Custom, Excise & Service Tax Tribunal
Shriram Epc Ltd vs Commissioner Of Service Tax on 12 February, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.ST/605/2009
[Arising out of Order-in-Original No.29/2009 dated 20.8.2009 passed by the Commissioner of Service Tax, Chennai]
For approval and signature:
Honble Shri MATHEW JOHN, Technical Member
1. Whether Press Reporters may be allowed to see 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
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? :
3. Whether the Member wishes to see the fair copy of
the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
Shriram EPC Ltd.
Appellant
Versus
Commissioner of Service Tax,
Chennai
Respondent
Appearance:
Shri N.Viswanathan, Advocate For the Appellant Ms.Indira Sisupal, AC (DR) For the Respondent CORAM:
Honble Shri Mathew John, Technical Member Date of hearing : 12-02-2014 Date of decision : 12-02-2014 FINAL ORDER No.40137/2014
1. In this case, the appellant was providing a few taxable services and was registered under service tax laws from 2001 onwards. During the audit of their accounts held in May 2007 short payment of service tax was pointed out by the audit team on three grounds namely,-
(i) tax not paid on amount billed and payments received in respect of a few invoices;
(ii) non-payment of tax on advance receipts for rendering tax;
(iii) non-payment of tax on import of technical know-how, namely drawings from joint venture partners abroad under provisions of section 66A of Finance Act, 1994.
2. When these issues were pointed out, appellant paid entire tax liability along with interest. Thereafter, a show cause notice dt. 1.4.2008 was issued for imposing penalty under section 76 for contravention of provisions of section 68 of the Act read with Rule 6 of Service Tax Rules, 1994 during the period 2006-07. On adjudication a penalty of Rs.5,76,417/- has been imposed on the appellant under the said provisions. Aggrieved by the order of Commissioner (Appeals), the appellant has filed this appeal.
3. Ld. advocate for the appellant submits that as per the legal provisions at that time, they were required to pay service tax only on receipt basis. For their convenience, they were paying tax on the basis of bills raised thus mostly there were payments ahead of the date of accrual of actual liability. According to him only in one case, the appellant had billed the amount and also received the consideration but did not pay tax due to error. However, the appellant paid the tax as soon as the issue was pointed out.
4. With reference to the liability on advances, he submits that the appellant was executing works contracts involving supply of material and advance was taken for value of material and not for value of service and hence the appellant thought that there was no need to pay service tax on advances received. He also submits that there was legal conflict between provisions in section 64 (3) as also various clauses under section 65 (105). In section 64 (3), the clause "services to be provided" was not included. Though such expression was introduced in section 65(105) with effect from 13-5-2005. However, when the issue was pointed out, they paid service tax along with interest because they did not want to pursue any litigation in the matter.
5. On the third issue, he submits that generally drawings are treated as goods and therefore the appellant thought that no service tax was payable on this item but on this item also, when it was pointed out by audit, they immediately paid service tax along with interest. He submits that section 73 (3) of Finance Act,1944 provided that where tax along with interest is paid before issue of show cause notice, no show cause notice should have been issued. He submits that this is not a case of any suppression and therefore benefit of section 73 (3) should have been given. At least, benefit of provisions of section 80 should have been extended for the reasons cited above. He prays that in the circumstances, order may be set aside and penalty may be waived.
6. Opposing the prayer, Ld. AR for Revenue submits that the irregularity could not have been found but for the audit. The legal provisions are very clear and the appellant was just trying to evade payment of service tax. Section 73 (3) is applicable to only in cases where there is no suppression but in the instant case, there was suppression and provisions of section 73 (3) is not applicable. She also relies on para 6.1. of the impugned order to argue that service tax was not discharged in time. She submits that mostly they were getting payments in the same months when bills were raised as recorded by the adjudicating authority. The claim of the counsel that there was delay in payment only in one case is not borne by records. She relies on para 8.1 of the adjudication order to argue that where there is delay in payment of service tax, penalty is imposable under section 76. She relies on the judgment of Hon. Karnataka High Court in CCE & STC Bangalore Vs First Flight Couriers Ltd. 2007 (8) STR 225 (Kar.) in support of her argument.
7. I have considered submissions on both sides. It is obvious that the appellant paid entire tax liability and interest. This inference is drawn because the impugned order does not involve demand for these but just imposes penalty for delay in payment. When provisions similar to section 73 (3) was introduced in Central Excise Act, 1944 as section 11A (2B) in the year 2001, it was clarified that these provisions are meant for encouraging immediate realization of short payments detected by audit teams so that whoever discharges the short paid tax immediately need not get entangled in protracted litigations. Therefore, unless there is a case of active suppression, provisions of Section 73 (3) should be extended. This is view of the Karnataka High Court also in the case of CCE & ST, LTU, Bangalore Vs APECCO Flexione Work Force Solutions Ltd. 2012 (26) STR 3 (Kar.). The decision in the case of First Flight Couriers was on a different footing because the appellant therein did not pay service tax and also did not file return on the ground there was a strike by the employees of that appellant. It was not a case of bonafide error or doubt regarding legal provisions and prompt payment when short payment was pointed out by audit as is the case in this appeal
8. The facts of the present case are more similar to that in the case of APECCO Flexione Work Force Solutions Ltd.(supra). So considering this decision of Hon. Karnataka High Court, I set aside the penalty imposed on the appellant. Thus the appeal is allowed.
(Dictated and pronounced in open court) (MATHEW JOHN) TECHNICAL MEMBER gs 2