Service Tax for the verification of arithmetical mistakes alleged by the appellant in the computation of Service Tax demand. Aggrieved of the same, the appellants are before us.
3. The learned Counsel for the appellants made the following submissions: -
(i) The impugned order is in grave error inasmuch as the same directed the Superintendent to re-quantify the Service Tax amount, after confirming the demand, in the same breath. Even if the Superintendent comes to a conclusion that lesser amount of tax is required to be paid by the appellant, since higher demand already stands confirmed, the verification, until the impugned order is quashed and set aside, could be of no avail. It is the appellants contention that since the rate of Service Tax changed during the period of demand, there are errors in the computation of tax demand in respect of the amounts received subsequent to the change in the rate of tax, whereas the services were rendered prior to increase in the tax rate.
(ii) It is also contended that the appellant had received substantial expenses over and above the service charges and this would constitute reimbursement and the Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. UOI 2013 (29) STR 9 (Del) has taken a view that reimbursements would not attract any Service Tax levy. In the impugned order, it is stated that the appellant had collected and not paid Service Tax on time, therefore, proceedings ought to have been initiated under Section 73A of the Finance Act, 1994 and not under Section 73 and, therefore, the impugned order deserves to be quashed and set aside. If the demands are confirmed under Section 73A then no penal proceedings would ensue under Sections 76, 77 and 78 of the Finance Act, 1994.
(iii) It is also contended that no simultaneous penalty under Section 76 and 78 ought to have imposed on the appellant, even for the period prior to 16.5.2008 in view of the decisions of this Tribunal in the case of CCE Vs. Green Line Housing Finvest Ltd. 2013-TIOL-194-CESTAT-DEL, CCE Vs. Mittal Tenopack P. Ltd. 2012-TIOL-1507-CESTAT-KOL and the decision of the Hon'ble High Court of Punjab & Haryana in the case of CCE Vs. First Flight Courier Ltd. 2011-TIOL-67-HC-P&H-ST. Penalty under Section 78 is not imposable on the appellant inasmuch as the appellant had made periodical payments towards Service Tax liability during the continuancy of investigation and when the tax stood paid before the issue of show-cause notice, no penalty under Sections 76, 77 and 78 should have been imposed and relies on the decisions of this Tribunal reported in 2007-TIOL-502-CESTAT-BANG, 2007-TIOL-465-CESTAT-BANG and 2006-TIOL-1515-CESTAT-MAD.
(iv) It is further contended that imposition of penalty on the Managing Director under Section 78 of the Finance Act, 1994 is impermissible in law, inasmuch as the said section provides for levy of penalty on the person liable to pay Service Tax and no personal penalty can be imposed under this provision on any Director/employee of the assessee.
(v) It is also argued that option to pay 25% of the penalty was not given by the adjudicating authority, which needs to be exercised now.
4. The learned Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority and submits that in the present case, there was a deliberate mis-declaration on part of the assessee and there was short levy and, therefore, the show-cause notice has rightly invoked the provisions of Section 73 and confirmed the demand under the said Section. It is also an admitted position that the appellant had deliberately mis-declared the value of taxable service in the ST-3 Returns and, therefore, imposition of penalty under Section 78 is justified. In view of the above, he prays for upholding the impugned order.
5. We have carefully considered the submissions made by both the sides.
5.1 As regards the contention that in the impugned order, the adjudicating authority had also directed the appellant to furnish a detailed calculation sheet to the Superintendent-in-charge of Service Tax for checking the veracity of their claim and, therefore, confirmation of demand pending verification is unsustainable in law, this contention needs to be rejected. During the course of arguments, the learned Counsel for the appellant was asked whether any detailed calculation sheet was submitted by the appellant to the department for verification, it was replied that no such sheet was submitted. Neither in the appeal memorandum nor in other documents submitted by the appellant alongwith the appeal memorandum, any such calculation-sheet has been furnished. When the Advocate was asked whether he has any work sheet available with him for consideration by this Tribunal, he could not give any satisfactory reply. The impugned order was passed on 16.3.2007 and more than six years have lapsed since then and inspite of such a long period, the appellant has not shown or produced any evidence in support of their claim that there are errors in computation of Service Tax demand. Therefore, this contention of the appellant remains a mere allegation without any supporting evidence. Such a contention cannot be accepted in the absence of any supporting documentary evidence and hence we reject this contention.
