Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri Manoj Kutty (Ar) on 11 April, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad COURT Appeal No. : ST/438, 439, 440, 441, 516/2012 Arising out of : 75/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ 74/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ 73/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ 77/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ 85/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ Passed by : The Commissioner (A), CCE., Ahmedabad For approval and signature : Mr. H.K. Thakur, Hon.ble Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of 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? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : CCE.,Ahmedabad Represented by : Shri Manoj Kutty (AR) Respondent (s) : M/s Om Sai Engg works & others
Represented by : Shri Naitk Mehta (CA) CORAM :
Mr. H.K. Thakur, Hon.ble Member (Technical) Date of Hearing / Decision : 11/4/2014 ORDER No. A/10912-10916/2014 dtd 11/4/2014 Per : Mr. H.K.Thakur,;
1. As the issues involved in the following appeals filed by the Revenue are the same, these are being taken up together for disposal through this common order:
S. No. Appeal No. Respondent Against Order in Appeal No. Passed by Commissioner (Appeals), Rajkot.
1.
ST/ 441/ 2012 Om Sai Engineering Works, Bhavnagar 77/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ
2. ST/ 440/ 2012 Sonthalia Steel Rolling Mills, Bhavnagar 73/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ
3. ST/ 439/ 2012 Himalaya Enterprise, Porbandar 74/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ
4. ST/ 516/ 2012 Sajini Leads & Fabricators, Veraval 85/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ
5. ST/ 438/ 2012 Municipal Corporation, Porbandar 75/ 2012/ (BVR)/ COMMR (A)/ RBT/RAJ
2. Briefly stated the facts relevant for disposal of the appeals are that the respondents were liable to pay service tax during the financial year 2005-06 to 2009-10 but they failed to pay service tax for these periods. Show cause notices were issued to them in the year 2010/ 2011 by invoking extended period of time limitation. In the case at S. No. 1, 2, 3, and 5 of the above Table, the original adjudicating authority imposed penalties under Section 78 of the Finance Act, 1994 (hereinafter referred to as the Act) on the respondents for evasion of service tax during the said periods, but did not impose penalty on them under Section 76 of the Act relying upon the following decisions:
(i) CCE Vs. First Flight Couriers Ltd. [2011 (22) STR 622 (P&H)];
(ii) CCE, Chandigarh Vs. City Motors [2010 (19) STR 486 (P&H)];
(iii) Chanasma Taluka Sarvoday Mazdoor Kamdar Sahakari Mandli Limited Vs. CCE, Ahmedabad [2012 (25) STR 444 (Tri. Ahmd.)];
(iv) Prompt Services Vs. CCE Bolpur [2011 (23) STR 523 (Tr. Kolkata)]; and
(v) CST, Bangalore Vs. Motor World, Bangalore [2012 (27) STR 225 9Kar.)].
In these four cases, Revenue filed appeal with the Commissioner (Appeals) against the Orders-in-Original of the original adjudicating authority praying for imposition of penalty on the respondents under Section 76 of the Act for the period up to 09.05.2008 in addition to penalty imposed under Section 78. The Commissioner (Appeals) dismissed the Revenues appeals vide the impugned Orders-in-Appeal following the aforesaid decisions. In the case of respondent at S. No. 4 of the above Table, the original adjudicating authority imposed penalties on the respondent under Section 76 as well as Section 78 of the Act, but on appeal by the respondent, the Commissioner (Appeals), vide his impugned Order-in-Appeal, set aside the penalty imposed Section 76 following the above decisions of the High Courts and the Tribunal.
3. Shri Manoj Kutty, Ld. AR for the appellants, argued as follows:
(i) That the amendment made in Section 78 by way of insertion of the proviso with effect from 10.05.2008 has only prospective effect. He argued that whenever law is amended, the amended law has prospective effect. He cited the following case laws in this context:
(a) Marcandy Prasad Radhakrishna Prasad Pvt. Ltd. Vs. CCE, Cal.-II [1998 (102) ELT 705 (Tribunal)];
(b) Commissioner of Central Excise, Coimbatore Vs. ELGI Equipments Ltd. [2001 (128) ELT 52 (S.C.)];
(c) Order dated 12.03.2010 of the Bombay High Court in the matter of Commissioner of Central Excise Vs. M/s Otis Elevator Co. (I) Ltd. in Central Excise Appeal No. 110 of 2004; and
(d) BNP Paribas Equities India P. Ltd. Vs. Commissioner of Service Tax, Mumbai [2013 (31) STR 22 (Tri. Mumbai)].
