Custom, Excise & Service Tax Tribunal
Salem vs King Network on 10 January, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Service Tax Appeal No. 40232 of 2014
(Arising out of Order-in-Original No. 07/2013-ST dated 07.10.2013 passed by Commissioner of
Customs, Central Excise and Service Tax, No. 1, Foulk's, Compound, Annai Medu, Salem - 636 001)
Commissioner of GST and Central Excise ...Appellant
Salem Commissionerate,
No. 1, Foulkes Compound,
Anaimedu,
Salem - 636 001.
Versus
M/s. King Network ...Respondent
No. 162, Mettur Road, Parimalam Complex, Erode - 638 011.
And Service Tax Appeal No. 42699 of 2014 (Arising out of Order-in-Original No. 07/2013-ST dated 07.10.2013 passed by Commissioner of Customs, Central Excise and Service Tax, No. 1, Foulk's, Compound, Annai Medu, Salem - 636 001) M/s. King Network ...Appellant Proprietor : N. Sivakumar, No. 85, Gandhiji 2nd Street, Carmel School Opp., Erode - 638 002.
Versus Commissioner of GST and Central Excise ...Respondent Salem Commissionerate, No. 1, Foulkes Compound, Anaimedu, Salem - 636 001.
APPEARANCE:
For the Assessee : Ms. P. Jayalakshmi, Advocate For the Revenue : Mr. Rudra Pratap Singh, Additional Commissioner / A.R. CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) 2 ST/40232&42699/2014 DATE OF HEARING : 22.11.2023 DATE OF DECISION : 10.01.2024 FINAL ORDER Nos. 40036-40037 / 2024 Order :- [Per Mr. VASA SESHAGIRI RAO] Service Tax Appeal No. ST/ 42669 /2014 has been filed by M/s. King Network, Erode assailing the Order-in-Original No. 07/2013 dated 07.10.2013 passed by the Commissioner of Central Excise, Salem Commissionerate confirming demands of Service Tax of Rs.2,89,84,753/- and Rs.20,31,400/- under the Category of "Cable Operator including Multi System Operator Service" for the periods from 01.07.2006 to 31.03.2010 and April 2010 to June 2010 respectively, Rs.8,77,118/- under Business Auxiliary service for the period from 01.12.2006 to 31.03.2010, under proviso to Section 73(1) of the Finance Act, 1994 by invoking the extended period and also levy of interest under Section 75, late fee under Section 70 and imposition of penalties under Sections 76, 77(2) and 78 of the Finance Act, 1994.
2. The Service of Cable Operator has been introduced into Service Tax net with effect from 16.08.2002. The services of Multi System Operator has been included in the category of Cable Operator Service w.e.f. 10.09.2004 by virtue of Notification No. 25/2004- ST dated 10.09.2004. As per Section 65(21) and 65(22) of Finance Act, 1994, "cable operator" shall have the meaning assigned to it in clause (aa) of Section 2 of the Cable Television Networks (Regulation) Act, 1995 (7 of 3 ST/40232&42699/2014 1995); (22) "cable service" shall have the meaning assigned to it in clause (b) of section 2 of the Cable Television Networks (Regulation) Act, 1995 (7 of 1995). As per the definition contained in Cable Television Network (Regulation) Act, 1995 (7 of 1995), Cable Operator means:-
"any person who provides cable service through a Television Network or otherwise controls or is responsible for the management and operation of cable television network'.
Similarly, Cable Service in the Act ibid means, "the transmission by cables of a programme including re-transmission by cable of any broadcast television signals".
As per Section 65(105)(zs) of Finance Act, 1994, "taxable services' means any service provided or to be provided "to any person by a cable operator including a multi system operator in relation to cable services". As such cable operator as well as Multi System Operator who sends signals through a cable operator or otherwise are taxable under Cable Operator service w.e.f 10.09.2004.
