Custom, Excise & Service Tax Tribunal
Commissioner Of Service Tax, Pune vs M/S. Shree Ganesh Enterprises on 22 March, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.
Appeal No.ST/86533/2015 &
ST/CO-91140/2015
Appeal No. ST/86269/2015
(Arising out of Order-in-Appeal No. PUN-SVTAX-000-APP-0072-14-15 dt. 19.03.2015 passed by the Commissioner of Service Tax (Appeals), Pune )
For approval and signature:
Honble Shri Ramesh Nair, Member (Judicial)
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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 : No
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?
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Commissioner of Service Tax, Pune
Vs.
:
Appellant
M/s. Shree Ganesh Enterprises
:
Respondent
And
M/s. Shree Ganesh Enterprises
Vs.
:
Appellant
Commissioner of Service Tax, Pune
:
Respondent
Appearance
Ms. P. Vinitha Sekhar, Dy.Commr. (A.R.) for Appellant/Respondent
None for respondent/Appellant
CORAM:
Honble Shri Ramesh Nair, Member (Judicial)
Date of hearing : 22/03/2016
Date of pronouncement : 25/04/2016
ORDER NO.
Per: Ramesh Nair
These two appeals one by the assessee and other by the Revenue and Cross-objection by the assessee in the Revenues appeal are directed against a common Order-in-Appeal No. PUN-SVTU-000-APP-0072-14-15 dt.19.3.2015 passed by Commissioner of Service Tax (Appeals) Pune, whereby the Ld. Commissioner (Appeals) passed the following order:
Order-in-Original No. STC/ADC/02/2014-15 dt. 07.11.2014 passed by the Additional Commissioner, Service Tax, Pune Commissionerate is modified as under:
(i) Confirmation of demand of Service Tax of Rs.29,09,226/-, alongwith interest of Rs.9,84,787/- payable thereon, is upheld.
(ii) Penalty imposed under Section 77 of the Act is reduced to Rs.10,000/- only.
(iii) Penalty imposed under Section 78 of the Act is reduced to Rs.14,54,613/- only.
2. The facts of the case is that the appellant are engaged in the activity of providing taxable services, viz. Manpower Recruitment or Supply Agency Services, Erection, Commissioning or Installation service and Maintenance or Repair Service. After enquiry, on going through the appellants record it was revealed that during the period from 2008-09 to 2011-12 they were providing taxable services of Maintenance & repair of machinery and erection and commissioning, that they had charged and collected service tax from their customers and the service income was accounted under the head job work in their financial Accounts, that they did not file service tax returns during this period. The appellant had paid the entire service tax on the piecemeal during the course of inquiry and also paid the interest on the service tax. The adjudicating authority confirmed the demand and imposed the penalty including the equal amount of penalty under Section 78. In the appeal of the assessee before the Commissioner (Appeals), the Ld. Commissioner (Appeals) reduced the penalty of Section 78 to 50% of the service tax invoking the amended Section 78 which was effective from 8.4.2011, on the ground that as per Section 38A the provisions of erstwhile Section 78 of the Act, wherein 100% penalty imposable was not saved. Therefore at the time of adjudication, the new Section 78 effective from 8.4.2011 is taxable and accordingly the penalty was imposed to the extent of 50% as per the new Section 78 instead of 100% imposed by the adjudicating authority applying the erstwhile Section 78 of the Act. Aggrieved by the order the assessee filed appeal for waiver of 50% penalty of Section 78 by invoking the Section 80 and Revenue also filed appeal against the reduction of penalty from 100% to 50%. The assessee also filed cross objection in the matter of Revenues appeal.
3. None appeared on behalf of the appellant nor any adjournment request is on record, this matter were listed a number of time on the earlier occasion on 13.11.2015, 1.1.2016, 5.2.2016, 17.2.2016 but none appeared on any occasion. I therefore, have no option except to decide the matter on merit.