(ii) That the imposition of penalty under Section 76 of the Act was mandatory for failure to pay service tax for the period prior to 10.05.2008, and that penalties could be imposed on the respondents simultaneously under Section 76 and as well as under Section 78 for the period prior to 10.05.2008, as ingredients of both the sections were present in the cases under consideration. He cited the following case laws in support his contention:
(a) Assistant Commissioner of Central Excise Vs. Krishna Poduval [2006 (1) STR 185 (Ker.)];
(b) Cadbury India Limited Vs. Commissioner of Customs & Central Excise, Pune-I [2008 (232) ELT 224 (Tri. L.B.)]; and
(c) Bajaj Travels Ltd. Vs. Commissioner of Service Tax [2012 (25) STR (Del.)].
4. None was present for the respondents other than Shri Naitik Mehta (CA). However, the respondent - M/s Om Sai Engineering Works had filed Memorandum of Cross Objection dated 10.12.2012 in Revenues appeal No. ST/ 441/ 2012-SM. The respondent submitted in its cross objection as under:
(i) The Central Board of Excise & Customs has issued Circular F. No. 390/ Misc./ 163/ 2010-JC dated 17.08.2011 directing the field formations not to file appeals before the CESTAT/ High Courts/ Supreme Court, where the amount involved is up to five lac rupees. In this case penalty of Rs. 30,696/- only is involved & the Revenue should not have filed this appeal. All other dues adjudged by the original adjudicating authority (ST. Rs. 30,694/- plus penalties of Rs. 4,000/ under section 77 plus appropriate penalty under Section 78 plus applicable interest) have been deposited by the respondent. Therefore, the Revenues appeal was not maintainable. Respondent cited the following case laws in support of his contention:
(a) Commissioner of Central Excise and Customs Vs. Stovec Industries Ltd. [2014 (33) STR 124 (Guj.)]; and
(b) Commissioner of Central Excise & Customs, Ahmedabad-II Vs. Rangdhara Polymers (Appeal No. 1732 of 2010).
(ii) The respondent further submitted that the circulars, issued by the CBEC, are binding on the Departmental officers, and thus no appeal should have been filed by the Revenue in their case. The respondent cited Para 5 of the case law Paper Products Ltd. Vs. CCE (1999) 7 SCC 84 [1999 (112) ELT 0765 (S.C.)] as under:
5.It is clear from the above said pronouncements of this Court that, apart from the fact that the Circulars issued by the Board are binding on the Department, the Department is precluded from challenging the correctness of the said Circulars even on the ground of the same being inconsistent with the statutory provision. The ratio of the judgment of this Court further precludes the right of the Department to file an appeal against the correctness of the binding nature of the Circulars. Therefore, it is clear that so far as the Department is concerned, whatever action it has to take, the same will have to be consistent with the Circular which is in force at the relevant point of time.
(iii) The Commissioner (Appeal) has correctly rejected the Revenues appeal as penalty could be imposed on them only under the provisions in force at the time of issuance of show cause notice on 22.04.2010. The respondent cited the case law West Minister International (P) Vs. Commissioner of Central Excise, New Delhi [2002 (140) ELT 244 (Tri. Delhi)]
(iv) The respondent also submitted that simultaneous penalties under Sections 77 and 78 were not imposable on them as held in the case laws cited in Para 2 above.
5. Heard both sides and perused the case records. The issues to be decided in these appeals are:
(I) Whether the following proviso inserted in Section 78 of the Finance Act, 1994 on 10.05.2008 had retrospective operation?
Provided also that if the penalty is payable under this section, the provisions of section 76 shall not apply. (II) Whether penalties under Sections 76 and 78 were imposable simultaneously on the respondents for failure to pay service tax for the period prior to 10.05.2008 where show cause notices were issued to them in the year 2010/2011?
(III) Whether the Revenues appeals, where service tax evasion involved in litigation is up to five lac rupees, are maintainable in view of Central Board of Excise & Customs Circular F. No. 390/ Misc./ 163/ 2010-JC dated 17.08.2011 directing the field formations not to file appeals before the CESTAT, where the service tax evaded is up to five lac rupees.
