Commissioner Of Central Excise, ... vs M/S. Top Security Ltd

APPEAL NO. ST/85148/14 CO/91021/15 [Arising out of Order-in-Appeal No. PUN-EXCUS-002-APP-098-13-14 dtd. 7/10/2013 passed by the Commissioner (Appeals), Central Excise, Pune-II]

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? =======================================================

Commissioner of Central Excise, Kolhapur : Appellants

VS

M/s. Top Security Ltd : Respondent

Appearance

Shri S.R. Nair, Examiner (A.R.) for the Appellant Shri Mahesh Bhattar, C.A. for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 1/7/2015 Date of decision: /2015

ORDER NO.

Per : Ramesh Nair

This appeal by the revenue is directed against the Order-in-Appeal No.PUN-EXCUS-002-APP-098-13-14 dated 07.10.2013 passed by the Commissioner (Appeals), Central Excise, Pune-II wherein the Ld. Commissioner (Appeals) maintained the demand of service tax of Rs. 22,93,525/-, allowed Cenvat credit of Rs. 10,932/- and waived the penalties under Section 76 and 78 by invoking section 80 of the Finance Act, 1994 and also waived penalty imposed under section 77(2) on Shri Diwan Rahul Nanda, Managing Director of the Respondents Company.

2. The facts of the case are that the Respondent Company is engaged in providing Security Agency Service and liable to pay service tax for which they are registered with Central Excise department. Directorate General of Central Excise Intelligence (DGCEI), Ahmadabad conducted investigations for all the branches and Mumbai head office of M/s. Tops Security Ltd. wherein it was revealed that their Kolhapur branch was liable to pay service tax amounting to Rs. 57,14,760/- for provision of security service for the period 2004-05 to 2009-10 (upto June). However, the Respondent had paid service tax of Rs. 26,99,582/- during the said period. Therefore a show cause notice dated 12.10.2009 was issued to the company as well as to Shri Diwan Rahul Nanda, Managing Director of the Respondents Company. In the adjudication, the adjudicating authority vide Order-in-Original No.02/ST/JC/Kop/2011, dated 24/28.03.2011 confirmed the demand of service tax of Rs. 29,64,569/-, demanded interest, rejected the Cenvat claim of Rs. 10,932/-, imposed penalties under Section 76 and 78 and also penalty of Rs. 5,000/- under section 77(2) on Shri Diwan Rahul Nanda. Aggrieved by the said adjudication order, the respondents preferred appeal before the Commissioner (Appeals) who initially dismissed appeal for non compliance of predeposit, however on remands by this CESTAT, passed the impugned order wherein after reduction certain amount, upheld the demand of service tax of Rs. 22,93,525/-, allowed cenvat credit of Rs. 10,932/- and waived the penalties under Section 76 and 78 by invoking section 80 of the Finance Act, 1994 and also waived penalty imposed under section 77(2) on Shri Diwan Rahul Nanda, Managing Director of the Respondents Company. Being aggrieved by the said impugned order, the revenue filed this appeal challenging the portion of the order by which the Ld. Commissioner (Appeals) dropped the penalties under Section 76 and 78 of the Finance Act, 1994.

3. Shri Sanjeev Nair, Ld. Examiner (AR) appearing on behalf of the Revenue Appellant reiterates the grounds of the Appeal. He further submits that setting aside the penalty under Sec. 78 is not justified as the present case involves collection of service tax and non payment to the Government; it is admitted fact that actual gross amounts received from their clients, service tax payable are different from those reported in ST3 returns filed by their branch office from time to time; the respondent before the adjudicating authority taken stand that delay in payment of service tax is due to delay in receipt of payment of their service charges from their clients, however the respondent have not produced any evidence to this claim. He submits, in view of the above undisputed facts the Ld. Commissioner wrongly waived the penalties imposed by the original authority under section 76 & 78 only on the ground of financial constraints of the respondent. In support of his submissions, he placed reliance on the following judgments:

(a) Remac Marketing (P) Ltd. Vs. Commissioner of Service Tax, Kolkata [2009(13) S.T.R. 658(Tri. Kolkata)].

