Commissioner Of Central Excise & ... vs M/S. The Mahalaxmi Udyog

(ARISING OUT OF ORDER-IN-APPEAL NO.03/RAN/2010 DATED 14.01.2010 PASSED BY COMMISSIONER (APPEALS), CENTRAL EXCISE & SERVICE TAX, RANCHI)

FOR APPROVAL AND SIGNATURE OF

DR. D.M.MISRA, HONBLE JUDICIAL MEMBER

1. Whether Press Reporters may be allowed to see : 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 His Lordship wishes to see the fair copy : of the Order? 4. Whether Order is to be circulated to the Departmental : Authorities ?

COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, RANCHI

 APPELLANT COMMISSIONER VERSUS

M/S. THE MAHALAXMI UDYOG ...RESPONDENT

APPEARANCE:

SHRI K.CHOWDHURY, A.R. (SUPDT.) FOR THE REVENUE;

SHRI PARASURAM SAH, ACCOUNTANT OF THE RESPONDENT COMPANY.

CORAM:

DR. D.M.MISRA, HONBLE JUDICIAL MEMBER

Date of Hearing & Decision:20.02.2015

ORDER NO.FO/A/75108/2015

This Appeal is filed by the Revenue against the Order-in-Appeal No.03/RAN/2010 dated 14.01.2010.

2. Briefly stated facts of the case are that the Respondent during the relevant period, i.e.01.04.02006 to 31.12.2006, had rendered taxable services under the category of Erection, Commissioning or Installation Services to M/s. BHEL, Kolkata. However, the Respondent, though received and realized the value of taxable services from M/s. BHEL, by rendering the said services, but failed to discharge the service tax on the amount so received. Consequently, on being pointed out by the Department, they had paid the service tax. Later on, a Show Cause Notice was issued to them on 29.08.2008, proposing appropriation of the amount already paid and imposition of penalty, and recovery of interest. The ld. Adjudicating Authority has confirmed the demand and appropriated the amount paid towards service tax liability and imposed penalty of Rs.7,07,029/- under Section 78 of the Finance Act, 1994; penalty of Rs.1,000/- under Section 77 of the said Act; and penalty @2% of the service tax per month under Section 76 of the Finance Act, 1994.

3. Aggrieved by the said Order, the Respondent-Assessee had preferred an appeal before the ld. Commissioner (Appeals). The ld. Commissioner (Appeals) dropped the penalty and allowed the appeal filed by the Respondent-Assessee. Aggrieved by the said Order, the Revenue is in appeal before this Forum.

4. At the outset, ld. AR for the Revenue has submitted that the Order of the ld. Commissioner (Appeals) is devoid of any reasoning passed without analysis of the facts, on the basis of which, the penalty had been imposed by the Adjudicating Authority. He submits that judgments referred to by the ld. Commissioner (Appeals), in the cases of KSL Industries vs. CCE, Vapi, 2009(14) STR 839 (Tri.-Ahmd.) and Santhi Casting Works, 2009(15) STR 219(T-Chennai), are not applicable to the present circumstances of the case. In the former case, the issue was whether the provisions of Section 73(1A) would be applicable to Sections 76 and 77 of the Finance Act, 1994. Similarly, in Santhi Casting Works case (supra), the issue was that, when an assessee voluntarily pays the service tax amount, whether issuance of a show cause notice be waived under sub-section (1) of Section 73 in respect of the amount so paid.

5. The ld. AR has also submitted that the Adjudicating Authority in the present case, has categorically observed that even though in the two Work Orders, under which the Respondent had rendered services to M/s. BHEL, it was specifically mentioned about the applicability of service tax, the Respondent had not paid the service tax by observing necessary formalities of registration etc. under the Finance Act, 1994, and the Rules made thereunder. The plea of the Respondent that they were unaware of the provisions of law, cannot be acceptable in view of the specific mention of the liability of service tax under both the Work Orders dated 21.01.2006 and 04.08.2006. The ld. AR also submits that once it is established that the Respondent had suppressed the facts from the knowledge of the Department, penalty is imposable. In support, he has referred to the decision of the Honble Supreme Court in the case of UOI vs. Rajasthan Spinning and Weaving Mills, 2009 (238) ELT 3(SC). However, he fairly accepts that the Respondent were not given an opportunity to exercise their option to pay 25% of the penalty, as prescribed under Section 78 of the Finance Act, 1994.

6. Ld. Representative for the Respondent submits that since they were not aware of the provisions of the Finance Act, 1994, therefore, they did not discharge the service tax on the amount received from M/S. BHEL. However, afterwards, on realization of their mistake, they had deposited the entire amount of service tax and interest. He submits that the ld. Commissioner (Appeals) had rightly dropped the penalty against them.

7. Heard both sides and perused the records. I find that the ld. Commissioner (Appeals) had not discussed the facts in detail, while setting aside the penalty imposed on the Respondent. On the other hand, the Adjudicating Authority deliberated in detail and analyzed the facts of the case, while imposing penalties on the Respondent under Sections 76, 77 and 78 of the Finance Act, 1994. I find that in the Work Order dated 04.08.06 issued by M/s. BHEL to the Respondent, at para 2.2, it was clearly stipulated as under:-

Service tax (as applicable) including educational cess shall be reimbursed against the submission of documentary evidences to the satisfaction of BHEL.

and in the Work Order dated 21.01.2006 at para 2, it was clearly stipulated as under :-

On the basis of accepted rates, the total contract price works out to Rs.27,29,829/- (Rupees twenty-seven lakh twenty-nine thousand eight hundred and twenty-nine). The contract price is inclusive of taxes, duties etc. except the service tax including educational cess, which BHEL shall reimburse as per tender provision.

8. In view of the aforesaid categorical stipulations in the respective Work Orders, there is no room for the Respondent to plead that they were not aware of the applicability of service tax to the services rendered by them. In this scenario, the setting aside of the penalty by the ld. Commissioner (Appeals) without recording reasons and analyzing the facts, in my opinion, is unsustainable. Consequently, the impugned Order is set aside. I find that the ld. Adjudicating Authority has imposed penalties under Sections 76, 77 and 78 of the Finance Act, 1994. Considering the facts and circumstances of the case, I am of the opinion that penalties under Sections 77 and 78 would suffice the present purpose; and therefore, the penalty imposed under Section 76 of the Finance Act, 1994, was not warranted. Consequently, the penalties imposed under Sections 77 and 78, are upheld and the penalty imposed under Section 76, is set aside. I am also of the view, that the Appellant be given an opportunity to exercise their option to pay 25% of the penalty imposed under Section 78 of the Finance Act, 1994, in view of the judgment of the Honble Gujarat High Court in the case of Commissioner vs. Krishnaram Dyeing & Finishing Works, 2013(298)ELT-376 (Guj.). Thus, for this purpose, the case is remanded to the Adjudicating Authority to afford an opportunity to the Respondent-Assessee to pay 25% of the penalty imposed under Section 78 of the Finance Act, 1994, on fulfillment of the conditions laid down therein. Revenues Appeal is partly allowed on above terms.

(Operative part of the Order was pronounced in the court.)

SD/-03.03.15 (D.M.MISRA) JUDICIAL MEMBER

DUTTA/

5 ST/A/100/2010

5