Custom, Excise & Service Tax Tribunal
S C Agarwal vs Ce & Cgst Ghaziabad on 7 May, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT No. I
Service Tax Appeal No.70086 of 2019
(Arising out of Order-in-Appeal No.54-GBN-EXST-APP-2018 dated 31/05/2018
passed by Commissioner (Appeals) Central Tax & CGST, Noida)
M/s S C Agarwal, .....Appellant
(RDC-116, Raj Naggar, Ghaziabad-201002)
VERSUS
Commissioner of Central Excise &
CGST, Ghaziabad ....Respondent
(CGO Complex-II Hapur Road, Ghaziabad)
APPEARANCE:
Shri Rajesh Chhibber, Advocate for the Appellant
Shri Santosh Kumar, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70546/2024
DATE OF HEARING : 07 May, 2024
DATE OF DECISION : 07 May, 2024
SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No: 54-
GBN-EXST-APP-2018 dated 31.05.2018 of Commissioner
(Appeals) Central Tax, GST & Central Excise Gautam Buddh
Nagar. By the impugned orde following has been held:
"ORDER
(a) I hereby drop the demand of Service Tax amounting to Rs.
10,45,944/-, as discussed at para 5.2 supra, confirmed by
the Original Authority on account of contravention of Rule
6(2) of the CENVAT Credit Rules, 2004 for the period
Service Tax Appeal No.70086 of 2019
2
2011-12. I also drop the corresponding demand of interest
and penalty confirmed on the aforesaid Service Tax.
(b) I confirm the demand of appropriate interest on the late
payment of Service Tax amounting to Rs. 8,16,780/-
under Section 75 of the Finance Act, 1994, as discussed at
para 5.5 above.
(c) I uphold the penalty imposed upon the Appellants by the
Original Adjudicating Authority under Section 78 of the
Finance Act-1994 for evasion of Service Tax by wrongly
availing abatement on the ongoing works contracts in
terms of provisions of Rule 2A(ii) of the Rules, 2006, as
discussed at para 5.6 above. However, I reduced the
quantum of penalty under Section 78 of the Act ibid, from
Rs. 15,53,827/- to Rs. 7,76,914/- as discussed at para 5.7
above.
(d) I allow benefit of duty cum price to the Appellants on the
Service Tax not paid under on job work / rental income
(declared as miscellaneous income under P & L Account of
the Appellants), and accordingly, I reduce the Service Tax
liability of the Appellants on such income for the period
2010-1 1 to 2012-13, from Rs, 74565/- to Rs. 67067/ as
discussed at para 5.9 above. However since Rs. 35,765/-
have been paid by the Appellants under VCES, the I
hereby confirm the demand of Service Tax amounting to
Rs. 31,302/-, (Rs. 67067/- minus 35,765/-) not paid
under on job work / rental income (declared as
miscellaneous income under P & L Account of the
Appellants) under proviso to Section 73(1) of the Finance
Act, 1994, as discussed at para 5.10 above,
(e) I uphold the demand of appropriate interest and penalty of
Rs, 16964/-, on demand of Service Tax, amounting to Rs.
31,302/- under Section 75 and` Section 78 of the Finance
Act, 1994 respectively, as discussed at para 5.10 above,
(f) The impugned Order-in-Original No, 122/ AC /ST/GZB/
2016-17 dated 31,03,2017 stands modified only to the
extent as discussed in the foregoing paras 6(a) to 6(e)
Service Tax Appeal No.70086 of 2019
3
above and the remaining portion of the impugned order
remain unchanged, The appeal filed by M/s S. C. Agarwal,
RDC 116, Raj Nagar, Ghaziabad is disposed of on above
terms,"
2.1 Appellant is a partnership firm having service tax
registration no. AAIFM8173ASTOO1 under the category of Works
Contract Service' and 'Commercial & Industrial Construction', for
executing construction works for their various clients.
2.2 During audit it was found that
during Financial year 2011-12, the Appellant was engaged
in providing taxable services and exempted services,
simultaneously, but failed to maintain separate accounts
of input services used in relation to exempted services
provided by them but availed CENVAT Credit and used it
for common output services, hence violated the provisions
of Rule 6(2) of CENVAT Credit Rules 2004. On the
exempted trading service the appellant was required to
pay/ reverse an amount of Rs. 10,45,9441- as per rule
6(3) of CCR and as per Explanation -I (c) of sub-rule 3D of
rule 6 of CCR respectively, which was not paid by the
Appellants.
In July 2012 (financial year 2012-13), the Appellants
provided Works Contract Service to M/s Wonder Cement
Ltd. for construction of private railway siding under an
agreement dated 01.03.12 to 30.06.2012. They were
availing CENVAT Credit facility on inputs but opted not to
avail the same and claimed 60% abatement from the
taxable value in terms of Rule 2A(i) of the Service Tax
(Determination of 'Value) Rules, 2006 ("the Rules 2006",
in short). They also availed benefit of Notification No.
30/2012-ST dated 20-06-2012 i.e. they availed 60%
benefit of abatement under Rule 2A (ii) and paid service
tax on 50% of gross amount charged. Subsequently,
during internal audit by the Department it was pointed out
that the Appellants cannot change the method of
valuation in respect of ongoing Works Contract and they
Service Tax Appeal No.70086 of 2019
4
were not eligible for the said abatement claimed by the
Appellants under Rule 2A(ii) of the Rules 2006. Thus the
Service tax amounting Rs. 36,46,785/- was short paid.
