Custom, Excise & Service Tax Tribunal
M/S. Prakash Sadashiv Karde vs Commissioner Of Central Excise, ... on 23 October, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. ST/89382/14 [Arising out of Order-in- Appeal No. AV(143) 147/2014 dated 4/7/2014 passed by the Commissioner (Appeals) of Central Excise & Customs, Aurangabad] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) =======================================================
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 :
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?
=======================================================
M/s. Prakash Sadashiv Karde
:
Appellants
VS
Commissioner of Central Excise, Customs & Service Tax, Aurangabad
:
Respondent
Appearance
Shri. O.P. Lalwani, Consultant for the Appellants
Ms. P. Vinita Sekhar, Dy. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 23/10/2015
Date of decision: /2015
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in- Appeal No. AV(143) 147/2014 dated 4/7/2014 passed by the Commissioner (Appeals) of Central Excise & Customs, Aurangabad wherein he has rejected the appeal filed by the appellant.
2. The fact of the case is that the appellant are providing services of Manpower Recruitment or Supply Agency to M/s. Godavari Bio-Refinery Pvt Ltd Sakharwadi, Kopargaon, Dist Ahmadnagar. The said services falling under Section 65(105)(k) of the Finance Act, 1994 and taxable w.e.f. 16/6/2005. During the scrutiny of the Cenvatable documents of M/s. Godavari Bio-Refinery Pvt Ltd, it was noticed that the appellant have been providing services of Manpower Recruitment or Supply Agency to M/s. Godavari Bio-Refinery Pvt Ltd. Thereafter on further inquiry with the service provider i.e. appellant, it was revealed that they have discharged the service tax liability up to year 2005-06 only. However they had not paid service tax for the year 2007-08 and 2008-09 for the amount received from M/s. Godavari Bio-Refinery Pvt Ltd against MRA services provided to the service receiver i.e. M/s. Godavari Bio-Refinery Pvt Ltd. During the visit to the Kopargaon Range Office, the Asstt. Commissioner, Central Excise, Custom & Service Tax, Ahmednagar division called the representative of the service provider and the service receiver in the Range Office and apprised him about the provision of law. Accordingly the appellant agreed and discharged the service tax liability and paid the service tax of Rs. 6,55,995/- for the year 2007-08 alongwith interest of Rs. 1,72,830/- for the delay. Thereafter appellant further paid service tax amount of Rs. 10,67,561/- along with interest of Rs. 1,69,039/- for the year 2008-09. Thus, on pointing out by the department the service provider have discharged the total service tax liability for the year 2007-08 and 2008-09 total amounting to Rs. 17,23,556/- along with interest Rs. 3,41,869/-. The appellant vide their letter dated 20/10/2010 confirmed the lapses and requested for waiver of SCN to the department, as they have paid the total service tax alongwith interest. Subsequently, a show cause notice was issued and the same was adjudicated wherein demand of service tax was confirmed and the same amount which already paid was appropriated. Similarly, interest amount paid was also confirmed and appropriated. Apart from this, appellant was fastened with penalty of Rs. 6,55,945 under Section 76 and penalty of Rs. 17,23,556/- under Section 78 and a late fees of Rs. 2,000/- per return was imposed under Section 70 of the Finance Act, 1994 read with Rule 7C of Service Tax Rules, 1994. A penalty of Rs. 5,000/- on M/s. P.S. Karde (proprietorship firm) C/o. M/s. Godavari Bio-Refinery Pvt Ltd was also imposed under Section 77 of the Finance Act, 1994. Being aggrieved by the Order-in-Original No. 30/ST/ADC/2011 dated 13/12/2011 appellant filed appeal before the Commissioner(Appeals) which was rejected, therefore the appellant filed this appeal only for waiver of penalties.
3. Shri. O.P. Lalwani, Ld. Consultant appearing on behalf of the appellant submits that the appellant is a small time individual service provider. He is only 11th class passed and had no knowledge about the Service Tax Provisions. As per bonafide belief, he was under impression that he is providing the services of supplying the water in the tanker to M/s. Godavari Bio-Refinery Pvt Ltd, therefore he has not paid the service tax during the period 2007-08 and 2008-09. It is recorded in the show cause notice that on the persuasion of the departmental officer, convincing with the officer, without any protest the appellant have discharged the entire service tax amount along with interest and also requested the department not to issue any show cause notice therefore the appellant has made out fit case for waiver of penalty under Section 73(3) as well as under Section 80 of the Finance Act. He further submits that the appellants bonafide is proved on the basis that since he was not aware of the service tax provisions, he has neither charged the service tax in his bills nor collected any service tax from the service recipient therefore there is no malafide on the part of the appellant hence the penalties should not have been imposed on the appellant. In support of his submissions, he placed reliance on the following judgments:
(a) Uniworth Textiles Ltd Vs. Commissioner of Central Excise, Raipur[2012(288)ELT 161 (S.C.)]