5.2 The next contention is that the demands should have been confirmed under Section 73A of the Finance Act, 1994 and not under Section 73. It will be useful to see the provisions of Section 73 and sub-section (1) is relevant and the same is reproduced below: -
(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the [Central Excise Officer] may, within eighteen months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice :
Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words eighteen months, the words five years had been substituted.
Explanation. Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of eighteen months or five years, as the case may be. Section 73A of the Finance Act, 1994 provides for depositing Service Tax collected from any person with Central Government and reads as follows:-
(1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made there under from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government.
(2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government.
(3) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) or sub-section (2) and the same has not been so paid, the Central Excise Officer shall serve, on the person liable to pay such amount, a notice requiring him to show cause why the said amount, as specified in the notice, should not be paid by him to the credit of the Central Government.
(4) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom the notice is served under sub- section (3), determine the amount due from such person, not being in excess of the amount specified in the notice, and thereupon such person shall pay the amount so determined.
(5) The amount paid to the credit of the Central Government under sub-section (1) or subsection (2) or sub-section (4), shall be adjusted against the service tax payable by the person on finalisation of assessment or any other proceeding for determination of service tax relating to the taxable service referred to in sub-section (1).
(6) Where any surplus amount is left after the adjustment under sub-section (5), such amount shall either be credited to the Consumer Welfare Fund referred to in section 12C of the Central Excise Act, 1944 or, as the case may be, refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B of the said Act and such person may make an application under that section in such cases. Inserted (w.e.f. 18.04.2006) by s. 68 of the Finance Act, 2006 (21 of 2006) within six months from the date of the public notice to be issued by the Central Excise Officer for the refund of such surplus amount.] While Section 73 deals with short-levy or short-payment, non-levy or non-payment or erroneous refund, Section 73A deals with payment of tax collected to the credit of the Central Govt. There is substantial difference between the two provisions. Under Section 73, the demand can be made only when the services rendered is a taxable service under Section 65(105) and the value of taxable service is to be determined under Section 67 read with the Valuation Rules and on the value so determined, the tax liability has to be discharged. In other words, Section 73 provides for assessment of tax and thereafter, payment of tax. Demand under Section 73A does not require any assessment of tax at all. It deals with payment of tax to the exchequer if any amount has been collected in excess of the Service Tax assessed or determined. Even in a case where service is not taxable, if any amount has been collected, which is not required to be so collected, the Section provides for crediting of the amounts so collected to the exchequer. Thus, Section 73 and 73A deal with altogether different situations.
5.3 In the case before us, the charge against the appellant is that the appellant has mis-declared the value of the services rendered and consideration received as evident from the show-cause notice, the relevant extracts of which is reproduced below: -
Period Value of Security services received as declared in the ST-3 returns Security charges actually realized as per bank statements and Bill Registers Differential value of taxable Service not declared in the ST-3 Returns 2001-02 74,29,321 3,83,58,683 3,09,29,362 2002-03 1,61,32,197 4,35,39,856 2,74,07,659 2003-04 1,59,29,381 4,10,79,483 2,51,50,102 2004-05 No ST-3 returns filed 5,07,74,775 5,07,74,775 2005-06 No ST-3 returns filed 6,32,38,144 6,32,38,144 Therefore, in the present case, the issue involved is short levy and short payment of service tax and therefore, it is the provisions of Section 73, which are attracted. Therefore, the confirmation of demand under Section 73 is correct in law and accordingly, we uphold the same.
5.4 With regard to penalties imposed on the appellant, penalty under Section 76 is imposed for default in payment of tax and, no mens rea is required to be proved for imposing such penalty. For mere default and delay in payment of tax, the liability to penalty arises. The Hon'ble High Court of Kerala in the case of Asst. Commissioner of Central Excise Vs. Krishna Poduval 2006 (1) STR 185 (Kar] has held that penalty under Section 76 of the Finance Act, 1994 can be imposed for mere default/delay in payment of Service Tax in addition to the penalty under Section 78 and these penalties are mutually exclusive and even if offences are committed in the course of same transaction or arise out of same act, penalty is imposable for ingredients of both offences.
