In The Customs, Excise & Service Tax ... vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.ST/343/11-Mum (Arising out of Order-in-Appeal No.Pl/RKS/25/2011dated 23.02.2011 passed by Commissioner of Central Excise, (Appeals) Pune) For approval and signature: Honble Mr.M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) 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 :No 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? Trans Engineers India Pvt. Ltd. Appellant Vs. Commissioner of Central Excise Respondent

Pune Appearance:

Shri . M.H. Patil, Advocate for Appellant Shri.B. Kumar Iyer, Supdt (AR) for Respondent CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing : 05/08/2015 Date of Decision : 05/08/2015

ORDER NO

Per: M.V. Ravindran

This appeal is directed against order-in-appeal no. Pl/RKS/25/2011 dated 23-2-2011.

2. Briefly stated the facts of the case are that, the appellants are holders of Service Tax Registration No. AABCT5507BST001 and are engaged in providing Installation and Commissioning of Plant and Equipment services to various clients. During the course of audit of the records of the appellants, it was observed that they had rendered services of Installation Commissioning of Plant and Equipment but had not obtained registration and not paid service tax on the value off services rendered. It was further seen that the appellants obtained registration in February 2005 and had themselves changed service tax on invoices raised during the period from November 2004 to February 2005, only to those clients who agreed to pay service tax. This shows that the appellants were aware of their tax liability, but suppressed the facts from the department with intent to evade payment of service tax. The tax liability worked out by the Audit amount to Rs. 46,62,677/-. A Show Cause Notice dated 8-6-2009 was therefore, issued to the appellants asking them to show cause as to why service tax amounting to Rs. 45,97,818/- plus Education cess of Rs. 64,859/-(totally amounting to Rs. 46,62,677/-) on the taxable services provided by them during the period 1-7-2003 to September 2005, should not be recovered under the provisions of Section 73 (1) read with Section 68 of the Finance Act, 1994, along with interest under the provisions of Section 75 of the Finance Act, 1994 and why penalty under the provisions of Section 76,77 and 78 of the Finance Act, 1994 should not be imposed on them for having suppressed the facts, for failure to pay service tax and for contravention of the various provisions of the Act and Rules.

3. Adjudicating authorities after following the due process of law confirmed the demands raised within limitation period and dropped the demand for the period 1. 7.2003 to 31. 3. 2004 on ground of limitation or also the demand of interest, imposed penalties. On an appeal filed by the appellant, authority rejected the contention raised by the appellant and upheld the order-in- original.

4. Learned counsel would take us through the case records in detail. After submissions on merits, he would submit that the entire issue is hit by limitation in as much, the records of the appellant were audited by the audit section in 2006 and no objections were raised as to the facts that appellant has discharged the entire service tax liability and filed the returns to the authority. It is his submission that subsequent audit which took place in 2008 for the period in question, to demand were raised by authorities, based on the audit report filed by the auditors, by invoking extended period.

5. He would submit that the entire tax liability and interest thereof are deposited, returns thereof filed with the lower authorities, second audit report could not have invoked the extended period. He would place reliance on the Judgment of Honble High Court of Karnataka in the case of MTR Foods Ltd. 2012 (282) E.L.T. 196.

6. Learned Departmental Representative would submit that the extended period has been correctly invoked as the appellant collected the service tax liability and failed paying the tax on the entire amount but for the earlier period, withholders the service tax liability on entire amount received by them.

7. We have considered the submissions made by both sides and perused the records.

8. On perusal of the records it transpires that the appellant here-in was awarded various contracts for installation, erection of industrial for various customers which included the activities such as fabrication, erection, piping, installation, cutting and building, paper supply etc. It is undisputed that the appellant have on own paid service tax liability under various services as he understood the Law. There was short payment of tax during 1.4.2004.to 30.9.2005, which appellant himself discharged and reflected in the return filed with the department. It is the case of the Revenue that appellant has undervalued the services hence service tax liability arises.

9. We find that the show cause notice has invoked the extended period for the demand of service tax liability. It is noticed by us that the records of appellants audited by the audit party of the Revenue in 2006 and vide audited report no 288/2006-07, for a period on 01/04/2003 to 31/12/2006, the authorities raised various quarries but not in respect of the short payment of service tax as is alleged in the show cause notice in question in this appeal. We find that the audit party of the revenue in the 2nd audit conducted by them in 2008, vide audit report no 46/2008-09 came to conclusion that there was short payment of duty with intention to evade Service Tax. The show cause notice in the case hand was issued based upon the 2nd audit report.

10. In our view the entire demand is to be set aside on the ground on limitation only. Revenue authority cannot invoke the extended period of limitation, when the records of the assessee were audited by the officers once but did not find any short payment from records. The 2nd audit party, doing the audit of same period or over lapping period, cannot allege that appellant has miss-stated or suppressed the facts from the departments. We find that the Honble High Court of Bombay in the case of Rajkumar Forge Ltd. 2010 (262) E.L.T. 155 (Bom.) held in paragraph no. 13.

13. It is an undisputed fact that in so far as the Petitioners are concerned, audit of the Petitioners factory was carried out on three dates i.e. 6th September, 1993, Fist November, 1995 and 2nd September, 1994. The Petitioners vide their letter dated 6th September, 1993 have recorded the visit of the audit party and have also replied to the audit objections raised by the said audit party in respect of scrap generated and have informed the authorities that they were debiting Rs. 80,000/- at the rate of Rs. 1,000/-per Metric Ton and that they were also debiting differential duty totaling to Rs. 63,318 /-in respects of Mill Rollers which was debited under PLA dated 3rd September 1993. Therefore, the petitioners vide their letter dated 5th July 1995 have informed the Superintendent of the Respondents that they had debited Rs. 2,08,760/- against the Scrap Generation at sub- contractor end, where material is sent for processing under Rule 57F(3) for the period January, 94 to March, 95. Therefore by the said letters the petitioner had made the Respondents aware of the payment of duty on the scrap as well as on the Mill Rollers and considering the fact that the Respondents had carried out audit on the dates mentioned herein above, the sad fact is conclusive in so far as the knowledge of the petitioners activities to the Respondents is concerned. Therefore, in our view, in the light of the audit carried out by the Respondents off the Petitioners factory and the correspondence that is addressed by the Petitioners to the Respondents, it cannot be said that the Petitioners have miss-stated the facts or there is a fraud practiced by the Petitioners.

11. The above said views are also relied on by the Honble High Court of Karnataka in the case of MTR Foods ltd. (supra). We reproduce the relevant paragraph:-

4. As is clear from the material on record, the returns were filed promptly. In the returns it is clearly mentioned the they availed credit under the aforesaid rules. The audit partly accepted the same. It is only in the second audit that they noticed the mistake and initiated proceedings. Therefore, in the light of the aforesaid facts none of the other conditions prescribed in the Proviso exists in this case to extend the period of limitation of 5 years. It is in this background the Tribunal was justified in setting aside the order passed by the appellate authority and in restoring the order passed by the original authority. Therefore, there is no merit in this appeal. Accordingly, it is dismissed.

12. In view of authoritative judicial pronouncements and in the facts of this case, extended period cannot be invoked for demanding service tax from the appellant. The demand being beyond the period of limitation, we set aside the entire demands. Consequently, the interest and the penalties imposed are also set aside.

13. As we have disposed of the appeal on the ground of limitation we have not recorded any findings on various points made by both sides.

14. The impugned order is set aside and the appeal is allowed on the ground of limitation only.

(Dictated in Court) (C.J. Mathew) Member (Technical) Akp (M.V. Ravindran) Member (Judicial)

1 APPEAL No.ST/343/11-Mum