3. Brief facts leading to the institution of the present appeals are that the Assessee, started business on 13.07.2006, obtained registration on 31.07.2006 and were engaged in rendering taxable services under the service categories "Cable Operator including Multi System Operator Service" and "Business Auxiliary Service". Though, the Assessee got registered on 31.07.2006 for "Cable Operator including Multi System Operator Service" but failed to get endorsement in the registration certificate for "Business Auxiliary Service". The Department was of the view that the Assessee had rendered services in as much as he received "Link 4 ST/40232&42699/2014 Charges" from the cable operators and received commission from various pay channels such as Sepro Holding (P) Ltd., New Delhi Television, S.S. Music, Raj T.V. etc. from December 2006 onwards till March 2010 on which appropriate Service Tax was not paid. It was also found that the Assessee had not filed periodical ST- 3 returns in respect of services rendered by them and not paid Service Tax. Thus, the Assessee has contravened the provisions of Section 69 and 70 of the Finance Act, 1994 read with Rules 4 and 7 of the Service Tax Rules, 1994. As such, the interest is leviable on the Service Tax payable under Section 75 and penalty imposable under Section 76, 77 and 78 ibid.
4. Consequently, a Show Cause Notice No. 25/2011 dated 18.04.2011 was issued to the Assessee by the Commissioner of Central Excise, Salem proposing to demand the Service Tax of Rs.2,89,84,753/- on Cable Operator including Multi System Operator Service for the period from 01.07.2006 to 31.03.2010 and Rs.8,77,118/- on Business Auxiliary Service for the period from December 2006 to March 2010 besides proposing to levy interest under Section 75 and to propose penalties under Sections 76, 77 and 78 of Finance Act,1994. The SCN also proposed to appropriate amounts of Rs.31,36,046/- paid towards demand on Cable operator service and Rs.5,65,026 paid towards interest. Subsequently another Show Cause Notice dated 17.10.2011 was issued to the Assessee proposing to demand Service Tax of Rs.20,31,400/- on Cable Operator including Multi System Operator Service for the period April 2010 to June 2010. After due process of law, the Adjudicating Authority confirmed the above demands, appropriated an amount of Rs.66,74,966/- already paid by the Assessee under Cable Operator 5 ST/40232&42699/2014 including Multi System Operator Service, besides levying interest under Section 75 after appropriating an amount of Rs.9,24,341/- paid towards interest and imposed equal penalty under Section 78 by invoking extended period from July 2006 to March 2010 and penalty under Section 76 and 77 and demanded late fee of Rs.54,000/- for delayed filing of ST-3 returns under Section 70 of the Finance Act, 1994 read with Rule 7C of the Service Tax Rules, 1994 while appropriating Rs.20,000/- already paid by the Assessee towards late fee.
5. Aggrieved by the above Order, the Assessee is on appeal before this forum.
6. Service Tax Appeal No. ST/40232/2014 has been preferred by the Department against the impugned Order-in-Original No. 07/2013 dated 07.10.2013 seeking imposition of Penalty under Section 78 of the Finance Act, 1994 instead of under Section 76 ibid, for non-payment of Service Tax during the period April 2010 to June 2010.
7.1 The Ld. Advocate Ms. P. Jayalakshmi representing the Assessee submitted that the Assessee started business on 13.07.2006 and obtained registration on 31.07.2006 after which the Range Officer, Erode-I Range vide letters dated 27.06.2007 and 25.07.2007 directed him to pay Service Tax with appropriate interest which makes it clear that the existence and activities of the Assessee were under the watch of the department. The Assessee wished to submit that they could not pay the Service Tax due to 6 ST/40232&42699/2014 insurmountable financial crisis they were facing then. In the meantime the Divisional Preventive officers sought for details and based on the documents furnished by the Assessee, a statement was recorded from him on 24.12.2008 in which the assessee had deposed that he was broadcasting channels to the cable operators, that the charges to the networks were paid along with service tax and such Service Tax paid was eligible as service tax credit; that proper accounts were maintained for the same and the service tax credit would be adjusted against the tax dues and the remaining amounts would be paid before 29.12.2008 and accordingly an amount of Rs.31,36,046/- was paid on 29.12.2008 followed by payments on various dates.
7.2 It was averred that the firm was audited by the Central Excise Audit party during August 2009 wherein the Audit party while raising objections, took cognisance of the tax paid after adjustment of the CENVAT credit in Para 3/3A and worked out the interest but the Respondent Department have not considered the CENVAT credit while working out tax liability for the period April 2009 to June 2009.
