Custom, Excise & Service Tax Tribunal
Haldia vs India Computer Technology on 29 January, 2025
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.1
Service Tax Appeal No.77000 of 2016
(Arising out of Order-in-Original No.36/Commissioner/CE/Haldia/Adjn/2016 dated
07.09.2016 passed by Commissioner of Central Excise & Service Tax, Haldia)
Commissioner of Central Excise & Service Tax, Haldia
(15/1, Strand Road, Kolkata-700001)
Appellant
VERSUS
M/s India Computer Technology
(Middle Point, Port Blair HO,Andaman & Nicobar Islands, Pin-744101)
Respondent
APPERANCE :
Shri P.Das, Authorized Representative for the Appellant None for the Respondent CORAM:
HON'BLE MR.ASHOK JINDAL, MEMBER (JUDICIAL) HON'BLE MR.K.ANPAZHAKAN, MEMBER (TECHNICAL) FINAL ORDER NO.75433/2025 DATE OF HEARING : 29 JANUARY 2025 DATE OF DECISION : 29 JANUARY 2025 Per Ashok Jindal :
Revenue has filed this appeal against the impugned order wherein the ld.Adjudicating Authority dropped the penalty under Section 78 of the Finance Act, 1994 by invoking Section of the Finance Act, 1994.
2.1 The facts of the case are that M/s India Computer Technology, Middle Poin, Port Blair HO, Amlaman & Nicobar Islands, PIN CODE 744101 holder of Service Tax Registration No. ANHPK2600GSD002 or rendering Commercial Training of Coaching, have contravened the provisions of Section 88(1) of the Finance Act, 1994, inasmuch as they failed to pay Service Tax amounting to Rs.8,24,21,927/- (including 2 Service Tax Appeal No.77000 of 2016 Cess) in respect of the taxable services provided by them to their clients during the Financial Year 2009-2010 to 2013-2014. 2.2 M/s ICT (M/s India Computer Technology) provided services pertaining to various E-government projects such as Computer training. Data Entry, Bio-metric Data capture, Execution of National Population Register, Demographic Data digitization, Capturing of individual data ete, to M/S. Electronic Corporation of India Limited (ECIL), M/S, ITI Ltd. and M/s.BEL, Bangalore, who are authorized by the Govt. of India to implement the National Population Register and Socio Economic Caste Census Project and on completion of the work/services as ordered by M/s ECIL. M/s ITI Ltd, and M/s BEL, Bangalore, the noticee raised bills/invoices including Service Tax, but they neither discharged the instant Service Tax, as is required, nor filed ST-3 returns. 2.3 Further, on going through their Annual Financial Statements, it has been revealed that the noticee have provided Commercial Training or Coaching to students and reflected the amount collected under the head of Professional Charges in their Annual Financial Statements/Balance Sheets. But the noticee neither paid the applicable Service Tax for the services rendered nor had filed ST-3 Returns as is required. 2.4 Consequent on the investigation initiated by DGCEI, Bangalore on 09.12.2013, the noticee have filed an application dated 31.12.2013 under VCES Scheme (Service Tax Voluntary Compliance Encouragement Scheme, 2013) by declaring Rs.41,32,586/- as their Service tax liability. They also paid Rs.20,66,294/- towards 50% of their liability declared under VCES scheme. Shri Kannadasan, Proprietor of ICT, in his 3 Service Tax Appeal No.77000 of 2016 deposition had also admitted that they have neither filed ST-3 Returns nor paid Service tax, before initiation of the investigation. 2.5 The said assessee failed to deposit the service tax on the amount so billed to their clients and hence appeared that they flagrantly violated the provisions relating to levy and collection of service tax in respect of 'Business Auxiliary Service'.
2.6 Accordingly, a Show Cause Notice was issued for disallowance of the application filed by the noticee under VCES scheme 2013 under the provision of Section 111(1) of the Finance Act. 2013 and demanding Service Tax to the tune of Rs. 8,24,21,927.00 (including Cess) in terms of Section 73(1) of the Finance Act, 1994 along with interest, as applicable, in terms of Section 75 of the Act and also proposing imposition of penalty in term of Sections 77 (2) & 78 of the Finance Act, 1994.
