Custom, Excise & Service Tax Tribunal
M/S Solar Industries India Ltd vs Commissioner Of Central Excise, Nagpur on 26 June, 2015
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. IV APPEAL NO. ST/85503/14 (Arising out of Order-in-Appeal No. NGP/EXCUS/000/APPL/924/13-14 dated 19.11.2013 passed by the Commissioner of Central Excise (Appeals), Nagpur.) For approval and signature: Honble Shri Anil Choudhary, Member (Judicial) =====================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy : Seen
of the order?
4. Whether order is to be circulated to the Departmental : Yes
authorities?
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M/s Solar Industries India Ltd.
: Appellant
Versus
Commissioner of Central Excise, Nagpur
: Respondent
Appearance
Shri Mayur Shroff, Advocate
: For Appellant
Shri Sanjeev Nair, Examiner (A.R.)
: For Respondent
CORAM:
HONBLE SHRI ANIL CHOUDHARY, MEMBER (JUDICIAL)
Date of Hearing : 26.06.2015 Date of Decision: 26.06.2015
ORDER NO.......................................................
Per: Anil Choudhary:
The appellant M/s Solar Industries India Ltd. manufacturer of excisable goods, is in appeal against Order-in-Appeal dated 19/11/2013, by which the penalty imposed on the appellant have been confirmed under Section various Sections.
2. The brief facts are that the appellant is a manufacturer, and used input services under the category Business Auxiliary Services and Management Consultant Services, among others, and is registered with the Department under the provisions of the Central Excise Act and Finance Act, 1994. Under the reverse charge mechanism, the appellant is required to pay service tax, as the receiver of the service, from abroad under the head's Business Auxiliary Services and Management Consultant Services. The appellant had been regularly paying the taxes and filing the returns. During the course of audit during July, 2010, it was found that the appellant have short paid service tax, being liability on the reverse charge basis in respect of Business Auxiliary Services and Management Consultant Services received from abroad. In the statement recorded of the Authority signatory, Shri DB Padgaonkar, it is explained that the amount shown in the Ledger, duly signed by him, pertains to solar industries India (Pvt.) Ltd. He also stated that they were paying the service tax regulary, however some amount of service tax appears to be short paid, due to lack of communication between the accounts Department and the person looking after the Central Excise matter. The assessee paid the said amount (short paid) of service tax Rs. 10,86,739/- along with interest of Rs. 92,256/- vide challan dated 17.08.2010. The show-cause notice dated 23.9.11 was issued on the appellant for the period January 2008 to June 2010 wherein it was alleged that in the course of audit by CERA, it was found that the appellant have received services from foreign commission agent, who do not have any office in India, and paid Rs. 1,04,66,304/ towards service provided as commission agent and for selling of the goods abroad and service tax is short paid during the said period. A letter was issued dated 19.08.2010 by the Superintendent directing the appellant to deposit the service tax short paid with the appropriate interest. On verification of records during audit it was noticed by the Revenue that the appellant have neither paid the amount of service tax on the taxable amount on account of commission/consideration to the foreign commission agent, nor declared the taxable amount in the return filed to the Department, from time to time. Accordingly it was proposed to assess the said amount along with proposal to appropriate the amount already deposited towards short paid service tax and interest. Further penalty was proposed under the provisions of Section 76, 77, 70 and 78 of the Finance Act.
3. The appellant appeared and contested the show-cause notice stating therein that they have been regularly depositing the tax. Further the transactions are duly recorded in the books of accounts, maintained in the ordinary course of business. It was further pointed out that the records of the appellant have been under continuous audit by the Revenue since November, 2007 and periodical audits doing the years 2009, 2010, 2008, etc. Further explained that in its audited financial statement, and accounts discloses the value of transactions in foreign currency, under various heads. In the present case when audit asked the appellant to reconcile the figure, mentioned in the balance-sheet, transaction on which service tax was paid and and/or disclosed in ST-3 return, the said short payments were discovered by the appellant and the audit. That there was no case of any suppression, as the transactions have been recorded in the books of account. It was further explained that even before the first letter written by the Superintendent from the Department, for payment of the tax short paid, that is letter dated 15 October, 2010, the appellant had already deposited the service tax short paid on 17.08.2010 along with interest. It was further explained that due to lack of coordination and clerical error in the office of the appellant dealing with the banking matters and the officer dealing with the Central Excise and Service Tax matters, resulted in short payment of service tax. As the payment for the services received from abroad is paid in foreign currency, the officer dealing with the Excise matters prepares returns and deposit the tax on the advise of the officer dealing with the banking matters. It was further explained that in the facts and circumstances there is no deliberate default and/or suppression on the part of the appellant nor any Act leading to deliberate default in the payment of tax liability.