7.3 The Ld. Counsel further contended that the Ld. adjudicating authority failed to consider the various submissions and evidences on record while passing the impugned order. In this regard, the Ld. Counsel would refer to the observations in Para 23 of the impugned order that the adjudicating authority was not concerned with the Assessee's eligibility for CENVAT credit was bad in law and liable to be set aside. The Assessee averred that the entire exercise is revenue neutral in as much as the invoice raised would contain the tax 7 ST/40232&42699/2014 particulars which are eligible for availing credit; that when a substantial portion of demand is available as credit, the intention to evade tax is unsustainable rendering the whole situation revenue neutral; the non- consideration of this vital fact vitiates the whole proceedings rendering the impugned order liable to be set aside. Regardless of the fact, the Assessee wished to submit that it is settled law, even in the case of clandestine removal, demand would be made only after appropriating CENVAT credit and in this regard cited the judgements in the case of
(i) Rukmini Inustries Vs. Commissioner of Central Excise, Hyderabad reported in [2014 (308) ELT 649 (AP)] and
(ii) Dhananiwala Textiles Vs. Commissioner of Central Exicse reported in [2001 (130) ELT 233].
7.4 It was contended that subsequent to the above, he had received a letter dated 14.07.2010 from the department calling for details in respect of Commission received from the pay channels from 01.02.2009 to 31.03.2010 which was followed by a summon and hence both the notices were hit by limitation.
7.5 It was pointed out that ST-3 returns for the period 01.07.2006 to 31.03.2008 were submitted by registered post on 03.06.2009 itself along with a late fee. Further, it was mentioned that except the sum of Rs.6,93,446/- paid under challan dated 02.08.2011 all other amounts have been paid prior to issue of SCN.
7.6 It was submitted that out of the total demand of Rs.3,18,93,277/- (First SCN for Rs.2,98,61,877/- plus Rs.20,31,400/- for second SCN), the Assessee had 8 ST/40232&42699/2014 CENVAT credit of Rs.2,37,87,918/- which was sought as adjustment and an amount of Rs.68,09,156/- was already remitted in cash. Of the amounts paid, except the sum of Rs.6,93,446/- paid under challan dated 02.08.2011, all other amounts were paid prior to issue of Show Cause Notice and the Assessee was making arrangements to pay the balance amount of Rs.12,96,196/-. Further, an amount of Rs.9,23,341/- was paid towards interest and Rs.20,000/- was paid towards late fee for belated filing of ST-3 returns and hence the provisions of Section 73(3) are squarely applicable as the entire amount was paid along with interest 22 months prior to issuance of Show Cause Notice.
7.7 It was submitted that delayed payment or non- payment of tax cannot be construed as suppression of fact and hence extended period could not be invoked. The Assessee being highly law abiding always took pleasure in discharge of their statutory obligations even in the face of unmanageable financial crunch. It was stated that the question of imposing penalty does not arise in view of the fact that the Assessee had already discharged their liability due. It was pointed out that the entire demand was worked out based on details provided by the Assessee sourced from books of accounts maintained thereby obviating any room for allegation of suppression warranting invocation of extended period. In this regard, reliance was placed on the following judicial pronouncements: -
(i) Orissa Bridge and Construction Corporation Vs. CCE, Bhubaneshwar reported in [2011 (264) ELT 14 (SC)].
(ii) Commissioner Vs. Gammon India Ltd. Reported in [2002 (146) ELT A313 (SC)].9
ST/40232&42699/2014
(iii) Commissioner of Central Excise, Mangalore Vs. Pals Microsystems Ltd. reported in [2009 (234) ELT 428 (Kar.)].
(iv) CCE, Mangalore Vs. Pals Microsystems Ltd. Reported in [2011 (270) ELT 305 (SC)].
(v) Right Resources management Services Vs. Commissioner of CGST,CE & Customs Dehradun & Ors.- [2023 (11) TMI 100-CESTAT, New Delhi].
(vi) Rangoli Division Vs. Commissioner (Appeals) CE & CGST, Jaipur- [2023 (9) TMI 930- CESTAT- New Delhi)].
(vii) Kushal Fertilisers (P) Ltd. Vs. Commissioner of Customs and Central Excise, Meerut- [2009 (5) TMI 13-SC].
(viii) Borana Pumps Vs. Commissioner of CGST, Customs & C.Ex, Jodhpur-I- [2021 (378) ELT 189 (Tri.-Del)].
(ix) Birla Corporation Ltd.- [2003 (152) ELT 428 (Tri.-Del.)].