2.7 The Noticee admitted the contention of the demand made in the show-case notice but disputed the quantification of the service tax demanded in the instant show cause notice. They stated that the income Figure under Sales of M/s Royal for amounting to Rs.1,38,67,081 had been included while calculating the taxable value of service tax, which in their view should not be considered. They also contended that they had already deposited Rs.58,92,327- before issuance of show cause notice to the Govt. Account as service tax which might be adjusted to their service tax liability. 2.8 After considering the facts of the case and the noticee's submissions, the Adjudicating Authority arrived at the following decisions on the issues :
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Service Tax Appeal No.77000 of 2016
(i) The Adjudicating Authority observed that the said assessee had rendered the services of Biometric Data capture, Execution of National Population Register, Demographic Data digitization, capturing of individual data etc. to M/s ECIL, M/s.ITI Und and M/s BEL, Bangalore, who are authorized by the Government of India and are engaged on behalf of Government of India and that the service rendered to the Govt.
(ii) The Adjudicating Authority also observed that the said assessee had provided the taxable services under the category of 'Business Auxiliary Service' to their clients; however, they have not obtained the service tax registration under the aforesaid taxable category. They neither have filed the ST-3 returns nor paid any amount of service tax during the period from 2009-2010 to 2013-2014.
(iii) As per Notification No.10/2013-ST dated 13th May, 2013 for availing VCES, any person who has filed return and disclosed true liability had not paid the disclosed amount of Service Tax, but the payment of declaration must be filed on or before 31st day of December, 2013. Here, the said noticee filed VCES application on 06.01.2014 and during the course of personal hearing, the Ld. Advocate of the said assessee confessed before the adjudicating authority that the said VCES application were rejected on the ground that they had availed Cenvat Credit while arriving at the service tax liability. The Adjudicating Authority found that nowhere in the said notification it was mentioned that the credit would be foregone, if not filed within stipulated time. 5
Service Tax Appeal No.77000 of 2016
(iv) The Adjudicating Authority held that the amount as sales figure shown under the head of "Income" in their Profit & Loss A/c. to the tune of Rs.1,38,67,081/- on which Service Tax liability comes to Rs.15,05,420/-(including cess) should not be included in the payable service tax amount i.e. Rs.8,24,21,927/- (including Cess) as demanded in the show cause notice. Accordingly, he was of the opinion that the service tax liability of M/s India Computer Technology is Rs.8,09,16,507/- (Rs.8,24,21,927/- - Rs.15,05,420/-) instead of Rs.8,24,21,927/ as the amount of Rs.1,38,67,081/- is earned by the said assessee through their trading transactions and they have not rendered any taxable service to any of their clients.
(v) Moreover, the Adjudicating Authority found that the Service Tax of Rs.6,34,54,478 (including Cess) paid by M/s Tera Software Ltd. who is a sub-contractor of M/s ICT, had been paid by M/s ICT against the bill raised by Tera Software Lad to ICT during 2011-12, 2012-13 and 2013-14. And from the available documents, it revealed that M/s Swathy Smart Cards Hi-Tech (P) Ltd also paid service Tax of Rs.6,07,9391- (including cess) for 2013-14 on work order received directly from M/S-ICT and the said amount had been received from M/s ICT. So the total service tax amounting to Rs.6,40,62,417- (Rs.6,34,54,478 + Rs.6,07,939-) paid by both M/s Tera Software Ltd. and M/s Swathy Smart Cards Hi-Tech (P) Lid paid to the Govt, exchequer for service rendered to M/s ICT as sub-contractors. Accordingly, he found that M/s ICT is entitled to avail those credit of Service Tax which had been paid by the noticee (M/S-ICT) against bills raised by both the sub-contractors i.e. M/S- Tera Software Ltd. and M/s 6 Service Tax Appeal No.77000 of 2016 Swathy Smart Cards Hi-Tech (P) Ltd. This amount of credit should be adjusted against their net service tax liability.
(vi) Further, the said noticee paid an amount Rs.58,92,327/- (Rs.41,32,586.00 Rs.17,59,741/-) before issuance of show cause notice on 31/12/2013, 02/7/2014 and 25/8/2014 to Govt. Exchequer for VCES benefit but the same application was rejected and the said amount is adjustable from their net service tax liability.
(vii) The Adjudicating Authority found that the net taxable liability for the material period is Rs.1,09,61,763/-((Rs.8,09,16,507.00- Rs.6,99,54,744.00 (Rs.6,40,62,417.00+Rs.58,92,327.00)].
(viii) The Adjudicating Authority found that the said noticee accepted their liability of service tax and the same has been shown in Audited Balance Sheet as well in Books of accounts so there was no bad intention or willful suppression for non-payment of service tax the only reason that they had not paid was due to mistake of their auditor.