Appellants had also wrongly availed CENVAT Credit to the
tune of Rs. 9,47,460/- in the month of June 2012 on the
invoices which were issued in the month of July 2012.
Appellants had not paid service tax to the tune of Rs.
74,565/- on the rent received in respect of tangible goods
rented out in 2010-11 to 2012-13. 'The Appellants had
shown this amount as miscellaneous income in their P/L
account.
2.5 Thus a Show Cause Notice dated 30.03.2015 was issued to
the Appellants asking them to show cause as to why:
The amount of Rs. 10,45,949/- (Rs. Ten Lakh Forty Five
Thousand Nine Hundred and Forty Nine only) should not
be demanded and recovered from them under Rule 14 of
the CENVAT Credit Rules, 2004 read with Section 73(1) of
the Finance Act, 1994, invoking the Proviso thereto
interest should not be charged and recovered from them
under Rule 14 of the CENVAT Credit Rules, 2004 read with
Section 75 of Finance Act, 1994 on the amount referred
above i.e. Rs. 10,45,949/-
Penalty should not be imposed upon them under Rule
15(1) & (2) of the CENVAT Credit Rules, 2004 read with
Section 78 of Finance Act, 1994 for evasion of Service Tax
mentioned in Para (i) above by contravening the provisions
of Rule 6(8) of the CENVAT Credit Rules, 2004.
Service tax of Rs. 17,93,156/- [Rs. Seventeen Lakh
Ninety three Thousand One Hundred and Fifty six Only] on
account of. wrong availment of abatement under Rule2A(ii)
of the Service Tax (Determination of Value) Rules, 2006 as
detailed and discussed in the foregoing paragraphs, should
not be demanded and recovered from them under Section
73(1) of the . Finance Act,1994, invoking the Proviso
thereto.
Service Tax Appeal No.70086 of 2019
5
Interest should not be charged and recovered from them
under Section 75 of the Finance, Act, 1994 on the amount
referred above i.e. Rs. 17,93,156/-.
Penalty should not be imposed upon them under Section
78 of the Finance Act, 1994 for evasion of Service Tax
mentioned in para (iv) above, by contravening the
provisions of Section 68 of the Finance Act, 1994 read with
Rule 6 of the Service Tax Rules, 1994 and Rule 2A of the
Service Tax (Determination of Value) Rules, 2006.
Service tax of Rs. 38,800/- [Rs. Thirty Eight Thousand
Eight Hundred only] not paid on supply of tangible goods'
service, as detailed and discussed in the foregoing
paragraphs, be not demanded and recovered from them
under Section 73(1) of the Finance Act, 1994, invoking the
Proviso thereto.
Interest should not be charged and recovered from them
under Section 75 of finance Act, 1994 on the amount
referred above i.e. Rs. 38,800/-
Penalty should not be imposed upon them under Section
78 of the Finance Act, 1994 for evasion of Service Tax
mentioned in para (vi) above, by contravening the
provisions of Section 68 of the Finance Act, 1994 read with
Rule 6 of the Service Tax Rules, 1994."
2.6 The show cause notice was adjudicated vide Order-In-
Original No. 122/AC /ST/ GZB/ 2016-17 dated 31-03-2017
holding as follows:
"ORDER
1. I confirm the demand of Rs.10,45,949/- (Rs., Ten lakh forty
five thousand nine hundred forty nine only) under Rule 14
of Cenvat Credit Rules 2004 read with proviso to Section
73(1) of Finance Act,1994 and order to recover the same
from the party.
2. I order to charge interest on the above mentioned amount
of Rs. 10,45,949/- under section 75 of Finance Act,1994
Service Tax Appeal No.70086 of 2019
6
read with Rule 14 of Cenvat Credit Rules, 2004 and order to
recover the same from the party
3. I impose equal penalty of Rs.10,45,949/- on (1) above
under section 78 of Finance Act,1994 read with Rule 15(1)
& (2) of Cenvat Credit Rules, 2004 for evasion of Service
Tax mentioned above by contravening the provisions of
Rule 6(3) of the CENVAT Credit Rules, in Para e 2004.
4. I confirm the demand of service tax amounting to Rs,
15,53,827/- (Rs. Fifteen Lakh fifty three thousand eight
hundred twenty seven only), on account of wrong availment
of abatement under Rule 2A(ii) of the Service Tax
(Determination of Value) Rules, 2006 under -proviso to
Section 73(1) of Finance Act,1994, out of total demand of
Rs. 17,93,156/- and order to recover the same from the
party. Since Rs.7,39,137.00 (paid after VCES) in cash &
Rs.8,16,780.00 from Cenvat account has already been paid
by the party, therefore, I also order for appropriation of all
these deposits along with Rs.2090.00 paid in excess as
calculated above on the FOC material, under section 73(1)
of Finance Act,1994, however I refrain to demand service
tax of Rs.2,39,329.00 on FOC material value in view of the
discussions referred above.
5. Since the tax deposited under VCES bears immunity from
interest and penalty and Rs. 7,39,137.00 was also paid by
the party with interest, therefore, I find no reason to
demand interest on this amounts under section 75 of
Finance Act,1994 and also order for appropriation of Rs
1,03,701/- deposited as interest, under section 75 of
Finance Act,1994. However, I order to charge interest on
Rs. 8,16,780/- paid through CENVAT credit under section 75
of Finance Act,1994 and order to recover the same from
the party.