(x) Shri Balaji Industrial Products Ltd. Vs. Commissioner of Customs & C.Ex, Jaipur- [2019 (370) ELT 280 (Tri.- Del.)].
(xi) Reliance Life Insurance Company Ltd. Vs. Commissioner - [2018 (19) GSTL J66 ( Tri.-Mumbai)].
(xii) Tally Solutions Limited Vs. Commissioner of C.Ex, Bangalore - [2020 (41) GSTL 520 (Tri-Bang.)].
(xiii) Ace Creative Learning Pvt. Ltd. Vs. Commissioner of C.T, Bengaluru South GST Commissionerate - [2021 (51) GSTL 393 (Tri.-Bang.)].
(xiv) Kanak Metal Industries Vs. Commissioner of CGST, Jodhpur - [2022 (61) GSTL 598 (Tri.-Del.)].
(xv) Nizam Sugar Factory Vs. Collector of Central Excise, AP reported in [2006 (4) TMI 127-SC ].
8.1 The Ld. Authorised representative Shri Rudra Pratap Singh representing the Revenue reiterated the findings of the lower Adjudicating Authority and submitted that the impugned order dealt with findings covering both the Show Cause Notices and has not given separate finding for each of the SCN. It was pointed out that in Para 38 of the impugned order Penalty was imposed under Section 78 for the period up to 31.03.2010 and under Section 76 for the period April 2010 to June 2010, though the adjudicating authority had held that offence of suppression had continued even 10 ST/40232&42699/2014 after issuance of Second Show Cause Notice and in Para 27 of the impugned order, the charge of contravention the provisions of Service tax with a deliberate intention and failure to pay service tax was proved.
8.2 The Ld. Authorised Representative has referred to the decision rendered in the case of Lok Priya Travels Vs. Commissioner of Service Tax, Ahmedabad [2012 (25) STR 499 (Tri.-Ahmd.)] wherein it was held inter alia that, "though it was a fact that they have taken Service Tax registration, they never disclosed the nature of services rendered nor they furnished ST-3 returns, which was mandatory for a person providing taxable services. The question naturally arises that if they were not aware that they had to pay Service Tax, why should they take a Service Tax registration. We are of the opinion that non-furnishing of information or non-filing of returns resulted in non-payment of Service Tax and this action on the part of Assessee tantamount to deliberate non- compliance with the provisions. In other words, this is only implying suppression of facts with an intent to evade payment of Service Tax. Therefore, the extended period, under Section 73(1) is rightly invoked by the Revenue". Hence, the allegation of suppression and the consequent invoking of the extended proviso in this case is amply justified.
8.3 He has also referred to the decision in the case of M/s. Safe & Sure Marine Service Pvt. Ltd. Vs. Commissioner of Service Tax, Mumbai [2012 (28) STR (Tri.-Mumbai)] wherein it was held inter alia that the Assessee, after having collected the tax from their customers, have never informed the Department of the same and have suppressed the facts from the 11 ST/40232&42699/2014 Department and therefore, the extended period of time has been rightly invoked in the instant case. The above ratio is squarely applicable in this case.
9. Heard both sides and carefully considered the submissions and evidences on record.
10. The following issues arise for decision in this appeal:
(i) Whether the Assessee is eligible to avail and utilise the input service credit on various services availed?
(ii) Whether invocation of extended period in terms of proviso to Section 73(1) of the Finance act, 1994 is maintainable or not considering the facts of the case?
(iii) Whether imposition of penalties under Section 76, 77 and 78 of the Finance Act, 1994 are justified and whether in accordance with the provisions of the law or not?
11. We find from appeal records that the Assessee commenced business on 13.07.2006 and obtained registration for Cable Operator Service from the Department on 31.07.2006 though failed to take an endorsement for BAS. A Show Cause Notice dated 18.04.2011 was issued to the Assessee proposing to demand Service Tax of Rs.2,89,84,753/- on Cable Operator service for the period from July 2006 to March 2010 and Rs.8,77,118/- on Business Auxiliary Service for the period December 2006 to March 2010.
