Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise & ... vs Cognizant Technology Solutions India ... on 5 May, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.ST/41275/2015
[Arising out of Order-in-Appeal No.14/2015 dt. 18.3.2015 passed by the Commissioner of Central Excise (Appeals-I), Central Excise & Service Tax, LTU, Chennai]
Commissioner of Central Excise & Service Tax, LTU, Chennai
Appellant
Versus
Cognizant Technology Solutions India Pvt. Ltd. Respondent
Appearance:
Shri K.P.Muralidharan, AC (AR) For the Appellant Shri Rajaram Ramanan, Consultant For the Respondent CORAM:
Honble Shri P.K.Choudhary, Judicial Member Date of hearing :04.04.2016 Date of Pronouncement : 05.05.2016 FINAL ORDER No.40729/2016 Before going into the merits of the case, although the Order-in-Appeal is common, the issues involved are different, the case is disposed by separate orders.
2. The brief facts of the case are that M/s. Cognizant Technology Solutions (hereinafter referred to as Respondent) was subject to audit by the Service Tax authorities. During the course of audit, it was noticed by the Revenue that excess CENVAT Credit was availed by the Respondent to the tune of Rs.13,69,210/-. The Respondent had agreed to the aforesaid observation of the audit department and has reversed the CENVAT Credit availed along with interest under protest before issuance of Show cause notice. A show cause notice no. LTUC/147/2011- (ADC) dated 21.04.2011 was issued stating that there was willful suppression on the part of the respondent in availing the CENVAT credit twice and proposed to levy penalty equal to the tax amount due. The Respondent had replied to the notice on 01.07.2011 stating, that interest is not applicable when the CENVAT Credit has not been utilized; that CENVAT Credit was not wrongly taken; that interest is payable only from the date of utilization of credit; that no penalty should be applicable in the present case as the Credit was reversed and interest was paid much before the issuance of show cause notice and that the said fact has been recorded in the Show cause notice itself; that there was no suppression in the present case as the CENVAT Credit details were submitted to the authorities at the time of filing the refund claim.
3. The original adjudicating authority adjudicated the matter and passed the Order-in-Original No. LTUC/53/2012-ADC dated 6.2.2012 whereby the tax and interest paid under protest was appropriated and penalty equal to the tax due was levied. Being aggrieved by the said OIO, the Respondent had preferred an appeal with the Commissioner (Appeals). The learned Commissioner (Appeals) after consideratiing the facts of the case, had dropped the penalty proceedings on the ground that the case is squarely covered under Section 73(3) of the Finance Act, 1994 and the case merits for waiver of penalty under Section 80 of the Finance Act, 1994. The Commissioner (Appeals) had placed reliance on the ruling of the Ahemdabad Tribunal in the case of Atwood Oceanics Pacific Ltd. Vs, CST Ahemdabad - 2013 (32) STR 756 (Tri.-Ahmd.) for waiver of penalty under Section 80 of the Finance Act, 1994. Being aggrieved by the order passed by the Commissioner (Appeals), the appellant-Revenue has preferred this appeal before Tribunal. 4. In the grounds of appeal, the Revenue has contended that the respondent-assessee had availed wrong CENVAT Credit on many occasions and that was not disclosed to the department either in their ST-3 returns or in any other form and hence suppression has been clearly established; that accordingly, extended period of limitation was invoked under proviso to Section 73(1) of the Finance Act, 1994 and consequently no waiver of penalty is possible under Section 80 of the Finance Act, 1994; that the case law relied by the Commissioner (Appeals) in the case of Atwood Oceanics (supra) has not been accepted by the Department and that an appeal has been preferred before the Supreme Court; that in the case of UOI Vs. Dharmendra Textile Processor - 2008 (231) ELT 3, the Hon'ble Supreme Court has held that any penalty otherwise imposable under Section 11AC of the Central Excise Act, 1944 cannot be avoided on the ground that the duty amount was paid by the assessee prior to issuance of show cause notice.