6. I impose penalty of Rs. 15,53,837/- under section 78 of
Finance Act,1994, upon the party out of Rs. 17,93,156/-,
for evasion of Service Tax mentioned in Para (iv) above by
contravening the provisions of Section 68 of the Finance
Service Tax Appeal No.70086 of 2019
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Act, 1994 read with Rule 6 of the Service Tax Rules, 1994
and Rule 2(A) of the Service Tax (Determination of Value)
Rules, 2006.
7. I confirm the demand of Rs.38,800.00 of Service Tax not
paid under supply of tangible goods service under proviso
to section 73(1) of Finance Act,1994 and order to recover
the same from the party. Since an amount of Rs.35765.00
has already paid by the party under VCES on this count, the
same is ordered to be appropriated, and the balance
amount of Service Tax for Rs.3035.00 is recoverable from
the party under proviso to section 73(1) of FINANCE
ACT,1994.
8. I charge interest on above mentioned amount of Rs. 3,035/-
under section 75 of Finance Act, 1994 and order to recover
the same from the party .
9. I also impose an equal penalty of Rs. 3,035.00 under
Section 78 of Finance Act,1994 for evasion of Service Tax
mentioned in Para (vii) above by contravening the
provisions of Section 68 of the Finance Act, 1994 read with
Rule 6 of the Service Tax Rules, 1994,.
The dues adjudged be paid forthwith.
2.7 Aggrieved appellant have filed appeal before firs appellate
authority, which has been disposed as per the impugned order.
2.8 Aggrieved appellant have filed this appeal.
3.1 We have heard Shri Rajesh Chibber, Advocate for the
appellant and Shri Santosh Kumar, Authorized Representative
for the revenue.
3.2 Arguing for the appellant learned counsel submits:
The so-called incorrect payment of service tax for works
contract service was due to the different understanding on
introduction of negative list under service tax. Hence it
could not be considered as intention to evade payment of
service tax. No query was raised by the department on
filing of ST Returns. Entire case was made out on the basis
of audit objection meaning thereby that it was not the case
Service Tax Appeal No.70086 of 2019
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of any clandestine activity or some malafide to evade
payment of tax. Whatever tax was determined by the
appellant was declared in the invoices and charged to the
customer and it was not the case of non- payment of
service tax.
The credit due in July 2012 was claimed while filing return
of June 2012 by mistake. However, once it is not disputed
that the same was eligible in the month of July 2012, at
best interest could be demanded for one month only. It is
an admitted fact that the appellant opted for VCES.
However, the appellant discharged the entire liability under
VCES by making cash payment and by utilizing cenvat
credit. Later the department did not accept the payment
from cenvat credit and accordingly the appellant paid said
amount in cash. However since the time for filing revised
ST3 Return was available to the appellant, he discharged
the service tax liability on full value without claiming
abatement and by utilizing cenvat credit, he filed revised
ST3 Return also. The show cause notice considered the
same but still raised demand. It is an undisputed fact that
the appellant discharged entire service tax liability well
before the issuance of SCN. The original authority
appropriated the amounts paid in VCES and did not
consider the revised return
The appellant is contesting the invocation of extended
period and imposition of penalty in the manner held in the
impugned order It is a settled legal position that when
entire basis on which case was made out, was in entered
in statutory books of account, it could not be the case of
any malafide intent. It is also a settled law that mere non-
payment of tax cannot be equated with evasion of tax.
Hon'ble Supreme Court in the case of Uniworth Textiles
Ltd. reported in 2013(288)ELT161(SC) has laid down the
law that every case of non- payment of tax can always be
considered as evasion of tax. The audit was conducted in
Dec.2013 whereas the SCN was issued in March 2015 by
Service Tax Appeal No.70086 of 2019
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invoking extended period whereas in terms of Judgment of
Hon'ble Allahabad High Court in the case of CCE vs.
Triveni Engg. reported in 2015 (317) ELT 408 (All.)
3.3 Arguing for the revenue learned authorized representative
reiterates the findings recorded in the impugned order.
4.1 We have considered the impugned order along with the
submissions made in appeal and during the course of argument.
4.2 From the appeal and the arguments advanced by the
appellant it is evident that the appellant is challenging the
impugned order only to the extent of invocation of extended
period of limitation and the penalty imposed upon him.
Impugned order records as follows:
"5.4 Now I take up the issue of demand of Service Tax
amounting to Rs. 15,53,827/- on account of wrong availment
of abatement under Rule 2A(ii) of the Servicc Tax
(Determination of Value) Rules, 2006 under proviso to
Section 73(1) of thc Act. In this . regard, I find that the
Appellants while providing taxable service of Works Contract
to M/s Wonder Cement Ltd. for construction of private
railway siding under an agreement dated 01.03.12 to
30.06.2012 were availing CENVAT Credit facility on inputs but
opted not to avail the same w.e.f. July 2012, and claimed
60% abatement from the taxable value in terms of Rule
2A(ii) of the Rules 2006. However, during internal audit by
the Department, it was pointed out to the Appellants that
they had short paid Service Tax to the tune of Rs.
36,46,785/- as they have illegally changed the method of
valuation in respect of ongoing works Contract as they were
not eligible for the said abatement under Rule 2A(ii) of the
Rules 2006. I further find that the Appellants in their written
submissions at the time of adjudication of impugned Order-
In-Original and also in the instant appeal have accepted their
mistake by stating that they were not fully conversant with
the new provisions introduced in the Service Tax Regime and
in this regard, they further stated that they have paid Rs,
Service Tax Appeal No.70086 of 2019
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15,55,917/- by way of challan and Cenvat Credit, which has
been appropriated by the lower authority. Upon scrutiny of
documents, I find that initially the Audit team had worked
out the Service Tax liability of the Appellants as Rs.
