Custom, Excise & Service Tax Tribunal
C.C.E. & S.T. Ludhiana vs Ajay Kumar Gupta on 12 September, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Single Member
Appeal No. ST/60359/2013-SM
(Arising out of Order-in-Appeal No. 78/Appl/Cus (D) Camp Chd/2013 dated 21.06.2013 passed by Commissioner of Customs (Appeals), Delhi, (Camp at Chandigarg)
Date of hearing: 11.6.2014 Pronounced on: 12.09.2014
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
C.C.E. & S.T. Ludhiana Appellant
Vs.
Ajay Kumar Gupta Respondent
Appearance:
Present for the Appellant: Shri M.S. Negi, DR Present for the Respondent: None Coram: Honble Mr. Manmohan Singh, Technical Member FINAL ORDER NO. 53568/2014 PER: MANMOHAN SINGH This appeal has been filed by the Revenue against the Order-in-Appeal dated 21.06.2013. No one appeared on behalf of the Respondent. On checking of records, it is seen that on earlier occasions also advocate requested for postponement and case was adjourned to 21.4.2014. Again on 21.4.2014 proxy Counsel requested for postponement and case was adjourned to 11.6.2014. Today also no one had appeared on behalf of the Respondent. Further there is no intimation requesting any adjournment. I therefore, deem it fit to hear the case with the assistance of learned AR to decide the matter on merits.
2. Learned DR explained the matter. Respondent Ajay Kumar Gupta had collected Service Tax amounting to Rs.652207/- vide his three invoices all dated 29.03.2008 from M/s Ahmedabad Strips (P) Ltd for his professional / liaison services rendered to them. Enquiry in the matter was initiated by DC (Audit) CE Ahmedabad III. On further enquiry, necessary information was sought from the Respondent vide letter dated 12.11.2008 by CE Ludhiana and statement of the Respondent was recorded on 24.11.08. Respondent paid impugned Service Tax amounting to Rs.652207/- on 15.11.08. Show Cause Notice dated 24.6.2009 was issued for appropriation of the Service Tax amount and for recovery of interest and imposition of penalty under section 76 and 78 of the Finance Act, 1994. Case was originally adjudicated by the Additional Commissioner vide order dated 29.6.10. Impugned Service Tax amount was confirmed and appropriated. Interest was ordered to be recovered under section 75 and penalties were also imposed upon the Respondent under both section 76 and 78 of the Finance Act, 1994. On appeal by respondents, the Commissioner (Appeals) upheld order for recovery of service tax and interest but dropped the imposition of penalties under sections 76 and 78 of the Act ibid. On the ground that of legal consultancy became taxable only on 7.7.2009 however period of rendering service was prior taxability.
3. Ld DR elaborated that Service Tax in the matter was payable in terms of Section 73A(2) of the Act as the Service Tax amounts had already been recovered by the Respondent from their customers and not deposited with the department. However such taxes were paid to the Department only after enquiry in the matter initiated by the Department. Interest leviable was also not paid. In such a situation, Show Cause Notice for recovery of Service Tax, interest and imposition of penalty was warranted in terms of Section 73(4) of the Act ibid. He submitted that penalties under sections 76 and 78 of the Act were imposable as this was an act of deliberate evasion of Service Tax when Service Tax as tax has been collected but not paid to the Department. Findings of the Commissioner (Appeals) that penalties under these provisions could not be imposed were also contested. On being asked whether both penalties could be imposed simultaneously, he referred that the period for the offence was March 2008 while section 78 was amended on 10.5.2008 to the effect that if penalty under this section was imposed the provisions of section 76 shall not apply; that therefore during the relevant period both penalties under section 76 and 78 were imposable simultaneously.
4. After going through written brief of DR and counsel who filed written brief later on and after going through the case records, I find that the issue is on a short compass i.e. whether penalties under sections 76 and 78 of the Finance Act, 1994 are imposable for recovery of Service Tax under section 73A of the Act. The provisions relevant to this discussion are as follows:-
Section 73A. Service tax collected from any person to be deposited with Central Government. (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 thereunder 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 sub-section (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 (1 of 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 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.
Section 68.?Payment of service tax. Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed.
(2)?Notwithstanding anything contained in sub-section (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
Section 76. Penalty for failure to pay service tax. Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, in addition to such tax and the interest on that tax in accordance with the provisions of section 75, a penalty which shall not be less than two hundred rupees for every day during which such failure continues or at the rate of two per cent. of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax :
Provided that the total amount of the penalty payable in terms of this section shall not exceed the service tax payable.
Section 78.
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 thereunder with intent to evade payment of service tax, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall not be less than, but which shall not exceed twice, the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded.
