Industrial Security & Protection ... vs Commissioner Of Service Tax, Mumbai-I

[Arising out of Order-in-Appeal No. SB(77)77/STC/2010 dtd. 25/06/2010 passed by the Commissioner (Appeals), Central Excise, Mumbai Zone-1]

For approval and signature:

Honble Mr. Ramesh Nair, Member (Judicial)

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

Industrial Security & Protection Services : Appellant

VS

Commissioner of Service Tax, Mumbai-I : Respondent

Appearance

Shri S. S. Gupta, C. A. for the Appellant Shri B. K. Iyer, Supdt. (A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 23/10/2015 Date of decision: / /2015

ORDER NO.

Per: Ramesh Nair

The appeal is directed against Order-in-Appeal No. SB(77)77/STC/2010 dtd. 25/06/2010 passed by the Commissioner (Appeals), Central Excise, Mumbai Zone-1, wherein the Ld. Commissioner upheld the Order-in-Original No. 56/2008 dtd. 10/11/2008 and accordingly rejected the appeal filed by the appellant.

2. The fact of the case is that the appellants are engaged in providing the services of Security Agency and for which they hold Service Tax registration under Section 69 of the Finance Act, 1994. During the scrutiny of records at the time of Audit, it was observed that the proprietary concerns of the appellant were not paying service tax on the service charges towards Security Service which were deposited in his bank account and reflected in their P&L account. Therefore, a Show Cause Notice dated 20/04/2004 had been issued to the appellant proposing the demand of service tax amounting to Rs. 12,59,510/- for the period 16/10/1998 to 31/12/2003. The demand proposed in the Show Cause Notice was confirmed by the Adjudicating Authority vide Adjudication Order dated 10/11/2008. In addition the Adjudicating Authority also demanded the interest under Section 75 and imposed the penalty under Section 76, a penalty of Rs. 500/- under Section 75A and a penalty of Rs. 6,25,118/- under Section 78 of the Finance Act, 1994 were also imposed. Aggrieved by the said order, the appellant filed an appeal before the Commissioner (Appeals) who rejected the appeal vide the impugned order, therefore, the appellant is before me.

3. Shri S.S. Gupta, Ld. C.A. appearing on behalf of the appellant submits that though the appeal was filed for setting aside the impugned order, but with the instruction of his client, the appellant is not contesting demand of service tax and interest thereupon, which was already paid by the Appellants. However the penalties under Section 76 & 78 are being contested. As regard penalty under Section 76, he submits that when penalty under Section 78 was imposed, no penalty under Section 76 should be imposed. In this regard, he placed the reliance on the following judgments: Commr. of S.T., Bangalore Vs. Motor World  2012 (27) S.T.R. 225 (Kar.)

Commr. of Cen. Ex., Chandigarh Vs. City Motors  2010 (19) S.T.R. 486 (P & H)

Commr. of Cen. Ex. Vs. Pannu Property Dealers, Ludhiana  2011 (24) S.T.R. 173 (P & H)

Commr. of Cen. Ex. Vs. First Flight Courier Ltd.  2011 (22) S.T.R. 622 (P & H)

Care And Cure (P) Ltd. Vs. Commr. of Cen. Ex., Chandigarh-II - 2015 (38) S.T.R. 225 (P & H)

United Communication Udupi Vs. Comm. of C. Ex, Mangalore-III  2012 (281) E.L.T. 168 (Kar.)

Commr. of Cen. Ex., Bhopal Vs. M/s Hemkunt Petroleum Ltd.  2015-TIOL-922-CESTAT-DEL

As per the consisting view taken by the Tribunal as well as by the various High Courts, it has been settled now, that penalty once imposed under Section 78, penalty under Section 76 cannot be imposed. He further submits that as regard penalty imposed under Section 78, no option under the first proviso to Section 78 was given in the Adjudication order and accordingly the benefit of reduction of 75% penalty was not extended to the appellant. He further submits that the issue whether the option of payment of service tax, interest and 25% penalty if not given in the adjudication order, the same can be provided at the subsequent stage, has been settled in the following judgments: M/s. Ram Singh Kanda & Sons Vs. Commr. of C.. Ex., Ludhiana  2014-TIOL-2433-CESTAT-DEL

Commr. of Cen. Ex. Vs. Bajaj Travels Limited  2011 (21) S.T.R. 497 (P & H)

Commr. of Cen. Ex. Vs. Bajaj Travels Limited - CC 19006/2011 (Supreme Court of India)