36,46,785/- and the same was paid by the Appellants in
different stages, I also find that the Original Authority has
taken on record that out of Rs. 36,46,785/-, the Appellants
discharged their Service Tax liability amounting to Rs.
18,53,629/- under VCES and the balance amount of Rs.
17,93,156/- was subsequently paid in two parts as under:-
(i) Rs. 7,39,137/- along with interest of Rs.
1,03,706/- was paid through challan; and
(ii) Rs. 8,16,780/- was paid through CENVAT Credit.
Thus out of balance amount of Rs. 17,93,156/-, the
Appellants paid Rs. 15,55,917/- (Rs. 7,39,137/- plus
8,16,780/-). The Appellants through their submissions have
also stated that the total demand of Rs. 36,46,785/- included
the Service Tax on free of cost material, amounting to Rs.
2,39,329/- and since the cost of free material should not
form the Part of the assessable value, their effective Service
Tax liability was actually Rs, 15,53,827/- but they had paid
Rs. 15,55,917/- (Rs. 2090/- paid in excess i.e. Rs.
15,55,917/- minus Rs. 2090/-). I find that the Original
Authority vide impugned Order has accepted the submissions
of the Appellants in this regard and has refrained himself
from demanding Service Tax amounting to Rs. 2,39,329/- on
Free of-Cost material. Accordingly, since the Appellants have
deposited the Service Tax on this issue and since the
Department has not filed any appeal in this regard, I do not
find any reason to interfere with Service Tax demand,
confirmed against the Appellants on this count.
5.5 However, on the above matter, discussed at para 5.4
above, I also find that the Appellants had wrongly availed the
CENVAT Credit amounting to Rs. 9,74,460/- during the
month of June, 2012 on the strength of invoices issued during
the month of July, 2012. Out of such wrongly availed
Service Tax Appeal No.70086 of 2019
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CENVAT Credit of Rs. 9,74,460/-, the Appellants utilized Rs.
8,16,780/- against discharge of their Service Tax liability,
being short paid on account of wrongly availing abatement
under Rule 2A(i) of the Rules 2006. However, the Appellants
reversed the aforesaid wrongly availed CENVAT Credit in
January, 2014. Thus the Service Tax amounting to Rs.
8,16,780/- remained unpaid till January, 2014 and the
Appellants are liable for payment of appropriate interest on
late payment of Service amounting to Rs. 8,16,780/-. In this
regard, I find that the Original Authority has correctly
demanded appropriate interest on Rs. 8,16,780/- under
Section 75 of the Finance Act, 1994 which is liable to
recovered from the Appellants.
5.6 Now, I take up the matter of demanding penalty of Rs.
15,53,827/- under Section 78 of the Act and observe that the
Appellants have submitted that the short payment of Service
Tax amounting to Rs. 15,53,827/- had occurred due to their
bona fide belief that the new provisions introduced in the
Service Tax regime were applicable to them and it was a
clerical mistake on their part to avail CENVAT Credit of excise
duty amounting to Rs. 9,74,460/- and since they have
paid/reversed the whole of service tax amount even before
issuance of SCN, they are not liable for any penalty under
Section 78(1) of the Act. Here, I find that the Appellants
were very well aware of the provisions of Service Tax as they
started availing benefit of abatement on the ongoing works
contract in terms , of Rule 2A(i) of the Rules 2006, as soon
as the said provisions were introduced. It is also difficult to
accept plea of the Appellants that it was a mere clerical
mistake on their part to wrongly avail CENVAT Credit in June,
2012 on the basis of invoices which were issued in July,
2012. Here, I find that one of the necessary condition for
availing abatement on- value of taxable service was that, no
CENVAT Credit cou!d ibe availed on inputs / input service and
since, the provisions were effective from July, 2012, it
appears that the Appellants knowingly availed the CENVAT
Service Tax Appeal No.70086 of 2019
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Credit for the period July, 2012, in June, 2012 so that the
benefit of abatement could be claimed. Therefore, in my
opinion, by wrongly availing abatement on the ongoing works
contract and wrongly availing CENVAT Credit on inputs /
input services in the month of June, 2012, the Appellants .
have rendered themselves for penal action under Section 78
of the Finance Act, 1994. Further,. the plea of the Appellants
that no penal action is liable against them as they have
deposited the entire duty involved before issuance of the
SCN, is not acceptable in terms of provisions of Section 73(4)
of the Act, which categorically deny any such benefit if the
evasion of duty is on account of any of the following
reasons;
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter
or of the rules made thereunder with intent to evade
payment of service tax.
Since, the Appellants have suppressed their taxable value by
not declaring to the Department through ST-3 returns, I hold
that they do not qualify for the exemption from penalty
under Section 78 of the Act, by paying Service Tax involved
prior to issuance of the SCN.
