Custom, Excise & Service Tax Tribunal
M/S. Srinivasa Real Estate vs Cst, Chennai on 17 April, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
ST/357/2010
(Arising out of Order-in-Appeal No. 35/2010 (MST) dated 18.03.2010, passed by the Commissioner of Central Excise (Appeals), Chennai).
For approval and signature
Honble Shri R. PERIASAMI, Technical Member
M/s. Srinivasa Real Estate : Appellant
Vs.
CST, Chennai : Respondent
Appearance Shri S. Ramachandra Rao, CA, for the appellant Shri M. Rammohan Rao, DC (AR), for the respondent CORAM Honble Shri R. PERIASAMI, Technical Member Date of Hearing/Decision: 17.03.2015 FINAL ORDER No. 40447 / 2015 The present appeal has been filed by the appellant against the impugned order No. 35/2010 dated 18.03.2010, only against the penalty imposed under Section 78 of the Finance Act.
2. Appellants are registered with service tax for rendering the service under Industrial or Commercial Construction Service. A show cause notice dated 19.04.2007 was issued to the appellant for demanding service tax of Rs. 28,92,655/- for the period 16.06.05 to 31.03.06 not paid under construction of residential complex. Appellants collected the amount and failed to remit service tax to the Govt. account. The adjudicating authority in his order dated 14.05.2008 confirmed the demand and also appropriated an amount of Rs. 28,92,635/- already paid towards service tax appropriated an amount of Rs. 57,852/- towards education cess and appropriated an amount of Rs. 75,639/- towards interest and imposed penalty under Section 76, 77 and equivalent penalty under Section 78 of the Finance Act, 1994. Appellant preferred appeal before the Commissioner (Appeals) against waiver of penalties. In the impugned order, the Commissioner (Appeals) has partially allowed their appeal and set aside the penalty imposed under Sections 76 and 77 of the Finance Act by invoking Section 80 of the Act and upheld the service tax demand and interest and penalty under Section 78.
3. Heard both sides.
4. Ld. Consultant for the appellant submits that there was a genuine dispute on payment of service tax under construction service and in view of Boards Circular they were under the bonafide belief that service tax is not payable on the construction service undertaken towards construction of residential complex. He further submits that immediately after pointed out by the Department, they paid the service tax amount of Rs. 22,30,957/- along with interest before issue of show cause notice and the remaining amount was paid before the adjudication order and also paid the interest thereof. He pleaded for waiver of penalty under Section 80 of the Act. He relied upon the following case laws in support of his contention.
1. Boving Fouress Ltd. Vs. CCE, Chennai 2006 (202) ELT 389 (S.C.)
2. Indian Oil Corporation Ltd. Vs. Collector of C.Ex 2006 (202) ELT 37 (S.C.)
3. Magus Construction Pvt. Ltd. And others Vs. UOI Legalcrystal.com/127153
5. On the other hand, Ld. AR for the Revenue reiterated the findings of the adjudicating authority and Commissioner (Appeals) and submits that the appellant has deliberately suppressed the facts of service tax already collected towards construction service and also intentionally filed Nil ST-3 returns for the half yearly ending September, 2005. Only after the case was registered by SIV section of Service Tax Commissionerate, evasion of service tax came to light. It is not the case of the appellant that voluntarily paid the service tax. He further submits that this is the case where the appellant collected the service tax along with the value of service rendered but failed to remit it to the department and knowingly suppressed the facts in their ST-3 returns filed in September,2005 and declared that taxable value realized during the period was Nil. He further submits that the Commissioner (Appeals) has already waived the penalties imposed under Section 76 & 77. He relied the following decisions:-
1. Kedia Business Centre Vs. CCE, Mumbai 2009 (15) STR 550 (Tri.-Mum.)
2. 2014-TIOL-287-CESTAT-Mum.