(b) Commissioner of C. Ex. Delhi-III, Gurgaon Vs. Machino Montell (I) Ltd [2004 (168) ELT 466(Tri. LB)]
(c) Auto Transport Services Vs. Commissioner of C. Ex. Jaipur-II[2006(3) S.T.R. 330 (Tri. Del.)]
(d) Catalyst Capital Services Pvt Ltd Vs. Commissioner of C. Ex. Mumbai-IV[2006(3) S.T.R. 582(Tri. Mumbai)]
(e) Catalyst Capital Services Pvt Ltd Vs. Commissioner of C. Ex. Mumbai-IV[2005(184) ELT 34(Tri. Mumbai)]
(f) EDC Ltd Vs. Commissioner of Central Excise, Goa[2008(10) S.T.R. 254(Tri. Mumbai)]
(g) Gupta Coal Field & Washeries Ltd. Vs. Commr. of Service Tax, Nagpur[2013(29) S.T.R.166(Tri. Mumbai)]
(h) Sen Brothers Vs. Commissioner of Central Excise, Bolpur[2014(33) S.T.R. 704(Tri. Kolkata)]
(i) Endeka Ceramics India Pvt Ltd Vs. Commissioner of C. Ex. Surat-II[2013(31) S.T.R. 355(Tri. Ahmd.)]
(j) Avas Engineers Vs. Commissioner of Central Excise, Ahmedabad-III[2013(32) S.T.R.640(Tri. Ahmd.)]
(k) M.D. Engineers Vs. Commissioner of Central Excise, Vadodara[2013(30) S.T.R. 389(Tri. Ahmd.)]
4. On the other hand, Ms. P. Vinita Sekhar, Ld. Dy. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. She further submits that the appellant knowingly did not discharge the service tax in time therefore there is suppression of facts in non payment of service tax, penalty cannot be waived by invoking either Section 73(3) or Section 80. In support of her submission, she placed reliance on following judgments:
(a) High- Tech Calibration Centre Vs. Commissioner of C. Ex. Coimbatore[2006(2) S.T.R. 357(Tri. Chennai)]
(b) Mulund Gymghana Vs. Commissioner of Service Tax, Mumbai[2009(15) S.T.R.543 (Tri. Mumbai)]
(c) Quality Welding Works Vs. Commissioner of C. Ex. Ludhiana[2011(21) S.T.R. 187(Tri. Del)]
(d) Mohammand Mustkeen Vs. Commr. of C. Ex. Chandigarh [2011(22) S.T.R. 170(Tri. Del.)]
5. I have carefully considered the submissions made by both the sides and perused the record.
6. I find that the appellant on advice of the Jurisdictional Asstt. Commissioner, on his visit to Range Office, agreeing with the Asstt. Commissioner, discharged the entire service tax liability along with interest. It is the submission of the appellant that the they were assured that no further action will be taken if the payment of service tax along with interest is made. It cleare that the appellant paid entire service tax along with interest and opted the waiver of the show cause notice with clear intention that they do not want to contest payment which they have made with a clear view that no action should be taken against them. I find that the appellant is a small time service provider without any higher education background. It is also found that on perusal of the invoices submitted by the appellant, it is observed that they have neither charged the service tax to their client nor collected any amount towards the service tax. The appellant paid the entire service tax and interest from their own pocket. In my view this itself is a burden on the appellant. It has been held in various judgments that payment of service tax with interest before issuance of show cause notice, no penalties should be imposed. Operative part of some of judgments are given below:-
Catalyst Capital Services Pvt Ltd (supra)
5.?It is contended on behalf of the appellants that there is no mala fide intention on the part of the appellants in making the late payment of Service Tax. There is also provision in the Finance Act for waiver of the penalty where sufficient cause is shown. As the appellants had already deposited the Service Tax and as there was no mala fide intention in making the delayed payment, the penalty imposed thereof i.e. Rs. 7,105/- is hereby set aside. Penalty of Rs. 1,000/- towards late filing of Return is confirmed.
