C.C.E., Jalandhar vs Chief Manager, Punjab National Bank

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes

Appeal No.ST/158/2009-CU[DB]

[Arising out of Order-in-Appeal No.762/CE/APPL/JAL/2008, dated 15.12.2008 passed by C.C.E.(Appeals), Jalandhar]

C.C.E., Jalandhar Appellant

Vs.

Chief Manager, Punjab National Bank Respondent

Appearance

Mr. BB Sharma, DR - for the appellant

Mr. A.K. Batra, C.A. - for the respondent

CORAM: Honble Justice G. Raghuram, President

Honble Mr. R.K. Singh, Member (Technical)

Final Order No.52679/2015, dated 31.07.2015

Per Mr. R.K. Singh :

Revenue in appeal against Order-in-Appeal dated 15.12.2008 which while upholding the demand set aside penalties under Sections 75A and 78 of the Finance Act, 1994 imposed by the primary adjudicating authority. The Commissioner (Appeals) invoked the provisions of section 80 ibid for setting aside the said penalties.

2. Revenue in its appeal has contended that penalty under section 78 ibid is mandatory penalty and there is no discretion poses same and that penalties under sections 76 and 78 ibid were not mutually exclusive during the relevant period.

3. The ld. advocate for the respondent stated that the issue was earlier settled by CESTAT Final Order No. 57/1112/2009 dated 12.01.2009 in terms of which the penalty under section 76 ibid imposed by the Commissioner vide Revision order No. 48/CE/R.N./07 dated 25.10.2007 was set aside and it is recorded by the Commissioner (Appeals) that there was reasonable cause for not paying impugned service tax which in any case was paid on 18.03.2005 and interest thereon was also paid on 22.07.2005. The Ld. advocate added that there was confusion about liability to service tax on MICR services and Indian Banks Association had taken up the matter with the Ministry of Finance and once the clarification was received that the said services were liable to service tax, it was paid and even the interest was paid.

4. We have considered the contention of both sides. It is relevant to briefly mention the facts of this case. The Show Cause Notice dated 20.06.2005 demanding service tax for the period 01.01.2002 to 09.092004 was issued to the respondent. The said Show Cause Notice was adjudicated vide Order-in-Original dated 26.10.2005 in terms of which service tax demand of Rs.17,85,071/- was confirmed and penalties of Rs.500 each under Sections 76 and 77 of the Finance Act,1994 were imposed. The Commissioner in its revisionary capacity revised the impugned Order-in-Original dated 26.10.2005 vide Revision Order dated 25.10.2007 in terms of which he enhanced the penalty under Section 76 from Rs. 500/- Rs.17,85,071/-. The respondent filed appeal before CESTAT. CESTAT vide its order dated 12.01.2009 set aside the enhanced penalty. In the meanwhile, the respondent paid service tax amounting to Rs.17,85,071/- on 18.03.2005 also paid interest of Rs.3,76,277/- on 22.07.2005. Thereafter, DGCEI issued a Show Cause Notice dated 11.04.2007 seeking differential service tax arising as a result of service tax payable at the enhanced rate applicable at the time of billing and the service tax payable at the rate of rendition of service which was adopted in the earlier Show Cause Notice dated 20.06.2005 and also for imposition of penalty under Sections 75A, 76 and 78 ibid. The primary adjudicating authority vide order dated 23.01.2008 confirmed the demand, appropriated the tax and interest already paid and imposed penalty of Rs.500/- under Section 75A and Rs.18,07,274/- under Section 78 ibid taking note of the fact that penalty under Section 76 had already been imposed in relation to earlier Show Cause Notice dated 20.06.2005. Commissioner (Appeals) vide order dated 15.12.2008 upheld the appropriation of service tax and interest paid but set aside penalty under Sections 75A and 78 by invoking section 80 ibid. Revenue is in appeal only with regard to setting aside of the penalty under Section 78 ibid.

5. As has been recorded by Commissioner (Appeals), the issue relating to applicability of service tax on MICR services was under dispute and this issue was taken up by the Indian Banks Association with the Ministry of Finance. CBEC vide its letter No.137/1/2005CXA, dated 25.02.2005 replied that Indian Banks Associations representation had been rejected and that IBA should advise all the member Banks to pay service tax with interest at the earliest. It is seen that on receipt of the advice of the IBA, the respondent paid service tax and also the interest thereon. In the circumstances, we are of the clear view that there was no wilful misstatement or suppression of facts in this case and there was reasonable cause for failure to deposit the service tax initially. Indeed, as noted above, having regard to the facts and circumstances, CESTAT vide its order dated 12.01.2009 set aside the penalty under Section 76 ibid and for the reasons alike, the Commissioner (Appeals) was fully justified in invoking Section 80 for waiving penalty under Section 78 ibid. Further, when the facts and circumstances do not indicate any wilful mis-statement or suppression, penalty under Section 78 ibid is not attracted.

6. In the light of the aforesaid factual matrix, we do not find any infirmity in the Order-in-Appeal. Accordingly, Revenues appeal is dismissed.

(Justice G. Raghuram)

President

(R.K. Singh)

Member (Technical)

SSK

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