12ST/40232&42699/2014 Subsequently, another Show Cause Notice dated 17.10.2011 was issued to the Assessee proposing to demand Service Tax of Rs.20,31,400 on Cable Operator service for the period April 2010 to June 2010. We further find that, out of the total demand of Rs.3,18,93,277/- in the two show cause notices, the Assessee paid an amount of Rs.68,09,156/- in cash and Rs.2,37,87,919 by way of utilising CENVAT credit and the balance amount payable was Rs.12,96,196/- towards Service Tax dues. The adjudicating authority while confirming evidence of payment of Rs.68,09,156/- by the Assessee in the schedule of payments discussed in Para 22 of the impugned order, has appropriated an amount of Rs.66,74,996/- vide the impugned order. The Assessee also paid Rs.9,24,341/- towards interest due and R.20,000/- towards late filing of ST-3 returns which were appropriated by the lower authority vide the impugned order. The above amounts were paid well before issuance of the first Show Cause notice.
12.1 On the issue of eligibility of CENVAT Credit on input services availed, we find that in the case of Rukmini Inustries Vs. Commissioner of Central Excise, Hyderabad reported in [2014 (308) ELT 649 (AP)], it was held that there is no specific rule rendering manufacturer ineligible for availing MODVAT credit when such manufacturer is involved in suppression of turnover or clearance of goods out of record and benefit of MODVAT credit to the extent of input utilized in manufacture of dutiable finished product cannot be denied under Rule 57B of erstwhile Central Excise Rules, 1944. The relevant portion of the judgement is reproduced below:-
13ST/40232&42699/2014 "16. The very premise on which a show cause notice was issued resulting in the adjudication order fastening liability of the excise duty, is that appellant had in fact purchased raw material in 27 third parties names and utilized the said raw material in manufacture of a dutiable product and cleared the finished product without payment of duty. In the process of adjudication the authorities recorded a finding that in fact the appellant was involved in procurement of raw material and manufacture and sale of dutiable product and demanded tax. It is not in dispute that in normal circumstances the appellant would have been eligible to avail Modvat credit on the purchase of LAB, raw material, which was used in the manufacture of the dutiable product. The Modvat credit is sought to be denied to the appellant on the ground that the appellant had involved in suppressing the turnover. A perusal of the Rules would show that there is no rule prohibiting extending the benefit of Modvat credit in a case where it is found that there was a suppression of manufacture and clearance of dutiable goods. Though in the context of the Income Tax Act, we may refer to the judgment of the Supreme Court referred to above, wherein the Hon'ble Supreme Court in Commissioner of Income Tax, Gujarat v. S.C. Kothari [AIR 1972 SC 391] held as follows :-
The approach of the High Court in the present case has been that in order to arrive at the figure of profits even of an illegal business the loss must be deducted if it has actually been incurred in the carrying on of that business. It is the net profit after deducting the out goings that can be brought to tax. It certainly seems to have been held and that view has not been shown to be incorrect that so far as the admissible deductions under S. 10(2) are concerned they cannot be claimed by the, assessee if such expenses have been incurred in either payment of a penalty for infraction of law or the execution of some illegal activity. This, however, is based on the principle that an expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of the trade cannot be described as such. Penalties which are incurred for infraction of the law is not a normal incident of business and they fall on the assessee in some character other than that of a trader; (See Haji Aziz & Abdul Shakoor Bros. v. Commissioner of Income-tax, Bombay City(2). In that case this Court said quite clearly that a disbursement is deductible only if it falls within S. 10(2)(xv) of the Act of 1922 and a penalty cannot be regarded as an expenditure wholly and exclusively laid for the purpose of the business. Moreover disbursement or expense of a trader is something "which comes out of his pocket. A loss is something different. That is not a thing which he expends or disburses. That is a thing which comes upon him abextra" (Finlay J., in Allen v. Farquharson Brothers & Co.) (3). If the „business is illegal neither the profits earned nor the losses incurred would be enforceable in law. But that does not take the profits, out of the taxing statute. Similarly the taint of illegality of the business cannot detract from the losses being taken into account for computation of the amount which can be subjected to tax as "profits" under S. 10(1) of the Act of 1922. The tax collector cannot be heard to say that he will bring the gross receipts to tax.
He can only lax profits of a trade or business. That cannot be done 14 ST/40232&42699/2014 without deducting the losses and the legitimate expenses of the business. We concur in the view of the High Court that for the purpose of S.10(1) the losses which have actually been incurred in carrying on a particular illegal business must be deducted before the true figure relating to profits which have to be brought to tax can be computed or determined. This will, however, not conclude the answer to question No. 2 because it seems to have been framed with the other aspect relating to "set off under S.24 of the Act.