It is his submission that in view of above judgments, it particular in the case Commr. of Cen. Ex. Vs. Bajaj Travels Limited (supra) passed by Honble High Court of Punjab & Haryana which has been upheld by the Honble Supreme Court by dismissing Revenues appeal, the appellant is entitled for reduction of penalty to the extent of 75% in terms of first proviso to Section 78. 4. On the other hand, Shri B.K. Iyer, Ld. Supdt. (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that as regard the penalties under Section 76 & 78, this Tribunal has passed a judgment in the case of Board Of Control For Cricket In India Vs. Commr. of S.T., Mumbai-I  2015 (37) S.T.R. 785 (Tri.-Mum.), according to which the penalty under section 76 as well as 78 can be imposed simultaneously. As regard the issue whether the option to pay 25% penalty in terms of proviso to Section 78 can be allowed after 30 days of adjudication order, the Honble High Court of Bombay in the case of CCE, Raigad Vs. Castrol India Limited  2012 (286) E.L.T. 194 (Bom.), it was held that the period of 30 days provided under the proviso to Section 11AC of Central Excise Act, cannot be extended accordingly to the pay 25% penalty beyond the time proscribed under the proviso to Section 11AC is not permissionable in law.

5. We have carefully considered the submissions made by both the sides. 6. As per the submissions of the Ld. C.A., the issues to be decides by me are as under:- (i) Once penalty under Sec 78 has been imposed whether penalty under Sec 76 can be imposed simultaneously. (ii) If the option of payment of 25% penalty in terms of proviso to Sec 78 has not been given in the adjudication order, whether it can be permitted at the later stage after 30 days of the adjudication order. On the first issue, I have gone through the various judgments of the various High Courts, where it has been held as under:- Commr. of Service Tax, Bangalore Vs. Motor World  2012 (27) S.T.R. 225 (Kar.) 21. When once the ingredients of Sec 78 are established and there is no reasonable cause for failure, Sec 80 is not attracted. Then the authority has to impose a minimum penalty of the amount of service tax sought to be evaded and the maximum is double the said amount. Here, there is no discretion, which is vested with the authority. The discretion is only confined to impose a penalty above the minimum and less than the maximum provided for under the Act.

It is in that context, in the light of the scheme of this provision that Sec 76 & 78 operate in a mutually exclusive area. For the same reason, the question of imposing penalty both under Sections 76 & 78 would not arise. The penalty is to be imposed either under Sec 78 or under Sec 76 and certainly not under both the provisions. In this connection, revenue has relied on the judgment of Division Bench of the Kerala High Court in the case of the Assistant Commr. of Central Excise vs. Krishna Poduval reported in 2006 TIOL-77-HC-KERALA-ST (1) STR 185 (Ker.) at para 11, it held as under: 11. The penalty imposable under Sec 76 is for failure to pay service tax by the person liable to pay the same in accordance with the provisions of Sec 68 and the rules made thereunder, whereas Sec 78 relates to penalty for suppression of the value of taxable service. Of course, these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But we are of the opinion that the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences.

There can be a situation where even without suppressing value of taxable service, the personal liable to pay service tax fails to pay. Therefore, penalty can certainly be imposed on erring persons under both the above sections, especially since the ingredients of the two offences are distinct and separate. Perhaps invoking powers under Section 80 of the Finance Act, the appropriate authority could have decided not to impose penalty on the assessee if the assessee proved that there was reasonable cause for the said failure in respect of one or both the offences. However, no circumstances are either pleased or proved for invocation of the said Section also. In any event, we are not satisfied that an assessee who is guilty of suppression deserves such sympathy. As such, we are of opinion that the learned single Judge was not correct in directing the 1st appellant to modify the demand withdrawing penalty under Sec 76. Therefore, the judgment of the learned Single Judge, to the extent it directs the first appellant to modify Ext. P1 by withdrawing penalty levied under Sec 76, is liable to be set aside and we do so.

The cumulative result of the above findings would be that the Writ Petitions are liable to be dismissed and we do so. However, we do not make any order as to costs. 22. With due respect, we are of the view that the said judgment runs counter to the express provisions contained in Sections 76 & 78. In fact, in support of out contentions, we would like to point out that by Finance Act, 2008 (18 of 2008) which came into force from 10-5-2008, the Parliament has made the legal position clear by introducing a proviso to Sec 78. It reads as under: provided also that if the penalty is payable under this section, the provision of Sec 76 shall not be attracted. 23. While imposing penalty under Sec 76, the question of imposing penalty under Sec 78 also will not arise because Sec 76 applies to a case where the person has not either registered himself under the Act or having registered himself has not filed the return and not paid tax for the activity which he is carrying on. In such circumstances, the question of finding fault with the returns, which are filed furnishing inaccurate value of such taxable service or suppressing or concealment of the value of taxable service would not arise.

