) Commissioner Of Central Excise vs ) R.Kuppuswamy

[Arising out of Order-in-Appeal No.74/2005-ST dated 19.9.2005 passed by the Commissioner of Central Excise (Appeals), Coimbatore]

1) Commissioner of Central Excise Coimbatore 2) R. Kuppuswamy Appellants

Versus

1) R.Kuppuswamy 2) Commissioner of Central Excise, Coimbatore Respondent

Appearance:

Shri K.P.Muralidharan, AC (AR) For the Revenue Shri S. Venkatachalam, Advocate For the Assessee

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing/Decision : 22-01-2015

FINAL ORDER No.40062-40063/2015

Both the assessee and Revenue have filed appeals against the Order-in-Appeal No. 74/2005-ST dt.19.9.2005. Therefore, both are taken up together for disposal.

2. The brief facts of the case are that the appellants were rendering clearing and forwarding service as consignment agent to M/s.Steel Authority of India Ltd. (SAIL). They have not discharged service tax for the period April'99 to March'04 and there was a delay in payment of service tax of Rs.44,31,640/- which was subsequently paid by the appellant. The adjudicating authority in his order confirmed the demand and appropriated the amount and also imposed penalty of Rs.7,43,586/- under Section 76 and imposed penalty of Rs.5000/- under Section77 for failure to file the returns. The assessees filed appeal against the denial of cum tax benefit and for waiver of penalty under Section 80. On the other hand, Revenue filed appeal against the impugned order against the reduction of penalty imposed under Section 76.

3. Heard both sides.

4. Ld. Advocate submits that service tax liability on consignment agent came into effect from 16.7.1997. Initially, payment of service tax liability was on the service recipient and w.e.f 1.9.1999, the service tax liability was shifted to service provider. He further submits that there was a confusion on the reimbursement amount of service tax from the service receiver in respect of consignment agents. Therefore, there was delay in payment of service tax. Therefore, they are eligible for waiver of penalty under Section 80. He further submits that they are eligible to cum tax benefit as they have received the gross amount which is inclusive of service tax amount. Commissioner (Appeals) denied the cum tax benefit. He relied on the following citations :-

(1) CCE & Cus. Patna Vs Advantage Media Consultant 2008 (10) STR 449 (Tri.-Kolkata)

(2) Commissioner Vs Advantage Media Consultant 2009 (14) STR J49 (SC) (3) Robot Detective & Security Agency Vs CCE Chennai 2009 (14) STR 682 (Tri.-Chennai) (4) Abirami Associates Vs CCE Pondicherry 2009 (14) STR 801 (Tri.-Chennai)

5. The Ld. AR reiterated the grounds of appeal as the assessees have not made out any valid ground for reduction in the penalty and they were not regularly paying service tax. He submits that Commissioner (Appeals) has no discretionary power for reducing the penalty under Section 76 as Section 76 restricts penalty payment for default payment of service tax to Rs.100/- per day.

6. Regarding assessee's appeal, he submits that they have not claimed the cum tax benefit before the adjudicating authority. Therefore, they cannot raise the issue of cum tax benefit. Commissioner (Appeals) has rightly disallowed the benefit of cum tax benefit. He submits that they have not discharged the interest liability. He relied on the following judgments :-

(1) Syndicate Bottles Vs CST Chennai 2014 (33) STR 389 (Tri.-Chennai)

(2) Master Marine Services P. Ltd. Vs CST Mumbai 2014 (35) STR 79 (Tri.-Mum.)

(3) Talera Logistics Pvt. Ltd. Vs Commissioner 2015 (35) STR J182 (SC)

(4) Transport Solution Group Vs CCE Mumbai-IV 2014 (33) STR 683 (Tri.-Mumbai)

7. Heard the submissions of both sides and perused the records.

8. The short issue on the appellant's appeal relates to denial of cum tax benefit and waiver of penalty. The Revenue's appeal relates to reduction of penalty under Section 76. As seen from the OIO and appellate order, payment of service tax under clearing and forwarding service on the consignment agent was under dispute including the taxability on the service recipient from 16.7.1997 to 1.9.1999 and subsequently the liability was shifted to service provider. This litigation was before various Tribunals and High Courts on the sustainability of tax on the consignment agent. Ultimately, this issue was settled by the Hon'ble Supreme Court in the case of Laghu Udyog Bharti and Gujarat Ambuja Cements Ltd. Government introduced retrospective amendment in 2003 for revalidating levy and collection of service tax.

