Custom, Excise & Service Tax Tribunal
Cce & St, Ltu, Chennai vs M/S. Saint Gobain Glass India Ltd on 26 May, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No.ST/41851/2015
(Arising out of Order-in-Appeal No.39/2015 dated 01.06.2015 passed by the Commissioner (Appeals-I) Central Excise & Service Tax, LTU, Chennai).
CCE & ST, LTU, Chennai : Appellant
Vs.
M/s. Saint Gobain Glass India Ltd. : Respondent
Appearance Shri L. Pannerselvam, AC (AR), for the Appellant Ms. V. Ubhaya Bharathi, Advocate, for the Respondent CORAM Honble Shri P. K. Choudhary, Judicial Member Date of Hearing: 08/04/2016 Date of Pronouncement: 26.05.2016 FINAL ORDER No._ 40849 / 2016 Revenue is in appeal against the impugned order on the only ground that the penalty imposed under Section 78 vide OIO has been set aside by the Ld. Commissioner (Appeals) and the same is to be restored.
2. Heard both sides.
3. The Ld. AR Shri L. Paneerselvam, AC appearing for the appellant submits that the respondent assessee had received services from foreign firms who do not have any office in India and were liable to pay tax under reverse charge as per Section 66A of the Finance Act, 1994 under the category of Banking and other Financial Services to the tune of Rs.3,27,266/- and a sum of Rs.7,78,841/- towards Sponsorship Service was also demanded as it appeared that some of the transactions are not in the nature of donations but given under an obligation to get something in return, such as display of banners in sponsors name or entitled for certain privileges; that the respondent assessee is under the jurisdiction of LTU and is well aware of all the statutory obligations, and it was only when the internal audit team pointed out the liability, the respondent assessee had paid the entire demand of service tax along with interest before the issuance of show cause notice. The adjudicating authority imposed equal penalty under Section 78. On appeal, the Ld. Commissioner (Appeals) allowed the appeal and set aside the penalty. The Review Committee reviewed the order on 31.08.2015 and directed the department to file an appeal against the OIA before this Tribunal, on the ground that the case law M/s. Atwood Oceanics Pacific Ltd. Vs. CST, Ahmedabad 2013 (32) STR 756 (Tri.-Ahmd.) relied upon by the Ld. Commissioner (Appeals) has not been accepted by the department and a civil appeal has been filed in the Honble Supreme Court and the same has been admitted vide C.A. No. D7374/2013 reported in 2014 (34) STR 3172 (SC); that the respondent assessee while filing the appeal before the Ld. Commissioner (Appeals) had only disputed the levy of equal penalty under Section 78 and did not dispute the order confirming the demand by invoking the extended period of limitation. Having confirmed the demand by invoking the extended period of limitation, equal penalty under Section 78 should automatically fall as there is no discretion in imposition of mandatory penalty; that as per the Act, if the assessee voluntarily pays the tax along with interest then they are entitled for the benefit of reduced penalty; that if this is accepted by the assessee then show cause notice will not be issued by the department; reliance was placed on the judgment of the Apex Court in the case of UOI Vs. Dharmendra Textiles Processors 2008 (231) ELT 3 (S.C).
4. The Ld. Counsel appearing on behalf of the respondent Ms. V. UbhayaBharathi, Advocate reiterated the findings of the Ld. Commissioner (Appeals) and submitted that the tax along with the interest was paid even before issuance of the show cause notice. The fact that the show cause notice sought to appropriate the tax and the interest, as in paragraph 4 of the said notice is sufficient proof for their statement that the above payments were prior to the issuance of show cause notice; that as per Explanation to Section 73(3) of the Act, no penalty under any of the provisions of the Act or Rules shall be imposed in respect of payment of service tax; that as per Section 80 when there is a reasonable cause penalty is not imposable; that as per Rule 3 (3) of Import of Service Rules, services should have been received by the recipient in India and in the instant case, entire services have been provided outside India and not received in India and therefore, the recipient was under the impression that there were no liabilities to pay. The learned Counsel had drawn attention to Ground No.9 of the appeal filed by the Department wherein it was stated that the respondent herein had filed an appeal before the Commissioner (Appeals) only against non-imposition of penalty and not against the order confirming the demand of tax by invoking the extended period of limitation and stated that this was factually incorrect and had drawn my attention to Page No.10 of their appeal filed before Commissioner (Appeals) wherein they had raised a specific contention that there was no suppression; that suppression is a finding which presupposes non-disclosure and the case on hand has nothing to do with it; that a mere failure to declare would not amount to willful suppression; that the Audit parties also visited the unit several times; that the show cause notice issued without any tangible evidence and based only on inferences is vitiated by an error of law and prayed for upholding of OIA and rejection of the Revenues appeal on this score alone. In her counter, she also submitted that the Ld. AR was referring to Section 73 (4) but the same is not applicable to this case and it was not raised in their grounds of appeal.