5. Shri K.P. Muralidharan, AC, Ld. A.R appearing for the Appellant-Revenue, re-iterated the grounds of appeal and stated that equal penalty ought to be levied in the present case. He also placed reliance on the ruling of the Madras High Court in the case of Dhandayuthapani Canteen Vs CESTAT, Chennai - 2015 (39) S.T.R. 386 (Mad.), wherein it was held that even though tax has been paid prior to issuance of show cause notice, Section 80 waiver cannot be provided where wilful suppression and concealment has been proved.
6. Shri Rajaram Ramanan, learned Consultant, appearing for the Respondent had submitted that the ruling of the Tribunal in the case of Atwood Oceanics Pacific Ltd. (supra) is squarely applicable to the facts of the case and that merely because an appeal has been preferred against the said ruling would not be a ground for appeal. He placed reliance on the ruling of the Supreme Court in the case of Union Of India Vs Kamlakshi Finance Corporation Ltd. - 1991 (55) ELT 433 (SC) to support his argument. He also submitted that the Respondent is a large tax payer and the quantum of data handled by the Respondent was voluminous i.e. the mistake had happened in 132 occasions out of 9400 entries (approx.). He also placed reliance on the ruling of Canara Bank Vs Commissioner of Service Tax Bangalore 2016 (3) TMI 712 - CESTAT BANGALORE, wherein it was held that no penalty is to be levied for unintentional mis-happenings/mistakes that take place at the time of availment of CENVAT Credit.
6.1 As regards the applicability of the ruling of the Madras High Court, he submits that there was no wilful suppression in their case and accordingly the case law relied by the Appellant is squarely distinguishable. He also submitted that several audits were conducted by the Appellant before and during the period of dispute and they were completely aware of all facts for the said period. He further submitted that it is an admitted fact that there was a mistake at the time of availment of credit however it was never the intention of the Respondent to wilfully suppress facts from the Department with an intention to evade payment of tax as all facts were made available to Department at the time of audits and that all CENVAT Credit details were available to the Department at the time of filing of refund claims.
7. Heard both sides in the matter. After perusing the records, I find that the short issue involved in the said appeal is that whether equal penalty is to be levied in the present case. I find that the Respondent has erred in availing CENVAT Credit on 132 entries out of 9400 entries (approx.) as contended during their argument. The consultant has stressed that given the volume of data handled by the Respondent, minor mistakes are bound to happen. In this regard, I find that the ruling of the CESTAT in the case of Canara Bank Vs CST Bangalore (supra) is squarely applicable to the facts of the present case. The relevant extract of the ruling is reproduced below:
"6. Regarding imposition of penalty of INR 14,67,499/- (Rupees Fourteen Lakhs Sixty Seven Thousand Four Hundred and Ninety Nine only) imposed under Rule 15(1) of Cenvat Credit Rules for the above wrongly taken cenvat credit, the facts indicate that for taking the cenvat credit there was no intention of the appellant to take it when it was not due. In fact it had become due to them, when they had paid the service tax in the month of November 2009; the said lapse has been explained by the appellant saying that the said services were received from abroad in their Mumbai office and statements using such services come to their centralized office in Bangalore. Sometimes such unintentional mis-happenings/mistakes do take place for which the appellant is not to be punished by imposing the penalties. The appellant has also cited in defense the Honble Supreme Courts decision in the case of Hindustan Steel Ltd. Vs. State of Orissa [1978 (2) E.L.T. (J159) (SC)] saying that in case of unintentional lapse imposition of penalty is not justified.
