Custom, Excise & Service Tax Tribunal
Rohan Dies & Iintermediates Ltd vs Service Tax - Ahmedabad on 28 March, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
Service Tax Appeal No. 11187 of 2014 - DB
(Arising out of OIA-AHM-SVTAX-000-APP-345-13-14 dated 11/02/2014 passed by
Commissioner of Service Tax-SERVICE TAX - AHMEDABAD)
Rohan Dies & Iintermediates Ltd ........Appellant
115-117/123. Gidc, Phase-i,
Vatva,
Ahmedabad, Gujarat
VERSUS
C.S.T.-Service Tax - Ahmedabad ......Respondent
7 th Floor, Central Excise Bhawan, Nr. Polytechnic Central Excise Bhavan, Ambawadi, Ahmedabad, Gujarat- 380015 APPEARANCE:
Shri H D Dave, Advocate for the Appellant Shri Anoop Kumar Mudwel, Superintendent (AR) the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU Final Order No. 10705 /2024 DATE OF HEARING: 22.11.2023 DATE OF DECISION: 28.03.2024 RAMESH NAIR The Appellant M/s. Rohan Dyes is engaged in the manufacture of Dyes and Dyes Intermediaries for which they are registered with the Central Excise Department. The Department seeks to recover service tax for the payments made by the Appellants to foreign commission agents for the period from 2003-04 to 31.12.2007. The payments so made in foreign exchange are sought to be subjected to service tax under business auxiliary services under section 65(105)(zzb) of the Finance Act, 1994. The instant appeal challenges the levy of penalties imposed on the Appellant vide Order
- in - Appeal No. AHM/ST.TAX/000-APP-345-13-14 dated 11.02.2014 under section 76 and Section 78 of the Finance Act only.
2. Shri H.D. Dave, Learned Counsel appearing on behalf of the Appellant submits that both the lower authorities have erred to confirm penalties under Section 76 and Section 78 of the Finance Act whereas simultaneously penalties cannot be so imposed. He submits that the entire amount of
2|Page ST/11187/2014 -DB service tax along with interest was duly paid and deposited during the investigation stage itself as there was confusion about the levy of service tax on foreign commission paid at the relevant period. That the Appellant being under confusion and bonafide belief whether such tax is payable or not did not have any guilty intention and mens rea to avoid payment of tax that they have immediately paid tax along with interest as soon as they were intimated by the Department for the same therefore it was wrongly alleged by the department that there was malafide intention on behalf of the Appellant to evade payment of tax.
3. Shri Anoop K. Mudval, Learned Superintendent AR appearing on behalf of the Department reiterates findings of the impugned order.
4. We have heard both the sides and perused the records. We find that the present appeal is directed against imposition of penalty under section 76 and 78 of the Finance Act, 1994 only. We observe that there is no dispute as regards the fact that the Appellant have paid service tax along with interest upon intimation by the Department. It is the claim of the Appellant that they were under bonafide belief as regards their liability to pay tax and when they were intimated about their obligation, they have discharged the tax liability along with interest there upon. We find that it is settled legal position as enumerated by the Hon'ble Gujarat High Court in the case of Raval Trading Company - 2016 (42) STR 210 (Guj) that penalty under section 76 and 78 cannot be imposed simultaneously. The relevant paragraph has been extracted below:-
"7. The additional question framed today pertains to simultaneous penalties under Sections 76 and 78 of the Finance Act, 1994. Section 78 of the Finance Act, 1994, provides for penalty where any service tax was not levied or not paid, or having short-levied or short-paid or erroneously refunded, by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 of the Finance Act or of the Rules made thereunder with the intent to evade payment of service tax. During the period in question i.e. the period from 09.07.2004 to 31.03.2006, Section 78 of the Finance Act, 1994, did not contain a further proviso, which, as noted above, which added with effect from 16.05.2008. The further proviso reads as under :- "Further provided that if the penalties is payable under this section, the provisions of Section 76 shall not apply."
8. Section 76 of the Finance Act, 1994, pertains to penalty for failure to pay service tax. As it stood at the relevant time this provision provided that any person who is liable to pay service tax in accordance with the provisions of
3|Page ST/11187/2014 -DB Section 68 or the Rules made under Chapter 5, but fails to pay such tax, shall pay, in addition to such tax and the interest on that tax in accordance with the provisions of Section 75, a penalty which shall not be less than one hundred rupees for every day during which such failure continues or at the rate of one per cent of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax. The proviso to Section 76 provided that the total amount of the penalty payable in terms of the said provision shall not exceed fifty per cent of the service tax payable. This Section 76 of the Finance Act, 1994, has been substantially amended with effect from 14.05.2015 to which we would make a reference at later stage.
9. It can thus be seen that at the relevant time Section 78 of the Finance Act, 1994, provided for penalty in cases of tax not being levied or paid, or short- levied or short-paid or erroneously refunded, by reason of fraud or collusion or willful mis-statement etc., whereas Section 76 covered the cases of non- payment of tax on any ground whatsoever. The penalty that authority could impose under Section 78 is hundred per cent of the amount of the service tax evaded. On the other hand, the penalty under Section 76 which could be imposed is at the fixed amount per day for the entire duration of the failure to deposit the tax which, in any case, would not exceed fifty percent of the service tax payable.