4. The show-cause notice was adjudicated by Order-in-Original dated 19.07.2013 by which the proposed demand was adjudicated and appropriated along with interest. Further penalty of Rs. 2000 was imposed under Section 70 read with Rule 7C of the Service Tax Rules for delayed filing, of each returns, further penalty was imposed being 2% of such tax per month or Rs. 200/- per day whichever is higher for non-payment of service tax on the due dates and further penalty of Rs. 2000/- was imposed under Section 77 and penalty equal to the amount of tax was imposed under Section 78. Being aggrieved, the appellant preferred appeal before the Commissioner (Appeals) who was pleased to reject the appeal, holding that the appellant mainly contended that there is no case of suppression nor any Act to defraud the revenue. It is simple case of clerical error, transaction escaping tax liability which happened due to communication error between the officers of the company. Such explanation was not accepted, it was further held that although that the appellant was liable to pay service tax the same was not paid, until it was detected by the audit. Even though the appellant had paid the amount alongwith interest before issue of show-cause notice, the learned Commissioner found that the tax was paid only on being pointed out by the audit. Had it not been detected by the audit it would have remained unnoticed and the appellant would not have paid the appropriate tax. So far the ground of Revenue neutrality is concerned, the learned Commissioner held that the appellant being assessable of Central Excise and Service Tax assessee, was aware of obligations and further failed to deposit the tax in time as required under the Service Tax Rules. That it implies that there was a deliberate contravention of provisions of the Act. The line between evasion and avoidance of taxes is thin and the appellant cannot take shelter under some pretext.
5. Being aggrieved the appellant is in appeal before this Tribunal on the ground that the learned Commissioner have erred in holding that there is suppression on the part of the appellant which is not the case in view of the facts on record. Further the explanation given by the appellant, that the transaction being duly recorded in the books of accounts maintained in the ordinary course of business, the tax short paid is due to lack of coordination between the two departments of the appellant. The said explanation has not been found to be untrue and accordingly the learned Commissioner is in error in rejecting the same. It is further urged that the appellant had deposited the amount of tax along with interest, found short paid even before the first communication/notice from the Revenue, to pay the same. It is further stated that the Appellant was entitled to the benefit under section 73(3) of the Finance Act and no show-cause notice was required to be issued. It is further urged that the appellant being a manufacture pays about Rs. 15 crores P.A. of tax towards Excise duty plus service tax. Further the appellant is entitled to take CENVAT credit of the service tax paid on the input services. The amount of service tax paid during the last two accounting year for 2008-09 and 2009-10 is about Rs. 26 lakhs per annum, which is fully adjustable with the Central Excise liability. In view of the Revenue neutrality there is no incentive to evade the tax leviable towards service tax, on the reverse charge basis. The learned Counsel further relies on the ruling of the Apex Court in the case of CCE V/s. Pals Microsystems Ltd wherein it has been held that there has was some finding to the effect that there was a fraud or of wilful misstatement or suppression of fact. Extended period of limitation is invocable only when there is positive act other than merely inaction of failure on the part of the manufacturer and that there is no conscious of deliberate withholding of information by the manufacturer. The learned Counsel further relies on the division bench ruling of this Tribunal in the case of Accurate Chemical Industries Vs. CCE- 2014 (300) ELT 451 wherein in the goods cleared as stock transfer to parent unit at a price lower than hundred 110% /115% of cost of production, the question was whether duty payment should conform to requirement of Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000. The demand of duty was confirmed along with interest and equal penalty under section 11AC by the adjudicating authority. It was held by the Tribunal that the demand was time barred. The Tribunal also found that the entire duty paid by the assessee in respect of clearances of MS tanks and radiators to the transformer unit, was available to the transformer unit as Cenvat credit. It was not disputed that the Appellant unit in Bulandshahar Distt. and the transformer unit of M/s. Accurate Transformers Limited were owned by the same person. Reliance was placed on the larger bench ruling of this Tribunal in the case of Jay Yushin Ltd Vs. CCE- 2000 (119)ELT 718 wherein it had that when revenue neutral situation comes about in relation to the credit available to an assessee himself in respect of the duty paid by him and not by the way of availability of the credit to the buyer of the assessees manufactured goods, the assessee cannot be accused of having contravened the rules with intent to evade the payment of duty and extended period under proviso to section 11A(1) would not be invocable. Accordingly; the Tribunal applied the ratio of the larger bench judgment and held that the larger period of limitation for short payment of duty would not be available to the revenue. It therefore held that that since in the facts and circumstances that was no evidence that the assessee committed any fraud or wilful misstatement, suppression of facts with intent to evade the payment of duty the penal provisions of section 11 AC also would not be applicable. The said ruling of the Tribunal was assailed before the Honorable Allahabad High Court and vide order dated 3-2- 2014, the Honorable High Court in CCE Vs. Accurate Chemical Industries- 2014(310)ELT 441 has upheld the order of the Tribunal observing that there no reason to interfere with the finding of fact that if a scrutiny had been made by the Range officer of the ER-1 returns, that would have revealed that the assessee had cleared its MS Tanks and radiators to the owning company for the manufacture of transformers. This indicated that there was no fraud, collusion, misstatement or suppression of facts. Besides since the situation was revenue neutral, no intent to evade the payment of duty could be ascribed to the assessee. Once there was no intent to evade the payment of duty, the Tribunal was justified in coming to the conclusion that the extended period of limitation under the proviso to section 11 A (1) of the Act, would not get attracted. The appellant submits that the above ratio is squarely applicable to the present case and the situation in the present case is also revenue neutral. Thus the appellant prays for allowing the appeal and setting aside the penalties imposed under section 76, 77 and 78 of the Finance Act, 1994.
