Customs, Excise and Gold Tribunal - Bangalore
Gem Star Enterprises (P) Ltd. vs The Commissioner Of Central Excise And ... on 30 March, 2007
Equivalent citations: [2007]11STJ77(CESTAT-BANGALORE), 2007[7]S.T.R.342
ORDER T.K. Jayaraman, Member (T)
1. The stay application and the appeal have been filed in respect of Order-in-Appeal No. 157/2006 ST dated 18.08.2006 passed by the Commissioner of Customs & Central Excise (Appeals), Cochin. As the issue lies in short compass, I take up the appeal for the disposal.
2. Shri G. Subramanian, learned Advocate appeared for the appellants and Shri R.K. Singla, Jt. CDR appeared for the Revenue.
3. In terms of the impugned order, the appellant is required to pay service tax amounting to Rs. 5,60,937/- along with interest. A penalty of Rs. 1,000/- under Section 77 of the Finance Act, 1994 has been imposed. Further a penalty of Rs. 100/- per day for the period 26.1.2000 to 31.1.2006 has been imposed under Section 76 of the Finance Act. Equal penalty of Rs. 5,60,937/- under Section 78 has also been imposed.
4. The learned Advocate referred to the instructions contained in the Service Tax Trade Notice No. 20/2002 dated 23.5.2002 issued by the Commissioner of Central Excise, Delhi-II clarifying that the failure to realize or even charge the service tax does not negate the statutory liability. The amount received from the client will not be taken to constitute the amounts inclusive of service tax. He said that in view of the above clarification, the amount received by the appellants from the clients has to be considered as inclusive of service tax and the tax liability recomputed treating the total receipt as cum tax. Further he relied on the following case laws:
(a) Panther Detective Services v. CCE, Kanpur 2006 (4) S.T.R. 116 (Tri.-Del.)
(b) Bhagawati Security Services v. CCE., Meerut-I 2006 (3) S.T.R. 762 (Tri. - Del.) It was also stated that the appellants were under the bonafide belief that there was no service tax liability on them as they did not collect the service tax from the clients. The moment they were apprised of the legal flaw in their stance, they readily accepted the liability and fully cooperated with the Department submitting all the relevant records and making an on the spot payment of Rs. 1,00,000/-towards the tax liability. This payment of Rs. 1,00,000/- was made even before the issue of Show Cause Notice. In these circumstances the penalty imposed under Sections 76 and 78 is not justified.
4. I have gone through the records of the case carefully. The appellants were rendering the services of C&F agents. They are not disputing the liability towards the service tax. They only requested to treat the amount received by them from their customers as cum-tax amount and to re-compute the tax liability. In this connection they have relied on the Trade Notice issued by Delhi Commissionerate and also two case laws cited (supra). I re-produce the relevant clarification issued as under:
(a) Para 8 in Tribunal decision in the case of Panther Detective Services (supra):
8. Coming to the penalty amounts, the contention of the learned Counsel is that in terms of Section 80 of the Finance Act, 1994, no penalty is warranted on the appellants. The contention is that the appellant had been making payment of duty in time and wrong valuation is a bona fide error and such errors are excluded under Section 80 from penalty. We may read that Section:
Notwithstanding anything contained the provision of Section 76 and 77, Section 78 and Section 79, no penalty shall be impossible on the assessee for any failure referred to in the said provision, if the assessee proves that there was no reasonable cause for the said failure.
(b) Para 6 of Tribunal judgment in the case of Bhagawati Security Services (supra):
6. Accordingly, the impugned order is set aside and the matter us remanded back to the original adjudicating authority to consider the plea of the appellant, as regard gross amount received by them being inclusive of Service Tax component. The original adjudicating authority will decide the matter afresh including the imposition of penalty and interest after granting the appellant an opportunity of personal hearing. Appeal is allowed by way of remand.
This position has been upheld in the decisions of the Tribunal. However, the Commissioner (Appeals) has not appreciated the stand of the appellant on the ground that Explanation II to Section 67 of the Finance Act, 1994 was inserted only on 10.9.2002 and the same cannot be made applicable in the present case. It stipulates that when the gross amount charged by the service provider is inclusive of service tax payable, then the value of the taxable services shall be such amount as addition of tax payable is equal to the gross amount charged. I do not agree with the Commissioner (Appeals). The Explanation only clarifies the general principle that when no tax is separately collected from the client, the gross amount collected is inclusive of the tax. This principle is applied in the Central Excise cases also in the light of the Maruti Udyog Ltd. case decided by the Supreme Court. Even in respect of removal without payment of duty when the duty liability is computed the sale value is taken to be cum-duty value. The same principle has to be applied here also. Therefore, we set aside the impugned order and remand the matter to the Original authority for re-computation of the duty liability taking the gross receipt as inclusive of service tax. It is seen that when the appellants came to know all the correct legal position, they voluntarily paid Rs. 1,00,000/- even before the issue of show cause notice. In these circumstances, the imposition of penalty on the appellant is not sustainable. The same is set aside. Therefore I remand the matter to the Original authority to re-compute the tax liability. However, appropriate interest as per law should be paid for the delayed payment of service tax. With the above directions, I remand the matter to the Original authority and allow the appeal.
(Pronounced and dictated in the open court)