Custom, Excise & Service Tax Tribunal
M/S. Omega Services & Consultants (P) ... vs The Commissioner Of Central Excise on 4 June, 2010
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench - Single Member Bench
Court - I
Date of Hearing: 04.06.2010
Date of decision: 04.06.2010
Appeal No. ST/433/2008
(Arising out of Order-in-Appeal No. 99/2008-ST dated 03.06.2008 passed by the Commissioner of Central Excise, Customs and Service Tax, Cochin)
For approval and signature:
Honble Mr. P. Karthikeyan, Member (Technical)
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3. Whether their Lordship wish to see the fair copy of the Order?
Seen
4. Whether Order is to be circulated to the Departmental authorities? Yes
M/s. Omega Services & Consultants (P) Ltd.
..Appellant(s)
Vs.
The Commissioner of Central Excise
Cochin ..Respondent(s)
Appearance Mr M.G. Varadarajan, Advocate, for the appellant Mr. U. Raja Ram, JDR, for the Revenue Coram:
Honble Mr. P. Karthikeyan, Member (Technical) FINAL ORDER No.___________________ 2010 Per P. Karthikeyan This appeal has been filed by M/s. Omega Services & Consultants (P) Ltd., Cochin. The Commissioner has rejected their appeal seeking to vacate a penalty of Rs 3,07,949/- (Rupees Three lakhs seven thousand nine hundred and forty nine only) imposed on them under Section 78 of the Finance Act, 1994 (the Act). The appellants had paid 25% of the above amount in terms of first proviso to Section 78 of the Act. The appellant seeks to vacate this amount paid by them.
2. Facts of the case are that the appellants were registered with the Department for providing Manpower Recruitment Agency service. They were also providing Tour Operator Service by arranging vehicles for organizing tours for the benefit of the tourists. During the material period, the appellants were found to have short paid service tax of Rs 1,31,027/- (Rupees One lakh thirty one thousand and twenty seven only) under the category Manpower Recruitment Agency service and had not paid service tax of Rs 3,67,332/- (Rupees Three lakhs sixty seven thousand three hundred and thirty two only) under the category Tour Operator Services. In the proceedings before the original authority, it was claimed that short payment of service tax had occurred under the category Manpower Recruitment Agency service as the taxable amount comprised amounts collected from prospective employees as registration fees etc. and that they were under the bona fide belief that no tax was payable on this amount. As regards the non-payment of service tax under the Tour Operator Service also they claimed bona fide belief for non-payment. The original authority imposed penalty equal to the service tax discharged by the appellants after issue of show cause notice. The appellants had paid service tax of Rs 1,90,356/- (Rupees One lakh ninety thousand three hundred and fifty six only) before the issue of show cause notice. The impugned order sustained the order of the original authority. In the appeal filed before the Tribunal, it is submitted that demand for short payment under the category Manpower Recruitment Agency was not sustainable as their clients were mostly based abroad and the charges received were exempted from service tax. The activity of conducting tours by hiring tourist vehicles was exempted up to 01.03.2000. The short payment and non-payment of demand confirmed against them had occurred on account of their bona fide belief that they were not liable to pay the impugned tax. During hearing, the learned Counsel for the appellant submits that the order of the original authority does not contain any finding of suppression of fact, fraud, willful mis-statement etc. envisaged under Section 78 to attract penalty under the said provision. It is submitted that the appellant seeks relief only as regards the penalty imposed. It is submitted that the appellants were entitled to cum-tax benefit and this relief was not claimed in the appeal.
3. He relied on the judgment of the High Court of Punjab & Haryana in CCE, Jalandhar Vs. Darmania Telecom [(2009 (14) STR 145 (P&H)] in support of the plea that no penalty was imposable in the absence of finding of fraud, collusion, willful mis-statement, suppression of facts etc. as envisaged in Section 78 of the Act. He also relies on the decision of the Tribunal in the case of CCE, Surat Vs. Star Crane Service [2010 (17) STR 576 (Tri.-Ahmd.)] which had held to the same effect that no penalty was imposable under Section 78 of the Act in the absence of finding of fraud, collusion, willful mis-statement, suppression of facts etc. by the assessee.
4. I have perused the decision in the case UOI Vs. Rajasthan Spinning & Weaving Mills - 2009 (238) ELT 3 (S.C) and CBEC Circular cited by the learned JDR. I find that this decision had held that penalty was liable to be imposed in cases where ingredients of Section 11AC were present. The CBEC circular clarified the decision that mandatory penalty equal to duty evaded was liable to be imposed in cases where ingredients of Section 11AC were present. There was no discretion to reduce mandatory penalty for the reason that duty was paid prior to issue of show cause notice etc. In the Aakriti Cable Network Vs. CCE, Jaipur - 2009 (15) STR 338 (Tri.-Del.), the Tribunal held that penalty could be validly imposed under Section 76 & 78 of the Act, if the transactions involved ingredients for imposing penalty prescribed under those sections. I find that the case laws and circular relied on by the learned JDR are not relevant to the facts of the case on hand.