(ix) The Adjudicating Authority observed that penalty under Section 78 of Finance Act, 1994 is leviable where there is intent to evade payment of tax coupled with some negative action on our part like fraud, suppression, collusion etc.. He found in this case that there was no intent whatsoever to evade the payment of tax, the reason was unintentional.
2.9 Accordingly, the Adjudicating authority has passed the following orders :
(i) Confirmed the demand and order for recovery of service tax of Rs.8,09,16,307/- instead of Rs.8,24,21,927/- against M/s Iadia Computer Technology, Middle Point, Port Blair HO Amdaman & Nicobar 7 Service Tax Appeal No.77000 of 2016 Islands, Pin-744101 under proviso to Section 73(2) of the Finance Act, 1994.
(ii) Allowed the Cenvat eredit amounting to Rs.6,40,62,417, so paid by sub-contractor of M/s ICT on the same service.
(iii) Ordered for appropriation the amount of Service tax Rs.6,40,62,417/- already paid by both M/s-Tera Software Ltd and M/s Swathy Smart Cards Hi-Tech (P) Ltd., sub-contractor of assessee M/s-
ICT against their above service tax liability.
(iv) Disallowed the application filed by the said assessee under Service Tax Voluntary Compliance Encouragement Scheme, 2013 under the provisions of Section 111(1) of the Finance Act, 2013.
(v) Ordered for appropriation of the amount of Rs.58,92,327/-, already paid by the said assessee against their above service tax liability.
(vi) Ordered to pay Rs.1,09,61,763/-.
(vii) Ordered to charge and recover interest at appropriate rate on the amount of Rs.1,09,61,763/- mentioned at Sl. No.(vi) above under the provisions of Section 75 of the Finance Act, 1994.
(viii) Refrained from imposing any penalty upon the said assessee under Section 78 of the Finance Act, 1994.
(ix) Imposed penalty Rs. 10,000/- only upon the said assessee under Section 77(2) of said Finance Act, 1994 for violation of Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994 in as much as the said assessee failed to submit half-yearly return during the material period.
2.10 Now, the Revenue is in appeal against the impugned order on the ground that the demand of Rs.8,09,16,507/- was confirmed against 8 Service Tax Appeal No.77000 of 2016 the respondent by invoking extended period of limitation, but the relief under Section 80 of the Finance Act, was allowed and refrained from imposing penalty under Section 78 of the Finance Act, 1994.
3. When the matter was called, none appeared on behalf of the respondent. However, with the consent of ld.A.R. for the Revenue, we take up the Revenue's Appeal for final disposal.
4. The ld.A.R. for the Revenue submits that as the Adjudicating Authority has failed to reveal the facts that the proprietor of the respondent raised the invoices to all the clients incorporating elements as applicable rates and also stated that they have not paid service tax recovered by them and after getting summons, they opted for VCES Scheme, therefore, the penalty under Section 78 of the Act is to be imposed on the respondent and they have not entitled to get benefit of such Section 80 of the Finance Act, 1944.
5. We find that that if the assessee can show that the service tax could not be paid due to their bonafide mistake in time by invoking Section 80 of the Finance Act,1994, the penalty can be waived. In this case, the respondent has showed their bonafide that they did not receive the payment from the clients for providing services and that is why, they could not pay the service tax in time. In that circumstances, it is observed from the audited balance sheet as well as in the books of accounts that income figures under sales of M/s Royal for amounting to Rs.1,38,67,081/- has been included while calculating the taxable value of service tax, if investigated properly, it should not have been included. Further, the report from Hyderabad Service Tax Division, confirmed payment of service tax by the Sub-contractor and the respondent 9 Service Tax Appeal No.77000 of 2016 discharged the said duty against their bills raised by M/s Tera Software Limited. It was also found that M/s Swathy Smart Cards Hi-Tech (P) Limited also paid service tax of Rs.6,07,939/- on work order received directly from the respondent and the respondent has also discharged the service tax.
6. In that circumstances, we find that the adjudicating authority has rightly invoked the provisions of Section 80 of the Finance Act, 1994 and refrained from imposing any penalty under Section 78 of the Act. We do not find any infirmity in the impugned order by dropping penalty under Section 78 of the Finance Act, 1994.
7. Accordingly, we do not find any merit in the appeal filed by the Revenue, the same is dismissed.
(Operative part of the order was pronounced in the open court) (Ashok Jindal) Member (Judicial) (K.Anpazhakan) mm Member (Technical)