Custom, Excise & Service Tax Tribunal
M/S. Arvind Processors P. Ltd vs Commissioner Of Central Excise And ... on 17 June, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. ST/88548/14-MUM [Arising out of Order-in-Appeal No. PUN-EXCUS-002-APP-012-14-15 dtd. 7/5/2014 passed by the Commissioner (Appeals), Central Excise, Pune-II] 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?
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M/s. Arvind Processors P. Ltd.
:
Appellants
VS
Commissioner of Central Excise and Service Tax, Kolhapur
:
Respondent
Appearance
Shri Ganesh K.S. Iyer, Advocate for the Appellants
Shri S.R. Nair, Examiner (A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 17/6/2015
Date of decision: 17/6/2015
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in-Appeal No. PUN-EXCUS-002-APP-012-14-15 dtd. 7/5/2014 passed by the Commissioner (Appeals), Central Excise, Pune-II, wherein Ld. Commissioner (Appeals) modified the Order-in-Original dated 22/2/2013 and held as under:
(i) the demand of service tax of to Rs. 9,10,592 was reduced to Rs. 6,20,019/- which
(ii) Penalties under Section 77 and 78 in respect of service tax on renting of immovable property service was waived in terms of Section 80(2) of the Act.
(iii) Penalty of Rs. 1,91,924/- related to demand on Intellectual Property service was upheld.
2. The appellant filed present appeal for setting aside the impugned order but during the hearing it was categorically stated by the Ld. Counsel Shri. Ganesh K.S. Iyer that they are not contesting the service tax demand and interest thereon confirmed by the Ld. Commissioner and payment thereof already made by the appellant. The appellant now contesting only penalty of Rs.1,91,924/- imposed under Section 78 which relates to the demand of equal amount of Service tax on intellectual property services for the period November, 2007 to March, 2011.
3. Shri. Ganesh K.S. Iyer, Ld. Counsel for the appellant submits that aforesaid penalty was confirmed by the Ld. Commissioner (Appeals) only on the ground that appellant have not contested imposition of penalty under Section 78 in respect of intellectual property services. He submits that para 3 of the impugned order discussed about the ground of appeal of the appellant, point no. 7 of para No. 3 mentioned that As the appellant were under bonafide belief of their activities being non taxable due to the confusion prevailing in field, they claimed immunity under Section 80 of the Act in respect of the penalties imposed. He further submits that appellant have specifically sought for in para 15.1of the ground of appeal before the Commissioner (Appeals) waiver of penalty under Section 80 as they were under bonafide belief about their activity were not taxable. It is his submission that in view of this undisputed facts Ld. Commissioner (Appeals) finding that for not considering waiver of penalty as not being contesting penalty is not correct. He submits that appellant entered in royalty agreement with M/s. Shree Arvind Finishers, Ichalkaranji for using the goodwill Finished by Shri. Arvind processors Pvt. Ltd for which they were receiving an amount as per the said agreement. The appellant was under bonafide belief that since the VAT has been paid on the entire amount of agreement the said use of goodwill shall not be liable for service tax. On this fact, appellant was under bonafide belief that the services is not taxable. He submits that appellant bonafidely entered into agreement and recorded the payment transaction in their books of account which clearly shows that appellant had no malafide intention to evade service tax on the services of Intellectual property. In view of this fact, he prays that penalty of an amount of Rs. 1,91,924/- imposed under Section 78 may be waived by invoking Section 80 of the Finance Act, 1944.
4. Shri. S.R. Nair, Ld. Examiner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that the appellant had not contested the penalty in respect of intellectual property service, as can be seen from the para 8 of the order in appeal. He submits that appellant has made ground of appeal before the Commissioner (Appeals) only for waiver of penalty in respect of renting of immovable property services and not in respect of intellectual property services, therefore since the appellant have not contested the penalty under Section 78 in respect of intellectual property services before the Commissioner (Appeals), the Commissioner (Appeals) has rightly confirmed penalty. He placed reliance in the case of Balaji Society [2011 (38) STR 139]. He also submits that in the present case extended period is invokable as appellant has neither informed to the department nor taken registration, therefore department not in knowledge of activity of the appellant.
5. I have carefully considered the submissions made by both sides and perused the record.
6. As regard the dispute whether appellant have made out their case before the Commissioner (Appeals) for waiver of penalty under Section 78. I have carefully gone through the record as submitted by both sides. I find in the impugned order in sub para 7 of para 3 appellants submission was recorded which is as under:
As the appellant were under bonafide belief of their activities being non taxable due to the confusion prevailing in field, they claimed immunity under Section 80 of the Act in respect of the penalties imposed.
The appellant in para 15 of their ground of appeal before the Commissioner (Appeals) stated as under:
15.0 Waiver under Section 80 15.1 Notwithstanding and without prejudice to the grounds as above it is submitted that the appellant is entitled for waiver of penalty under Section 80 of Finance Act, 1994. Section 80 is invokable since the appellant was always under the bonafide belief that their activities are not subject to service tax. Bonafide belief has been held to be fit reason for setting aside penalty under Section 80 in the following case laws.
ETA Engineering Limited Vs. CCE 2004 174 ELT 19(Tri. LB) Ada Ranga Mandira Trust Vs. CCE 2007 6 STR 381(Tri Bang.) From the above recording in the impugned order as well as grounds made before the Commissioner (Appeals), it is clear that appellant has indeed contested the penalty as whole and waiver thereof was sought for under Section 80, therefore I find that the Commissioner (Appeals) is not correct in holding that the appellant have not contested penalty under Section 78 in respect of intellectual property services. Now whether the appellant have made out the case for reasonable cause for waiver of penalty invoking Section 80 of the Act. On going through the records and the submissions, I find that as regard the intellectual property services appellant have entered into agreement for royalty. The agreement does not bear any clause for levy of service tax and payment thereof. The royalty amount has been accounted for in books of account of both the companies i.e. royalty holder and royalty payee. The service tax and interest have been paid by the appellant and they are not contesting such liability. In view of this position, appellant have not tried to hide any transaction of the royalty and for which legal agreement was singed by both the parties. The submission of the appellant that they entertained bonafide belief that the said service is not taxable and therefore they could not pay service tax on time, I find force in the submission of appellant that had they have malafide intension they would not have entered into any agreement and would not have accounted for transaction of the royalty in their books of account. Therefore in view of the facts and circumstances as discussed above, I find that appellant have shown reasonable cause for non-payment of service tax on time, however the same alongwith interest has been paid by them. In view of the above position, I am of the view that appellant have made out the case of waiver of penalty under Section 78 by invoking Section 80. I therefore set aside the penalty imposed under Section 78 in respect of intellectual property services under the provisions of Section 80 of Finance Act. 1994. However, the demand of Service tax amounting to Rs. 6,20,019/- and interest thereof and payment of the same already made stand upheld. Appeal is partly allowed in above terms.
(Dictated in court) Ramesh Nair Member (Judicial) sk 7