5. I have perused the case records and the rival submissions. In reply to show cause notice, the appellants submitted that they had not deliberately contravened the statutory provisions or suppressed the value of any taxable service. The reply furnished in paragraph 5 is extracted below:
(I) It is alleged in the notice that we had contravened the provisions of section 68, 69 and 70 of the Finance Act, 1994 and Rules 4, 6 and 7 of Service Tax Rules, 1994 in as much as we have rendered tour operators service without taking service tax registration, without payment of service tax and without filing of ST 3 returns and suppressed a portion of the value of manpower recruitment services with intent to evade service tax as detailed in the show cause notice.
(II) In this connection it is submitted that we have not intentionally contravened the above provisions or suppressed the value of any taxable service, even though it is true that there was some lapse on our part as explained below:
a) We had taken registration for the service of Manpower Recruitment and had paid service tax on all the amounts received from the employers except those received in foreign exchange. Apart from these amounts we had also collected from prospective candidates, seeking employment through us, small amounts towards bio-data registration fees (accounted as web-site registration fees) and small amounts towards expenses for providing/facilitating employment to prospective candidates. However, we had neither colleted nor paid service tax on these amounts on the bonafide belief that amounts collected from candidates are not liable to service tax for the reason that we are doing the services of manpower recruitment to the prospective employers only.
b) We did not take service tax registration for the tour operator service as we were not holding any Tourist Permit and were under the bonafide belief and impression that persons holding tourist permit alone are covered by tour operator service.
c) Once we realize that we are liable to pay service tax on tour operation service and employment/recruitment services provided to candidates, we have paid the service tax in spite of financial constraints faced by us.
d) Further we wish to mention here that we have not collected any amount as service tax from the clients (for tour operations) as well as from the candidates (for providing employment) and the service tax payments made were from our own funds and as such we have not misappropriated any Government Funds. Under the circumstances, it will be unfair to impose any further burden on us by way of interest & penalty which will do irreparable damage to us and also adversely affect our existence in the trade.
(e) When the officers of the Directorate General of Central Excise intelligence issued summons to us to produce the records we produced the records and furnished the required information and fully co-operated with the authorities. We had already paid an amount of Rs 1,95,866/- even before the issue of show cause notice . We had subsequently paid the following amounts:
i. Challan No. 042/05-06 dated 31.03.2006 Rs. 1,50,000.00
ii. Challan No. 041/05-06 dated 20.04.2006 Rs. 1,09,699.00
iii. Challan No. 040/05-06 dated 20.04.2006 Rs. 10,745.00
iv. By adjustment in credit amount Rs. 37,505.00
_____________
Total Rs. 3,07,949.00
Amount already paid Rs. 1,90,356.00
______________
Total Rs. 4,98,305.00
______________
(Copies of challans enclosed)
(III) It is submitted that since service tax is a new law they were not fully aware of the implications of the law and its procedures. In this connection your kind attention is invited to the decision of the Honble Tribunal in the case of R.B. Bhutule Vs. CCE, Mumbai reported in 2004 (166) ELT 233 according to which the adjudicating authority has got the discretion in not imposing penalty for delay in payment of service tax and delay in filing returns.
(IV) Since we had fully discharged our liability and dues and since the non-payment was due to the inexperience with the law & its procedures and on bonafide belief as explained above, we humbly request your good self to kindly invoke your powers under section 80 of the Finance Act, 1994 and spare us from the interest and penalties proposed in the notice and also drop further penal proceedings, if any.
6. The Commissioner imposed penalty under Section 78 limiting the same to the amount paid after issue of show cause notice.
7. I find that the impugned order does not render any finding on the appellants being guilty of any of the misconduct enumerated under Section 78 of the Act. The following are his findings:
I have gone through the case records carefully. The assessee has admitted the lapse occurred in their reply to the Show Cause Notice as well as in the submissions made during personal hearing. The assessee requested to waive the proposed penalty as they have paid the Service Tax in full. I find there is no dispute about the short payment of the Service Tax and the assessee paid Rs. 1,90,356 + Rs. 5,510/- (interest) prior to the issue of Show Cause Notice. The request of the assessee for waiver of penalty can be considered only for the amount paid by them prior to the issuance of Show Cause Notice.
8. I find that in CCE, Jalandhar Vs. Darmania Telecom (supra), the Honble High Court of Punjab & Haryana made the following observations:
The provision under Section 78 of the Act is required to be acted upon in the absence of finding of fraud, collusion, willful mis-statement, suppression of facts etc., as envisaged by Section 78 of the Act. The order-in-original dated 15.06.2005 (A-1) does not record any finding of fraud, mis-statement etc., which could have been the basis for acquiring jurisdiction to impose the penalty. 8.1. The decision of the Tribunal cited also held that penalty was not imposable under Section 78 in the absence of any fraud, suppression on the part of the assessee.
9. Respectfully following the ratio of the judgment of the Honble High Court in CCE, Jalandhar Vs. Darmania Telecom (supra), the penalty imposed on the appellants is set aside and the appeal is allowed.
(Pronounced & dictated in open Court) (P.KARTHIKEYAN) Member (Technical) //iss//