Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise & ... vs Cognizant Technology Solutions India ... on 5 May, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.ST/41276/2015
[Arising out of Order-in-Appeal No.15/2015 dt. 18.3.2015 passed by the Commissioner of Central Excise (Appeals-I), Central Excise & Service Tax, LTU, Chennai]
Commissioner of Central Excise & Service Tax, LTU, Chennai
Appellant
Versus
Cognizant Technology Solutions India Pvt. Ltd. Respondent
Appearance:
Shri K.P.Muralidharan, AC (AR) For the Appellant Shri Rajaram Ramanan, Consultant For the Respondent CORAM:
Honble Shri P.K.Choudhary, Judicial Member Date of hearing :04.04.2016 Date of Pronouncement : 05.05.2016 FINAL ORDER No.40731/2016 Before going into the merits of the case, although the Order-in-Appeal is common, the issues involved are different, the case is disposed by separate orders.
2. The facts of the case are that M/s. Cognizant Technology Solutions (hereinafter referred to as Respondent) was subject to audit by the Service Tax authorities. During the course of audit conducted by the authorities, it was noticed by the Revenue that service tax under reverse charge mechanism was not deposited for the services received from the foreign vendors to the tune of Rs.12,90,540/-. The Respondent-assessee had agreed to the aforesaid observation of the audit department and had paid the service tax along with applicable interest, before issuance of Show cause notice. A show cause notice No.38/2011 dated 31.03.2011 was issued stating that there was willful suppression on the part of the Respondent in failure to pay tax and proposed to levy penalty equal to the tax amount due. The Respondent had replied to the notice on 02.06.2011 stating that equal penalty should not be applicable in the present as the tax and interest was paid much before the issuance of show cause notice and that the said fact has been recorded in the SCN itself. The original adjudicating authority adjudicated the matter and passed the OIO No.LTUC/184/2012-ADC dated 30.5.2012 whereby penalty equal to the tax due was levied. However, relief was also provided to the Respondent for levy of 25% penalty, if the penalty amount is paid within 30 days from the date of receipt of order.
3. Being aggrieved by the OIO passed by the Adjudicating authority, the Respondent had preferred an appeal with the Commissioner (Appeals) as regards levy of equal penalty. It is also submitted that the Respondent has paid 25% penalty within 30 days under protest. However, the Respondent had proceeded to contest the levy of penalty as regards levy of equal penalty.
4. The Commissioner (Appeals) after considering the facts of the case vide Order in Appeal No. 15/2015 dated 18.03.2015 had dropped the penalty proceedings on the ground that the case is squarely covered under Section 73(3) of the Finance Act, 1994 and the case merits for waiver of penalty under Section 80 of the Finance Act, 1994. The Commissioner (Appeals) had placed reliance on the ruling of the Ahemdabad Tribunal in the case of Atwood Oceanics Pacific Ltd. Vs CST Ahemdabad - 2013 (32) STR 756 for waiver of penalty under Section 80 of the Finance Act, 1994.
5. Being aggrieved by the order of the learned Commissioner (Appeals), the Appellant-Revenue has preferred an appeal before this Tribunal on the ground that the tax payer had not paid service tax in respect of the services received from Foreign Service provider on reverse charge basis, which was unearthed by the DGCEI; That the suppression has been clearly established as the fact of receiving services from various foreign customers came to light only upon investigation conducted by DGCEI; that extended period of limitation was invoked under proviso to Section 73(1) of the Finance Act, 1994 and consequently no waiver of penalty is possible under Section 80 of the Finance Act, 1994; that the case law relied by the Commissioner (Appeals) in the case of Atwood Oceanics (supra) has not been accepted by the Department and that an appeal has been preferred before the Supreme Court; that in the case of UOI vs. Dharmendra Textile Processors - 2008 (231) ELT 3 (SC), the Supreme Court has held that any penalty otherwise imposable under Section 11AC of the Central Excise Act, 1944 cannot be avoided on the ground that the duty amount was paid by the assessee prior to issuance of show cause notice.