17. Applying similar analogy, in the absence of a specific rule making the manufacturer to be ineligible for availment of Modvat credit when such manufacturer is involved in suppression of turnover/clearance of goods out of the record, we are of the view that Modvat credit to the extent of input utilized in manufacture of dutiable finished product is leviable and the benefit of the same cannot be denied. In that view of the matter, question No. 3 is required to be answered in favour of the appellant and against the Revenue."
12.2 In Dhananiwala Textiles Vs. Commissioner of Central Excise reported in [2001 (130) E.L.T. 233 (Tri. - Chennai)], it was held that the order of denial of MODVAT Credit is not correct in law when duty paid goods were used in the manufacture of dutiable final products. The relevant portion of the judgement has been reproduced below:-
"3.(b) Our findings are as under :-
(i) There is no finding or allegation that POY, procured from M/s. Sanghi and texturised and cleared without duty determination thereon was non-duty paid. In fact the SCN and the findings link the invoices in different names issued by M/s. Sanghi as payment of duty. If that be so, it can be concluded that it is an admitted position that texturising was done on duty paid POY.
There is no dispute that the assessee had filed declarations under Rule 57A, the duty paying invoices are available, goods are being found to have been brought to the factory, therefore we see no reason not to grant the Modvat credit, if on the final product (Textured yarn) duty is being determined and demanded. The bar of Rule 57E is applicable only to non duty paid or inadequate duty paid inputs and not to full duty paid inputs as in this case. Therefore, the order of denial of Modvat credit by the Commissioner is not correct in law. His reliance on the case of Mihir Textiles [1997 (92) E.L.T. 9 (S.C.)] is not correct as that decision is with regard to classification of imported goods under registered contract and is not applicable to Modvat credit. Once inputs (POY in this case) is held to be duty paid and duty is demanded on Texturised yarn and also in 1996-97 the exemption granted under 15 ST/40232&42699/2014 notification is being denied and goods are being treated as dutiable. Therefore, we find Modvat credit cannot be denied as the issue is no longer res integra there being a catena of judgments supporting the eligibility of the same, even in cases of clandestine removal viz. Gujarat Ambuja Cement v. C.C.E. - 1996 (85) E.L.T. 154; Indian Oxygen Ltd. - 1995 (80) E.L.T. 573; Saphire Steels (P) Ltd. - 1994 (71) E.L.T. 1049.
(ii) Not only we find that Modvat credit eligibility will be required to be worked out but the demand on the final texturised yarn and its value may need not be worked out for purposes of duty and turnover by applying the Supreme Court decision on the appeal of Modvat credit on Valuation in the case of Dai Ichi Karkaria [1999 (112) E.L.T. 353 (S.C.)].
(iii) for the above purposes, the orders are required to be set aside and remanded for determination of the actual amounts of duty to be payable and thereafter a re-determination of penalty is required to be arrived at under Rules 9(2), 52A and 226."
12.3 We find that the in Paragraph 23 of the impugned order, the lower authority dismissed the claim for adjustment of CENVAT credit against Service Tax dues on the ground that the question of admissibility is not the subject matter in the Show Cause Notice. The said view cannot be accepted. CENVAT Credit being a substantive right, same ought to have been extended at the time of quantifying the demand. The law under CENVAT Credit Rules, 2004, does not say that the adjustment of Credit is not to be allowed, if the returns are filed belatedly. On such score, disallowance of credit is not legal and proper. Eligible credit has to be allowed for adjustment to compute the assessee's tax liability. However, the amount of credit has to be verified. The assessee has furnished the table showing the details of the credit available. Even as per Audit report, it was informed that they are eligible for CENVAT Credit. However, we are of the opinion that matter of computation on CENVAT Credit eligible needs to be remanded to the original adjudicating authority for the 16 ST/40232&42699/2014 limited purpose of verifying the amount of credit as furnished in the table and allow the adjustment towards liability. As such, the lower adjudicating authority is directed to requantify the duty liability after adjusting the CENVAT Credit amount.