4. Ms. P. Vinita Sekhar Ld. Deputy Commissioner (A.R.) appearing on behalf of the Revenue, in the Revenues appeal reiterating the grounds of appeal submits that as regard application of new Section 78, the same is not applicable in the cases which were made out before the enactment of the new Section 78 and at the time of cause of action the old Section 78 was enforced. Therefore the penalty is liable to be imposed as per old Section 78, which provides for penalty of equal amount of service tax not paid. She further submits that though Section 38A does not provide the saving to the provision of old Section 78 but as per General Clauses Act, under Section 6 of the Act, the proceedings initiated under old Section 78 shall continue, accordingly, even after enactment of new Section 78 penalty shall be imposed as per old Section 78. In support she placed reliance on the following judgments:
(1) L & T Ltd. Vs. Collector of Central Excise, Mumbai 2010 (119) ELT 51 (Tri. LB) (2) Commissioner of Central Excise Trichi Vs. Lakshmi Packagings Ltd.
2008 (228) ELT 93(Tri.-chennai) (3) Union of India Vs. Rajasthan Spinning and Weaving Mills 2009 (238) ELT 3(S.C.) (4) S.A. Enterprises Vs. Commissioner of Central Excise Pune-I & Commissioner of Central Excise Pune-I Vs. S.A. Enterprises Tribunal Order No. A/784-785/15/SMB dt. 31.3.2015.
(5) Union of India Vs. Dharmendra Textile Mills 2008 (231) ELT 3 (SC) As regard partys appeal for waiver of penalty imposed under Section 78 equal to 50% of the service tax amount, she submits that it is not under dispute that the appellant had collected the service tax from their service recipient and not deposited to the Government exchequer, in such case no reasonable cause present in the act of evading payment of service tax. Therefore the appellant do not deserve any leniency. In support, she placed reliance on the following judgments :
(i) Indsur Global Ltd. Vs. Additional Commissioner of Service Tax 2015 (38) STR 14 (Guj.)
(ii) Master Marine Services Pvt. Ltd. Vs. Commissioner of Service Tax Mumbai 2014-TIOL-612-CESTAT-MUM
5. I have carefully considered the submissions made by the Ld. AR and perused the records. I find that as regard Revenues appeal for imposition of 100% penalty under the erstwhile Section 78 this Tribunal on the identical issue in the case of Commissioner of Central Excise Pune-I Vs. Srikrishna Associate 2016-TIOL-607-CESTAT-MUM passed the following order :
5. On careful consideration of the grounds of appeal, submission made by Ld. A.R. and the findings of the impugned order, I find that the only issue to be decided by me is whether the unamended provision of Section 78 according to which 100% penalty or amended provision of Section 78 according to which 50% penalty is applicable in case the where transactions are recorded in the books of the assessee, when the offence was taken place during the period of unameded Section 78. I find that in this issue Ld. Commissioner (Appeals) has given detailed findings which is reproduced below:-
6.1 I have carefully gone through the Appeal Memorandum and the case records. As the Appellant has filed this Appeal only in respect of quantum of penalty imposed under Section 78 of the Act, therefore, the only issue to be decided in the present appeal is whether penalty has been correctly imposed by the Ld. Adjudicating authority under the substituted Section 78 of the Act in respect of the Manpower Recruitment or Supply Services and Security Agent Services provided by the Respondent.
7. Not declaring the supply of said services and not paying the Service Tax payable thereon during the period covered by the Show Cause Notice/Order-in-Original clearly proves the Respondent's intent to evade Service Tax thereon. Their payment of a small portion of the Service tax, further confirms their intent to evade Service Tax. Thus, I agree that the Respondent are liable for penalty under Section 78 of the Act, especially because the Respondent were operating under Self-Assessment regime of Service Tax and the entire onus of discharging correct Service Tax liability was on the Respondent. I have noticed that it is not disputed by the appellant that the Transactions on the basis of which Service Tax liability gas been ascertained/demanded by the records of the Respondent. Thus only question left in this Appeal is whether provisions of Section 78 of the Act, as they existed on the date of passing of the Order-in-Original would be applicable or the provisions of erstwhile Section 78 of the Act would be applicable in the present case as they existed during the period 2005-06 to 2009-10 (upto December, 2009) when the said services were received. Section 78 of the Act was substituted w.e.f. 8/4/2011. The appellant has relied upon Section 38A of the Central Excise Act, 1944, read with Section 83 of the Act, in their Grounds of Appeals.
