Custom, Excise & Service Tax Tribunal
I) M/S. Ak & I Advertising Pvt. ... vs The Commissioner Of Central Excise ... on 21 April, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT BANGALORE Appeal No: ST/431 & 432/2007 (Arising out of Order-in-Appeal Nos: 33 & 32/2007 dated 31.07.2007 passed by the Commissioner of Central Excise (Appeals - II) Bangalore 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? Yes 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wishes to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? i) M/s. AK & I Advertising Pvt. Ltd.Bangaloreii) M/s. IB & W Communications (P) Ltd. Bangalore Appellants Vs. The Commissioner of Central Excise (Appeals - II)Bangalore Respondent
Appearance Mr. Prakash Mehta, learned Advocate, appeared on behalf of the appellant Mr. Raja Dass, Authorized Representative, for the Revenue.
CORAM DR. S.L. PEERAN, HONBLE MEMBER (JUDICIAL) SHRI T. K. JAYARAMAN, HONBLE MEMBER (TECHNICAL) Date of Hearing: 21.04.2008 Date of decision:
FINAL ORDER No._______________________2008 Per Shri T. K. Jayaraman These appeals have been filed against the following Orders - in - Appeal passed by Commissioner of Central Excise (Appeals - II) Bangalore.
2. The details of the appeals are given in the following tabular column.
Sl.No. Appellant/ Respondent Orders-in-Appeal No. Service Tax demanded Penalties Imposed 1 M/s. AK & I Advertising Pvt. Ltd. Vs. CCE, Bangalore 33/2007 dtd. 31.07.2007 Nil Rs 200/- per day or 2% of service tax per month whichever is higher u/s 76, Rs 1000 per return u/s 77 & Rs 1,35,104/- u/s 78 2 M/s. IB & W Communications (P) Ltd. Vs. CCE, Bangalore 32/2007 dtd. 31.07.2007 Nil Rs 200/- per day u/s 76, Rs 1000 per return u/s 77 & Rs 2,00,206/- u/s 78
3. The issue involved in both the appeals is one and the same. Therefore, we are passing a common order.
4. Shri Prakash Mehta, learned Advocate, appeared on behalf of the appellants and Shri Raja Dass, learned DR, appeared on behalf of the Revenue.
5. We heard both sides. In these cases the appellants are Service Tax payer. Both the appellants availed the benefit of the Service Tax Amnesty Scheme in order to discharge the service tax liability. However, the Departmental Officers during their visit found out that the correct value of the taxable amount has not been included in the returns filled by the appellants. Therefore, there was short levy. Hence, Revenue proceeded against both the appellants by way of issue of show cause notice. However, even before the show cause notice was issued and when the Departmental Officers pointed out the short levy, service tax was paid by the appellant along with interest. But in the proceedings apart from confirming the demand of service tax along with interest, penalties have been imposed under various Sections of the Finance Act 75, 76, 77 & 78. There has also been imposition of equal penalty. The appellants approached the Commissioner (Appeals) for relief. The Commissioner (Appeals) has given a very exhaustive order. He has distinguished all the case laws cited by the appellants and stated that even during the amnesty scheme as the appellants had not paid the service tax on the entire value, there was suppression. Therefore, penalty is leviable. Taking that view he has upheld the Orders in - Original levying the various penalties.
6. The learned Departmental Representative in this connection brought to our notice the decision of the High Court of Karnataka in the case of Commissioner III Vs. M/s. Kennametal Widia India Ltd. - 2008-TIOL-169-HC-KAR-CX wherein the Honble High Court has set aside the Tribunals order and held that interest is leviable even when the short payment was made even before the issue of Show Cause Notice. In the said decision the question of law formulated was whether the Tribunal was not justified in setting aside the order of Commissioner of Central Excise Appeals II whereby the order of the Assessing Authority was concerned, holding that respondent assessee was not liable to pay interest under Rule 57 AH of the Excise Rules 1944 read with Section 11AB of the Act as the irregular credit that was availed by the assessee was paid before the issue of Show Cause Notice against him. The learned JDR relied on the above decision and held that the interest in any case was payable even if the appellants had paid the short levy even before the issue of Show Cause Notice.
