Avanti Feeds Ltd vs Commissioner Of Customs, Central ...

[Arising out of Order-in-Appeal No. 22/2010 dated 27/09/2010 passed by the Commissioner of Customs, Central Excise and Service Tax, Guntur]

For approval and signature:

HON'BLE Mr. B.S.V. MURTHY, 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? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

Avanti Feeds Ltd. 15-11-24, Vemuluru Road, Kovvur, West Godavari Dist. Andhra Pradesh Appellant(s)

Versus Commissioner of Customs, Central Excise and Service Tax, Guntur P.B. No. 331, C.R. Building, Kannavari Thota, Guntur  522 004 Andhra Pradesh Respondent(s)

Appearance:

Mr. B.V Kumar, Advocate #103, 17 "C" Main Road, 5th Block, Koramangala , Bangalore  560 095 Karnataka For the Appellant

Mr. Mohd Yusuf, AR For the Respondent

Date of Hearing: 05/03/2015 Date of Decision: 05/03/2015 CORAM:

HON'BLE Mr. B.S.V. MURTHY, TECHNICAL MEMBER

Final Order No. 20563 / 2015

Per: B.S.V. MURTHY

Service Tax of Rs. 4,12,831/- (Rupees Four Lakhs Twelve Thousand Eight Hundred and Thirty One only) with interest on royalty services paid by the appellant for the period from 18.04.2006 to 31.03.2009 has been appropriated and penalties under Section 76, 77 and 78 of the Finance Act 1994 have been imposed. The appellant is not disputing the liability of service tax and interest but seeks waiver of penalty by invoking the provisions of Section 80 of Finance Act 1994. Learned counsel on behalf of the appellant submitted that in this case there was reasonable cause for the appellants not to have paid service tax on royalty. He submits that the date from which service tax is liable to be paid in respect of services received from abroad attained finality only with the decision of Honble High Court of Mumbai in the case of Indian National Ship Owners Association Vs. Union of India reported in [2009 (13) STR 235 (Bom.)] which has been upheld subsequently by the Honble Supreme Court. He submits that once Honble High Court of Bombay decided the issue finally, the appellants paid the entire amount of tax with interest before issue of show-cause notice and therefore penalty should not have been imposed in this case. Further he also submits that there is no suppression or intention to evade payment of service tax on the part of the assessee in this case. He submits that assessee was paying service tax on GTA services received by them. Further he also submits that there was a dispute between the department and the assessee as regards liability of the assessee for payment of service tax on the technical know-how fee paid by them amounting to 2 lakhs dollars in the year 2003. Finally the proceedings were dropped somewhere in 2008. He submits that the agreements for technical know-how as well as royalty were in the knowledge of the department and therefore suppression could not have been invoked in this case. He relies upon several decisions to submit that where tax has been paid before issue of show-cause notice with interest, no penalty need be imposed.

2. Learned AR would submit that penalty has been rightly imposed in this case and three years after 18.04.2006 the appellant had not paid the tax. The dispute in the Indian National Ship Owners Association case was relating to the period prior to 18.04.2006 and there could not have been any doubt after 18.04.2006.

3. I have considered the submissions made by both the sides. Learned counsel fairly admitted that it may not be possible for the appellant to claim revenue-neutrality in this case since the final products manufactured by the appellants are exempt and even though there is liability to pay service tax on GTA services as a receiver of services, after 01.04.2008, for outward transportation there is no such liability. As regards his reliance on various decisions, I find that in the case of Mount Housing & Infrastructure Ltd. Vs. CCE & S.T, Coimbatore [2014 (35) S.T.R. 389 (Tri.-Chennai)], penalty was imposed only under Section 76 of Finance Act 1994 and in that case a view was taken that provisions of Section 80 could have been invoked. There Tribunal noted that there was confusion about tax liability during the period. In this case I have not noticed any confusion about tax liability. Decision in the case of CST, Bangalore Vs. Fruition Informatics (P) Ltd. [2012 (26) S.T.R. 519 (Kar.)], the service tax was paid belatedly and in that case there was concurrent finding by the Tribunal and the appellate authority that a ground has been made out for waiving penalty. In that case NIIT had given opinion that they have made out a ground for claiming exemption. The appellant was a franchise to the NIIT. The facts are peculiar to that case and therefore it is difficult to apply that case to the present case.

4. The next decision relied upon by the advocate was in the case of CCE Vs. Indian Institute of Chemical Technology [2012 (26) S.T.R. 97 (A.P.)]. In that case the Honble High Court observed that there was a bona fide doubt about service tax liability. Honble High Court observed that as per the Notification dated 09.07.2001, the consultation provided in relation to the research projects funded by the Government no service tax is payable. Therefore there were doubts about the correct application of the exemption notification and therefore a view was taken that provisions of Section 80 could have been invoked.

5. The next decision relied upon is in the case of Cauvery Travel Links Vs. CST, Bangalore [2011 (21) S.T.R. 207 (Tri.-Bang.)] wherein the penalty was waived by invoking the provisions of Section 80 of Finance Act 1994. In that case the appellant was advised to wait and not to pay service tax as the association was pursuing the matter with the Government. In this case there is no association and there is no pursuit. Therefore this decision also may not be applicable.

6. However I find that imposition of penalty under both the Sections 76 & 78 of Finance Act 1994 is not proper and there are decisions taking a view that even prior to the amendment providing for no imposition of penalty under Section 76 of Finance Act when penalty has been imposed under Section 78, penalty under both the Sections need not be imposed. Therefore penalty under Section 76 in my opinion can be waived in this case. As regards penalty under Section 78, penalty has been imposed equal to twice the service tax amount payable. Keeping in view the fact that appellant was liable to pay service tax as a receiver of service from abroad, I find that this is very harsh. Therefore the penalty is reduced to an amount equal to the service tax payable that is Rs. 4,12,831/- (Rupees Four Lakhs Twelve Thousand Eight Hundred and Thirty One only). A penalty of Rs. 1,000/- (Rupees One Thousand only) has been imposed under Section 77 which I find reasonable and need not be reconsidered. The appeal is decided in above terms.

(Order pronounced in open court)

(B.S.V. MURTHY) TECHNICAL MEMBER

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