8. Section 38A of the CEA saves a legal provision contained in a rule, notification or order made or issued under such rule, unless a different intention appears. Thus, for the purposes of Section 38A, the intention behind the change in the legal provision has to be examined first. Whenever any legislation is introduced in the Parliament, the intention behind introducing the said legislation is given in the Statement of Objects' which is also placed before the Parliament. In the case of changes in Central Excise Act, 1944 and Finance Act, 1994 dealing with Central Excise & Service Tax matter, the legislative changes are contained in the Finance Act which is introduced every year. When, the Finance Act is introduced every year. When the Finance Act is introduced in the Lok Sabha by the Hon'ble Finance Minister, it is done alongwith a Budget Speech by the Hon'ble Finance Minister which explains the intention behind introducing the changes in the Central Excise Act, 1944 and the Finance Act, 1994. The said intention & rationale is reflected in the Budget Speech of Hon'ble Finance Minister made in Lok Sabha on 28/2/2011, as contained in para 192 of the Budget Speech, which is reproduced as below:
"192. In keeping with our thrust to encourage voluntary compliance, the penal provisions for Service Tax are being rationalised. A key component of this strategy would be to treat less harshly those who have maintained truthful records but have fallen short of discharging their tax liability. Simultaneously, deliberate evaders with unrecorded business transactions will be dealt with more severely. Similar changes are being carried out in Central Excise and Customs laws. The details of the provisions are in the Finance Bill."
Along with presentation of Budget in Lok Sabha by Hon'ble Finance Minister, Simultaneously, the joint Secretary (TRU) in the Ministry of Finance issues a D.O. letter which also explains the rationale and intentions between the legislative changes introduced through the Finance Bill. In respect of amendment made vide Finance Act, 2011, which had substituted Section 78 of the Act w.e.f. 08.04.2011, the intention can be understood in detail from the letter D.O.F. no. 334/3/2011-TRU dated 28.2.2011-TRU dated 28.2.2011 of J.S. TRU-II, wherein the rationale behind the substituted Section 78 of the Act has been explained as under:-
4. Compliance Mechanism:
4.1 The existing scheme relating to compliance has been proposed for a revamp with a view to strike a healthy balance between the interests of revenue and legitimate business and to promote voluntary compliance.
4.2 As a result a number of changes have been proposed with the following philosophy:
(i) Improve voluntary compliance by encouraging self-correction, wherever the deviations are unintentional omissions;
(ii) Reduced penalties may be imposed if the transactions are captured fully and truthfully in records and further abated if timely admission and payment is made;
(iii) Intentional and unrecorded violations should be dealt with severely with no concession whatsoever.
4.3 Thus the undue advantage obtained by carrying on surreptious activities at the cost of law-abiding business is sought to be neutralized. The revised system also encourages informed decision-making by the taxpayers at the early stages of investigation orverification by the Department. Changes proposed in the compliance mechanism are given in the following paragraphs.
4.4 The maximum penalty for delay in filing of return under section 70 is proposed to be increased from Rs.2,000/- to Rs.20,000/-. However, the existing rate of penalty is being retained under rule 7C of the Service Tax Rules, 1994. The maximum penalty is presently reached after a delay of 40 days. The new limit will impact only those who delay filing of return for longer durations.
4.5 The provisions of section 73 (1A) and both the Provisos of section 73 (2) are proposed for deletion. As a result, the benefit of reduced penalty shall not be available in cases of fraud, mis-statement, suppression, collusion etc. in the ordinary course. However, revised benefit will be available under the new sub-section 4A of section 73 in situations where the true and complete account of transactions is otherwise available in the specified records and the assessee during the course of audit, verification or investigation pays the tax dues, together with interest and the reduced penalty. It is clarified that the assessee can also avail this benefit on his own also. The extent of penalty is being further reduced to 1% per month of the tax amount for the duration of default, with an upper ceiling of 25% of the tax amount.