9. As regards the assessee's contention on the cum tax benefit, I find that though assessee have not claimed cum tax benefit before adjudicating authority, they have rightly claimed before the appellate authority. The Tribunal's in the case of Commissioner Vs Advantage Media Consultant (supra) has allowed the cum tax benefit during the period when there was no Explanation in the Section for extending the cum tax benefit. The above Tribunal's order was upheld by the Hon'ble Apex Court in the case of Commissioner Vs Advantage Media Consultant (supra). The relevant portion of the order is reproduced as under :-

"The Supreme Court Bench comprising Honble Mr. Justice S.H. Kapadia and Honble Mr. Justice B. Sudershan Reddy on 13-10-2008, after condoning the delay dismissed the Civil Appeal No. D 23523 of 2008 filed by Commissioner of Central Excise & Customs, Patna against the CESTAT Final Order Nos. A/355-356/KOL/2008, dated 19-3-2008 in the case of Commissioner v. Advantage Media Consultant as reported in 2008 (10) S.T.R. 449 (Tri. - Kolkata). While dismissing the appeal, the Supreme Court passed the following order :

Delay condoned.

The Civil Appeal is dismissed. The Appellate Tribunal in its impugned order had upheld the remand order of Commissioner (Appeals) where cum-tax benefit was directed to be given. The party was rendering Advertising Agency service and Service tax was not collected for services rendered to government agencies. It held that Service tax being an indirect tax, was borne by consumer of goods/services and the same was collected by assessee and remitted to government and total receipts for rendering services should be treated as inclusive of Service tax due to be paid by ultimate customer unless Service tax was paid separately by customer. The Tribunal had noted that cum-tax value has been incorporated in Section 67 of Finance Act, 1994 vide amendments made subsequently."

Accordingly, I hold that appellants are eligible for the cum tax benefit.

10. On the imposition of penalty under Section 76 of Finance Act, the adjudicating authority has imposed a penalty of Rs.7,43,586/-. In the impugned order, the lower appellate authority has reduced the penalty to Rs.1.50 lakhs. On perusal of records, I find that appellant was providing clearing and forwarding service to Public Sector undertaking M/s.SAIL as per the contract executed between the parties. Payment on the service tax on the consignment agent came into effect from 16.7.97 and subsequently payment of service tax was shifted to service provider (appellant) from 1.9.99. There is no justification for delayed payment of tax for a period of 5 years and not filed any return. Only after being pointed out by department, appellants paid Rs.39,33,638/- partially before issuance of SCN and the remaining amount after issuance of SCN. Payment of service tax by service provider came into from 1.9.99 and appellants were fully aware that they cannot take shelter on the count that there was dispute between service providers and service recipients for the earlier period. Therefore, I do not find any justifiable ground for assessee's plea for total waiver of penalty under Section 80. As rightly contended by the Revenue in their appeal, the lower appellate authority has no power to reduce the penalty under Section 76 which is specifically mentioned in the Section as Rs.100/- per day of the delay subject to maximum of service tax amount. The appellate authority having held that penalty is imposable under Section 76 cannot reduce the penalty under Section 76. The imposition of penalty under Section 76 is purely for delay in payment of service tax for which no mens rea is required. The Tribunal in the case of Transport Solution Group Vs CCE Mumbai-IV (supra) has held that imposition of penalty under Section 76 is sustainable. Relevant portion of the said order is reproduced as under :-

"5.3?Coming to the issue of whether the demand is time-barred or not, from the records of the case, it is seen that even though the appellant applied for registration in June, 2002, there were number of correspondences exchanged between the department and the appellant, and the information relating to the consideration received by the appellant during the period 1-9-2001 to 31-5-2002 was furnished by the appellant to the department only in March, 2003, even though the department had sought for these details as early as in October, 2002. Inasmuch as the show cause notice has been issued on 13th October, 2003 i.e. within a period of one year from the date of knowledge, it cannot be alleged that the show cause notice is time barred, as has been held by the Honble Apex Court in the case of Nizam Sugar Factory Ltd. [2008 (9) S.T.R. 314 (S.C.) = 2006 (197) E.L.T. 465 (S.C.)] It is the date of knowledge of the activity by the department which is relevant for computing the time-limit and accordingly, we hold that the show cause notice has been issued within the time-limit specified and the demand is not time-barred. Since the appellant did not file any returns they are rightly liable to penalty under Section 77 and we uphold the same. As regards the [penalty] imposed under Section 76 the said penalty is attracted for failure to pay service tax by the due dates and there is no mens rea required to impose penalty under the said Section. Therefore, imposition of penalty under Section 76 is also sustainable in law, subject, of course, at the rates prescribed in the said section and also subject to ceiling of ` 17,77,448/- which was the amount in default."

Accordingly, I hold that the Commissioner (Appeals) reducing penalty under Section 76 is liable to be set aside.

11. In view of the above discussion, the assessee's appeal (ST/134/05) is partly allowed to the extent of extending cum tax benefit with consequential relief. The adjudicating authority is directed to re-quantify the service tax and interest after allowing cum tax benefit.

12. The impugned order reducing penalty under Section 76 is set aside and penalty imposed by the adjudicating authority is restored and the Revenue's appeal (ST/117/2005) is allowed to that extent.

13. Both the appeals are disposed of in the above terms.

(Dictated and pronounced in open court)

(R. PERIASAMI) TECHNICAL MEMBER

gs

8