10. The tenor, background and the purpose for which the penalty could be imposed under Section 78 of the Finance Act, 1994, is entirely different than in case of Section 76 of the Finance Act, 1994. However, the language of Section 76 did not specifically exclude the situation; otherwise covered under Section 78 namely non-payment of tax on account of willful mis-statement, fraud or collusion etc. One plausible argument therefore could be that Section 76 would also cover such situations and permit the department to levy a further penalty for default as envisaged under Section 76 of the Act over and above the penalty imposed under Section 78 of the Finance Act, 1994. In order to clarify this position, a further proviso was introduced in Section 78 making it clear that, if the penalty is payable under Section 78, the provisions of Section 76 shall not apply. In other words, with the introduction of further proviso to Section 78 whenever penalty was imposed under Section 78, no further penalty could be levied under Section 76 of the Finance Act, 1994.
11. In view of the nature of this further proviso and the relevant position of the two statutory provisions both pertaining to penalty, we are convinced that the proviso was in the nature of clarificatory amendment and not creating a liability for the first time. Even without the aid to this further proviso to Section 78, one entire plausible view was that the situation envisaged under Section 76 of the Finance Act, 1994, would exclude those cases covered under Section 78 of the Finance Act, 1994. In other words, Section 76 of the Finance Act, 1994, would cover only the cases of nonpayment of service tax which are not related to fraud, collusion, willful mis-statement, suppression of facts or contravention of any of the provisions of the said Chapter or the rules made thereunder with the intent to evade payment of service tax since legislature had already provided for
4|Page ST/11187/2014 -DB penalty in Section 78 in such situations. Thus further proviso to Section 78 made it explicit which was till then implicit.
12. Section 76 of the Finance Act, 1994, as is now amended with effect from 14.05.2015 gives further credence to this argument. Section 76(1) as it stands after the said amendment provides that where service tax was not levied or not paid or having been short-levied or short-paid, or erroneously refunded for any reason, other than the reason of fraud or collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of Chapter 5 or the rules made thereunder with an intent to evade the payment of service tax, the person liable shall in addition to service tax and interest also be liable to pay penalty not exceeding ten per cent of the amount of such service tax. Thus, by way of this amendment, the statute has ensured that Sections 76 and 78 of the Finance Act, 1994, apply in mutually exclusive areas. In other words, the cases of nonpayment of tax by reason of fraud or collusion or willful misstatement or suppression of facts etc., would be covered under Section 78 of the Finance Act, 1994, and all cases other than those envisaged under Section 78 would be covered under Section 76 of the Finance Act, 1994.
13. The view taken by us is supported by the judgment of Punjab and Haryana High Court in the case of Commissioner of Central Excise Vs. First Flight Courier Limited [ 2011(22) S.T.R. 622 (P&H) = 2011-TIOL-67-HC-P&H-ST in which in para 4 and 5 it was held and observed as under:
"4. Only point which has been urged by learned counsel for the appellant is that after 10-05-2008, there is an amendment providing that penalty under Section 76 could not be levied if penalty under Section 78 has been levied but for the period prior thereto, penalty could be levied under both Sections. The Commissioner (Appeals) as well as the Tribunal erred in deleting the penalty under Section 76 by assuming that simultaneously penalty under both the provisions could not be levied for the period in dispute.
5. We are unable to accept the submission. Section 76 provides for penalty for failure to pay the amount while Section 78 provides for penalty for suppressing the taxable value. Section 78 is, thus, more comprehensive and provides for higher amount. Even if technically, the scope of Sections 76 and 78 is different, penalty under Section 76 may not be justified if penalty had already been imposed under Section 78. The matter was considered by this Court in STA No.13 of 2010 (Commissioner of Central Excise Vs. M/s. Pannu Property Dealers, Ludhiana decided on 12-7-2010, wherein it was observed:"
We are of the view that even if technically, scope of sections 76 and 78 of the Act may be different, as submitted on behalf of the revenue, the fact that penalty has been levied under section 78 could be taken into account for levying or not levying penalty under section 76 of the Act. In such situation, even if reasoning given by the appellate authority that if penalty under section 78 of the Act was imposed, penalty under section 76 of the Act could never be imposed may not be correct, the appellate authority was within its
5|Page ST/11187/2014 -DB jurisdiction not to levy penalty under section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under section 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time."
