Custom, Excise & Service Tax Tribunal
Gandhinagar vs Adani Energy Ltd on 13 August, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH - COURT NO. 3
SERVICE TAX Appeal No. 13755 of 2013-DB
[Arising out of Order-in-Original/Appeal No STC-30-COMMR-AHD-2013 dated 21.08.2013
passed by Commissioner of Service Tax-SERVICE TAX - AHMEDABAD]
C.CGST & C.Ex-Gandhinagar .... Appellant
Ahmedabad North, First Floor Customs House,
Narvangpura, Ahmedabad -380009
VERSUS
Adani Energy Limited .... Respondent
8th Floor, Heritage Building, Ashram Road, Usmanpura, AHMEDABAD, GUJARAT.
APPEARANCE :
Shri Tara Prakash, Deputy Commissioner (AR) for the Appellant Shri Hardik Modh, Advocate for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) DATE OF HEARING : 15.07.2024 DATE OF DECISION: 13.08.2024 FINAL ORDER NO. 11742/2024 RAMESH NAIR :
This appeal is filed by the Revenue seeking imposition of penalty under Section 78 of the Finance Act, 1994 with reference to confirmation of demand in the impugned order by the learned Commissioner. However, the learned Commissioner has not imposed the penalty under Section 78 of the Finance Act, 1994. Therefore, the present appeal filed by the Revenue.
2. Shri Tara Prakash, Learned Deputy Commissioner (AR) reiterates the grounds of appeal. He submits that learned commissioner has confirmed he demand however this Tribunal vide Final Order No. A/10909-10914/2019 dated05.04.2019 though allowed appeal of the assessee however, this order has been reversed by the Hon'ble Supreme Court reported at Commissioner of Service Tax , Ahmedabad vs. Adani Gas Ltd (now known as Adani Energy 2 Appeal No. ST/13755/2013 Ltd) -2020 (40) GSTL 145 (SC). He submits that the Adjudicating Authority did not impose the penalty under Section 78 of the Finance Act, 1994 relying on the judgment of Nizam Sugar Factory - 2006 (197 ) ELT 465 (SC) which is erroneous and fallacious.
2.1 He submits that the Learned Commissioner has failed to consider that the service provider has failed to give details for issuance of show cause notice for the subsequent period nor there is any evidence to the fact that the service provider has done something wrong to suppress the details.
Therefore, without examining this fact refraining from imposing penalty under section 78 is not correct. The Learned Commissioner also failed to surmise that there can be number of eventualities where provision of Section 78 can be invoked such as fraud or collusion or any wilfulmis-statement or suppression of facts or contravention of any of the provision of this act or on the rule made thereunder with intention to evade payment of duty.
2.2 He further submits that reliance of the Learned Commissioner on judgment of Nizam Sugar Factory (Supra) is not proper, as in that case Hon'ble Apex Court held that since the show cause notices were issued earlier also the matter was in the knowledge of the Department and therefore, suppression cannot be pleaded, However, there is clear contravention of provisions of Finance Act and the rules made thereunder with intent to evade the payment of service tax, therefore, the respondent is liable to penalty under section 78 of the Finance Act, 1994.
2.3 He submits that the matter may be remanded to the Adjudicating Authority to decide the imposition of penalty under Section 78 of the Finance Act, 1994.
3Appeal No. ST/13755/2013
3. Shri Hardik Modh, Learned Counsel appearing on behalf of the Respondent at the outset submits that the demand in the present case has arisen as a recurring issue under recurring show cause notice and the demand is in normal period of one year therefore, there is no suppression of fact or any contravention. Hence, the penalty was rightly not imposed by the Adjudicating Authority. He further submits that in the show cause notice the penalties were proposed under Section 76 and 78 of the Finance Act, 1994.