6. Regarding the first issue, I find that an identical question whether section 11AC of the Central Excise Act 1944, which was brought on the statue on 28.09.1996 had retrospective operation, was raised before the Honble Supreme Court in the matter of Commissioner of Central Excise Vs. Elgi Equipments Ltd. [2001 (128) ELT 52 (S.C.)], and the Honble Apex Court held as under:
2.Having heard learned Attorney General, we are in entire agreement with the view expressed by the High Court that Section 11AC of the Central Excise Act, 1944, is prospective in operation and the illegality committed prior to insertion of Section 11AC in the Act, cannot be the subject matter of penalty under the said provision. The question, whether the provisions of section 11AC are applicable to cases where show cause notice is issued subsequent to enforcement of provisions of section 11AC i.e. 28.09.1996 even though the period of dispute is prior to 28.09.1996, also arose before the Honble Bombay High Court in the case of Commissioner of Central Excise, Mumbai-V Vs. M/s OTIS Elevator Co. (I) Ltd. in Central Excise Appeal No. 110 of 2004. In this case the Honble High Court held as under:
16. On the above back drop, considering the weight of authorities, the judgment of the Apex Court in Lal Mining Engg. Works and Elgi Equipments Ltd. (both cited supra) need to be followed since the view taken therein is better in point of law which, unequivocally, hold that section 11AC of the Act being a penal provision providing for mandatory penalty cannot have retrospective operation as such it cannot be invoked in a case where the period of dispute or offence is prior to 28th September, 1996 i.e. prior to its enactment. Similarly, the Honble Delhi High Court held in the case of Bajaj Travels Ltd. Vs. Commissioner of Service Tax [2012 (25) STR 417 (Del.)] as under:
16.?No doubt, Section 78 of the Act has been amended by the Finance Act, 2008 and the amendment provides that in case where penalty for suppressing the value of taxable service under Section 78 is imposed, the penalty for failure to pay service tax under Section 76 shall not apply. With this amendment the legal position now is that simultaneous penalties under both Section 76 and 78 of the Act would not be levied. However, since this amendment has come into force w.e.f. 16th May, 2008, it cannot have retrospective operation in the absence of any specific stipulation to this effect. Going by the nature of the amendment, it also cannot be said that this amendment is only clarificatory in nature. . I find that the ratio of the above case laws is squarely applicable to the issue in hand, and I accordingly hold that the proviso inserted in Section 78 with effect from 10.05.2008 has prospective operation.
7. As regards the second issue, I find that in the case of Assistant Commissioner Vs. Krishna Poduval [2006 (1) STR 184 (Ker.)], the Honble Kerala High Court has held as follows:
11.?The penalty imposable under S. 76 is for failure to pay service tax by the person liable to pay the same in accordance with the provisions of S. 68 and the Rules made thereunder, whereas S. 78 relates to penalty for suppression of the value of taxable service. Of course these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But we are of opinion that the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences. There can be a situation where even without suppressing value of taxable service, the person liable to pay service tax fails to pay. Therefore, penalty can certainly be imposed on erring persons under both the above Sections, especially since the ingredients of the two offences are distinct and separate. Similarly, in the case of Bajaj Travels Ltd. Vs. Commissioner of Service Tax [2012 (25) STR 417 (Del.)], the Honble Delhi High Court has held as follows:
15.?By their very nature, Sections 76 and 78 of the Act operate in two different fields. In the case of Assistant Commissioner of Central Excise v. Krishna Poduval - (2005) 199 CTR 58 = 2006 (1) S.T.R. 185 (Ker.) the Kerala High Court has categorically held that instances of imposition of penalty under Section 76 and 78 of the Act are distinct and separate under two provisions and even if the offences are committed in the course of same transactions or arise out of the same Act, penalty would be imposable both under Section 76 and 78 of the Act. We are in agreement with the aforesaid rule.
.
17.?However, in the instant case, the appellate authority, including the Tribunal, has chosen to impose the penalty under both the Sections. Since the penalty under both the Sections is imposable as rightly held by Kerala High Court in Krishna Poduval (supra), the appellant cannot contend that once penalty is imposed under Section 78, there should not have been any penalty under Section 76 of the Finance Act. In view of the above findings, I hold that penalties under both Sections 76 and 78 were imposable simultaneously on the respondents for failure to pay service tax for the period prior to 10.05.2008 although show cause notices were issued to them in the year 2010/2011.
8. Regarding the third issue I find that out of the five appeals under consideration, only one appeal filed by the Revenue against respondent at S. No. 4 of the Table in Para 1 above, involves evasion of service tax of more than five lac rupees (actual tax evasion Rs. 5,64,345/-). In the remaining cases, the amount of service tax evasion in each case is less than the monetary limit of five lac rupees. Appeals in these four cases were filed by the Revenue on 05.12.2012 when the CBEC Circular F. No. 390/ Misc./ 163/ 2010-JC dated 17.08.2011 was in force, which directed the field formations not to file appeals before the CESTAT where the amount involved is up to five lac rupees. Obviously, the Revenue should not have filed any appeal against these four persons, as the directions contained in CBEC circulars are binding on Departmental Officers. The same issue has been decided in favour of the assessee as per the Order No. A/10016/WZB/AHD/12 dtd 21/12/2012 passed by this Bench in the case of CST Ahmedabad vs. Gala Gymkhana Pvt Ltd (Appeal No. ST/34/2011). In view of the above, I hold that the Revenues Appeal Nos. ST/ 441/ 2012, ST/ 440/ 2012, ST/ 439/ 2012 and ST/ 438/ 2012 are not maintainable.
9. Based on the above observations, I allow Appeal No. ST/ 512/ 2012 and dismiss the Appeal Nos. ST/ 441/ 2012, ST/ 440/ 2012, ST/ 439/ 2012 and ST/ 438/ 2012.
(Operative part pronounced in the Court) (H.K. Thakur) Member (Technical) swami ??
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