Custom, Excise & Service Tax Tribunal
S.P. Associates vs Commissioner, Central Excise, Pune I on 16 November, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. ST/85125/2015 [Arising out of Order-in-Appeal No. PUN-EXCUS-001-APP-070-14-15 dated 18.9.2014 passed by Commissioner (Appeals) Central Excise Pune-I] For approval and signature: Honble Shri 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 : No
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?
======================================================
S.P. Associates
:
Appellant
VS
Commissioner, Central Excise, Pune I
:
Respondent
Appearance
Shri. Amit Agrawal, C.A. for Appellant
Shri. Sanjeev R. Nair, Examiner (A.R) for respondent
CORAM:
Honble Shri Ramesh Nair, Member (Judicial)
Date of hearing : 16/11/2015
Date of pronouncement: 11/03/2016
ORDER NO.
The appeal is directed against Order-in-Appeal No. PUN-EXCUS-001-APP-070-14-15 dated 18.9.2014 passed by Commissioner (Appeals) Central Excise Pune-I whereby the Ld. Commissioner dismissed the appeal filed by the appellant. The present appeal was filed by the appellant only challenging the penalties imposed under Section 77 & 78 of the Finance Act, 1994.
2. The fact of the case is that the appellant engaged in the construction of complex services which became taxable w.e.f.16.6.2005, however the appellant did not pay the service tax in time for the period July 2010 to June 2012. The appellant on their own applied for the registration on 5.1.2012 and suo moto computed the service tax liability for the aforesaid period and started paying service tax. The appellant paid the entire amount of service tax of Rs.26,72,756/- and interest of Rs.4,53,658/- before issuance of show cause notice. The appellant also filed return though belatedly, therefore they also paid the late fees for delayed filing of returns. Subsequently, the show cause notice was issued on 18.12.2012 proposing demand of service tax and imposition of penalties. In the adjudication, the service tax demand was confirmed, the amount of service tax already paid was appropriated and penalties under Section 77 & 78 were also imposed. Aggrieved by the original order, the appellant filed appeal before the Commissioner (Appeals), who by the impugned order dismissed the appeal of the appellant upholding the Order-in-Original. Therefore, the appellant is before me with a prayer for waiver of penalties imposed under Section 77 & 78 of the Finance Act.
3. Shri Amit Agrawal, Ld. Chartered Accountant appearing for the appellant submits that in the present case the demand is on construction of complex. The levy of service tax itself was disputed right from beginning and there were various circulars issued by the Board on this service. He submits that the issue of levy of service tax was also challenged in the following judgments:
(i) Magus Construction Pvt. Ltd. Vs. Union of India 2008 (11) S.T.R. 225 (Gau.)
(ii) Commissioner of Service Tax Vs. Sujal Developers 2013 (31) S.T.R. 523 (Guj.)
(iii) Maharashtra Chamber of Housing Industry Vs. Union of India 2012 (25) S.T.R. 305 (Bom.) In view of the uncertainty on the levy of service tax due to the matter being in litigation in various courts, the many construction industry were not paying service tax on the construction service. The appellant on their own computed the service tax and paid the same along with interest before issuance of show cause notice. Therefore for this reason also the penalties should not have been imposed as held in the following judgments:
(i) Neev Sai Developers Vs.Commissioner of Central Excise, Pune-I 2014-T IOL-2197-CESTAT-MUM
(ii) C.C.E. & S.T., LTU, Bangalore Vs. Adecco Flexione Workforce Solutions Ltd. 2012 (26) S.T.R. 3 (Kar.)
(iii) M/s. Metro Automobiles Vs. Commissioner of Central Excise, Daman 2013-TIOL-886-CESTAT-AHM He submits that since the levy of service tax was not free from doubt, it was a bona fide belief of the appellant that the service tax is not leviable, hence the appellant could not pay the service tax in time. In this regard, the appellant placed reliance of the following judgment:
(i) Hindustan Steel Ltd. Vs. State of Orissa 1978 (2) E.L.T.(J 159) (S.C.)
(ii) Commissioner of C.Ex. Mangalore Vs. Abharan Motors Pvt. Ltd.
