M/S. 3 Guys vs Commissioner Of Central Excise- Haldia

Appeal No. ST/161/11 &ST/ 166/11 (Arising out of the order in Appeal No. 56/ST/HAL/2011. Dated 17/02/2011 passed by the Commissioner of Central Excise, (Appeal-1), Kolkata)

FOR APPROVAL AND SIGNATURES OF

SHRI H.K.THAKUR, HONBLE TECHNICAL 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 Their Lordships wish to see the fair copy : of the Order? 4. Whether Order is to be circulated to the Departmental : Authorities?

M/s. 3 Guys APPLICANT(S) VERSUS Commissioner of Central Excise- Haldia ...RESPONDENT (S)

APPEARANCE:

SHRI S.P.SIDDHANTA, CONSULTANT FOR THE APPELLANT SHRI A.ROY, SUPDT.(AR) FOR THE REVENUE

CORAM:

SHRI H.K.THAKUR, HONBLE TECHNICAL MEMBER

Date of Hearing: 09.10.2015 Date of Decision: 09.10.2015

ORDER NO.FO/A/75588-75589/15

Per Shri H.K.Thakur

Appeal No. ST/161/11 has been filed by Appellant. M/s. 3 Guys against OIA No. 56/ST/HAL/2011 dt 17/02/11 upholding Sec 78 penalty imposed upon the appellant by the Adjudicating authority. Appeal No. ST/166/11 has been filed by Revenue against the same OIA dt 17/02/11 under which penalty imposed under Sec 76 of the Finance Act 1994 has been set aside by the first appellate authority.

2 Sh. S.P. Siddhanta (Consultant) appearing on behalf of the appellant argued that show cause notice dt 20/7/2009 was issued to the appellant after 16/05/2008 when Sec 78 of the finance Act 1994 was amended. That as per amended Sec 78 of the Finance Act provision relating to simultaneous imposition of penalties under Sec 76 & 78 of the finance Act 1994 was not attracted. That in view of Karnataka High Courts order in the case of CST Bangalore Vs The peoples Choice [2014 (36) STR 10 (Kar)] penalty is not impossible. Learned consultant made the bench go through Para- 2 & 4 of this order to argue that simultaneous imposition of penalties under Sections 76 & 78 of the Finance Act 1994 can not be made applicable to show cause notice issued after 16/05/2008 when amended provisions of Sec 78 were in force.

2.1 On the imposition of Sec-78 penalty imposed upon the appellant it was argued by the Learned Consultant that entire amount of Service Tax payable in relevant period was truly reflected in the periodical returns filed with the department. He made the bench go through the relevant ST-3 returns filed by the appellant to argue that in the light of true disclosures made in these returns there can not be any intention to evade payment of Service Tax. That even when extended period was not invokable still appellant made payment of the entire Service Tax alongwith interest much before adjudication. That penalties as per the provisions contained in Sec 80 should be waived as appellant has financial hard ships. It was also the alternative argument of the Learned consultant that benefit of cum duty value was not considered by the lower authorities while imposing Sec 78 penalty and that option of 25% reduced penalty was also not extended to the appellant.

3 Sh. A. Roy Supdt (AR) appearing on behalf of the Revenue argued that Simultaneous penalties under Sec. 76 & 78 of the Finance Act 1994 are imposable for the period prior to 16/05/2008 when Sec 78 of the finance Act 1994 was amended in view of the following case laws:-

(i) Bajaj Travels Ltd Vs CST [2012 (25) STR 417 (Del)]

(ii) Master marine Service (P) Ltd Vs CST Mumbai [2014 (35) STR 79 (Tri-Mumbai)]

3.1. On the issue of imposition of Sec 78 penalty Learned AR argued that appellant in the ST- 3 returns filed, gave a wrong declaration that all the assessed tax has been paid when in fact Service tax was collected from the customers but not paid to the department till detected by the departmental officers. That the act on the part of the appellant was clearly malafide & extended period and imposition of penalty under Sec 78 of the Finance Act 1994 were fully justified Learned. AR thus strongly defended the order passed by the first appellate authority with respect to Sec 78 penalty imposed upon the appellant.

4. Heard both sides & perused the case records. Following issues are required to be answered in these appeals:-

(i) Whether Section 76 & penalties can be imposed upon the appellant simultaneously under a show cause notice dt 20/7/2008 issued after amendment dt 16/05/2008 carried out in Sec 78 of the finance Act 1994.

(ii)whether penalty under Sec 78 of the finance Act 1994 is attracted against the appellant in the present proceedings.

5. So for as point mentioned at Para- 4 (i) is concerned it is not disputed that show cause notice is issued after the amendment dt 16/05/2008 carried out in Sec 78 of the Finance Act 1994. It is observed from Para-3 of the case law Bajaj Travels Ltd Vs CST (Supra) , relied upon by Learned AR, that the SCN in the case before CESTAT Mumbai was issue on 17/10/2005 ie. before the amendment carried out in Sec 78 of the Finance Act 1994. The facts of the case laws relied upon by the AR are thus different then the facts of the present appeals. Secondly, the case law of Karnataka High court in CST Bangalore Vs The Peoples Choce, relied upon by the appellant, was not available before CESTAT in the case laws relied upon by Learned AR. In this case Karnataka High court framed the following law & decided the appeal against the Revenue:-

2. We have heard learned counsel for the parties for some time and with their assistance gone through the relevant provision so as to consider the basic question whether the proceedings initiated in respect to the period prior to the amendment by invoking the provision before amendment is vitiated after the amendment? This question was framed at the stage when the appeal was admitted on 16/09/2011.

3. Admittedly, show cause notice was issued by the Assistant Commissioner of Service Tax, Service Tax Division01 , