Commissioner, Central Excise, ... vs M/S. Suvijay Espee Constructions

[Arising out of Order-in- Appeal No. PIII/RP/238/2012 dtd. 29/10/2012 passed by the Commissioner (Appeals-III), Central Excise, Pune]

For approval and signature:

Honble Mr Ramesh Nair, Member(Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities?

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Commissioner, Central Excise, Pune-III : Appellants

VS

M/s. Suvijay Espee Constructions : Respondent

Appearance

Shri. K. S. Mishra, Addl. Commissioner(A.R.) for the Appellants Shri. Kaustubh Kairnar, Advocate for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 6/2/2015 Date of decision 6/2/2015

ORDER NO.

Per : Ramesh Nair

This Revenues appeal is directed against Order-in- Appeal No. PIII/RP/238/2012 dtd. 29/10/2012 passed by the Commissioner (Appeals-III), Central Excise, Pune, wherein while upholding the confirmation of demand of Rs. 7,85,904/-, penalty of equal amount imposed by the adjudicating authority was waived under Section 80 of the Act. The fact of the case is that the appellant engaged in providing services i.e. Commercial Construction service as defined under Section 68(1) & 68(2) of the Finance Act, 1994. For providing such services, material such as cement and steel were provided free of cost by M/s. Mahindra and Mahindra Ltd. Mumbai and value of such material was not added in the gross value while determining the same for payment of service tax during the period of Oct 2007 to March 2009. The appellant has availed abatement as provided under Notification No. 1/2006 ST dated 1/3/2006. The adjudicating authority has confirmed the demand of Rs. 7,85,904/-and equal amount of penalty under Section 78 on the ground that since the appellant have not included the cost of the material in the gross value of the construction services, the appellant is not entitled for exemption /abatement as provided under Notification No. 1/2006-ST. The appellant, aggrieved by the said order, filed appeal before the Commissioner(Appeals), who vide Order-in-Appeal dated 29/10/2012, though upheld the confirmation of demand of Rs. 7,85,904/- however waived the penalty of Rs. 7,85,904/- under Section 80 of the Act. Aggrieved by the said order-in-appeal Revenue is before me.

2. Shri. K. S. Mishra, Ld. Addl. Commissioner(A.R.) appearing for the Revenue submits that the respondent have not challenged the confirmation of demand of service tax and the same was admitted and paid by them. So long there is no challenge to the confirmation of demand, penalty imposed under Section 78 is correct and same could not have been waived. It is his submission that since the material cost was not added in the gross value of the services, respondent have intentionally undervalued the services and evaded the service tax, hence there was correct liability of imposition of penalty under Section 78, therefore the Commissioner (Appeals) has erred in waiving the said penalty. He prays that impugned order be set aside and Revenues appeal be allowed. He placed reliance on following judgments.

(a) [2006(1)S.T.R. 289(Tri-Chennai)] Inma International Security Academy P. Ltd. Vs. C.C.E. Chennai

(b) [2007(6) S.T.R. 54(Tri- Mumbai)] ETC Networds Ltd. Vs. CC. Ex. Mumbai-I

(c) [2007(211) E.L.T. 233(Tri. Mumbai)] Triton Communication Pvt. Ltd. Vs. CC of C. Ex. Mumbai

(d) [2007(6) S.T.R. 32(Tri-Kokata)] CC.Ex. Kolkata-I Vs. Gurdian Leisure Planners Pvt. Ltd.

(e) [2003(161) E.L.T. 827(Tri- Mumbai)] Larson & Toubro Vs. CC.Ex. Mumbai-II

(f) [2010(19) S.T.R. 697(Tri-Chennai)] The Modern Co-op Bank Ltd. Vs. CC.Ex. Nasik

(g) [2008(9) S.T.R 138(Tri. Del)] CC.Ex. Jaipur-I Vs. Science Center

3. On the other hand, Shri. Kaustubh Kairnar, Ld Counsel for the respondent submits that in the present case, the issue involved is that whether for claiming abatement under Notification no. 1/2006 ST dated 1/3/2006, the assessee is required to add value of material supplied by service recipient or otherwise. It is his submission that this issue is highly debatable and on the subject issue there were conflicting views of different benches of the Tribunal and matter was subsequently referred to the Larger Bench and the Larger Bench in the case of [2013-TIOL-1331-CESTAT-DELHI-LB] M/s. Bhayana Builders Pvt. Ltd. Vs. CST held that value of material supplied free of cost by the service recipient not to be added in the gross value of service of construction. He submits that first of all issue was not free from doubt, moreover as per the Larger Bench the respondent is entitled for abatement as provided under Notification No. 1/2006-ST and therefore demand itself is not sustainable. In such a situation merely because respondent has not challenged the demand of service tax the penalty can not be imposed under Section 78.

4. I have carefully considered the submissions made by both the sides and perused the record.

5. I am convinced with the argument of the Ld. Counsel for the respondent that as of now, after conflicting views on the merit of the issue the Larger Bench in Bhayana Builders Pvt. Ltd (Supra) case, it was held that the respondent is not required to pay service tax. Since on the issue on merit there were conflicting views and finally issue was decided by the Larger Bench of this Tribunal there is reasonable cause of non-payment of service tax on the abatement amount. Therefore in my considered view Ld. Commissioner (Appeals) has rightly waived the penalty under Section 78 invoking Section 80 of Finance Act, 1944. In this regard the finding of the Ld. Commissioner (Appeals) is reproduced below:-

Regarding penalty, I find that there is substantial force in the contention of the appellant that the issue involved was not free from doubt and there were Stay Orders of Honble High Court/CESTAT since 2007. Further, there was also an Order of Commissioner(Appeals) Pune-II. Thus I feel that there was reasonable cause for the failure of the Appellant to pay the differential service tax during the period covered by the Show Cause Notice/Order-in-Original. I am also inclined to take this view as entire service tax paid by the Appellant was available as CENVAT Credit to their service recipient M/s. Mahindra & Mahindra, Mumbai and therefore the entire transaction would have been revenue neutral in the CENVAT chain. I therefore hold that no penalty needs to be imposed on the Appellant by virtue of Section 80 of the Act.

From the above findings of the Ld. Commissioner(Appeals) I find that he has correctly invoked Section 80 and waived the penalty of Section 78. Therefore, I upheld the impugned order and dismissed the appeal of the Revenue.

(Operative part pronounced in the Court)

Ramesh Nair Member (Judicial))

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