4.6 Interest rate for delayed payment of service tax is being increased to 18% per annum, effective 01.04.2011 (Notification 15/2011-ST). A concession of 3% has been proposed in the Bill for tax-payers whose turnover during any of the years covered in the notice or the preceding financial year is below Rs 60 lakh. 4.7 Penalty for failure to pay tax under section 76 is being halved.
4.7 Penalty for failure to pay tax under section 76 is being halved.
4.8 The maximum penalty under section 77 for contravention of various provisions is proposed to be increased from Rs.5000/- to Rs.10000/-. However, the daily rate of penalty, wherever applicable, is being retained.
4.9 Penalty under Section 78 is being altered from upto twice the amount of tax to an amount equal to the tax. Moreover, in situations where the taxpayer has captured the true and complete information in the specified records, penalty shall be 50% of the tax amount. The latter penalty (only) shall be further reduced to 25% if the tax dues are paid within a period of one month together with interest and reduced penalty. For assessees with turnover upto Rs.60 lakh the period of one month shall be increased to ninety days.
4.10 Section 80 is being amended by substituting section 78 with the words "proviso to section 78" and thus the power to waive penalty shall be available only in cases where the information is captured properly in the specified records.
4.11 The revised position relating to penalties and their mitigation or waiver is summed up in the following table (portion in italics being the changes):
Situation Position in records Penalty & Provision Mitigation Complete Waiver No fraud, suppression etc. Captured 1% of tax or Rs 100 per day upto 50% of tax amount: Sec 76 Totally mitigated if tax and interest paid before issue of notice: Section 73(3) On showing reasonable cause under section 80 Cases of fraud, suppression etc. Captured true & complete position in records 50% of tax amount: Proviso to Section 78
(a) 1% per month; max of 25% if all dues paid before notice: Sec 73(4A);
(b) 25% of tax if all dues paid within 30 days (90 days for small assesses): Provisos to Section 78
-do-
Not so captured Equal amount:
Section 78 No mitigation at all Not possible From the above explanation, the intention of the new Section 78 clearly emerges, which is to bring a qualitative change in the regime of imposition of penalty on service tax evaders by differentiating between (i) those who had not paid service tax under a mistake bonafide belief that no service tax is payable or incorrect interpretation of provisions of law but had recorded and captured the relevant transactions in their specified records; and (ii) those person's who were liable to pay service tax but had not willfully not paid the same by indulging in fraude, mis-statement, suppression, collusion etc. and by not recording and capturing the relevant transactions in their specified records.
9. Thus, in the context of Section 38A of Central Excise Act, 1944, it is clear that when Section 78 of the Finance Act,1994 was substituted w.e.f. 8/4/2011, the intentin in respect of the mechanism for ensuring compliance, by way of imposition of penalty under the provisions of Section 78 of the Act, was different from the intention or rationale as was contained in the said Section 78, as it existed prior to 8/4/2011. Therefore the saving provisions under the said Section 38A of the CEA are not capable of saving the provisions of erstwhile Section 78 of the Act, as they existed prior to their substitution w.e.f. 08.04.2011.
10. IN addition, I have also noticed that what can be saved under Section 38A of the CEA can only be any Rule, Notification or Order made or issued under the Central Excise Act, 1944 or any notification or Order issued under any Rules which are issued under the Central Excise Act, 1944. Since the relevant Section of the Act (ie. Section 78) has itself been substituted, this substitution goes out of the purview of said Section 38A which is not applicable in respect of any Section of the Act or any Section of the CEA. In other words, Section 38A of the CEA enables saving of only the delegated legislation (vizz. Rule, Notification, Order) and is not capable of saving any action under any Section of the CEA or any action under the Act. The present Appeal has lost sight of the fact that the scope of Section 38A is very limited and the said Section 38A can be pressed into service only when a rule, notification or order made or issued under the Central Excise Act or any Notification or Order issued under such rule is amended, repealed, superseded or rescinded'. In the present case, any Rule, Notification or Order made or issued under the CEA or any Notification or Order issued under any Rule has not been applied by the Ld. Adjudicating Authority, but Section 78 of the Act, as substituted w.e.f 8.4.2011 has been applied by the Ld. Adjudicating authority while passing the impugned Order-in-Original dated 14/12/2011. Thus, I find that the present Appeal is based on erroneous reading of the provisions contained in Section 38A of the Central Excise Act, 1944. If Provisions of any section are intended to be saved, then the law usually provides for such specific provision, as seen in the case of Sub-Section (5) of Section 73 of the Act, which was substituted w.e.f. 10.9.2004. The said Sub-Section (5) reads as under:
"(5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003."