The amendment brought about is only clarificatory in nature. That was the position even before the amendment. It is clear from the express provisions of Sec 76 and 78.

Commr. of C. Ex., Chandigarh Vs. City Motors - 2010 (19) STR 486 (P & H) 4. The respondent was levied penalty under Sec 76 and 78 of the Act for the same cause of action by the adjudicating authority. In appeal, the Commissioner reduced the penalty under Sec 78 of the Act and set aside the penalty under Sec 76 of the Act. The Revenue challenged the order passed by the Commissioner (Appeals) which has been dismissed. 5. A perusal of the impugned order shows that the penalty imposed under Sec 78 of the Act was sufficient to cover the default of service tax. Moreover, two penalties for the same default could not be imposed upon the respondent. Apart from the above, even the amount involved in the present appeal is very less, i.e. only 56,024/-

Commr. of C. Ex. Vs. Pannu Property Dealers, Ludhiana - 2011 (24) STR 173 (P & H) 6. We are of the view that even if technically, scope of Sections 76 and 78 of the Act may be different, as submitted on behalf of the revenue, the fact that penalty has been levied under Sec 78 could be taken into account for levying or not levying penalty under Sec 76 of the Act. In such situation even if reasoning given by the appellate authority that if penalty under Sec 78 of the Act was imposed, penalty under Sec 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty under Sec 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under Sec 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time. Moreover, the amount involved in Rs. 51026/- only.

Commr. of C. Ex. Vs. First Flight Courier Ltd. - 2011 (22) STR 622 (P & H) 4. Only point which has been urged by learned counsel for the appellant is that after 10-5-2008, there is an amendment providing that penalty under Sec 78 has been levied but for the period prior thereon, penalty could be levied under both Sections. The Commr. (Appeals) as well as the Tribunal erred in deleting the penalty under Sec 76 by assuming that simultaneously penalty under both the provisions could not be levied for the period in dispute. 5. We are unable to accept the submission. Sec 76 provides for penalty for failure to pay the amount while Sec 78 provides for penalty for suppressing the taxable value. Sec 78 is, thus, more comprehensive and provides for higher amount. Even if technically, the scope of Sections 76 and 78 is different, penalty under Sec 76 may not be justified if penalty had already been imposed under Sec 78. The matter was considered by this Court in STA No. 13 of 2010 (Commr of C. Ex. Vs. M/s. Pannu Property Dealers, Ludhiana) decided on 12-7-2010, wherein it was observed: We are of the view that even if technically, scope of Sections 76 and 78 of the Act may be different, as submitted on behalf of the revenue, the fact that penalty has been levied under Sec 78 could be taken into account for levying or not levying penalty under Sec 76 of the Act. In such situation even if reasoning given by the appellate authority that if penalty under Sec 78 of the Act was imposed, penalty under Sec 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty under Sec 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under Sec 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time. 6. In view of the above, no substantial question of law arises. The appeal is dismissed.

Care And Cure (P) Ltd. Vs. Commr. of C. Ex., Chandigarh-II - 2015 (38) STR 225 (P & H) 7. We have heard counsel for the parties. While considering the scope and ambit of Sections 76, 77, 78 of the Act, this Court has held in STA No. 48 of 2010  Commr. of Cen. Ex. Commissionerate, Ludhiana Vs. M/s. Akash Cable, 1411 Urban Estate, Phase-II, Dugri, Ludhiana and STA No. 13 of 2010  Commr. of Cen. Ex. Vs. M/s. Pannu Propery Dealers, Ludhiana that Sections 76, 77 and 78 of the Act, do not envisage imposition of simultaneous penalties. This apart, there appears to be error in the order passed by the Tribunal holding that the appellant did not deposit 25% of penalty within one month of its impositions. The Tribunal lost sight of the fact that adjudicating authority did not impose penalty and therefore, the assessee did not get an opportunity to deposit 25% of the penalty, within one month.