5.5 As regards the penalty under Section 78, the same is attracted when Service Tax is demanded and confirmed invoking the extended period of time and short-levy or short-payment or non-levy or non-payment or erroneous refund is on account of fraud or collusion or willful mis-statement and suppression of facts and contravention of any of the provisions to chapter V of the Finance Act, 1994 or to the rules made thereunder, with an intent to evade payment of Service Tax. In the present case, the appellant had suppressed the value of the taxable service received by them in their ST-3 Returns and in respect of the year 2004-05 and 2005-06, the appellant did not file any return at all. It has also been admitted in the statements recorded under Section 14 of the Central Excise Act by the Managing Director of the appellant firm that they mis-declared the value so as to evade payment of Service Tax. Statements recorded under Section 14 is a valid piece of evidence under the Evidence Act as held by the Constitution Bench of the Hon'ble Apex Court in the case of Ramesh Chandra Mehta Vs. State of West Bengal - 1999 (110) ELT 324 (SC) and, therefore, the suppression of facts is clearly established in the present case. Therefore, imposition of penalty under Section 78 on the appellant is in accordance with law. However, for the period after 10.5.2008, only penalty under Section 78 would be sustainable, as the provisions of Section 78 were amended w.e.f. 10.5.2008 that if the penalty is payable under Section 78, then the provisions of Section 76 shall not apply. Therefore, for the period prior to 10.5.2008 while provisions of both the Section 76 and 78 would apply, for the period on or after 10.5.2008, penalty under Section 78 alone shall apply.
5.6 The appellant has contended that imposition of penalty on the Managing Director under Section 78 is not sustainable in law. There is merit in this argument. Section 78 provides for penalty on the person liable to pay tax and since the person liable to pay tax is the appellant firm and not the Managing Director, imposition of penalty on the Managing Director is not sustainable in law and accordingly, we set aside the same.
5.7 The last issue for consideration is whether the appellant is liable for the benefit of 25% of the penalty imposed under Section 78, if the tax, interest and the penalty is paid within 30 days from the date of receipt of the order by the Tribunal, inasmuch as the adjudicating authority has not explicitly mentioned the availability of this option. There are contrary views on this issue. However, the Hon'ble High Court of Bombay in the case of Commissioner of Central Excise, Raigad Vs. Castrol India Ltd. 2012 (286) ELT 194 (Bom) considered this issue and held as follows in the context of Section 11AC of the Central Excise Act, 1944. The relevant extracts from the said decision is reproduced below: -
22.?Thus, the legislature while mandatorily imposing penalty under Section 11AC equal to 100% of the duty determined under Section 11A(2), provides an incentive to the assessee covered under Section 11AC by providing that if the duty determined under Section 11A(2) together with interest payable under Section 11AB is paid within the stipulated time, then, the penalty payable would be 25% determined, subject to the condition that 25% of the penalty is also paid within the time stipulated therein. Section 11AC neither requires the Central Excise Officer to determine the quantum of 25% penalty nor does it require the Central Excise Officer to communicate the availability of the option under Section 11AC. Once the duty is determined under Section 11A(2) and 100% penalty is imposed under Section 11AC, it is for the assessee to avail the incentive by paying the duty, interest and 25% of the penalty within the time stipulated under the section. If the assessee fails to fulfill the conditions set out in the first and the second proviso to Section 11AC within the time stipulated therein, then, the incentive is lost and the assessee is required to pay penalty at 100%. Therefore, in the absence of any obligation cast upon the Central Excise Officer under Section 11AC to determine penalty at 25%, the argument that if the Central Excise Officer fails to determine 25% penalty, the appellate authority can determine 25% penalty and permit the assessee to pay penalty within thirty days from the date of communication of the order passed by the appellate authority cannot be accepted.
23.?The fact that this Court in the case of Viraj Alloys Limited (supra) as also various High Courts and even the CBDT have directed the adjudicating authorities to make it explicitly clear in the operative part of the adjudication order regarding the availability of paying 25% penalty in the circumstances set out in the first and the second proviso to Section 11AC, does not mean that the statute casts such an obligation on the adjudicating authorities. Therefore, if the adjudicating authority fails to make a reference in its order regarding the availability of paying 25% penalty, the assessee cannot agitate that there is violation of the statutory provisions contained in Section 11AC and it will not be open to the appellate authorities or the Courts to permit the assessee to pay 25% penalty beyond the time prescribed under Section 11AC.
24.?The argument advanced on behalf of the assessee that the provisions of Section 11AC have to be read liberally cannot be accepted, because, Section 11AC imposes punishment to an assessee who has intended to evade duty by adopting any of the means mentioned therein. While punishing the persons who have sought to evade payment of duty, the legislature gives an incentive to pay lesser penalty provided the duty sought to be evaded with interest and 25% of the penalty is also paid within the time stipulated therein. The incentive in Section 11AC is intended to encourage payment of tax due to the revenue at the earliest without resorting to unwarranted litigation and it is not an incentive for violating the provisions of law. Therefore, the incentive in Section 11AC given to the persons who have violated the provisions of the 1944 Act cannot be treated as if an incentive given to persons who have complied with the provisions of law. Therefore, the provisions contained in Section 11AC have to be construed strictly and if the assessee fails to comply with the conditions set out in the proviso to Section 11AC, the benefit of paying lesser penalty cannot be extended to the assessee.