I find no similar saving provision was inserted in Section 78 of the Act, when it was substituted w.e.f. 8/4/2011, as also reflected in the intension behind substitution of Section 78, as explained above.
11 I have also noticed that since Section 78 of the Act has not been amended, but has been substituted. Therefore, the provisions of Section 78 as they existed prior to 8/4/2011, cannot be applied while imposing penalty under Section 78 of the Act after 8/4/2011. It is settled law that when a new penal provision substitutes an earlier provision, and the offence remains the same, then the earlier legal provision is obliterated.
12. Further, I find that in the present case, the Rule of beneficial construction is also applicable. In the present case, it is fact that the offence has remained the same, but the effect of the substituted provisions of law has a beneficial effect and in fact that is the ground of the present appeal. The Rule of the Beneficial Construction was upheld by the Hon'ble Supreme Court, in respect of the effect of amendment of law, in the case of T.Barai vs. Henry Ah Hoe [(1983)-1-SSC-177] the relevant portion of which is reproduced as under:
"22. It is only retroactive criminal legislation that is prohibited under Art. 20(1). The prohibition contained in Article 20(1) is that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence prohibits nor shall he be shall be subjected to a penalty greater than which might have been inflicted under the law in force at the time of the commission of the offence. It is quite clear that in so far as the Central Amendment Act creates new offences or enhances punishment for a particular type of offence no person can be convicted by such ex post fact law nor can the enhanced punishment prescribed by the amendment be applicable. But insofar as the Central Amendment Act reduces the punishment for an offence punishable under Section 16(1)(a) of the Act, there is no reason why the accused should not have the benefit of such reduced punishment. The rule of beneficial construction requires that even ex post facto law of such a type should be applied to mitigate the rigour of the law. The Principle is based both on sound reason and common sense. This finds support in the following passage from Craies on Statute law, 7 th Edn. At pp. 387-88;
A retrospective statute is different from an ex post facto statute, "Every ex post facto law" Chase J. in the American case of Calder vs. Bull "must necessarily be retrospective, but every retrospective law is not an ex post facto law. Every law that takes away or impairs rights vested agreeably to existing laws is retrospective, and is generally unjust and may be oppressive; it is a good general rule that a law should no retrospect, but in cases in which the laws may justify and for the benefit of the community and also of individuals relate to a time antecedent to their commencement; as statutes of oblivion or of pardon. They are certainly retrospective, and literally both concerning and after the facts committed. But I do not consider any law ex post facto within the prohibition that mollifies the rigour of the criminal law, but only those that create or aggravate the crime, or increase the punishment or change the rules of evidence for the purpose of conviction . There is a great and apparent difference between making an unlawful act lawful and the making an innocent action criminal and punishing it as a crime.
23. To illustrate, if parliament were to re-enact Section 302 of the Indian Penal Code, 1860 and provide that the punishment for an offence of murder shall be sentence for imprisonment for life, instead of the present sentence of death or imprisonment for life, then it cannot be that the Courts would still award a sentence of death even in pending cases.
24. In Rattan Lal vs. The State of Punjab , [AIR 1965 SC 444], the question that fell for consideration was whether an appellate court can extend the benefit of Probation of Offenders Act,1958 which had come into force after the accused had been convicted of a criminal offence. The court by majority of 2:1 answered the question in affirmative. Subha Rao, J, who delivered a majority opinion, concluded that in considering the question, the rule of beneficial construction required that even ex post facto law of the type involved in that case should be applied to reduce the punishment.