7. Considering the facts on record and the decision of the Honble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa (supra) and the provisions of Section 80(1) of Finance Act 1994 (as they existed then) penalty of ? 14,67,499/- (Rupees Fourteen Lakhs Sixty Seven Thousand Four Hundred and Ninety Nine only) imposed on the appellant under Rule 15(1) of Cenvat Credit Rules is hereby set aside. In this regard the following pronouncement of Honble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa (supra) gives support to hold that above penalty of ? 14,67,499/- (Rupees Fourteen Lakhs Sixty Seven Thousand Four Hundred and Ninety Nine only) is not justified. The Honble Supreme Court inter alia has held as below:
An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that the Company was not a dealer. Granting that they erred, no case for imposing penalty was made out. The Revenue has alleged that there was wilful suppression in the present case as they had detected that wrong availment of credit only during the course of audit conducted by them. In this regard, I find that the ruling of the Tribunal in the case of Atwood Oceanics Pacific Ltd. Vs, CST Ahemdabad (supra) is squarely applicable to the facts of the present case. The relevant extract of the ruling is reproduced below:
162. However, I find that the said assessee has shown its bonafide by rendering full cooperation to the department in the investigation and also making goods the liability immediately on being pointed out. The fact that they have already paid the service tax along with interest much before the issuance of show cause notice and they have borne the incidence of tax on their shoulders, is sufficient evidence to show that the reasons for not paying the service tax by the assessee were the technical/ legal reasons rather than wilful suppression with an intent to evade payment of service tax.
From the above, we find that besides our own observations finding of the Commissioner with which we agree, support the view that provisions of Section 80 are required to be invoked for waiving penalty imposed under Section 78 of the Finance Act, 1994 on M/s. Atwood.
8. The Appellant had contended that this case has not been accepted by the Department and an appeal has been preferred in the Supreme Court. I find that the argument of the Appellant is not tenable in view of the principle laid down by the Honble Supreme Court in the case of UOI Vs Kamlakshi Finance Corporation Ltd. 1991 (55) ELT 433 (SC), wherein it was held that mere fact of filing an appeal can furnish no ground for not following a judicial pronouncement unless its operation has been suspended by a competent Court. Based on the above, I am of the view that there is no suppression in the present case, as contended by the Appellant, as the Respondent has paid the service tax and interest by showing their Bonafides. The Appellant has relied on the ruling of the Madras High Court in the case of Dhandayuthapani Canteen (supra) wherein it was held that penalty is payable even though service tax and interest has been paid prior to the issuance of show cause notice. However, I find that in the case relied on by the Appellant, willful suppression was established and not litigated by the Appellant. However, in the present case, as seen above since there is no wilful suppression on the part of the Respondent, I am of the view that the case law relied on by the Appellant is not applicable to the facts of the present case. Further, I also find that in the case of Dhandayuthapani Canteen (supra) there was no previous audit/scrutiny conducted by the Department, whereas in the present case, the Respondent is a large corporate assessee registered with Large Tax Payer Unit (LTU) and who is a regular tax payer and subject to various audits/scrutinies conducted by the Department.
9. The Appellant/Department had also placed reliance on the ruling of the Hon'ble Supreme Court in the case of UOI vs. Dharmendra Textile Processors (supra), to support their argument that penalty levied under Section 78 of the Finance Act, 1994 is mandatory in nature and that no waiver of penalty is possible. I find that the distinction between the Central Excise Act and Finance Act, 1994 is that there is a specific provision for waiver of penalty under the Finance Act, 1994 when reasonable cause exists whereas the same is not available under Central Excise law. Section 80 of the Finance Act, 1994 provides for waiver of penalty in cases where sufficient cause has been shown for penalties imposable under Section 76, 77 and 78 of the Finance Act, 1994. In the present case, as seen above, there is no suppression of facts with an intention to evade payment of duty and accordingly a reasonable cause is present to invoke Section 80 of the Finance Act, 1994. Accordingly, I hold that the case law relied by the Appellant is distinguishable and not applicable to the facts of the present case.
10. By following the Tribunal rulings referred to supra, I hold that the Department appeal is devoid of merit and accordingly the same is rejected.
(Order pronounced in open court on 05.05.2016) (P.K.CHOUDHARY) JUDICIAL MEMBER gs 10