EDC Ltd (supra)
4.?On perusal of the records, I find that the appellants' being State Finance Corporation, were providing loans to the small industrial enterprises and enterprises carrying on other economic activities for starting, running, expanding and modernizing. On being pointed out that they are supposed to pay Service Tax, the appellant discharged the entire Service Tax liability along with interest before the issuance of show cause notice. To my mind, if the appellants have paid the service tax and interest thereon before issuance of show cause notice, the question of imposition of penalty does not arise. The adjudicating authority has held that since the Service Tax liability is accepted and paid by the assessee and they had defaulted the payment for 435 days, an amount of Rs. 43,500/- (@Rs. 100/- per day) is imposable as penalty under Section 76 read with Section 77 of the Finance Act. I do not agree with this proposition.
5.?Considering the facts and circumstances of the case, I find that the provisions of Section 80 of the Finance Act, 1994 can be invoked and penalty imposed on the appellant is liable to be set aside and I do so. The impugned order is set aside and the appeal is allowed.
Gupta Coal Field & Washeries Ltd. (supra)
5.?Heard both sides and perused the provisions of Section 73(3) of the Finance Act, 1994 which are reproduced here as under :-
Sec. 73(3). - Where any service tax has not been levied or paid or has been short levied or short paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid.
6.?On perusal of the said provisions, we find that it is a mandate of the Act that if any assessee does not pay service tax in time and does not file the return in time, but later on, on their own ascertainment they pay service tax along with interest and file the return and inform the department in writing, in that case show cause notice is not required to be issued. Same has been clarified by the Board circular cited above. Admittedly, in this case the appellant has paid service tax along with interest and filed the service tax returns on 17-12-2009. Therefore, after waiving the requirement of pre-deposit, we have taken up the appeal itself for final disposal.
7.?As discussed above, the show cause notice was not required to be issued to the appellant. Therefore, we do not find any merit in the impugned order qua imposition of penalty on the appellant. Accordingly, the portion of the order imposing penalty is set aside. Appeal and stay application are disposed of in the above terms.
Sen Brothers (supra)
7.?It is thus evident from the aforesaid provisions that in the cases of non-payment of Service Tax on due dates, once payment along with interest is made before issuance of show cause notice, in such cases no show cause notice could be issued for imposition of penalty. In this regard I also find that ld. Commissioner (Appeals) in his order has made a categorical finding that the elements of fraud, suppression, misstatement, etc. were not present in this case. Revenue has not contested his findings by filing appeal. In view of these facts the appellants case is fully covered by the provisions of sub-section (3) of Section 73 of the Finance Act, 1994.
8.?It is not in dispute in this case that the appellant had discharged the entire Service Tax liability and interest thereof before the issuance of show cause notice. The issue is regarding the imposition of penalty on the appellant under Section 76 of the Finance Act, 1994. I find that once the appellant has already discharged Service Tax liability and the interest thereon and no additional liability has been adjudged in the adjudication proceedings, provisions of Section 73(3) will be applicable in this case and there was no necessity of issuing any show cause notice to the appellant. In such cases no penalty is imposable by virtue of Explanation 2 to sub-section (3) of Section 73 of the Finance Act, 1994.
9.?Honble Karnataka High Court in the case of CCE & ST, LTU, Bangalore v. Adecco Flexione Workforce Solutions Ltd. - 2011-TIOL-635-HC-KAR-ST = 2012 (26) S.T.R. 3 (Kar.) has upheld the ratio that in case the entire amount of Service Tax liability, interest thereon stands paid by the appellant before issuance of show cause notice, hence provisions of Section 73(3) of the Finance Act, 1994 should be made applicable and no show cause notice should have been issued. This judgment has been followed by this Tribunal in the case of M.R. Coatings Pvt. Ltd. v. CCE, Rajkot - 2013 (30) S.T.R. 76 (Tri.-Ahmd.).