5.7 However, before deciding upon the quantum of
penalty under Section 78 ibid, I hereby examine the legal
provisions of Section 78 ibid. On perusal the transitory
provisions contained under Section 78B of the Act, I find that
if the SCN has not been adjudicated upto 13-05-2015, then
the provisions of Section 78 as amended by the Finance Act
2015 shall be applicable. In the instant case, SCN was issued
on 30-03-2015 and the impugned Order-In-Original was
passed on 31-03-2017 i.e. after 14-05-2015.Thus, in the
case in hand, penalty should be imposed upon the Appellants
under amended provisions of Section 78 i.e. 100% penalty is
Service Tax Appeal No.70086 of 2019
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liable to be imposed upon the Appellants. However, I find
that as per first proviso of Section 78 ibid if the details
relating to non-payment of service tax have been recorded in
the specified record during 08.04-2011 to 14-05-2015, the
penalty shall be 50% of the service tax so determined. Since
in the instant case, the internal audit team has taken the
figures of non-payment of service tax from the specified
records of the Appellants and since the period involved is of
2012-13 which falls between 08.04.2011 & 14.05.2015, only
50% of the Service Tax so determined can be imposed as
penalty. Therefore, in view of first proviso of the amended
provisions of Section 78 of the Finance Act, 1994, I hold that
the Original Authority has erred in imposing 100% penalty of
the Service Tax so determined i.e. Rs 15,53,827/-, upon the
Appellants. Thus I hold that the Appellants are liable for
penalty of Rs. 7,76,914/- in terms of amended provisions of
Section 78 ibid.
5.8 Moving on to the issue of miscellaneous income
amounting to Rs. 28,124/- during 2010-11, I find that the
Appellants have claimed that this income is not related to job
work/renting of machine and have stated that this amount
does not pertain to any taxable services and hence, Service
Tax amounting to Rs. 2,897/- cannot be demanded from
them. Here, I find that the Appellants have not submitted
anything in support of their claim and that this income
remain unexplained and since the Appellants are claiming
benefit of the Service Tax upon the said income, the onus of
proving it so also lies upon them. Therefore, I hold that the
Appellants are liable for payment of Service Tax on the said
income, as received by, them during 2010-11.
5.9 The Appellants have further, requested for allowing
the benefit of Cum Tax price on the service tax demanded
amounting to Rs. 74,565/-. I have considered the legal
provisions in this regard and find that the Section 67(2) of
Finance Act, 1994 provides that where the gross amount
charged by a service provider, for the service provided or to
Service Tax Appeal No.70086 of 2019
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be provided is inclusive of service tax payable, the value of
such taxable service shall be such amount as, with the
addition of tax payable, is equal to the gross amount
charged". In such cases, gross value of taxable service shall
be considered as inclusive of service tax. Also, as per Section
67(3) of the Act, gross amount charged for taxable service
shall include any amount received towards the taxable
service before, during or after the rendering-of such service.
Hence, 1 am of the view that the benefit of cun tax price can
- be allowed to the Appellants on the miscellaneous incorne
during 2010-1t to 2012-13 The details of miscellaneous
income of the Appellants for the period 20 10-1 1 to 2012-13
as pointed out by the internal audit team are reproduced
below:
S Period Job work/ Rental S. Tax rate Service Tax
No. income received as applicable payable after
allowing tax cum
price benefit
1 2010-11 28124 10.3 2626
2 2011-12 383000 10.3 35765
3 2012-13 260675 12.36 28675
Total 67067
Since, the Appellants have accepted their Service Tax
liability on such income, I hold that the Service Tax
amounting to Rs. 67,067/-, as discussed above, is liable to
be demanded and recovered from the Appellants against
the miscellaneous income (Job work / Rental income
received) after allowing the benefit of duty cum price
benefit to the Appellants.
5.10 In this regard, I find that out of the total demand of
Service Tax of Rs. 74,565/- (Rs. 67067/-), after allowing
duty cum price benefit) against miscellaneous income,
which include miscellaneous income of Rs. 28,124/- as
Service Tax (as discussed above at para 5.8), the Original
Authority has confirmed the demand of Rs. 38,800/- only,
on the reason that Rs. 35,765/- have already been paid
Service Tax Appeal No.70086 of 2019
15
by the Appellants under VCES. However, I find that the
Original Authority has erred in treating Rs. 35,765/- (paid
under VCES), as to have been paid by the Appellants out
of Rs. 38,800/-, thereby again debiting Rs. 35,765/- from
Rs, 38,800/- and the balance amount of Rs. 3035/- has
been held as recoverable from the Appellants. Whereas,
from records, I find that an amount of Rs. 35,765/- has
been paid by the Appellants only once (under VCES) that is
to say after deducting Service Tax paid under VCES by the
Appellants, the net Service Tax liability comes to Rs
31,302/- (after allowing benefit of duty cum price to the
Appellants) Therefore, the net Service Tax liability to be
confirmed against the Appellants against their
miscellaneous income should be Rs. 31,302/- instead of
Rs. 3035/-. Accordingly, I hold that the Appellants are
liable to pay Service Tax amounting to Rs. 31,302/- under
proviso to Section 73(1) of the Finance Act, 1994 along
with appropriate interest on Rs. 31,302/- under Section
75 of the Act ibid. Further, since the Appeliants have
willfully suppressed their miscellaneous income from the
department and did not declare it in their ST-3 returns,
they have rendered themselves for Penalty under Section
78 of the , Act, ibid. Thus, they are liable for penalty of
Rs. 16,964/- as detailed below, under amended provisions
of Section 78 of the Act, ibid (as discussed at para 5.6
above):
(i) Rs. 2,626/- (100% penalty of the Service Tax
so determined for the period 2010- 11,
amounting to Rs. 2,626/-);
(ii) Nil, for the period 2011-12 as the Service Tax
involved, amounting to Rs. 35,765/- has been
paid by the Appellants under VCES and not
liable for penalty.
(iii) Rs. 14,338/- (50% penalty of the Service Tax
so determined for the period 2012-13,
amounting to Rs. 28675/-).
