Bombay High Court
Commissioner Of Cgst And Central Excise vs Nuclear Power Corporation on 10 July, 2024
Author: K.R. Shriram
Bench: K.R. Shriram
2024:BHC-OS:10206
1/5 10.CEXA-25-2022.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CENTRAL EXCISE APPEAL NO.25 OF 2022
Commissioner of CGST and Central Excise ....Appellant
V/s.
Nuclear Power Corporation ....Respondent
----
Mr. Siddharth Chandrashekhar for appellant.
Ms. Lakshmi Menon a/w. Mr. Manas Kulkarni i/b. M.V. Kini and Co. for
respondent.
----
CORAM : K.R. SHRIRAM &
JITENDRA JAIN, JJ.
DATED : 10th JULY 2024 P.C. :
1 The following six substantial questions of law are proposed :
QUESTION OF LAW
i) Whether the Hon'ble CESTAT, Mumbai was correct in holding that penalty ought not to have been imposed on the Respondent and that Section 80 of the Finance Act, 1994 was rightly applied to the case of the Respondent?
ii) Whether the Respondent being a Public Sector Undertaking and yet not paying the Service Tax due in this case ought to be considered to be "reasonable cause"?
iii) Whether the ratio in the case of HUDCO [2012 (26) STR 531 (T-Ahd)] were correctly understood and applied in this case by the Hon'ble CESTAT, Mumbai?
iv) Whether the Hon'ble CESTAT, Mumbai was correct in holding that various penalties ought not to have been imposed under Sections 76, 77 and 78 of the Finance Act?
Gauri Gaekwad
2/5 10.CEXA-25-2022.doc
v) Whether after holding that the various penalties under Sections 76, 77 and 78 were imposable, they ought to have been waived?
vi) Whether the Hon'ble CESTAT, Mumbai was correct in holding that taking note of the fact that the Respondent is a public sector undertaking the amounts demanded as service tax would be admissible as CENVAT Credit?
2 Respondent, a Government of India undertaking, is stated to have availed many services including those of consulting engineers from foreign residents on which according to Department respondent is liable to pay service tax on reverse charge basis. It is Revenue's case that respondent did not pay the service charge. During the course of audit undertaken, it was observed that the services that respondent received were liable to service tax under the category of consulting engineering services as defined by Section 65(105)(g) of the Finance Act, 1994. Since the service provider was located outside India and was not having any permanent establishment or office in India, respondent as service receiver, was required to discharge the service tax liability in respect of the services that were received by them as provided by Section 67 of the Finance Act, 1994. 3 The Department issued a show cause notice dated 22 nd October 2013 to respondent demanding service tax on payments made to overseas contractors. The show cause notice was contested by respondent which was rejected and an order-in-original dated 21 st May 2015 was passed by the Gauri Gaekwad 3/5 10.CEXA-25-2022.doc Principal Commissioner of Central Excise and Service Tax, LTU, Mumbai holding that service tax was payable. The interest was also levied on the amounts not paid and a penalty, equal to the service tax amount of Rs.18,11,23,250/- under Section 78, was also imposed. A penalty of Rs.10,000/- for failure to take registration within specified timeline and for not having properly self assessed their service tax liabilities was also imposed.
4 Respondent filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The appeal came to be disposed by the CESTAT vide an order dated 8 th June 2020 partly holding in favour of appellant. The CESTAT upheld the demand of tax and interest but as regards the penalty that was imposed on respondent, set aside the order passed by the Commissioner. Ms. Menon stated that to the extent the CESTAT held against respondent, respondent has preferred an appeal before the Hon'ble Apex Court which is still pending. 5 As regards the rejection of imposition of penalty, the CESTAT accepted assessee's explanation that there was a reasonable cause for non payment. The relevant portion reads as under :
4.10. Now coming to the issues in relation to penalties imposed on the Appellant. There cannot be any dispute to effect that by not making proper declaration and disclosures to the concerned authority, appellant have contravened the provisions of Finance Act, 1994 and the Rules made themselves. For such contraventions they are liable to penalty as provided under Section 76, 77 & 78 of Finance Act, 1994.
However we also note that Appellants are a Public Sector Gauri Gaekwad 4/5 10.CEXA-25-2022.doc Undertaking, and Section 80 of Finance Act, 1994 provides as follows:
"80. Notwithstanding anything contained in the provisions of Section 76, Section 77, Section 78 or Section 79, no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure."
In case of HUDCO, [2012 (26) STR 531 (T-Ahd)] Ahmedabad Bench of CESTAT held as follows:
"22. An alternative submission was made that the provisions of Section 80 are invocable in this case. According to Section 80 of Finance Act, 1994, "provision of Section 76, 77 or 78, no penalty shall be imposable on the assessee for any failure referred to any such provision, if the assessee prove that there was a reasonable cause for the said failure." We consider that the appellant being a wholly owned government company and the fact that they did not pay Service Tax only on prepayment charges and reset charges and also in view of the fact that accounting treatment given to these items as additional interest has been accepted by the Income Tax department, in our opinion, would be sufficient for invoking provisions of Section 80 of Finance Act, 1994. Accordingly, while upholding the demand of Service Tax and interest, penalties imposed under various Sections of Finance Act, 1994 are set aside."
Thus taking note of the fact that Appellants are a public sector undertaking, amounts demanded as service tax will be admissible to the Appellants will be admissible to them as CENVAT Credit and the provisions of Section 80 of the Finance Act, 1994, In our view though the penalties under Section 76, 77 & 78 are imposable, they should be waived by the application of Section 80.
The CESTAT has not only considered the fact that respondent/assessee was a public sector undertaking but has also kept in mind that if the service tax had been paid, respondent would have been entitled to take credit of the amounts paid, the net effect being it would Gauri Gaekwad 5/5 10.CEXA-25-2022.doc have been revenue neutral. It is for that reason, the CESTAT set aside the order imposing penalty. It is a discretionary order and we should also note that the finding that it will be revenue neutral has not been challenged in this appeal.
6 Therefore, no substantial question of law would arise. 7 Appeal dismissed.
(JITENDRA JAIN, J.) (K.R. SHRIRAM, J.)
Gauri Gaekwad
Signed by: Gauri A. Gaekwad
Designation: PS To Honourable Judge
Date: 12/07/2024 12:43:25