25. It is settled both on authority and principle that when a later statute again describes an offence created by a former statute and affixes a different punishment, or varies the procedure, the earlier statute is repealed by implication. In Michell vs. Brown (1958) 120 SCR 676] Lord Cambel put the matter thus:
It is well settled rule of construction that, if a the later statute again describes an offence created by a former statute and affixes a different punishment, varying the procedure, the earlier statute Is repealed by the later statute see also Smith Vs. Benabo [(1937 1 All ER 523].
In Regina vs. Youle, [1961) 158 ER 311] Marin B said in the oft quoted passage:
If a statute deals with a particular class of offences, and a subsequent Act is passed which deals with precisely the same offences, and a different punishment is imposed by the later Act, I think that, in effect, the legislature has declared that the new Act shall be substituted for the earlier Act.
The rule is however subject to the limitation contained in Art. 20(1) against ex post facto law providing for a greater punishment and has also no application where the offence described in the later Act is not the same as in the earlier Act i.e. when the essential ingredients of the two offences are different."
13. In view of the above discussion it clearly emerges that neither there was any intention to save the tougher provisions of Section 78 of the Act after 8/4/2011, nor Section 38A of the CEA is legally capable of saving the provisions of erstwhile Section 78 of the Act, as Section 78 is not piece of the delegated legislation. Further, the erstwhile Section 78 of the Act does not exist after 8/4/2011 in view of its substitution by new Section 78 of the Act. Further in the present case, the Principle of Beneficial Construction also does not allow imposition of higher penalty under the provisions of erstwhile Section 78 of the Act. Thus, in the present case, the imposition of penalty equal to 50% of the Service Tax amount not paid, i.e. Penalty of Rs. 12,15,924/- is found legal and proper.
From the above detail findings of the ld. Commissioner (Appeals), I find that it was held that there is no saving clause in Section 38A of the Central Excise Act, for saving erstwhile Section 78 of the Finance Act, nor even anything provided in the amended Section 78 regarding the non applicability of the amended provisions in the case pertaining to the period prior to amendment. In such situation amended Section 78 shall clearly apply at the time of Adjudication of the show cause notice. I therefore, do not find any infirmity in the impugned order hence the same is upheld. Revenue's appeal is dismissed. In the above order, this Tribunal dealing with identical issue held that in the absence of savings clause in respect of erstwhile Section 78, the new Section 78 shall apply and accordingly the penalty of 50% is imposable. As regard judgments relied upon by the Ld. AR, I find that in the case of L & T Ltd. (supra) the issue relates to amendment of Modvat Rule 57 C. As per Section 38A the amendment of any Rule or notification is saved. However in the present case, the issue relates to the repeal of Act, i.e. Section 78 therefore this judgment shall not apply. Similarly,the Tribunals order in the case of Lakshmi Packaging Ltd. (supra), the issue relates to the amendement of Notification. The Honble Supreme Court judgement in the case of Rajasthan Spinning and Weaving Mills (supra and Dharmendra Textile Processors (supra). The issue involved is whether the mandatory penalty under Section 11AC can be reduced or otherwise, that is not the issue involved in the present case. On going through the Tribunals order in S.A. Enterprises cases, I find that that order does not deal with application of Section 38A. Therefore all the judgments relied upon by the Ld. AR are not on the identical facts and circumstances, therefore the ratio of the same is not applicable in the present case. The Revenues appeal is not maintainable. As regard assessees appeal for waiver of 50% penalty imposed under Section 78. I find that admittedly the assessee have collected the service tax and not deposited to the Government exchequer. They have also not filed return in respect of the transaction for which service tax was collected and not deposited. In this fact, it is a clear case of suppression of fact with intent to evade payment service tax, therefore no reasonable cause has been shown by the assessee in order to invoke the Section 80. The penalty was rightly imposed under Section 78 by the lower authority which is upheld.
6. In the result, the Revenues appeal is dismissed, Cross objection in the matter of Revenues appeal also stand disposed of. Partys appeal No. ST/86269/2015 is also dismissed.
(Pronounced in court on 25/04/2016) (Ramesh Nair) Member (Judicial) SM.
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