10.?The issue of penalty came up for the consideration before the High Court of Karnataka in the case of Commissioner of Service Tax, Bangalore v. Master Kleen - 2012 (25) S.T.R. 439 (Kar.). The ratio from the judgment of Honble High Court in the case of Master Kleen is reproduced below :-
The Revenue has preferred this appeal against the order passed by the Tribunal [2010 (17) S.T.R. 365 (Tribunal)] setting aside the orders passed by the lower authorities, imposing penalty under Section 76 of the Finance Act, 1994 for non-payment of Service Tax on due dates.
2.?The material on record discloses that the assessee on being pointed out by the authorities for not paying the Service Tax, has paid the Service Tax with interest even before the issue of show cause notice. Sub-section (3) of Section 73 of the Finance Act, 1994, categorically states that if tax and interest is paid and the same is informed to the authorities, then the authorities shall not serve any notice calling upon the authorities to pay penalty. It is unfortunate that inspite of statutory provisions, the authorities have issued a show cause notice claiming penalty. So, tax and interest was paid before issue of show cause notice. Therefore, the Tribunal was justified in setting aside those orders. As the said order is strictly in accordance with law we do not find any legal infirmity that calls for interference. Therefore this appeal is dismissed.
11.?In view of the law being settled as hereinabove stated, I find that the impugned order is liable to be set aside and I do so. Impugned order is set aside and the Appeal is allowed.
Endeka Ceramics India Pvt Ltd (supra)
6.?Obviously show cause notice has been issued invoking suppression of facts and therefore we have to see whether in the facts and circumstances of this case suppression of fact or misdeclaration could be alleged. Obviously the Assistant Commissioner had visited the unit before the commercial operations had started and advised them to pay which was readily accepted. This coupled with the fact that appellants did not have qualified staff and they paid the Service Tax after the amounts were paid by them for the services received from time to time and discharged the liability in full which is not in dispute would show that extended period could not have been invoked in this case. Moreover entire duty liability was discharged by July, 2008 which is less than nine months from the visit of the officer which would again show that the payment was made promptly without any delay. Having regard to these facts and having regard to the fact that appellant was eligible for Cenvat credit, we find that this was a case where provisions of Section 73(3) was applicable and no show cause notice should have been issued. Further we also find that this is a case where appellants have been able to show reasonable cause for non-payment of the tax even if it is assumed that there was delay in payment in view of the revenue-neutral situation and lack of availability of qualified staff. In view of the above, we find that the penalty imposed on the appellant cannot be sustained and has to be set aside. In the result the amount paid towards Service Tax and interest thereon demanded and appropriated is sustained and penalties imposed on the appellant are set aside.
Avas Engineers (supra)
5.?It can be seen from the above reproduced findings that the adjudicating authority has come to a conclusion that the issue involved in this case is regarding waiver of penalty. The said provisions exist in Section 80 of Finance Act, 1994. The first appellate authoritys findings that the adjudicating authority has not invoked the provisions of Section 80 seems to be incorrect as the adjudicating authority has specifically held that waiving penalties imposed under Sections 76, 77 & 78 of Finance Act, 1994, which can be only under the provisions of Section 80.
6.?I find that the findings of the adjudicating authority in this case carry a very important aspect which indicates that the appellant had voluntarily paid almost 80% of the amount and balance amount before issuance of show cause notice. It is also to be noted that the appellant herein is a proprietary concern and could not have been aware about the intricacy of discharge of Service Tax liability within the time period. In my view, this is a fit case for invoking the provisions of Section 80 of Finance Act, 1994. Accordingly, I invoke the provisions of Section 80 of Finance Act, 1994 and set aside the penalties imposed on the appellant by the first appellate authority In view of the above judgments, it was consistently held that when the assessee discharged service tax alongwith interest before issuance of show cause notice penalty has been waived. In view of the above facts when the appellant themselves after discharging the service tax liability along with interest, opted the waiver of show cause notice the case is clearly falls under the provisions of Section 73(3) of Finance Act. I am of the view that the appellant has made out a fit case for waiver of penalty even in terms of Section 80 also considering overall facts and circumstances and above discussion made thereof, I am of the view that show cause notice should not have been issued in the present case. I therefore waive the penalty and fees imposed under Sections 76, 77, 78 and 70 of the Finance Act, 1994 by invoking Section 73(3) read with Section 80. The service tax alongwith interest paid by the appellant is maintained. Appeal is allowed in above terms.
(Order pronounced in court on___________________) Ramesh Nair Member (Judicial) sk 13 ST/89382/14