6. I have carefully considered the submissions of both sides. The present appeal is limited to only waiver of equivalent penalty imposed under Section 78 of the Act. The appellants have already paid the entire demand along with interest, and the same was appropriated in the OIO. On perusal of the records, I find that it is clearly brought out in the show cause notice as well as in the adjudication order, the appellants have collected service tax amount on the taxable service rendered by them and failed to remit the same and also suppressed the facts in their half yearly return filed for the period September, 2005. They have filed nil return for the said period mentioning that they have not rendered any taxable service. Whereas, it is established that the appellants rendered the service of construction of residential complexes Blue Mount and for the East Crust received the payment from the clients. The appellants only contention is that they have paid the entire duty and the interest before adjudication. It is not the case of the appellants that they have voluntarily paid the service tax on their own. Only on registration of an offence case by the department, the appellants have paid the service tax partially before the issue of show cause notice and the balance amount paid before adjudication. As rightly held by the adjudicating authority in his findings, the appellants have already registered with the department and filing returns regularly and during the period September, 2005 they have filed a nil return, in spite of knowing the fact that they already collected the amount from their clients on the above projects. Therefore, the appellants cannot plead for innocence for invoking Section 80. There are number of Tribunals and High Courts decisions where Section 78 penalty/under Section 11AC penalty were upheld, where there is a deliberate suppression of the facts proved with an intention to evade service tax. Honble Tribunal in the case of Kedia Business Centre (supra), by relying the Honble Apex Court and Honble High Courts orders upheld the penalty imposed under Section 78. The relevant portion is reproduced as under:-
2.?The learned counsel has mainly argued that, as the service tax was paid with interest prior to the date of issue of the show-cause notice, any penalty was not liable to be imposed on the appellant under any of the above provisions. In this connection, he has relied on the Bombay High Courts decision in CCE v. Gaurav Mercantiles Ltd. - 2005 (190) E.L.T. 11 (Bom.) and a plethora of orders by this Tribunal. The Honble High Court held that where the entire duty liability was discharged prior to issuance of show-cause notice, no penalty was to be imposed on the assessee under Section 11AC of the Central Excise Act. Some of the decisions of the Tribunal cited by the counsel are also to the same effect. A few decisions of the Tribunal are to the effect that any penalty under Sections 76/77/78 of the Finance Act, 1994 is not imposable on a service-provider who paid service tax prior to issue of show-cause notice. The learned SDR has opposed the above argument of the counsel, on the strength of the Honble Supreme Courts decision in UOI & Ors. v. Dharamendra Textile Processors & Ors. - 2008 (231) E.L.T. 3 (S.C.). He has also pointed out that the above argument of the learned counsel cannot be accepted, in view of the Supreme Courts order on Civil Appeal No. 6435 of 2008 [2009 (235) E.L.T. A87 (S.C.)] (CCE v. Monarch Pipes Ltd.). It is submitted that the civil appeal was allowed by the apex court on the basis of the courts earlier decision in Dharamendra Textile Processors case and accordingly any penalty under Section 11AC of the Central Excise Act or any interest on duty under Section 11AB of the Act was not avoidable on the ground that the amount of duty had been discharged before issuance of show-cause notice. I find that, in the case of Dharamendra Textile Processors (supra), the Honble Supreme Court held that penalty under Section 11AC of the Central Excise Act was mandatory. Following this ruling, the Court, in the case of Monarch Pipes Ltd., set aside the Tribunals order [2007 (208) E.L.T. 470 (Tri.-Bang.)], wherein it had been held that penalty under Section 11AC of the Central Excise Act was not imposable where the assessee had already paid duty before issuance of the show-cause notice. The final legal position is, therefore, that any penalty otherwise imposable under Section 11AC of the Act cannot be avoided on the ground that the duty amount was paid by the assessee prior to issuance of show-cause notice. I am of the considered view that this principle is applicable to the penalty under Section 78 of the Finance Act, 1994 inasmuch as both these provisions of law (Section 11AC of the Central Excise Act and Section 78 of the Finance Act, 1994) deal with penal liability of an assessee who has failed to discharge tax liability in comparable circumstances. However, I am not inclined to apply the above principle to the penalties under Section 76 and 77 of the Finance Act, 1994. Insofar as those penalties are concerned, some of the decisions cited by the learned counsel are found to be operating in favour of the appellant. In the case of Sieger Spintech Equipments Pvt. Ltd. v. CCE, Coimbatore - 2006 (3) S.T.R. 736 (Tri.-Chennai), the appellants had paid service tax before the issue of show-cause notice and, therefore, penalties imposed on them under Sections 76 and 77 were set aside. The penalty imposed under Section 76 of the Finance Act on the assessee was set aside in identical circumstances in the case of Warna Industries Ltd. v. CCE, Pune - 2006 (4) S.T.R. 535 (Tri.-Mumbai). A similar penalty was set aside in the case of Heera Metals Ltd. v. CST, Kolkata - 2006 (4) S.T.R. 540 (Tri.-Kolkata). There are also other decisions of the Tribunal to the above effect, amongst the records filed by the counsel. The above Tribunals decision squarely applicable to the facts of the present case. Accordingly, I do not find any merit on the appellants plea for waiver of penalty imposed under Section 78. The LAA has already waived the penalties imposed under Section 76 & 77 of the Act. I do not find any infirmity in the impugned order in so far as upholding the penalty under Section 78. The impugned order is upheld and the appeal is rejected on the above terms.
(Operative part of the Order pronounced in the Open Court on 17.03.2015) (R. PERIASAMI) TECHNICAL MEMBER BB 1