Service Tax Appeal No.70086 of 2019
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5.11 The Appellants have also submitted that the demand
is time barred as it pertains to the period 2011-12 and
2012-13, while the SCN was issued on 30-03-20 15. In
this regard, I find that the Appellants willfully suppressed
their taxable value and the tax evasion came to the
knowledge of the Department when a team of officers of
the Department conducted audit of the Appellants.
Therefore the provisions of extended period of demand in
terms of Rule 14 of the CCR read with the proviso to
Section 73 of the Finance Act, 1994 have been correctly
invoked under the said Show Cause Notice and since the
demand was issued on 30-03-2015 i.e. within a five years
from the relevant date, I find that the demand is not time
barred. Thus, I find no infirmity in the impugned Order and
the Said Show Cause Notice to the extent of invocation of
extended period and it is not hit by time limitation."
4.3 From the impugned order and the order in original it is
evident that the
(i) para 1,2 & 3 of the order in original has been set aside,
and
(ii) para 4 & 5 of the order in original has been upheld.
(iii) Para 6 has been modified to the extent of reducing the
penalty imposed under Section 78 from Rs 15,53,827/-
to Rs 7,76,914/-.
(iv) para 7 has been modified to the extent of enhancing the
amount to be recovered from the appellant Rs. 3,035/- to
Rs 31,302/-.
(v) Para 8 has been modified to demand interest on the
modified amount of Rs 31,302/-, and the penalty imposed
under section 78 has been increased from Rs 3,035/- to
Rs 16,964/-.
4.4 It is also evident from the impugned order no appeal was
filed by the revenue before the First Appellate authority
challenging the order. Section 35A of the Central Excise Act,
1944 provides as follows:-
Service Tax Appeal No.70086 of 2019
17
"35A. Procedure in appeal:--
(1) The Commissioner (Appeals) shall give an opportunity
to the appellant to be heard, if he so desires.
(2) The Commissioner (Appeals) may, at the hearing of an
appeal, allow an appellant to go into any ground of
appeal not specified in the grounds of appeal, if the
Commissioner (Appeals) is satisfied that the omission of
that ground from the grounds of appeal was not wilful
or unreasonable.
(3) The Commissioner (Appeals) shall, after making such
further inquiry as may be necessary, pass such order,
as he thinks just and proper, confirming, modifying or
annulling the decision or order appealed against:
Provided that an order enhancing any penalty or fine in
lieu of confiscation or confiscating goods of greater
value or reducing the amount of refund shall not be
passed unless the appellant has been given a
reasonable opportunity of showing cause against the
proposed order:
Provided further that where the Commissioner
(Appeals) is of opinion that any duty of excise has not
been levied or paid or has been short-levied or short-
paid or erroneously refunded, no order requiring the
appellant to pay any duty not levied or paid, short-
levied or short-paid or erroneously refunded shall be
passed unless the appellant is given notice within the
time-limit specified in Section 11A to show cause
against the proposed order.
(4) The order of the Commissioner (Appeals) disposing of
the appeal shall be in writing and shall state the points
for determination, the decision thereon and the reasons
for the decision."
It is evident from the impugned order has sought to enhance the
demand made against the appellant from Rs.3,035/- to
Rs.31,302/- and interest and penalties imposed in respect of
these amounts. Nothing is available on the record to suggest
Service Tax Appeal No.70086 of 2019
18
that the procedure as prescribed under 35A (3) has been
followed while making the order enhancing the demands
confirmed. As we have noted earlier that revenue was not in
appeal challenging these part of the order in original
Commissioner (Appeal) could not have in the appeal filed by the
appellant modify these paragraphs detrimental to the interest of
the appellant in his appeal. Hon'ble Bombay High Court has in
case of Jyoti Plastic Works Pvt. Ltd. [2020-TIOL-1874-HC-MUM-
CX] observed as follows:
40. In this connection we may refer to the maxim
reformatio in peius. It is a latin phrase meaning a change
towards the worse i.e., a change for the worse. As a legal
expression it means that a lower court judgment is
amended by a higher court into a worse one for those
appealing it. In many jurisdictions, this practice is forbidden
ensuring that an appellant cannot be placed in a worse
position as a result of filing an appeal. When the above
phrase is prefixed by the words „no‟ or „prohibition‟, which
would render the maxim as no reformatio in peius or
prohibition of reformatio in peius, it would denote a principle
of procedure as per which using a remedy available in law
should not aggravate the situation of the person who avails
the remedy. In other words, a person should not be placed
in a worse position as a result of filing an appeal. No
reformatio in peius or prohibition of reformatio in peius is a
part of fair procedure and thus by extension can also be
construed as part of natural justice. It is not only a
procedural guarantee but is also a principle of equity.
41. Supreme Court in Jawal Neco Limited Vs. Commissioner
of Customs, 2015 (322) E.L.T. 561 emphasized this point
when it held that appellant cannot be worse off by reason of
filing appeal.
42. A Division Bench of Madras High Court in Servo
Packaging Limited Vs. CESTAT, 2016 (340) E.L.T. 6 held as
follows:-
Service Tax Appeal No.70086 of 2019
19
"25. In the absence of any appeal filed by the department
on the finding, relating to alleged clandestine removal of
raw materials, the appellant cannot be put in a worse
position, in their own appeal and in such circumstances,
the principle of "no reformatio in peius" would come into
play, which means that a person should not be placed in a
worse position, as a result of filing an appeal. It is a latin
phrase, expressing the principle of procedure, according
to which, using the remedy at law, should not aggravate
the situation of the one who exercises it.