(b) Hotel Amarjit Pvt. Ltd Vs. Commr. of C. Ex. & Service Tax, Nagpur [2014(35) S.T.R. 140 (Tri.  Mumbai)]

(c) Golden Detective & Security Services Vs. Commr. of S.T. Bangalore [2009(14) S.T.R. 474(Tri. Bang.)]

(d) Commissioner of Central Excise, Ahmedabad Vs. Shivam Textiles [2014(314) ELT 223(Tri. Ahmd.)]

(e) Vidarbha Cricket Association Vs. Commissioner of C. Ex. Nagpur [2015(38) S.T.R 99(Tri. Mumbai)]

4. On the other hand, Shri Mahesh Bhattar, Ld. C.A. appearing on behalf of respondent submits that though in the Revenues appeal, it appears that there are two respondents, one is appellant company and other is Shri Diwan Rahul Nanda, who is Managing Director of the Company. He submits that as regard the penalty under Section 77 on Shri Diwan Rahul Nanda, Committee while reviewing the Commissioners order has not proposed the appeal against penalty under Section 77 set aside by the Commissioner; therefore, there is no appeal by the Revenue against Shri Diwan Rahul Nanda. He further submits that as regard the authorization by the Commissioner of the committee who reviewed the impugned order, it can be seen that both the Commissioners have signed at different dates that shows that Review decision is not unanimous decision of the committee and therefore appeal filed on the basis of such illegal Review order, deserves to be dismissed only on this ground. He further submits that this is a case of delayed payment of service tax and not evasion of service tax. He submits that it is incorrect to say that the respondents have recovered the service tax and did not deposit the same to the department. They have time and again submitted before the Adjudicating authority that huge amount of receivable payments from the client become bad debts which approximately amounting to Rs. 100 crores. In view of this fact it cannot be said that the respondent have retained the service tax collected by them rather respondent have lost huge amount i.e. 100 crores as against small amount of service tax liability. Considering above aspect the Ld. Commissioner (Appeals) applying the Sec. 80 and following the judicial discipline waived the penalty under Section 76 and 78. Therefore impugned order is just and proper and does not require any interference. Ld. Counsel in support of his submission placed reliance on the following judgments.

(a) Diwan Rahul Nanda Vs. Commissioner of Central Excise, Goa [2013(29) S.T.R. 544(Tri. Mumba)].

(b) M/s. U B Engineering Ltd Vs. Commissioner of Central Excise, Pune-III [2015-TIOL-580-CESTAT-MUM]

(c) Commr. of C. Ex. Mumbai Vs. Top Detective & Security Services Pvt Ltd. [2005(180) 363 (Tri. Mumbai)]

(d) Ralson Carbon Black Ltd. Vs. Commr. of C. Ex. Chandigarh-I [2014(34) S.T.R. 227(Tri. Del.)]

(e) M/s. Bhagwati Caterers Pvt. Ltd. Vs. Commissioner of Service Tax, Ahmedabad [2014-TIOL-259-CESTAT-AHM].

(f) Toyota Constructions Pvt. Ltd. Vs. Commr. of E. Ex. Daman [2014(36) S.TR. 199 (Tri. Ahmd.)]

(g) Commissioner of Service Tax Bangalore Vs. M/s. Motor World [2012-TIOL-418-HC-KAR-ST]

(h) Jivant Enterprise Vs. Commissioner of Service Tax, Ahemedabad [2012(28) S.T.R. 582(Tri. Ahmd.)]

