Custom, Excise & Service Tax Tribunal
Kedia Business Centre vs Commissioner Of Central Excise, ... on 20 March, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No. ST/256/05 (Arising out of Order-in-Appeal No. 290/MI/2004 dated 30.6.2005 passed by Commissioner of Central Excise (Appeals), Mumbai-I) For approval and signature: Hon'ble Mr. P.G. Chacko, 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?
====================================================== Kedia Business Centre Appellant Vs. Commissioner of Central Excise, Mumbai-I Respondent Appearance: Shri A.H. Punwani, Advocate, for appellant Shri P.K. Agarwal, Authorised Representative (SDR), for respondent CORAM: Hon'ble Mr. P.G. Chacko, Member (Judicial) Date of Hearing: 20.3.2009 Date of Decision: 20.3.2009 ORDER NO.................................
After examining the records, I find that the appellant was engaged in the business of rendering mandap keepers' service during the period of dispute (April 1999 to September 2002). This service was made exigible to service tax w.e.f. 1.7.1997. The appellant, however, did not pay service tax on the amounts collected by them for mandap keepers' service during the above period, nor did they even take steps for getting registered with the department. The service tax authorities, by a letter dated 4.9.2002, required the appellant to provide details of the service rendered during the above period. Subsequently, in October 2002, they summoned the appellant. On the basis of the information gathered from the appellant, the authorities issued a show-cause notice dated 29.1.2003, proposing to impose penalties on them under various provisions of the Finance Act, 1994. As the amount of service tax with interest had already been paid during the course of investigations, this show-cause notice proposed to appropriate those payments towards service tax and interest. The appellant, in their reply to show-cause notice, contested the above proposals. The appellant submitted that they were not aware of the service tax liability in respect of their business and that is why they failed to get registered with the department and pay service tax. They also pointed out that they had already paid service tax of Rs.12,279/- with interest of Rs.3,854/- voluntarily. In the circumstances, they requested for waiver of penalty. The original authority, however, did not accept this plea. It imposed a penalty of Rs.12,000/- under Section 76 of the Finance Act, 1994, another penalty of Rs.7,000/- under Section 77 of the Act and a separate penalty of Rs.24,000/- under Section 78 of the Act, on the appellant. Aggrieved by these penalties, the party went in appeal to the Commissioner (Appeals) but the latter rejected the same after holding that the appellant was not eligible for any relaxation under Section 80 of the Finance Act, 1994. The present appeal is directed against the appellate Commissioner's order.
2. The learned counsel has mainly argued that, as the service tax was paid with interest prior to the date of issue of the show-cause notice, any penalty was not liable to be imposed on the appellant under any of the above provisions. In this connection, he has relied on the Bombay High Court's decision in CCE vs. Gaurav Mercantiles Ltd. 2005 (190) ELT 11 (Bom.) and a plethora of orders by this Tribunal. The Hon'ble High Court held that where the entire duty liability was discharged prior to issuance of show-cause notice, no penalty was to be imposed on the assessee under Section 11AC of the Central Excise Act. Some of the decisions of the Tribunal cited by the counsel are also to the same effect. A few decisions of the Tribunal are to the effect that any penalty under Sections 76/77/78 of the Finance Act, 1994 is not imposable on a service provider who paid service tax prior to issue of show-cause notice. The learned SDR has opposed the above argument of the counsel, on the strength of the Hon'ble Supreme Court's decision in UOI & Ors. vs. Dharmendra Textile Processors & Ors. 2008 (231) ELT 3 (SC). He has also pointed out that the above argument of the learned counsel cannot be accepted, in view of the Supreme Court's order on Civil Appeal No. 6435 of 2008 (CCE vs. Monarch Pipes Ltd.). It is submitted that the civil appeal was allowed by the apex court on the basis of the court's earlier decision in Dharmendra Textile Processors case and accordingly any penalty under Section 11AC of the Central Excise Act or any interest on duty under Section 11AB of the Act was not avoidable on the ground that the amount of duty had been discharged before issuance of show-cause notice. I find that, in the case of Dharmendra Textile Processors (supra), the Hon'ble Supreme Court held that penalty under Section 11AC of the Central Excise Act was mandatory. Following this ruling, the Court, in the case of Monarch Pipes Ltd., set aside the Tribunal's order [2007 (208) ELT 470 (Tri.-Bang)], wherein it had been held that penalty under Section 11AC of the Central Excise Act was not imposable where the assessee had already paid duty before issuance of the show-cause notice. The final legal position is, therefore, that any penalty otherwise imposable under Section 11AC of the Act cannot be avoided on the ground that the duty amount was paid by the assessee prior to issuance of show-cause notice. I am of the considered view that this principle is applicable to the penalty under Section 78 of the Finance Act, 1994 inasmuch as both these provisions of law (Section 11AC of the Central Excise Act and Section 78 of the Finance Act, 1994) deal with penal liability of an assessee who has failed to discharge tax liability in comparable circumstances. However, I am not inclined to apply the above principle to the penalties under Section 76 and 77 of the Finance Act, 1994. Insofar as those penalties are concerned, some of the decisions cited by the learned counsel are found to be operating in favour of the appellant. In the case of Sieger Spintech Equipments Pvt. Ltd. vs. CCE, Coimbatore 2006 (3) STR 736 (Tri.-Chennai), the appellants had paid service tax before the issue of show-cause notice and, therefore, penalties imposed on them under Sections 76 and 77 were set aside. The penalty imposed under Section 76 of the Finance Act on the assessee was set aside in identical circumstances in the case of Warna Industries Ltd. vs. CCE, Pune 2006 (4) STR 535 (Tri.-Mumbai). A similar penalty was set aside in the case of Heera Metals Ltd. vs. CST, Kolkata 2006 (4) STR 540 (Tri.-Kolkata). There are also other decisions of the Tribunal to the above effect, amongst the records filed by the counsel.
3. In the result, the penalty imposed on the appellant under Section 78 of the Finance Act, 1994 is sustained and the rest of the penalties are set aside. The appeal stands allowed in part.
(Pronounced in Court) (P.G. Chacko) Member (Judicial) tvu 1 5