Cc&Ce & St, Allahabad vs M/S Parikshit Nirmanak

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

Service Tax Appeal No. 51866 of 2014-SM

(Arising out of order in appeal No. 126,127/ST/ALLD/2013 dated 28.11.2013 passed by the Commissioner, Central Excise & Service Tax, Allahabad).

CC&CE & ST, Allahabad Appellant

Vs.

M/s Parikshit Nirmanak Respondent

Appearance:

Shri P. K. Mishra, DR for the appellant- department

Shri Mayank Garg, Advocate for the Respondent- assessee

Coram: Honble Mr. Justice G. Raghuram, President

Final Order No. 51457/ 2015

Per: Justice G. Raghuram:

Revenue has preferred this appeal against the order of the Commissioner (Appeals), Central Excise & Service Tax, Allahabad dated 28.11.2013, to the extent the appellate authority allowed the respondent-assessees appeal and lifted the penalty imposed under Sections 77 and 78 of the Finance Act, 1994 while confirming rest of the primary adjudication order dated 05.02.2013, passed by the Joint Commissioner, Central Excise & Service Tax, Allahabad.

2. During 2006-2007 to 2010-2011 the respondent assessee had provided commercial or industrial construction service and works contract service to several entities for commercial purposes. The assessee neither obtained registration for providing taxable services during the initial period nor remitted the service tax on commercial or industrial construction service; and w.e.f. 01.06.2007 on works contract service. The assessee obtained registration for providing commercial or industrial construction service only on 26.06.2009 and for works contract service on 30.03.2010.

3. The Anti Evasion Branch of the Central Excise Commissionerate, Allahabad, on the basis of an enquiry pursuant to intelligence received learnt about rendition of the taxable services, non-registration and non-remittance of service tax by the assessee. On 22.02.2010, in response to a query by departmental officers, the assessee admitted to rendition of taxable services; to non-remittance of service tax and placed not to have received service tax from recipients of services provided by it. In response to departmental queries and pursuant to the proceedings initiated the assessee remitted different amounts towards service tax and the interest component thereon during the period 10.03.2010 to 23.04.2011, in a total amount of Rs. 14,34,003/-.

4. A show cause notice dated 20.09.2011 was issued to the assessee proposing demand of service tax of Rs. 10,96,375/- alongwith interest thereon; appropriation of the amounts remitted by the assessee; levy of late fee under Rule 7(c) of the Service Tax Rules, 1994; and levy of penalty under Sections 77 and 78 of the Act. This notice clearly alleged that the assessee failed to furnish the relevant information with regard to rendition of taxable services, failed to obtain registration and to remit service tax and thus to have indulged in suppression of facts and non-remittance of tax with an intent to evade service tax and the applicable cess. In response to the show cause notice, the assessee inter-alia submitted that it was ignorant about the liability to service tax since neither the service recipients nor Revenue officials had advised the assessee about its liability to tax. Assessee further pleaded that since the service tax due alongwith the interest thereon was deposited prior to issuance of show cause notice, no proceedings should be initiated nor penalty imposed.

5. By the primary adjudication order dated 04.02.2013, the Joint Commissioner confirmed the demand of service tax and appropriated the amounts already remitted towards the demand; imposed a penalty of Rs. 10,000/- under Section 77 of the Act, for violation of Section 70 read with Rule 7; imposed late fee of Rs. 2,000/- under Section 70 of the Act and a further penalty of Rs. 10,96,375/- under Section 78 of the Act; and ordered for appropriation of Rs. 10,96,375/- from out of the deposit already made by the appellant.

6. Aggrieved, the assessee preferred an appeal which was partly allowed by the impugned order of the learned Commissioner (Appeals). The appellate authority recorded in para 4.6 of the order that since the assessee had deposited the service tax due from time to time during 10.03.2010 to 23.04.2011 and since assessee pleaded to have no knowledge about its liability to service tax, allegations of fraud, collusion, wilful mis-statement or suppression of facts or contravention of the provisions of the Act with intent to evade tax have not been made out. Consequent on this conclusion, while confirming the demand of service tax as recorded by the primary authority, the appellate Commissioner set aside penalties imposed under Sections 77 and 78 of the Act and confirmed another finding of the primary authority regarding rejection of a claim presented by the assessee and in respect of which the assessee has preferred an appeal No. 112/ST/2012 before the appellate Commissioner.

7. Revenue asserts, in reiteration of allegations in the show cause notice and findings in the primary adjudication order, that the fact that the appellant had provided construction services, the taxability of which was in no doubt whatsoever on a mere reading of Section 65(25b) Section 65(105)(zzzza) of the Act; the failure of the assessee to have obtained registration; to have filed returns of Service tax periodically and within time and to remit the service tax due, amounts to violation of the provisions of the Act, inviting the application of the 1st proviso to Section 73 of the Act which is also the provision and the conditions set out in sub-section (4) of Section 73 of the Act, which excludes of the applicability of the provisions of sub-section (3) of Section 73 of the Act. According to Revenue the learned appellate Commissioner erred in allowing the assessees appeal and dropping penalties imposed under Sections 77 and 78 of the Act.