5. I have carefully considered the submissions made by both sides.

6. From the records and the submissions made, the present case is not case of evasion of service tax whereas there is only delay in payment of service tax which appellant have discharged their service tax liability alongwith interest. When the appellant, though could not pay their service tax liability in time, declared their liability in the ST3 returns, it shows that they are duty bound and undertake to discharged the service tax liability and it is on record that whatever demand was raised in the show cause notice and confirmed in the adjudication order, the same was paid by the appellant alongwith interest. Taking into consideration this undisputed facts, the Ld. Commissioner has passed very reasoned order wherein he has given the waiver of penalty under Section 76 and 78. The relevant paras of the findings of the impugned order are reproduced below:

8.3 M/s. Tops emphasised on the fact that they have discharged some tax liability of Rs. 27,71,652/- before issue of SCN. Further, they claimed to have deposited Rs. 11,05,166/- till the date of submissions. They stated that they have enclosed copies of challans and acknowledged letters.

8.4 From 2007-08 onwards due to recession they have not received payments from their customers in stipulated time and the amounts are shown as debtors in the Balance Sheet. At the same time, they had to make salary payments of their employees and they have borrowed funds to pay to employees. Due to shortage of funds and huge outstanding with debtors, they could not deposit service tax in time. They relied upon the case of CCE V/s Tops Detective & Security Services (2005) f1 STT 22 = 180 ELT 363 = 3 STR 443 (CESTAT) wherein it was held that late receipt of payments from customers was sufficient cause. They also relied on the case law in Tiger Service Bureau V/s CCE (2007) 8 STR 14 (CESTAT), Shree Khodiyar Security Guard Services V/s CCE (2007) 8 STR 22 (CESTAT SMB), George Thomas V/s CCE (2006) 3 STT 11 = 1 star 116 (CESTAT) wherein penalty was reduced considering financial hardship.

8.5 M/s. Tops accepted that there was apparent delay in filing the returns. However, the same was on account of compilation of the requisite information as well as due to the absence of the quality staff at the branch level for proper appreciation of the information. They stated that the company has never attempted to intentionally evade the levy of service tax at any time. It is not correct to say that the information in ST-3 return is mis-declared. They have submitted the detailed worksheet before any investigation or any audit programme. As regards unpaid service tax, they shown readiness to pay the same along with interest. Hence, penalty u/s 76 should not be made applicable to them. They could not make service tax payments in time due to financial hardship and they have no guilty mind. As per Section 80 penalty of Section 76 can be waived. They placed reliance on the decision of the Honble Supreme Court in the case of CWT V/s Ellis Bridge Gymkhana 1998 (229) ITR 1. They also stressed on the provisions of Section 80 of the Act for waiver of penalties under Sections 76, 77 and 78 of the Act. For waiver of penalty in terms of Section 80, they relied upon the case law of CCE V/s SRE Venkateswara Hi-Tech Machinery 2007 (6) STR-139 (Tri Chennai).

8.6 The above payment of service tax was made suo motu by them and payment of such tax has preceded the issue of SCN. Hence, the entire allegation in connection with intention evasion of tax would be baseless. The company was free to avail credit of service tax paid on such services being input services. They have disclosed all the relevant facts to the authorities at all times during the investigation. Their intention was never to evade any amount of tax. So, question of imposition of penalty should not arise.

8.7 Finally, they requested to set aside the allegations raised in the SCN.

9. I have gone through all the records of the case, reply to SCN, case laws cited by M/s Tops and records of personal hearing including written submission. I find that the SCN has alleged that M/s Tops Kolhapur have provided taxable services of Security Agencys Services and have received taxable value for providing these services but have not paid appropriate service tax due thereon to the Government account; with intent to evade payment of service tax. It is also alleged that a lot of time was taken by M/s Tops Kolhapur for reconciliation of receipts of taxable value, tax payable and tax paid. M/s Tops Kolhapur changed their versions of reconciliation and has not paid appropriate service tax even as per their own calculations.

From the above findings of the Ld. Commissioner (Appeals), it can be seen that he has considered all the aspects and circumstances for delay in payment of service tax and waived penalty applying the Section 80 of the Finance Act, 1994. I, therefore, do not find any infirmity in the impugned order. Hence the same is upheld. Revenues appeal is dismissed. CO stands disposed of.

(Order pronounced in court on .)

Ramesh Nair Member (Judicial)

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10 ST/85148/14