5. The amount of Service Tax has been collected by the Respondent from his customers vide the three invoices, though service tax was not chargeable on relevant service. However once service tax was collected from the service receiver, it was required to be deposited to the Government exchequer in terms of section 73A(2). I find that the Respondent had collected the said amount as Service Tax vide three invoices dated 29.3.08 and had deposited the Service Tax with the Revenue, after investigations were initiated against him, on 15.11.2008. It was not deposited suo motto Show Cause Notice was issued on 24.6.2009. Benefit under Section 73(3) i.e. waiver of show cause notice and closure of the case could not be extended to them as interest alongwith service tax was not deposited. Thus there is no waiver of penalty available to appellants.
6. As regards imposition of penalties, I find that the charging of Service Tax by the Respondent and retaining the same with him instead of paying the same to the Revenue is an act of wilfull suppression of facts with intent to evade Service Tax and establishes Respondents malafide. It was only on insistence of the Revenue that dues were paid. Therefore all the elements essential for imposition of penalty under sections 76 and 78 are there. The Commissioner (Appeals) set aside these penalties on the reasoning that penalties under these sections could be imposed only when the Service Tax was not paid / short paid be Service Tax actually payable in terms of section 68 of the Act. He also held that the service rendered by the Respondent was that of legal consultancy which was not taxable during the relevant period. I find that ground taken by Commissioner (Appeals) is not sound and legal. Section 68 makes persons providing taxable services to pay Service Tax at the rates specified under section 66. However section 73A is the relevant section to recover Service Tax in the instant case, and not section 68, Section (73A) stipulates that any amount collected as Service Tax is to be paid to the Government forthwith. This has not been done in this case. Surprisingly, Commissioner (Appeals) confirmed payment of interest but set aside imposition of penalties though for both impositions, same principle applied.
7. A clear reading of sections 76 and 78 reveals that penalty under both the sections is imposable for short payment / non payment of Service Tax. Section 76 is applicable to Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax similarly Section 78 is applicable for non payment / short payment of service tax for any contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax. The Chapter mentioned in these provisions is Chapter V of the Finance Act, 1994 which also contains Section 73A. Further Service Tax Rules, 1994 framed under section 94 of the Act regarding collection and payment of the Service Tax are also applicable in the matter as these rules also framed under the same Chapter V of the Finance Act, 1994.
8. In view of above, I find no merits in the Commissioner (Appeals)s finding on the matter of penalty and hold that penalties under section 76 and 78 of the Act are imposable for non payment / short payment of Service Tax recoverable under section 73A of the Act based on interpretation of law. However whether both penalties are imposable simultaneously is being discussed in succeeding para.
9. To determine whether or not both the penalties under sections 76 and 78 are imposable simultaneously, it is necessary to look into the period involved in the matter under consideration. The period involved in the matter is March 2008. It is noted that Section 78 was amended w.e.f. 10.5.2008 to the effect that if penalty is payable under this section, the provisions of section 76 shall not apply. Therefore, after 10.5.08 only, one of these penalties can be imposed at a time. For the period prior to this amendment, it is noted that the matter was rather debatable and different High Courts have interpreted the issue differently. While the Kerala High Court and Delhi High Court held that these penalties were imposable simultaneously [case laws - Assistant Commissioner of Central Excise vs. Krishna Poduval 2006(1) STR 185 (Kerala); Bajaj Travels Ltd. vs. Commissioner of Service Tax 2012(25) STR 417 (Delhi) refer], on the other side the Punjab and Haryana High Court differed and ordered that penalties could not be imposed simultaneously (case law Commissioner of Central Excise vs. First Flight Courier Ltd.- 2011(22) STR622(P&H) - refers). The Principal Bench of this Tribunal has also relied upon the Punjab and Haryana High court to decide such an issue pertaining to a assessee situated in Jalandhar (case law - CCE Chandigarh vs. Punjab State Federation Co-Operative Sugar Mills ltd Final Order No. 52161/2014 dated 15.05.2014- refers). In the instant case, I find that the Respondent is situated in Punjab and therefore judgement pronounced by Punjab and Haryana High Court which is jurisdictional High Court, has to be followed. Accordingly I hold that both these penalties are not imposable simultaneously even prior to amendment on 10.5.2008 in the jurisdiction of Punjab & Haryana High Court.
10. The ld. DR pleads for imposition of penalty under section 78 submitting that this is a case of deliberate evasion of Service Tax where the amount was collected by the Respondent and not paid to the Department till the enquiry in the matter was conducted mens-rea is clearly manifested. I agree with the departmental contention and hold that penalty under section 78 which is equivalent to the amount of Service Tax evaded, is imposable from the Respondent along with interest recoverable under section 75 of the Act.
11. In view of the above findings, Commissioner (Appeals)s order is modified and Revenue appeal is allowed in the above terms.
12. Ordered accordingly.
(Pronounced on 12.09.2014) (Manmohan Singh) Technical Member k. Gupta 1