The penalty under Section 76 was imposed, it is now settled legal position that both the penalties under Section 76 and 78 cannot be imposed simultaneously, therefore, for this reason also the learned Commissioner has rightly refrained from imposing the penalty under section 78 of the Finance Act, 1994. In support he placed reliance on the following judgments :-
Adani Gas Ltd - 2019 (28) GSTL 238 (Tri. Ahmd) Commissioner of Service Tax vs. Adani Gas Ltd - 2020 (40) GSTL 145 (SC) Raval Trading Company - 2016 (42) STR 210 (Guj.) Commissioner of CGST vs. Sai Consulting Engineering Pvt Ltd -2018 (15) GSTL 708 (Guj.) Stollberg India Pvt Ltd - 2017 (52) STR 327 (T) Remac Marketing Pvt Ltd - 2009 (13) STR 658 (T) Nizam Sugar Factory - 2006 (197) ELT 465 (SC) J.K Enterprises - 2023 (70) GSTL 297 (T) Maa Communications Bozell Ltd - 2017 (3) GSTL 89 Adani Enterprise Ltd - 2022 (63) 465 (T) C.C.Ex. vs. Adani Enterprise Ltd - 2022 (63) GSTL 411 (SC) R. Balarami Reddy - 2019 (22) GSTL 255 Triveni Udyog vs. C.C.Ex.-2017 (358) ELT 950 (T) 4 Appeal No. ST/13755/2013
4. We have carefully considered the submission made by both sides and perused the records. We find that by this appeal, Revenue sought to impose penalty under Section 78 of Finance Act, 1994. We find that in the show cause notice penalties under both Sections i.e. Section 76 and 78 were proposed to be imposed. Learned Commissioner has imposed penalty under Section 76 and for this reason also simultaneously penalty under Section 78 cannot be imposed as held by the Hon'ble Gujarat High court in the case of Raval Trading Company (Supra) as under:-
"6. Insofar as the first question is concerned, we have no hesitation in confirming the penalty imposed under Section 78 of the Finance Act, 1994. The adjudicating authority, the appellate authority and the Customs Excise and Service Tax Appellate Tribunal, Ahmedabad concurrently held that the assessee who was not a small firm and was liable to pay service tax as was admitted by its partner in a written statement, had not deposited the same with the revenue authorities. The explanation offered by the assessee was not accepted. It was the case of the assessee that unaware of the tax liability, the service tax was not deposited with the department. Had this been the case, the assessee would have surely pleaded that such service tax was never collected from the service recipient. The defence that due to financial hardship such service tax was not paid would firstly destroy the assessee's case of ignorance of service tax liability. Secondly, the fact that the assessee even did not obtain registration with the Sales Tax Department would belie its stand that though willing to pay the tax could not do so due to financial hardship. The question No. 1 therefore shall have to be answered against the assessee and in favour of the department.
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 wilful 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 9-7-2004 to 31-3-2006, Section 78 of the Finance Act, 1994, did not contain a further proviso, which, as noted above, which added with effect from 16-5-2008. 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 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 5 Appeal No. ST/13755/2013 payable. This Section 76 of the Finance Act, 1994, has been substantially amended with effect from 14-5-2015 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 wilful misstatement, 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 wilful misstatement, 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 non-payment of service tax which are not related to fraud, collusion, wilful misstatement, 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 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 14-5-2015 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 wilful misstatement 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 non-payment of tax by reason of fraud or collusion or wilful 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 v. First Flight Courier Limited [2011 (22) S.T.R. 622 (P&H) in which in paras 4 and 5 it was held and observed as under :
6Appeal No. ST/13755/2013 "4. Only point which has been urged by learned counsel for the appellant is that after 10-5-2008, 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 v. 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 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 v. Motor World [2012 (27) S.T.R. 225 (Kar.)] 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.), 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 26-2-2008. 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 18-4-2006 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.7
Appeal No. ST/13755/2013 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 v. Commissioner of Service Tax [2012 (25) S.T.R. 417 (Del.)] 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 Sections 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) 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.
4.1 Similar view was taken by the Hon'ble Gujarat High Court in the case of Sai Consulting Engineering Pvt Ltd (Supra). The order is reproduced below:-
"The appeal is filed by the department challenging the judgment of CESTAT dated 13-6- 2017 raising the following question for our consideration :8
Appeal No. ST/13755/2013 "Whether in the facts and circumstances of the case and law, the Hon'ble Tribunal has committed substantial error of law by quashing and setting aside the OIO dated 6-5-2011 holding that simultaneous penalty under Sections 76 and 78 of the Finance Act, 1994 cannot be imposed?"
2. The sole question thus is whether simultaneous penalties under Sections 76 and 78 of the Finance Act, 1994 could have been imposed.
3. This issue is already covered by judgment of Division Bench of this Court in case of Raval Trading Company v. Commissioner of Service Tax (Tax Appeal No. 1534/2011, judgment dated 7-1-2016) [2016 (42) S.T.R. 210 (Guj.)] in which following observations were made :
"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 wilful misstatement 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 non-payment 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 penalty in Section 78 in such situations. Thus further proviso to Section 78 made it explicit which was till then implicit."
4. The Court noticed that similar view was expressed by Punjab and Haryana High Court in case of Commissioner of Central Excise v. First Flight Courier Limited reported in 2011 (22) S.T.R. 622 (P&H) and by Karnataka High Court in case of Commissioner of Service Tax, Bangalore v. Motor World reported in 2012 (27) S.T.R. 225 (Kar.).
5. Learned Counsel for the department however brought to our notice judgment of Kerala High Court in case of Asstt. CCE & Ors. v. Krishna Poduval & Ors, (W.A. Nos 715 and 717 of 2005, judgment dated 20-10-2005) [2006 (1) S.T.R. 185 (Ker.)]. However when decision of this Court is already rendered, we would be bound by such decision.
6. In the result, tax appeal is dismissed."
9Appeal No. ST/13755/2013 4.2 In view of the above judgments of jurisdictional High Court, once the penalty was imposed under Section 76 no simultaneous penalty can be imposed under both section. For this reason, penalty under section 78 is not imposable.
4.3 Without prejudice to the above, we further find that this show cause notice in the present case was issued as recurring in nature, therefore, the judgment of Hon'ble Supreme Court in case of Nizam Sugar Factory (supra) is clearly applicable. Consequently, the ingredient such as fraud, collusion, willful mis-statement, contravention of any provision or rules with intent to evade payment of duty does involve in the present case. Moreover, in the show cause notice as well as in the impugned order, the demand was proposed/confirmed under Section 73 (1) of the Finance Act, 1994 which reads as under:-
(73). Recovery of service tax not levied or paid or short levied or short-paid or erroneously refunded.
(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise officer may, within thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:
Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of-
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provision of this Chapter or of the rules made thereunder with intent to evade payment of service tax, By the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "thirty months", the words "five years" had been substituted.10
Appeal No. ST/13755/2013 Explanation.- Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of thirty months or five years, as the case may be.
4.4 From the above it can be seen that the demand under Section 73 (1) can be made only when there is no fraud, collusion, willful mis-statement, contravention of any provision or rules with intent to evade payment of duty, if these ingredients exist then the demand should be raised under proviso to Section 73 (1). For this reason also for demanding the service tax, proviso was not invoked. Therefore, different yardstick for imposing penalty under Section 78 cannot be adopted by the Revenue. The Learned Commissioner has rightly refrained from imposing penalty under Section 78.
4.5 We are of the clear view that in facts and circumstances of the case, respondent is not liable for penalty under Section 78, therefore, the order of the Learned Commissioner so far he refrained from imposing penalty under Section 78 of Finance Act, 1994 is correct and legal. Therefore, the revenue's appeal is not maintainable.
5. Accordingly, the Revenue's appeal is dismissed.
(Pronounced in the open court on 13.08.2024) (Ramesh Nair) Member (Judicial) (C L Mahar) Member (Technical) KL