6. Shri K.P. Muralidharan, A.C., Ld.A.R appearing for the Appellant, re-iterated the grounds of appeal and stated that equal penalty ought to be levied in the present case. He also placed reliance on the ruling of the Madras High Court in the case of Dhandayuthapani Canteen Vs CESTAT, Chennai - 2015 (39) S.T.R. 386 (Mad.), wherein it was held that even though tax has been paid prior to issuance of show cause notice, Section 80 waiver cannot be provided where willful suppression and concealment has been proved.
7. Shri Rajaram Ramanan, Consultant, appearing for the Respondent had submitted that the ruling of the Tribunal in the case of Atwood is squarely applicable to the facts of the case and that merely because an appeal has been preferred against the said ruling would not be a ground for appeal. He placed reliance on the ruling of the Hon'ble Supreme Court in the case of Union of India Vs Kamlakshi Finance Corporation Ltd. 1991 (55) ELT 433 (SC) to support his argument. He submitted that the Respondent is a large tax payer and the quantum of data handled by the Respondent was voluminous and that there were certain omissions while computing the service tax payment. However, when DGCEI had pointed out, they had immediately paid the tax along with interest. Also, they had paid 25% penalty under protest within 30 days as the Respondent was of the view that the benefit available under Section 73(3) of the Finance Act, 1994 was available to them which has been granted by the Commissioner (Appeals) itself. Further, he submits there was no suppression involved in the present case, as the only fault of the Respondent was non-payment of tax and that they have paid the tax upon being pointed out along with interest. To support his argument, he places reliance on the following judicial precedents whereby it was held that mere inaction or failure to do an action does not lead to willful suppression:
i) CCE v. Chemphar Drugs reported in (1989 (40) E.L.T. 276 (S.C.))
ii) Padmini Products vs. Collector Of Central Excise (2002-TIOL-289-SC-CX)
iii) Jaiprakash Industries Ltd. v. CCE (2002 (146) ELT 481 SC), He also submits that the Order in Original itself provides for reduced penalty, in case the same is paid within 30 days from the date of communication of the order which in present case the Respondent have deposited the penalty within 30 days, and that there is no requirement for any appeal to be preferred in this case. He further submits that this fact has not been disputed by the Appellant in their appeal. He also submitted that in the case of Dharmendra Textile Processor relied by the Department would not be applicable to the present facts of the case, as the Commissioner (Appeals) had waived the penalty under Section 80 of the Finance Act, 1994 which is a power provided under the provision of the Finance Act itself.
8. Heard both side in the matter. After perusing the records, I find that the short issue involved in the said appeal is that whether equal penalty is to be levied in the present case as it is an undisputed fact that tax along with interest stands paid. I find that the Respondent has failed to pay service tax under reverse charge mechanism during the period 2006-07 and upon being pointed out by the DGCEI authorities they have paid the tax along with interest before issuance of show cause notice. As the whole dispute has arisen on the ground of allegation of willful suppression it is necessary to analyze whether there was any willful suppression or not. The Respondent is a member of the LTU. Their office was frequented by the Department officials/Appellant and their records were scrutinized. All the facts were known to the Department when they had visited the Respondents premises. When there is knowledge on the side of the Department the invocation of extended period alleging suppression of facts with an intention to evade payment of duty would not arise. The contention of the Respondent that merely because there was a lapse, the same should not be construed as suppression is well founded. The Supreme Court in the case of Jaiprakash Industries Ltd. v. CCE (2002 (146) ELT 481 SC) had held that:
The law on this point is well-settled. In the case of Padmini Products v. Collector of Central Excise reported in [1989 (43) ELT 195 (S.C.)] = (2002-TIOL-289-SC-CX), this Court has held that wherever there is the scope for believing that the goods are not excisable to duty and, therefore, no licence is required to be taken out, then the extended period of limitation for demand under Section 11A is inapplicable. This Court has held that mere failure or negligence on the part of the manufacturer in not taking out a licence and in not paying duty does not attract the extended period of limitation. This Court has held that there must be evidence to show that the manufacturer knew that the goods were liable to duty and that he was required to take out a licence. This Court has held that for invoking the extended period of limitation duty should not have been paid, short levied or short paid or erroneously refunded because of either fraud, collusion, wilful mis-statement, suppression of fact or contravention of any provision or rules. This Court has held that these ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or wilful mis-statement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation.