26. Had the assessee not filed an appeal, it would not be
placed in a situation of inviting an adverse order, on the
aspect of clandestine removal. A party who files an
appeal, expects that the appellate authority would only
address the grounds of appeal, made against the order
impugned, and the appellant does not expect the
appellate authority to go beyond the scope of appeal, and
pass an order, adverse to his interest, in which event, it
certainly creates a worse situation for the
appellant/assessee, in his own appeal, than the order
under challenge.
27. As rightly contended by the learned counsel for the
appellant, instead of addressing the issue, as to whether,
the appellate authority had acted beyond the scope of the
appeal, and exceeded in his jurisdiction, the Tribunal
passed an order, impugned before us, elaborating, as to
how, adjudication has to be done, with reference to the
aspect of clandestine removal of raw materials, which in
our considered opinion, is jurisdictionally erroneous. On
the facts and circumstances of the case, we hold that the
directions issued by the appellate authority and that of
the Tribunal, run contrary to the principle of "no
reformatio in peius"."
43. This decision was followed by the same High Court in
Rajaram Johra Vs. Commissioner of Customs (Airport &
Cargo), 2019 (365) E.L.T. 424 in the following words:-
Service Tax Appeal No.70086 of 2019
20
"11. The Court held that had the assessee not filed an
appeal, they would not be placed in a situation of inviting an
adverse order on the aspect of clandestine removal. A
party, who files an appeal, expects that the appellate
authority would only address the grounds of appeal made
against the order impugned and the appellant does not
expect the appellate authority to go beyond the scope of the
appeal and pass an order adverse to his interest, in which
event, it certainly creates a worse situation for the
appellant/assessee in his own appeal than the order under
challenge. Further, it was pointed out that the principal of
"no reformatio in peius" would come into play, which means
that a person should not be placed in a worse position, as a
result of filing an appeal. It is a Latin maxim expressing the
principle of procedure according to which, using the remedy
at law, should not aggravate the situation of the one who
exercises it."
.......
45. These amounts would now be the tax dues of the petitioners and this position would not change because of the subsequent order of the CESTAT dated 30.10.2017 setting aside the order in original dated 29.03.2006 for the purpose of deciding afresh the whole issue on merit, limitation etc. apart from quantification. As a technicality the order in original dated 29.03.2006 had to be set aside. Since the figures i.e., demand amounts in the order in original dated 29.03.2006 have been accepted by the respondents, it is those figures which would be material and not the figures mentioned in the show cause-cum-demand notice. Petitioners cannot be put in a worse off condition or the situation faced by them cannot be aggravated because they had availed the remedy of appeal or had sought relief under the scheme which is a beneficial one.
In view of the above we do not find any merits in the impugned order to the extent it has travelled beyond the order by enhancing the demands, interest and penalties. Thus impugned Service Tax Appeal No.70086 of 2019 21 order to the extent it modifies the para 7, 8 and 9 of the order in original to extent it is detrimental to the appellant cannot be sustained.
4.5 It is evident that the appellant has paid the amount due as per the demand made against him in para 4 of the order in original i.e. Rs 15,53,827/- in the manner as indicated below (para 5.4 of the impugned order)
(i) Rs. 7,39,137/- along with interest of Rs. 1,03,706/-
was paid through challan; and
(ii) Rs. 8,16,780/- was paid through CENVAT Credit.
In para 5.6 it has been observed that the nonpayment of these amounts was on account of "their bonafide belief that the new provisions introduced in Service Tax regime were applicable to them and it was a clerical mistake on their part to avail CENVAT Credit of excise duty amounting to Rs 9,74,460/- and since they have paid/ reversed the whole service tax amount even before the issuance of SCN, they are not liable for any penalty under Section 78 (1) of the Act." Commissioner (Appeal) after having recorded so discusses the provisions of Section 78 and finally concludes to reduce the penalty to 50% of the tax evaded in terms of the amendments made in 2015. It is not correct to say that the Commissioner (Appeal) has recorded any finding in respect of the bonafide belief. Impugned order after making the discussion concludes that the appellant has suppressed the taxable value and hence are liable for penalty under the said section. Hon'ble Bombay High Court has in case of Responsive Industries Ltd [2019 (26) G.S.T.L. 457 (Bom.)] observed as follows:
"8. From the record it is undisputed that Appellant had not paid the service tax as the outward transportation under the category of GTA for the period from April, 2009 to December, 2011, this even though they had admittedly incurred expenses for the same. It is only during the course of EA 2000 audit that above non-payment of service tax on the part of the Appellant was discovered by the revenue.
Service Tax Appeal No.70086 of 2019 22 This discovery on the part of the Revenue led the Appellant to deposit the service tax as well as interest thereon even before the show cause notice was issued by the revenue. In the above circumstances, even if the tax and the interest on the same was paid before the issue of notice, it is not open to the Appellant to take benefit of Section 73(3) of the Act as the non-payment of the service tax was on account of suppression with a mala fide intention to evade payment of service tax. Thus in view of Section 73(4) of the Act, the benefit of Section 73(3) of the Act, claimed by the Appellant would not be available.
9. The contention that there was a bona fide belief that the Appellant are not liable to pay the service tax on outward transportation of goods and the GTA is not supported by any reasonable explanation. The bona fide belief that one is not liable to pay the tax has to be based on some facts on record which led to the belief. It is not the Appellant‟s case that the belief based on a ruling of the some authority that it not liable to pay service tax on outward transportation. A mere statement to the effect that the Appellant was under a bona fide belief of non liability of paying tax cannot be accepted in the face of clear provision of law. Thus, it is not possible to accept the contention that the Appellant had bona fide belief of for non-payment of tax, so as to invoke Section 80 of the Act."