8. Section 73(3) of the Act enjoins that where any service tax has not been paid or short paid but has been paid subsequently on the basis of the assessees own ascertainment of the liability or on the basis of the tax ascertained by the competent officer, before service of notice on him under sub-section (1) in respect of service tax and informs the competent officer of such payment in writing, no proceedings or notice under sub-section (1) should be initiated. Sub-section (4) of this provision enacts an exception to the operation of sub-section (3) and enacts that notwithstanding anything contained under sub-section (3) where any service tax has not been paid or has been short paid by reason of fraud, collusion, wilful mis-statement, suppression of facts or contravention of any provisions of Chapter V or the rules made thereunder with intent to evade payment of service tax.

9. In the facts and circumstances of this case it is clear that the assessee had provided the taxable services of CICS or WCS during 2006-2007 to 2010-2011 but failed to obtain registration and remit any service tax, till 10.03.2010. On and from 10.03.2010 the assessee remitted service tax at its discretion and in trickles. Assessee remitted Rs.15,753/- and Rs. 26,533/- on 10.03.2010; Rs. 6,59,445/- and Rs. 3,420/- on 23.03.2010; Rs. 1 lac on 30.03.2010 and Rs.6,28,852/- on 23.04.2011. The remittances should be considered in the context of the fact that the assessee obtained registration for rendition of CICS on 26.06.2009 and for WCS on 30.03.2010. Clearly therefore and certainly from 26.03.2009, the appellant must be presumed to have knowledge of being the provider of taxable services liable to remit service tax on the consideration received therefor. The failure of the assessee to remit service tax even immediately after obtaining service tax registration for CICS on 26.03.2009 therefore leads to the clear presumption of conscious knowledge of the liability to tax and of the failure to remit the tax with an intent to evade the same, in violation of the provisions of the Act.

Even prior to 26.03.2009, on a plain reading of the provisions of Section 65(25b) of the Act the assessee cannot claim to have been under any doubt as to having provided the specified taxable service. The appellant cannot be to heard to plead that it was ignorant of the law and that such ignorance is predicated on the fact that it did not go through the provisions of the Act Ignorancia juris non excusat. Learned Counsel for the assessee would place reliance on the judgments in CCE vs. Chemphar Drugs & Liniments  1989 (40) ELT 276 (SC); Lubri-Chem Industries Ltd. vs. CCE, Bombay  1994 (73) ELT 257 (SC); and in Nestle India Limited vs. CCE, Chandigarh  2009 (235) ELT 577 (SC) for the proposition that for applicability of the provisions of Section 73(4) the mere failure on the part of the assessee to obtain registration, file returns or remit tax is not sufficient and there should be a something positive to infer fraud, collusion, suppression of facts or an intent to evade payment of tax. A positive conduct can be inferred either by direct evidence or drawn from circumstances. The unambiguous provisions of Section 65(25b); the fact of the assessee having obtained registration for rendition of CICS on 26.06.2009 but failing to remit any tax till 10.03.2009 and that too in instalments and at the assessees own convenience, without any justification pleaded for failure to remit the service tax and interest due immediately after 26.06.2009, leads to but one inference, namely that the assessee had consciously failed to obtain registration, file returns or remit the service tax due.

10. In the circumstances, in view of the provisions of sub-section (4) imposition of penalties under Sections 77 and 78 cannot be avoided. The impugned order passed by the Commissioner (Appeals) is therefore unsustainable.

11. The second proviso to Section 78 of the Act enacts that where such service tax and the interest payable thereon is paid within thirty days from the date of the communication of the order determining the liability, the amount of penalty liable to be paid by such person under the first proviso to Section 78 shall be 25% of such service tax. The Gujarat High Court in CCE&C, Surat-I vs. Harish Silk Mills  2010 (255) ELT 393 (Guj.), the Madras High Court in CCE, Chennai-III vs. Motherson Sumi Systems Ltd.  2014 (301) ELT 225 (Mad.) and another decision of the Gujarat High Court in CCE, Ahmedabad-III vs. Ratnamani Metals and Tubes Ltd.  2013 (296) ELT 327 (Guj.) have ruled that when no such option is given earlier to the assessee, the same benefit could be provided either by the Tribunal or by the High Court. In the light of the law declared in these decisions, while upholding the order of the Commissioner (Appeals) it is clarified that if the respondent assessee remits 25% of the penalty under Section 78 imposed by the primary Authority then that would constitute sufficient remittance of the penalty amount by the respondent. The impugned order is therefore set aside to the extent the levy of penalty under Section 78 was dropped by the Commissioner (Appeals), but subject to remittance of 25% of the penalty as stated supra. The dropping of penalty under Section 77 by the learned Commissioner (Appeals) is without jurisdiction in the circumstances and is also set aside.

12. Revenues appeal is therefore allowed to the extent above. There shall be no order as to costs.

(Justice G. Raghuram)

President

Pant