7. The learned Advocate brought to our notice the clarificatory circular issued by the Board on 3.10.2007 with regard to the conclusion of the proceedings initiated against the assessee, when the tax along with the interest is paid before the issue of Show Cause Notice. In the said circular it has been stated that Section 73 (1A) of the Finance Act, 1994 provides for conclusion of adjudication proceedings in the case of willful suppression/fraud/collusion if the tax payer pays service tax liability along with interest and a penalty equal to 25% of service tax amount, within a period of one month from the date of issue of Show Cause Notices. Similarly, Section 73 (3) provides conclusion of adjudication proceedings in other cases on payment of service tax and interest.
8. On a very careful consideration of the issue, we find that with regard to the levy of penalty as well as demand of interest, there are conflicting decisions of the Tribunal and the High Court. Therefore, we are of the view that each case has to be decided on the facts and circumstances of the case. In the present appeal, it is seen that even during the amnesty scheme certain values had been suppressed and later when the Department pointed out that the appellants had short paid the service tax, they paid the tax demanded along with interest even before the issue of Show Cause Notice. Both circulars dated 3.10.2007 are cited. The same is reproduced below.
F. No. 137/167/2006-CX.4 Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs Dated: October 3, 2007 Subject: Issuance of SCNs for levy of penalty in the cases where service tax is paid suo-moto by the assessee reg.
Section 73 (1A) of the Finance Act, 1994 provides for conclusion of adjudication proceeding in the cases of willful suppression/fraud/collusion if the taxpayer pays service tax liability along with interest and a penalty equal to 25% of service tax amount, within a period of one month from the date of issue of SCNs. Similarly, Section 73 (3) provides conclusion of adjudication proceedings in other cases on payment of service tax and interest.
2. A question has been raised as to whether the conclusion of proceedings in such cases is limited to the action taken under section 73 of the Act or all proceedings under the Finance Act, 1994, including those under section 76, 77 and 78, get concluded.
3. The issue has been examined. The intention of section 73 (1A) has already been explained vide Para 8(g) of the post budget instructions issued by TRU vide D.O.F. No. 334/4/2006-TRU dated 28.02.2006, wherein it has been clarified that this sub-section provides for conclusion of adjudication proceedings in respect of person who has voluntarily deposited the service tax.
3.1. The relevant portion of section 73 is reproduced below:-
Provided further that where such person has paid service tax in full together with interest and penalty under sub-section (1A), the proceeding in respect of such person and other person to whom notices are served under sub-section (1) shall be deemed to be concluded. Thus, law prescribes conclusion of proceedings against such person to whom SCN is issued under sub-section (1) of section 73. Therefore, it is not merely a conclusion under sub-section (1), but conclusion of all proceeding against such person. Similar is the position in respect of sub-section (3) of section 73.
4. Accordingly, conclusion of proceeding in terms of sub-section (1A) and (3) of section 73 implies conclusion of entire proceedings under the Finance Act, 1994.
(Gautam Bhattacharya) Commissioner (ST)
9. In terms of the above circular which has only clarified various provisions of the Finance Act, even in cases of willful suppression if the service tax along with interest and penalty equal to 25% of the service tax amount is paid even within a period of 1 month from the date of issue of Show Cause Notice, the adjudication proceedings will be concluded. In other words, no penalty will be levied under the other Sections. As regards the interest we are bound to follow the decision of the Karnataka High Court pointed out by the learned Departmental Representative. In the present case both the interest and the service tax amount have been paid before the issue of Show Cause Notice. Section 73(1A) provides conclusion of proceedings even in cases where the interest, service tax along with a penalty equal to 25% is paid within 1 month from the date of Show Cause Notice, the other penalties are not levied and the proceedings are deemed to have been concluded. In that case, in the light of the above legal provision, the present cases have to be viewed more leniently because the interest and service tax have been paid even before the issue of Show Cause Notice. Therefore, in our view the penalty under Section 78 can be limited to 25% of the service tax amount which has not paid and we are of the view that the penalty under all the other sections can be waived. Therefore, we modify the impugned orders by confirming the tax amount and also the interest. As regards the penalty, we hold that in both the appeals the penalty under Section 78 is limited to 25% of the service tax amount. The penalties imposed under the other Sections are set aside. Thus, we allow the appeals partially in the above manner.
(Pronounced in open Court on )
(T.K. JAYARAMAN)Member (T) (S.L.PEERAN) Member (J)
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