13.1 Regarding, the invocation of extended period, on a perusal of Section 73 it is amply clear that any tax not levied or paid, short levied or short paid is recoverable from the petitioner. The show cause notice for realization of tax not levied or paid or short levied or short paid could be issued within one year from the relevant date. After amendment with effect from 28th May, 2012 by the Finance Act, 2012, the period of limitation is 18 months instead of one year. However, in view of the Proviso, where Service Tax has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of fraud, collusion, willful mis-statement, suppression of facts or contravention of any of the provisions of Chapter V of the Finance Act, 1994 with intention to evade Service Tax notice may be issued within five years instead of one year. Admittedly, in this case, notice has been issued on 18th April, 2011 for the years 2006-07, 2007-08, 2008- 2009 and 2009-2010 by invocation of the extended period. The question is whether the conditions precedent for invocation of the extended period of limitation existed or not? The reasons for invoking the extended period of time are stated in paragraph 4.01 of the Show Cause Notice dated 18.04.2011 which are that the Assessee have willfully suppressed the facts to gain unlawful monetary benefits by evading payment of Service Tax though received linking charges from the cable operators and hence the extended period under the proviso to 17 ST/40232&42699/2014 Section 73(1) is invokable in the case. Again, in Para 25 of the impugned order, the adjudicating authority has confirmed invocation of Section 73(1) on the ground that the Assessee had not paid Service Tax and not filed Service Tax returns with an intention to gain financial accommodation.
13.2 It is not in dispute that the assessee though had commenced business in July 2006 has not filed the returns and has not paid the Service Tax. The assessee was found recording the CENVAT Credit eligible on their payment to various TV channels and he was collecting link charges from various cable operators. The first cash payment of Service Tax was made on 29.12.2008 and the statutory returns were filed only on 03.06.2009 which was three year after the commencement of business. Service Tax dues were paid at various intervals from 29.01.2008 to 02.06.2011. There are many decisions by the Tribunal and Higher Courts to support the view that extended period is invokable when the assessee has failed to pay the Service Tax and failed to file the ST-3 returns though conducting his business throughout the Notice period. Due to persistent efforts by Audit and preventive sections could only make the assessee to pay the tax and file returns.
13.3 The non-payment of Service Tax collected along with the link charges from the cable operators had resulted in undue financial accommodation and therefore the suppression indulged has all necessary elements to be considered as having been resorted to with intent to evade payment of Service Tax. In such a situation extended proviso is rightly invokable as held by the CESTAT, Mumbai in the case of M/s. Safe & Sure Marine Service Pvt. Ltd. Vs. Commissioner of Service Tax, 18 ST/40232&42699/2014 Mumbai [2012 (28) STR (Tri.-Mumbai)] wherein it was held interalia "that the appellant, after having collected the tax from their customers, have never informed the Department of the same and have suppressed facts from the Department and, therefore, the extended period of time has been rightly invoked in the instant case. The above ratio is squarely applicable in this case". Considering the facts and circumstances of this case and relying upon the above decision, we have no hesitation to hold that the extended period of limitation in terms of the proviso to Sub-Section (1) of Section 73 of Chapter V of the Finance Act, 1994 is rightly invokable in this case.
13.4 Non-payment of Service Tax and non-filing of returns would tantamount to clear cut suppression of facts committed with intention to evade payment of duty, as held in the case of Lok Priya Travels Vs. Commissioner of Service Tax, Ahmedabad [2012 (25) STR 499 (Tri.-Ahmd.)] wherein it was held interalia that, "Though it was a fact that they have taken Service Tax registration, they never disclosed the nature of services rendered nor they furnished ST-3 returns, which was mandatory for a person providing taxable services. The question naturally arises that if they were not aware that they had to pay Service Tax, why should they take Service Tax registration. We are of the opinion that non- furnishing of information or non-filing of returns resulted in non-payment of Service Tax and this action on the part of appellants tantamount to deliberate non- compliance with the provisions. In other words, this is only implying suppression of facts with an intent to evade payment of Service Tax. Therefore, the extended period, under Section 73 (1) is rightly invoked by the Revenue". Hence the allegation of suppression and the 19 ST/40232&42699/2014 consequent invoking of the extended proviso in this case is amply justified.