United Communication Udupi Vs Commr of C.Ex, Mangalore-III - 2012 (281) ELT 168 (Kar.) In para 5. At the same time it is now well settled that the liability cannot be imposed both under Sections 76 and 78. Therefore, in this case the liability to pay penalty is only under Sec 78. In fact the proviso to Sec 78 makes it very clear that if penalty is payable under this Section, the proviso to Sec 76 shall not apply. Thereby no penalty could be imposed both under Sections 76 as well as 78. therefore, in this case the penalty is to be construed under Sec 78. To that extent the appeal succeeds.

Commr. of C. Ex., Bhopal Vs. M/s. Hemkunt Petroleum Ltd. - 2015-TIOL-922-CESTAT-DEL 2. We have considered the contentions of Revenue. There is no dispute about the fact that the penalties under Sections 76 and 78 of the Act, became mutually exclusively only with effect from 16-5-2008 when proviso was added to Section 78 to the effect that if the penalty was payable under Sec 78 provisions of Sec 76 shall not apply. That having been said, it has to be seen that with effect from 16-5-2008, penalties under Sections 76 and 78 ibid were made mutually exclusive in-as-much-as if the penalty under Sec 78 was imposed, the penalty under Sec 76 was made unimposable. This amendment with effect from 16-5-2008 in a way reflected the refinement of penal provisions. Indeed it has been held by Punjab & Haryana High Court in the case of CCE Vs. M/s. Pannu Propery Dealers, Ludhiana [2011 (24) STR 173 (P & H)] = 2010-TIOL-874-HC-P&H-ST that even if technically, scope of Sections 76 and 78 of the Act may be different, as submitted on behalf of the revenue, the fact that penalty has been levied under Sec 78 could be taken into account for levying or not levying penalty under Sec 76 of the Act.

In such situation even if reasoning given by the appellate authority that if penalty under Sec 78 of the Act was imposed, penalty under Sec 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty under Sec 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under Sec 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time. Further in the case of CCE Vs. First Flight Courier  2011-TIOL-67-HC-P&H-ST Punjab & Haryana High Court held that penalty under Sec 76 may not be justified if penalty under Sec 78 has been imposed even if technically penalties under both sections could be imposed and that the appellate authority was well within its jurisdiction not to levy penalty under Sec 76 having regard to the fact that penalty under Sec 78 has been imposed. In the wake of the said judgments of Punjab & Haryana High Court, we are of the view that the impugned order does not suffer from such a grave illegality/impropriety as to warrant our interference.

Therefore, we dismiss the Revenues appeal. From the above judgments, I find that the various High Courts and this Tribunal consistently held that once the penalty under Sec 78 has been imposed, no penalty under Sec 76 can be imposed. As regard the judgments of this Tribunal in the case of Board of Control for Cricket in India (supra), relied upon by the revenue, I find that since the very same issue has been decided time and again by various High Courts as stated above, the view taken by the Karnataka, Punjab & Haryana High Courts shall prevail, accordingly, following of the ratio of those judgments, I am of the view that penalty under Sec 76 is not sustainable; hence the same is set aside. 7. As regard the second issue whether the appellant can be permitted 25% penalty in terms of proviso to Sec 78, I find that though there are confecting views of Honble Bombay High Court and Punjab & Haryana High Court in the case of Castrol India Ltd. (supra) and Bajaj Travel Ltd. (supra) respectively, the case of Bajaj Travel Ltd. (supra) has been upheld by the Honble Supreme Court vide judgment dated 25-11-2011 in civil appeal No. 19006/2011 which is reproduced below: ORDER

Delay condoned.

Having regard to the facts of the case and bearing in mind the fact that the tax and interest amount had been deposited by the respondent even before the order of adjudication was passed, no ground is made out for our interference with the impugned judgment in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special leave Petition is dismissed accordingly. Therefore, respectfully following the above Honble Apex Court order, I hold that the appellant is entitled to pay 25% penalty, subject to its payments within 30 days from the receipt of this order.

8. In view of above discussion and the various judgments as discussed above, the penalty imposed under Sec 76 is set aside, the penalty imposed under Sec 78 is reduced to 25% of Rs. 6,25,118/- subject to its deposit within 30 days from the receipt of this order. The demand of service tax and interest thereupon, which has already been paid and a penalty of Rs. 500/- imposed under Section 75A is upheld. The appeal is partly allowed in above terms.

(Order pronounced in Court)

Ramesh Nair Member (Judicial)

saifi

12 APPEAL NO. ST/494/10-Mum