Custom, Excise & Service Tax Tribunal
M/S. Solomon Foundry vs Cce, Tiruchirapalli on 5 September, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
S/PD/106/08 & S/123/2008
(Arising out of Order-in-Revision No. 06/2008 dated 07.03.08, passed by the Commissioner of Central Excise (Appeals), Tiruchirapalli).
For approval and signature
Honble P.KARTHIKEYAN, Member (Technical).
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M/s. Solomon Foundry : Appellant
Vs.
CCE, Tiruchirapalli : Respondent
Appearance Ms. K. Priya, Consultant, for the appellant Shri V.V. Hariharan, JCDR, for the respondents CORAM Shri P. KARTHIKEYAN, Member (Technical) Date of hearing : 05.09.08 Date of decision : 05.09.08 Final ORDER No.________/2008 This is an application filed by M/s. Solomon Foundry for waiver of predeposit and stay of recovery of the penalties imposed under Sections 76, 77 and 78 of the Finance Act, 1994 (the Act) by the revisional authority, the Commissioner of Central Excise, Trichy. The appellants were found to have rendered the Maintenance and repair service during the material period 01.07.2003 to 31.12.2005. Out of the total service tax liability of Rs. 3,59,853/-, the appellants paid an amount of Rs. Three lakhs before issue of show cause notice and paid the balance amount before adjudication.
2. The original authority while finding the assessees liability to pay service tax observed that the default in payment of service tax had been occasioned by bonafide belief of the appellants that they were not required to pay service tax on the activity undertaken by them during the material period.
3. The authorized representative of the appellants submits that when the relevant contract was executed between the appellants and its client ONGC, service in question had not been brought under the tax net. Therefore, the contract did not contain any specific provision to recover the service tax from its clients. Therefore, they had to absorb the tax liability and they were not in a position to pass on the same to its clients. On this and other grounds narrated in the appeal a lenient decision is prayed for. It is reiterated that a large body of case law supported waiver of penalty on a defaulting assessee if the tax due was paid before issue of show cause notice. In the instant case, most of the tax was paid before issue of show cause notice and the balance amount was paid before the dispute was adjudicated. She also relies on the following judicial authority in support of the above prayer for waiver of penalty imposed in the revisional order.
CCE, Bangalore-II Vs. Sunitha Shetty 2006 (3) STR 404 (Tri.-Bang.) It was held by the Honble High Court of Karnataka in the above judgment that the discretion exercised by the Dy. Commissioner in imposing penalty on the service tax assessee could not be reviewed by the Commissioner. Their Lordships made the above observation upholding the authority of the Dy. Commissioner to levy penalty in exercise of the discretion conferred on him under Section 80 of the Act. She also cited S-Mac Security Services Pvt. Ltd., Vs. CST, Bangalore 2007 (6) STR 348 (Tri.-Bang.) [ Stay Order Nos. 87 & 88/07 dated 11.01.2007.] in support of the plea that once the entire dues were paid before adjudication, the defaulter could not be penalized in the absence of malafide intention to evade payment of duty.
4. Ld. JCDR submits copies of decisions of this Tribunal in Hi-tech Calibration Centre Vs. CCE, Coimbatore reported in 2006 (2) STR 357 (Tri.-Chen.) and Continental Advertising Services Vs. CCE, Kolkata-I, reported in 2006 (1) STR 191 (Tri-Kolkata) in both of which it was held that ignorance of law was not sufficient cause envisaged in Section 80 of the Act.
5. I have carefully considered the facts of the case and the rival submissions. I find that the original authority exercised the discretion under Section 80 of the Act and refrained from imposing penalty on the appellants under various sections of the Act. He had made the following categorical finding and order as regards the penal liability of the appellants.
In exercise of the powers conferred on me under Section 80 of the Finance Act 1994, I refrain from imposing any penalty under Section 76,77 & 78 of the Finance Act, 1994, since they were not aware of the Service Tax rules and procedures due to ignorance and proper guidance from field formation. In the judgment of the Honble High Court of Karnataka, their Lordships had upheld the order of the Tribunal to the effect that a revisional authority did not have powers to revise a decision of the competent authority, which had, in exercise of the discretion conferred on it under Section 80 of the Act, consciously refrained from imposing penalty on the assessee. Respectfully following the ratio of the above judgment, I vacate the impugned order and allow this appeal. The stay application also gets disposed of.
(Dictated and pronounced in open Court) (P.KARTHIKEYAN) MEMBER (T) BB ??
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