6. The learned A.R appearing for the Revenue supports the impugned order. He further points out that it had been rightly held in the impugned order that the appellant have deliberately defaulted in payment of the current service tax liability. For that the discrepancy came to light only when the Revenue Audit directed the appellant to prepare the reconciliation with respect to the payments made in foreign currency as appearing in the financial statements along with the tax liability. The learned A.R. further relies on the ruling of the Punjab and Haryana High Court in the case of CCE Vs. Supreme Polytubes (P) Ltd. 2010 (262) ELT 231 wherein the Excise Preventive Staff visited the factory premises of the dealer and detected shortage of 7.601 MT of PVC pipes, involving Central Excise duty/ credit of Rs.55,821/-. The Director of the unit in his signed statement admitted shortage by stating the reason of mis-reporting by illiterate labour. It was further the fact on record that weighment of the stock material was done on eye estimate basis as for such a huge quantity of 7.601 MT a number of days would be required to load the trucks and then take them to weighment bridge and for loading and unloading the same to weigh the material a number of times. Under such facts and circumstances the Honorable High Court noted that the finding recorded by the assessing authority nowhere stated that there was any suppression of facts or mis-statement or fraud with the intention to evade payment of duty. The Honorable High Court thus held was that in the light of the absence of findings of clandestine removal of goods or any fraud, mis-representation, suppression of facts with the intention to evade duty, Section 11AC was not attracted as has been held by the Honorable Supreme Court in the case of Rajasthan Spinning and Weaving Mills- 2009 (238) ELT 3. The learned A.R. further relies on the Division Bench ruling of this Tribunal in the case of Bharat Automotive Pressings (I) Pvt. Ltd. Vs. CCE- 2010 (262) ELT 720 wherein the issue was the inclusion of the value of the moulds/dies which were supplied free of cost by buyer for the manufacture of final products by the aforesaid assessee. Therein, the defence was taken that there was conflict of decisions of the Tribunal and the issue finally settled in favour of revenue by the Larger Bench in Mutual Industries Ltd. The Tribunal held that the appellant had continue to exclude the amortized cost of moulds from the assessable value even after the decision in Flex Industries case (1997) which was to the effect that such cost was liable to be included in the assessable value of the goods. A contra decision of the Tribunal came, admittedly after 1999. It was thus found that having made an endeavour to derive benefit of the so called confusion arising out of conflicting decisions of the Tribunal, the appellant cannot turn around and say that they were not aware of the Tribunals decision in Flex Industries case. It was thus held that the appellant had deliberately excluded the amortized cost of moulds from the assessable value. It was held that the demand of duty for the extended period was not time barred. The issue of Revenue neutrality pleaded by the assessee appellant was also not accepted and it was held that the demand of duty for the extended period cannot be resisted by the appellants on the premise that whatever duty paid by them would ultimately be available as Modvat/ Cenvat credit to the buyer. The Tribunal placed reliance on the decision in the case of M/s. Jay Yushin Ltd. Vs. Commissioner-2000(119) ELT 718 in this connection.
7. Having considered the rival contentions, I hold that there is no case of contumacious conduct and/or suppression of facts, or any case of mis-statement with intention to evade the payment of duty/tax is made out against the appellant. The explanation given by the appellant, at the very first instance, at the time of recording of the statement, that the discrepancy occurred due to lack of co-ordination between the two Departments as separate officers were dealing with the banking matter and other dealing with the Central Excise and Service Tax compliances have not been found to be untrue, by both the Courts below. Further I find from the conduct of the appellant that they have co-operated with the audit and immediately on finding the discrepancy, that is short payment of service tax, without waiting for any instruction from the Revenue, they have deposited the service tax, short paid along with interest. This fact is an admitted fact on the face of the record. Further I find that the appellant have been paying about Rs. 15 crores of Central Excise & Service Tax P.A. during the period in question. Further the appellant being entitled to CENVAT credit on the service tax paid on the input services, there is no incentive to evade the service tax liability. Thus I hold that the appellant is entitled to the benefit under the provisions of Section 80 of the Finance Act. I further find under the facts and circumstances that the ingredients of penalty under Section 70 are not there as there is no finding as to the delayed filing of the returns. Accordingly, the appeal is allowed. I set aside the penalty imposed under Section 70, 76, 77 and 78 of the Act. The appellant will be entitled to consequential benefit, if any, in accordance with law.
(Pronounced in open Court) (Anil Choudhary) Member (Judicial) Sp 11