Thus we do not find any merits in the submissions made by the appellant to the effect that extended period of limitation could not have been invoked.
4.7 In case of Om Sai fabricators [(2023) 6 Centax 208 (Tri.- Bom)] Mumbai bench has held as follows:
"4.8 To argue on the limitation appellant have pressed the ground of bonafide belief and for that reason they rely upon the certificate issued to them by M/s Gammon. They also submit that there were conflicting views in the matter. However on query from the bench the counsel for appellant Service Tax Appeal No.70086 of 2019 23 was unable to point out to a single decision available during the relevant period giving a contrary view. Further the submission to the effect that there were conflicting circulars is also not borne out by any evidence. Larger bench has in case of Melange Developer Pvt Ltd. clearly in para 12 noted that all Trade Notices/Instructions/Circulars/Communications were superseded by the Master Circular dated 23 August, 2007, and this circular had clarified the liability of sub contractor to pay the service tax. It is settled law that bona fide belief is not the blind belief and needs to be established. Hon'ble Bombay High Court has in case of Responsive Industries Ltd. [2019 (26) G.S.T.L. 457 (Bom.)] held as follows:
"9. ......."
4.9 A statement of Shri Sukhdeo Vasudeo Yadav (proprietor of appellant} was recorded on 10-11-2008 wherein he stated that he has paid the service tax but has not filed any service tax return so far and submitted copies of taxable invoices, bank pass book and bank statement for 2006-07; that as a sub-contractor, he has provided commercial & industrial construction service to Gammon India Ltd, Mumbai, Japsin Jacob Wire Drawing P Ltd, New Delhi and Man Infra Project Ltd, Mumbai but has not paid any service tax till 31-3-2008 being a sub-contractor; that from 1-4- 2008, he started charging service tax on the service provided as sub-contract and that the same would be credited to the service tax department; that he does not have any agreement with these 3 firms but has letter of indent from Gammon India Ltd.
4.10 Shri Sukhdeo Vasudeo Yadav, in his statement dated 21-11-2008 deposed that he paid service tax for the year 2006-07 but did not pay service tax for 2007-08 and 2008- 09(up to October 2008); that in 2006-07, he discharged service tax on the invoices where contract was direct but where contract was on sub-contract basis, he did not discharge service tax; that he was not aware that a sub Service Tax Appeal No.70086 of 2019 24 contractor is liable to pay service tax; that he collected Rs. 1,44,904.00 @12.24% for the period 2007 08 and Rs. 14,49,484.00 @12.36% for the period 2008-09 (till Oct 2008); that he would pay the service tax amount by December 2008 after rechecking his liability and agreed to submit VAT returns and balance sheet on 5-12-2008.
4.11 On verification of sample work order bearing number 8450/112 dated 07/04/2007, issued by M/s Gammon India Limited in favor of the appellant, it is observed that as per Clause/ Condition No. 23 of the said contract, "Sub- Contractor has agreed that the service tax is included in his offer and so no claim whatsoever shall not be entertained in this regard & Gammon shall not be liable to pay the same." This condition clearly indicates that contract itself placed service tax liability on the appellant. In contradiction to specific provision of the contract, the submission of the appellant on the basis of the certificate issued by the M/s Gammon India only need to be negated. This condition in contract itself shows that appellant was aware of his liability to pay service tax.
4.12 The Appellant concealed the correct taxable amount with the service tax department, until the Departmental officers initiated an inquiry in this regard. These facts were suppressed with intent to evade the payment of service tax due on various taxable services provided by them thereby facilitating the evasion of service tax payable on the said services so rendered by them. Thus it the extended period, as provided for under the proviso to sub-section (1) of section 73 ibid for recovery of such service tax not paid and/or short paid by Appellant has been correctly invoked by the revenue authorities."
This order of Mumbai Bench has been affirmed by the Hon'ble Supreme Court as reported at [(2023) 6 Centax 210 (S.C.)]. Thus we do not find any merits in submission to extent of invoking extended period of limitation.
Service Tax Appeal No.70086 of 2019 25 4.8 We have take note of the fact that the entire amount has paid much prior to the issuance of show cause notice, which is not in dispute. Section 73(3) of the Finance Act, 1994 is reproduced below:-
"SECTION 73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. --
(3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the [Central Excise Officer] of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid : Provided that the Central Excise Officer may determine the amount of short-payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been 18 paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "thirty months" referred to in sub- section (1) shall be counted from the date of receipt of such information of payment.
Explanation.1-- For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub- section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the [Central Excise Officer], but for this sub-section.
Service Tax Appeal No.70086 of 2019 26 Explanation 2. -- For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service tax under this sub-section and interest thereon."
4.9 As the entire amount has been paid on the basis of direction at the time of audit or on his own ascertainment, we are of the view that the case of the appellant should have been considered for closure in terms of the said Section without going into any other aspects. We also note that major changes were affected in the law w.e.f. 01.07.2012 leading to ascertain certain discrepancies in the payment of tax. Appellant admitted and have discharged the entire tax liability which has been confirmed accordingly in respect of this demand also. The matter should have been examined as per this Section and settled without imposition of any penalty under Section 78. In view of the above taking note of the payments made prior to the issuance of show cause notice, we set aside the penalties imposed. However, we make it clear that appellant shall not be entitled to any refund of the taxes paid voluntarily or on the direction of the revenue in the present case.
5.1 Appeal is allowed as indicated in para 4.4 and 4.9 above.
(Operative part of the order pronounced in open court) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp