Custom, Excise & Service Tax Tribunal
The South India Paper Mills Ltd vs Commissioner Of Central Excise, ... on 10 February, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: ST/25500/2013-DB [Arising out of Order-in-Appeal No. 633/2012 dated 14/11/2012 passed by the Commissioner of Central Excise, Mangalore] For approval and signature: HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER 1 Whether Press Reporters 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 the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 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 The South India Paper Mills Ltd. Chikkyanachatra Nanjangud 571 301 Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax, Mysore S1-S2, Vinaya Marga, Siddhartha Nagar, Mysore 570 011 Respondent(s)
Appearance:
Shri M.S. Nagaraja, Advocate T. Rajeswara Sastry & Associates No. 48, 11th Main Road, Banashankari IInd Stage, Bangalore 560 070 For the Appellant Shri Pakshi Rajan, AR For the Respondent Date of Hearing: 23/12/2015 Date of Decision: / /2016 CORAM:
HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER Final Order No. / 2016 Per: ASHOK K. ARYA Both sides have been heard.
2. The Revenue in this case issued show-cause notice based on the intelligence that the appellant namely The South India Paper Mills Ltd. receiving taxable services from outside India for which they were liable to pay service tax as recipient of the services, had not paid the same. Revenue says that for the taxable service of Erection, Commissioning or Installation service from M/s. IMG (Asia) Machinery Co. Ltd. China this service was received and the appellant paid consideration of US dollar 6500 towards the said service to above Chinese Company. The amount of US dollar 6500 was worked out to Rs. 2,56,750/- (Rupees Two Lakhs Fifty Six Thousand Seven Hundred and Fifty only) at the rate of 1 USD=Rs. 39.5 as per the Foreign Bills Transaction Advice of M/s. Vijay Bank, Mysore dated 07.12.2007 and the demand of service tax of Rs. 30,810/- (Rupees Thirty Thousand Eight Hundred and Ten only) including Education Cess and Secondary Higher Education Cess along with interest under Section 75 of the Finance Act 1994 issued and penalties under Sections 76, 77(1a) and 77(2) of Finance Act were also invoked by the show-cause notice dated 22.07.2011.
2.1. The show-cause notice was adjudicated by the Assistant Commissioner of Central Excise and EOU Division, Mysore vide his Order dated 02.04.2012 by which the above demand of Rs. 30,810/- (Rupees Thirty Thousand Eight Hundred and Ten only) including the Education Cess and Secondary Higher Education Cess was confirmed along with interest. The appellant-assesse had paid the above service tax totaling to Rs. 30,810/- (Rupees Thirty Thousand Eight Hundred and Ten only) and the interest of Rs. 9652/- (Rupees Nine Thousand Six Hundred and Fifty Two only) which was appropriated by the order-in-original passed by the Assistant Commissioner. Assistant Commissioner in his order also imposed penalty on the appellants under Sections 76, 77 (1a) and 77(2) and Section 78 of the Finance Act 1994.
2.2. Appellant went in appeal against the above order of Assistant Commissioner before Commissioner (Appeals), Mangalore. Commissioner (Appeals), Mangalore vide his Order dated 14.11.2013 rejected the appeal of the appellant-assessee except for penalty imposed under Section 76 which was set aside.
3. The appellant namely The South India Paper Mills Ltd. now is before this Tribunal against the order-in-appeal dated 14.11.2012 by Commissioner (Appeals). The appellant mainly argues as follows:
i. They were under bona fide belief that since they had paid Customs duty on entire contracted price including the amount of US dollar 6500 towards Erection, Training and Roundup Trip ticket cost, they were not required to pay service tax separately on the said amount towards erection and commissioning.
ii. The appellant paid service tax of Rs. 31800/- (Rupees Thirty One Thousand Eight Hundred only) along with Education Cess and Secondary Higher Education Cess and also the interest vide challans dated 19.03.2010 and 31.08.2010 and also made a request to Assistant Commissioner vide letter dated 08.09.2010 for not issuing show-cause notice in terms of Section 73(3) of Finance Act 1994.
iii. Appellant believed bonafidely that the transaction of sale of goods on the basis of which customs duties were paid and the service were mutually exclusive and when the amount of US dollar 6500 paid towards Erection, Training and Round Trip Ticket Cost was included in the price or transaction value of the imported goods and the customs duty was paid, the same amount was not to be treated as the value for levy of service tax. Appellant relies on BSNL Vs. Union of Indi [2006 (2) S.T.R. 161 (SC)].
iv. The allegations of suppression of facts or contravention of the Finance Act, 1994 with intention to evade payment of service tax and invoking larger period of limitation are not sustainable. When they had requested not to issue show-cause notice there was no justification for the Department to issue show-cause notice dated 22.07.2011 alleging suppression of facts. The show-cause notice is against the provisions of Section 73(3) of Finance Act 1994.
v. Appellant relies on CBEC Circular F. No. 137/167/2006 Cx dated 03.10.2007 which clarified that with payment of service tax and interest the proceedings are deemed to be concluded in terms of Section 73(3) of the Finance Act 1994. When service tax paid by the assessee is available as cenvat credit resulting in Revenue Neutral position, there cannot be any intention to evade payment of service tax. Appellants believed bonafide as per the facts they had paid customs duty on total value including the amount of US dollar 6500 which was the value towards Erection, Training and Roundup Trip ticket cost, there was reasonable cause for not paying service tax on this amount paid towards Erection, Training and Roundup Ticket cost.
vi. Departmental authorities themselves were confused about levy of service tax and value of taxable services and show-cause notice dated 22.07.2011 was issued only after appellant-assessee explained the value of service and paid service tax on 31.08.2010. Therefore there was reasonable cause for non payment of service tax and interest. As soon as the Department insisted on payment of service tax, they paid service tax along with interest. Therefore provisions of Section 80 of Finance Act applies to the facts of the case and no penalty is imposable.
3.1. The appellant represented by learned advocate, Shri M.S. Nagaraja has cited in support the following case-laws:
a) CCE Vs. Tejas Agency 2014 (34) STR 803 (Guj.)
b) CCE & ST, LTU Bangalore Vs. Adecco Flexione Workforce Solutions Ltd. 2012 (26) STR 3 (Kar.)
c) CST, Bangalore Vs. Master Kleen 2012 (25) STR 439 (Kar.)
d) CCE, Nagpur Vs Murli Industries Ltd. 2015 (39) STR 1033 (Tri.-Mumbai)
e) Sunita Tools Pvt. Ltd. Vs. CST, Mumbai-II 2015 (37) STR 644 (Tri.-Mumbai)
f) CCE, Chennai-IV Vs. Tenneco RC India Pvt. Ltd. 2015 (323) ELT 299 (Mad.)
g) Nirlon Ltd. Vs. CCE, Mumbai 2015 (320) ELT 22 (S.C)
h) Veriton Software Solution Pvt. Ltd. Vs. CCE, C&ST, Mysore 2015 (39) STR 845 (Tri.-Bang.)
4. Revenue represented by learned AR Shri Pakshi Rajan reiterated the findings given in the order-in-original and the order-in-appeal.
5. From the facts on record it is clear that there was no intention on the part of appellant-assessee for non-payment of service tax. The facts clearly indicate that when it was pointed out to the appellant that there was liability on them to pay service tax for the services of Erection, Commissioning and Installation, they immediately made the payment along with interest vide challans dated 19.03.2010 and 31.08.2010. They had also made a request that as there was confusion and doubt and as they had paid the liability of service tax along with interest show-cause notice need not be issued and still Department issued show-cause notice invoking the penalty provisions under Sections 76, 77 & 78.
5.1. The provisions of Section 73(3) of the Finance Act, 1994 say that when the liability of tax has been paid by an assessee before service of notice on him under Section 73(1) and when the said assessee has informed the department of such payment in writing, the Department was not to serve any notice under Section 73(1). However it is right that Section 73(4) also makes it clear that wherever there has been such non-payment by reason of fraud, or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, an assessee cannot take the benefit of provisions of Section 73(3) of Finance Act 1994. In this case Department has completely failed to prove that there was an intention to evade payment of service tax or there was any fraud or collusion or willful misstatement or suppression of facts on the part of the assessee-appellant with intention to evade payment of service tax.
5.2. Further it is also clear from the facts that the appellant-assessee was entitled to take cenvat credit for payment of service tax. Therefore Department cannot say that they had an intention to evade payment of service tax.
5.3. The appellant has made out a right case of defense under the provisions of Section 80 of Finance Act 1994 as the facts and circumstances indicate that there was reasonable cause for failure to pay service tax in this regard.
6. Considering above discussions the penalties imposed on the assessee under Sections 78 & 77(1a) and 77(2) of the Finance Act, 1994 are hereby set aside and the appeal decided accordingly.
(Order pronounced in open court on )
(ASHOK K. ARYA)
TECHNICAL MEMBER
iss