14. The Karnataka High Court has also taken a similar view in the case of Commissioner of Service Tax, Bangalore Vs. Motor World [2012( 27) S.T.R.225 (Kar.)] = 2012-TIOL-418-HC-KAR-ST in which in paras 17, 18 and 19 it was observed as under:
"17. This decision of the Tribunal has been affirmed by this Court in the case of CCE v. Sunitha Shetty reported in 2006 (3) S.T.R. 404 (Kar.) = 2004 (174) E.L.T. 313 (Kar.) = 2004-TIOL-49-HC-KAR-ST, which has been followed by this court in the case of Commissioner of Central Excise v. Royal Agencies in CEA No.4 of 2004 disposed of on 26022008. Similar views have been taken by various other High Courts. Therefore, this penalty provision being penal in nature has to be strictly considered. If two views are possible, it is that view which is beneficial to the assessee which is to be preferred. That is what has been done by the Tribunal as well as by this Court. Therefore, it is not possible to accept the contention of the revenue that less than one hundred rupees has to be considered as less than one hundred rupees for everyday.
18. Probably, noticing this loophole, the Legislature taking note of the judicial pronouncement, from 1842006 amended the law so as to include `every day' after the words one hundred rupees. Therefore, till such amendment, the interpretation placed by the Judicial authorities has been accepted by the Government. That is the cause for amendment. Therefore, the minimum penalty leviable under Section 76 is one hundred rupees and the maximum penalty leviable is two hundred rupees per day, during the relevant period. However, the same is subject to the condition stipulated in the said section that he has failed to pay service tax. Therefore, discretion is left to the authority to prescribe the measure of penalty between these two stipulations.
19. If it is a failure to comply with the requirement of Section 78, a separate penalty is stipulated in the said provision. Section 78 applies to a case where a person has registered himself under the Act and failed to file the prescribed return and in such return filed, he has suppressed or concealed the value of taxable service or has furnished inaccurate value of such taxable service. Therefore, it is clear that Section 78 operates in an altogether differed field. But, even if as a matter of fact, it is established that the assessee has suppressed or concealed the value of taxable service and has furnished inaccurate value of such taxable service, the imposition of penalty is not automatic. The intention is clear from the words used in the said provision, to the effect that, he may act according to the provision while imposing penalty."
15. We are not unmindful of the decision of the Delhi High Court in the case of Bajaj Travels Limited Vs. Commissioner of Service Tax [2012 (25) S.T.R. 417
6|Page ST/11187/2014 -DB (Del.) = 2011-TIOL-896-HC-DEL-ST in which in para 16 the Delhi High Court observed as under:
"No doubt, Section 78 of the Act has been amended by the Finance Act, 2008 and the amendment provides that in case where penalty for suppressing the value of taxable service under Section 78 is imposed, the penalty for failure to pay service tax under Section 76 shall not apply. With this amendment the legal position now is that simultaneous penalties under both Section 76 and 78 of the Act would not be levied. However, since this amendment has come into force w.e.f. 16th May, 2008, it cannot have retrospective operation in the absence of any specific stipulation to this effect. Going by the nature of the amendment, it also cannot be said that this amendment is only clarificatory in nature. We may mention that Punjab and Haryana High Court in its decision dated 12th July, 2010 in STA 13/2010, entitled Commissioner of Central Excise v. M/s. Pannu Property Dealers, Ludhiana [ 2011(24) S.T.R. 173 (P*H) = 2010-TIOL-874-HC-P&H-ST has taken the view that even if the scope of two sections of the Act may be different, the fact that penalty has been levied under Section 78 could be taken into account for levying or not levying penalty under Section 76 of the Act. However, that was a case where the appellate authority had exercised its discretion not to levy the penalty under Section 76 of the Act, when the larger penalty had already been imposed under Section 78 of the Act. In this scenario, the appeal of the Revenue against the said view taken by the appellate authority was dismissed holding that "appellate authority was within its jurisdiction not to levy the penalty under Section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under Section 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time. Moreover, the amount involved is Rs.51,026/-only." The Court, thus, chose not to interfere with the aforesaid discretion of the Tribunal."
16. Under the circumstances, we answer the additional question in favour of the appellant-assessee and delete the penalty under Section 76 of the Finance Act, 1994, while upholding the penalty imposed under Section 78 and other penalties. The tax appeal is accordingly disposed of with no order as to costs."
Similar view has been upheld by this Tribunal in the case of M.D. Engineers v CCE & ST vide order dated 18.08.2023 arising out of Service Tax Appeal No. 13997 of 2013 wherein it was held as follows:-
"5. Without prejudice, we also find that the appellant have been imposed penalty under section 76 and 78 simultaneously. It is settled legal position by the Hon'ble Gujarat High Court in the case of Raval Trading Company - 2016 (42) STR 210 (Guj) that the penalty under Section 76 and 78 cannot be imposed simultaneously. Accordingly, the penalty under section 78 is not imposable also on this principle."
7|Page ST/11187/2014 -DB Therefore, in view of the aforesaid and following the judicial discipline, we are of the considered view that penalty under Section 76 and 78 cannot be imposed simultaneously. Accordingly, penalty under section 76 should not be imposed on the Appellant when they have paid the service tax along with interest whereas penalty under section 78 and other penalties is upheld.
5. As per our above discussion and finding, the impugned order is modified to the above extent. The appeal is partly allowed in the above terms.
(Pronounced in the open court on 28.03.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Raksha