5. In the instant case the issue is on two aspects viz., non-payment of tax under reverse charge for a sum of Rs.3,27,266/- for the period February 2009 to March 2012 on their commitment fees paid to the foreign financial institutions and another sum of Rs.7,78,841/- under Sponsorship service for the period from Jan08 to Mar12. I find that on both the aspects the non-payment was due to their lapse but certainly not on account of suppression of facts. The Respondent have, as a matter of fact, paid the entire service tax due on the two categories mentioned supra along with the interest due and going by the records there is no suppression of facts with an intention to evade payment of tax. On the first aspect viz., non-payment under reverse charge the tax paid is eligible for credit to the respondent themselves and this is enough proof in the facts of the present case that there is no suppression of facts with an intention to evade payment of tax. With regard to the second issue, the contention of the Counsel for the respondent by reading the allegation from the show cause notice that some of the transactions are not in the nature of donations but given under an obligation to get something in return such as displaying the banner in the sponsors name or entitled to certain privileges is too vague an allegation which cannot stand the scrutiny of law. The show cause notice should clearly spell out the allegations as it is the foundation for any litigation. The allegation as referred supra is too wide and vague and therefore, the complexity involved in the aspect of taxability cannot be ruled out. The fact that the respondent has discharged their tax liability would only go to show that there has been no malafide intention to evade the payment of tax.
6. In this case as rightly pointed out by the Counsel for the Respondent, they had in their appeal filed before the Commissioner (Appeals) as a matter of fact raised the plea of non invocation of extended period and the Revenues contention to the contrary is clearly erroneous. I find that in the instant case there is no suppression of facts as suppression is a finding which would presuppose non disclosure and there has been no withholding of information in the instant case. A mere failure to disclose certain facts to the Department would not result in willful suppression of facts as decided by the Honble Supreme Court on various occasions and in particular in the case of Pahwa Chemicals Pvt. Ltd. Vs- CCE 2005 (189) ELT 257 (SC). It was held by the Honble Supreme Court in the above case that mere failure to declare does not amount to willful mis-declaration or willful suppression. There must be some positive act on the part of the party to establish either willful mis-declaration or willful suppression. All the particulars were culled out only from the respondents record. It is also a fact that when the department culls out a case from the record of the assessee, the allegation of suppression is unsustainable. The respondent has raised a specific plea that the Audit parties have visited their unit several times and the Revenue is fully aware of their activities. This fact has not been countered by the Revenue stating that the respondents record were not inspected and that Audits were not conducted. The contention of the respondent being that they were under the scrutiny of the LTU which is subject to periodical checks and audits was also not contested to be factually incorrect. In the instant case the respondent could not file the returns on the disputed aspects as they were under a bonafide belief that tax was in fact not payable. In these circumstances, the imposition of penalty is unsustainable.
7. The AR had placed reliance on the judgement of the Honble Supreme Court in the case of Dharmendra Textile Processors reported in 2008 (231) ELT 3 (SC), wherein it was held that the penalty under Section 11AC of the Central Excise Act, 1944 is mandatory if larger period is invoked. Reliance was also placed on the ruling of the Madras High Court in the case of Dhandayuthapani Canteen Versus CESTAT, Chennai 2015 (39) S.T.R. 386 (Mad.), wherein it was held that even though tax has been paid prior to issuance of show cause notice, Section 80 waiver cannot be provided where wilful suppression and concealment has been proved. In both the cases referred to by the AR, there was suppression of facts which is not present in the case on hand. In Dharmendra Textile Processors case, the issue was when there is suppression of facts and invocation of extended period, whether the payment of the adjudged dues before issuance of show cause notice would absolve the assessee from non-imposition of penalty. The Honble Supreme Court had in those circumstances negated the contention of the assessee holding that, a mere payment of the tax dues before issuance of show cause notice would not absolve the assessee from non-imposition of equal penalty under Section 11AC of the Central Excise Act, 1944. The Madras High Court judgement in the case of Dhandayuthapani Canteen supra was also a case where suppression was upheld by the lower authorities and at the same time penalty was not imposed under Section 78 of the Finance Act, 1994 due to invocation of Section 80 of the said Act.It was in these circumstances that the High Court had held that if suppression is proved, penalty cannot be waived. I find that both the judgements relied upon by the Revenue are inapplicable as in the instant case the non-payment of tax was on account of bonafide belief and the Revenue had conducted Audits which would go to show that there was in fact no suppression of facts. On the other hand I find that the judgement of the Tribunal in the case of Atwood Oceanic Pacific Ltd. Vs- CST 2013 (32) STR 756 (T) is more akin to the facts of the present case and therefore the Commissioner (Appeals) has rightly applied the said judgement for waiver of penalty under Section 78. Moreover a mere pendency of Civil Appeal in Atwoods case supra before the Supreme Court is no ground not to follow a binding precedent. One more aspect to be noted is that during the relevant period, Section 80 was in operation which does not figure in the Central Excise Act, where there is a discretion not to impose penalty when reasonable cause is shown. I find that in the instant case, the ends of justice would be met by upholding the order of the Commissioner (Appeals) for the reasons stated above. Departments appeal is dismissed.
(Order Pronounced in the open court on 26.05.2016 ) (P.K. CHOUDHARY) Judicial Member BB/gs 1