14.1 The Ld. Advocate for the assessee has drawn our attention to the decision in the case of Orissa Bridge and Construction Corporation Vs. Commissioner of Central Excise, Bhubaneshwar [2011 (264) ELT 14 (SC)], contending that the Show Cause Notice in the instant case was issued after more than 2 years from undertaking the Audit of the assessee and so the Department is not justified in invoking extended period. He has also relied upon the decision rendered by the Hon'ble High Court of Karnataka in the case of Commissioner of Central Excise, Mangalore Vs. Pals Microsystems Ltd. [2009 (234) ELT 428 (Kar.)] wherein it was held that Show Cause Notice alleging suppression issued in much delayed manner as time-barred. Many other decisions were cited by the Ld. Advocate in support of his contention that extended period is not invokable as all the facts were in the knowledge of the Department and the duty amount was computed on the basis of assessee's records.
14.2 We have carefully gone through all these decisions. It is not disputed that the assessee though has collected linking charges from the cable operators, but not paid the due Service Tax for the period from 2006 to 2009 and also not filed returns which were done belatedly consequent to conducting the Audit of the assessee's unit and also due to investigations started by the Department. The facts obtaining in this appeal are so distinguishable.
20ST/40232&42699/2014
15. The Ld. Advocate has argued that the Service Tax dues have been paid substantially before the issuance of the Show Cause Notice and requested for extension of the benefit of Section 73(3) of the Finance Act, 1994. The impugned order No. 07/2013-ST dated 07.10.2013 has recorded the payments made by the Assessee amounting to Rs.68,09,156/- and the last instalment being on 02.06.2011 whereas the Show Cause Notice issued was dated 18.04.2011 covering the period from July 2006 to March 2010.
Service Tax Appeal No. 40232 of 2014
16. We find, the Department has filed an appeal vide No. 40232 of 2014 for non-imposition of penalty under Section 78 of Finance Act, 1994 for Service Tax demanded and confirmed in the second Show Cause Notice No. 98/2011-ST dated 17.10.2011 which was issued demanding and confirming Service Tax of Rs.20,31,400/- for the period from April 2010 to July 2010. Though the Show Cause Notice dated 17.10.2011 was issued invoking extended period, the adjudicating authority has imposed the penalty under Section 76 of Finance Act, 1994 and not under Section 78 of the Finance Act, 1994. The Show Cause Notice was issued covering four Months period. The appellant has paid the Service Tax dues except for one instalment of Rs.6,93,446/- on 02.06.2011. There is no justification for invoking the extended period in this case. The adjudicating authority has rightly imposed only the penalty under Section 76 of the Finance Act, 1994. We do not find any merit in Department's appeal.
21ST/40232&42699/2014
17. Imposition of Penalties:-
i. As has been already held that extended period is invokable as above, the assessee is liable for penalty under Section 78 of the Finance Act, 1994. However, the penalty amount will be equivalent to the tax payable after adjustment of the CENVAT Credit eligible to the assessee which has to be computed on remand.
ii. The first Show Cause Notice covers the period from July, 2006 to June, 2010. With effect from 10.05.2008, a proviso was inserted in the Finance Act, 2008 which reads as follows.
"Provided also that if the penalty is payable under this Section, the provisions of Section 76 shall not apply."
The above makes it clear that there is no statutory provision prior to 15.05.2008, restraining imposition of penalty under both Sections i.e., Section 76 and 78 of the Finance Act, 1994.
In respect of second Show Cause Notice, penalty was imposed on the appellant under Section 76 of the Finance Act, 1994 for non-payment or delayed payment of Service Tax for period from April, 2010 to June 2010.
Considering the peculiar circumstance of the case as the appellant has paid substantially the Service Tax amount before the issuance of the Show Cause Notice No. 25/2011 dated 18.04.2011, we consider it as sufficient cause to waive the penalties imposed under Section 76 of the Finance Act, 1994 in terms of provisions of Section 80 of 22 ST/40232&42699/2014 the Finance Act, 1994 in respect of both the Show Cause Notices.
iii. However, penalties imposed under Section 77 of the Finance Act, 1994 are not disturbed.
18. The original adjudicating authority is directed as discussed in Paragraph 12.3 to arrive at the Service Tax payable after allowing the adjustment of CENVAT Credit eligible. Thus, the appeal No. 42699 of 2014 filed by the assessee is partly allowed and partly remanded. The appeal No. 40232 of 2014 filed by the Revenue is dismissed.
(Order pronounced in open court on 10.01.2024) Sd/- Sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.) MEMBER (TECHNICAL) MEMBER (JUDICIAL) MK