2011 (23) S.T.R. 72 (Tri.- Bang.)
(iii) Kalsis Kitchenette Vs. Commissioner of C. Ex., Pune-III 2010 (20) S.T.R. 772 (Tri.-Mumbai) He further submits that since the matter was under litigation and legal interpretation was involved on the levy of service tax on the construction of complex service, for this reason also malafide intention cannot be alleged and penalty cannot be imposed as held in the following judgments:
(i) Color Times Vs. Commissioner of C.Ex., Hyderabad 2006 (3) S.T.R. 741 (Tri.Bang.)
(ii) J.P. Transformers Vs. Commissioner of C. Ex. & S.T., Kanpur 2014 (36) S.T.R. 471 (Tri.-Del.)
(iii) Fibre Foils Ltd. Vs. Commissioner of Central Excise, Mumbai-IV 2005 (190) E.L.T. 352 (Tri-Mumbai)
(iv) Union of India Vs. Rajasthan Spinning & Weaving Mills 2009 (238) E.L.T. 3 (S.C.) He submits that under the given circumstances of the present case the penalty is not imposable invoking Section 80 as held in the following judgments:
(i) ETA Engineering Ltd. Vs. Commissioner of Central Excise, Chennai 2006 (3) S.T.R. 429 (Tri.-LB)
(ii) Commissioner of Service Tax, Bangalore Vs. Vinayaka Travels 2011 (23) S.T.R. 5 (Kar.)
(iii) Commr. of Service Tax, Mumbai Vs. Gamma Consultancy Pvt. Ltd.
2006 (4) S.T.R. 591 (Tri.-Mumbai).
4. On the other hand, Shri Sanjeev Nair, Ld. Examiner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that the argument of the Ld. Counsel that the levy of service tax was under dispute and it was pending in the various court, the appellant has entertained the bonafide belief for non-payment of service tax is not correct for the reason that the scope of taxable service on construction of complex was expanded on 1.7.2010, by which all the doubts on the taxability of services were cleared. Therefore the appellant should have paid the amount immediately after 1.7.2010, which the appellant failed to do so hence the penalty was correctly imposed.
5. I have carefully considered the submissions made by both the sides. I find that the issue relates to the penalties imposed under Section 77 & 78 of the Finance Act due to non-payment of service tax in time on the services of construction of complex. The appellant are not contesting the service tax liability, moreover they have paid the service tax along with interest before the issuance of show cause notice. I find that there is a force in the argument of the Ld. Counsel that the issue of taxability of construction of complex was under doubt right from beginning and various circulars were issued to clarify the position on taxability of the said services. I also observed that in the case of Magus Construction Pvt. Ltd. (supra), Sujal Developers (supra) and Maharashtra Chamber of Housing Industry (supra), the constitutional validity of the levy of construction of complex were challenged. It is also observed that even after 1.7.2010 the Maharashtra Chamber of Housing Industry filed writ petition in the Honble Bombay High Court wherein a stay was granted on 23.10.2010 and finally judgment was passed by the Honble High Court in January 2012 only. Even the said judgment was challenged by Maharashtra Chamber of Housing Industry (supra) which is pending in the Honble Supreme Court. In view of this position, on the taxability of the services, the bona fide belief of the appellant in non payment of service tax in time, is established. It is not disputed that the appellant have recorded the entire transaction of their services in their books of accounts. In view of the above position, I find that the appellant have shown the reasonable cause for waiver of penalties invoking under Section 80 of the Finance Act. In various judgments this Tribunal has taken a consistent view, that penalty under similar fact is not imposable. Some of the judgments were relied upon by the appellant as cited in their submission made hereinabove. In the similar circumstances, the penalties should not be imposed invoking the provisions of Section 80 of the Act. The penalties imposed under Section 77 & 78 are waived, however the service tax and interest thereon paid by the appellant is upheld.
I, therefore set aside the impugned order and allow the appeal of the appellant.
(Pronounced in court on 11/03/2016) (Ramesh Nair) Member (Judicial) SM.
7Appeal No. ST/85125/2015