9. I also find that Ahemdabad Tribunal in the case of Atwood Oceanics Pacific Ltd. Vs, CST Ahemdabad - 2013 (32) STR 756 (Tri- Ahmd.) is squarely applicable to the facts of the present case. The relevant extract of the ruling is reproduced below:
'162. However, I find that the said assessee has shown its bonafide by rendering full cooperation to the department in the investigation and also making goods the liability immediately on being pointed out. The fact that they have already paid the service tax along with interest much before the issuance of show cause notice and they have borne the incidence of tax on their shoulders, is sufficient evidence to show that the reasons for not paying the service tax by the assessee were the technical/ legal reasons rather than wilful suppression with an intent to evade payment of service tax.
From the above, we find that besides our own observations finding of the Commissioner with which we agree, support the view that provisions of Section 80 are required to be invoked for waiving penalty imposed under Section 78 of the Finance Act, 1994 on M/s. Atwood.
The Appellant had contended that this case has not been accepted by the Department and an appeal has been preferred in the Supreme Court. I find that the argument of the Appellant is not tenable in view of the principle laid down by the Honble Supreme Court in the case of UOI Vs Kamlakshi Finance Corporation Ltd. 1991 (55) ELT 433 (SC), wherein it was held that mere fact of filing an appeal can furnish no ground for not following a judicial pronouncement unless its operation has been suspended by a competent Court. In this case, I find that only omission on the part of the Respondent was non-payment of tax and that they have paid the same along with interest upon intimation by the DGCEI. I find that there is no suppression much less a willful suppression on the part of the Respondent to evade payment of tax which is a pre-requisite for invocation of extended period and imposition of penalty. The Appellant had relied on the ruling of the Madras High Court in the case of Dhandayuthapani Canteen (supra) wherein it was held that penalty is payable even though service tax and interest has been paid prior to the issuance of show cause notice. However, I find that in the case relied by the Appellant, willful suppression was established and not litigated by the Appellant. However, in the present case, as seen above since there is no wilful suppression on the part of the Respondent, I am of the view that the case law relied by the Appellant is not applicable to the facts of the present case. Further, I also find that in case of Dhandayuthapani Canteen there was no audit/scrutiny conducted by the Department, whereas in the present case, the Respondent is a large corporate assessee registered with Large Tax Payer Unit (LTU) and who is a regular tax payer and subject to various audits/scrutiny conducted by the Department.
The Appellant/Department had also placed reliance on the ruling of the Supreme Court in the case of UOI vs. Dharmendra Textile Processor - 2008 (231 ELT 3, to support their argument that penalty levied under Section 78 of the Finance Act, 1994 is mandatory in nature and that no waiver of penalty is possible.
10. I find that the distinction between the Central Excise Act and Finance Act, 1994 is that there is a specific provision for waiver of penalty under the Finance Act, 1994 when reasonable cause exists whereas the same is not available under Central Excise law. Section 80 of the Finance Act, 1994 provides for waiver of penalty in case sufficient cause has been shown for penalties imposable under Section 76, 77 and 78 of the Finance Act, 1994. In the present case, as seen above, there is no suppression of facts with an intention to evade payment of duty and accordingly a reasonable cause is present to invoke Section 80 of the Finance Act, 1994. Accordingly, I hold that the case law relied by the Appellant is distinguishable and not applicable for the facts of the present case. Accordingly, I hold that the benefit under Section 73(3) of the Finance Act, 1994 is available to the Respondent and no penalty is to be levied since the tax and interest has been paid even before the issuance of show cause notice and the non-payment was not due to any malafides.
11. By following the Tribunal rulings referred supra, I hold that the Department appeal is devoid of merit and accordingly the same is rejected.
(Order pronounced in open court on 05.05.2016) (P.K.CHOUDHARY) JUDICIAL MEMBER gs 9