25.?If the contention of the assessee that even the appellate authority can direct the assessee covered under Section 11AC to pay 25% of the penalty within thirty days from the date of communication of the order passed by the appellate authority is accepted, then it would defeat the very object with which the incentive under Section 11AC is allowed. The basic object of granting incentive under Section 11AC is to encourage payment of duty sought to be evaded with interest and penalty at 25% within the time stipulated therein. When the legislature specifically fixes the time-limit within which the duty with interest and penalty at 25% is to be paid for availing the incentive, it would neither be open to the appellate authority nor any other authority to permit the assessee to pay 25% penalty at any time other than the time prescribed under Section 11AC.
26.?By comparing Section 11AB with Section 11A(2B) and (2C) and also by referring to Section 11AC as substituted with effect from 8th April, 2011, it was contended by the counsel for the assessee that it was never the intention of the legislature to levy 100% penalty under Section 11AC. We see no merit in the above contention because, firstly sub-section (2B) and (2C) to Section 11A are applicable to cases not involving fraud, collusion, suppression of facts etc, whereas Section 11AC applies to cases where there is intention to evade payment of duty on account of fraud, collusion or any wilful mis-statement or suppression of facts etc. Secondly, to attract Section 11AC criminal Intent or mens rea is a necessary constituent, whereas, under Section 11A, the criminal intent or mens rea is not the necessary constituent. Therefore, the provisions of Section 11AC cannot be interpreted with reference to the provisions contained in Section 11A of the 1944 Act. Similarly, the Section 11AC as substituted with effect from 8th April 2011 does not support the case of the assessee because, even under those provisions the penalty imposable under Section 11AC is the penalty equal to the duty determined under Section 11A(10) i.e. 100% of the duty sought to be evaded and the incentive to pay lesser penalty is also given in those provisions subject to the conditions set out therein. Thus, under Section 11AC as substituted with effect from 12th May 2000 as also substituted with effect from 8th April 2011, the penalty mandatorily imposable is 100% of the duty sought to be evaded, but if the assessee pays the duty sought to be evaded with interest and penalty at the rates specified therein within the stipulated time, then, the balance penalty would not be payable.
27.?Moreover, the third and the fourth proviso to Section 11AC make it further clear that, it is only when the duty determined as payable under Section 11A(2) is increased by the appellate authority or the Court as the case may be, then, the twenty five per cent of the increased penalty has to be paid within thirty days of the communication of the order by which such increase in the duty take effect. Thus, the appellate authority under the fourth proviso to Section 11AC is authorised to permit the assessee to pay penalty beyond the time prescribed under Section 11AC only in respect of the increased penalty required to be paid on account of the increase in the duty determined as payable under Section 11A(2) in the appellate proceedings and not in any other cases. Therefore, when the liability to pay 25% penalty under the first and the second proviso to Section 11AC is required to be paid within thirty days from the date of communication of the order the Central Excise Officer determining duty under Section 11A(2), it would not be open to the appellate authority or the Court to direct the assessee to pay 25% penalty beyond the date stipulated in the first and the second proviso to Section 11AC. For all the aforesaid reasons, we find it difficult to endorse the contrary views expressed by the Delhi High Court, P & H High Court and the Gujarat High Court in the cases referred to by the counsel for the assessee. In view of the decision of the Hon'ble Bombay High Court, which is the jurisdictional High Court, which we are bound to follow, the appellant is not eligible for the benefit of reduction in penalty.
6. In sum,
(i) We uphold the demand of Service Tax under Section 73 of the Finance Act, 1994 along with interest thereon under Section 75 of the Finance Act, 1994.
(ii) We also uphold the imposition of penalties on the appellant firm under Sections 76, 77 and 78 of the Finance Act, 1994 for the period prior to 10.5.2008. For the period after 10.5.2008, penalty under Section 76 shall not be leviable and only penalty under Section 78 shall sustain.
(iii) Penalty imposed upon the Managing Director of the appellant firm under Section 78 is set aside.
The appeal is disposed of in the above terms.
(Pronounced in Court on .)
(Anil Choudhary) (P.R. Chandrasekharan)
Member (Judicial) Member (Technical)
Sinha
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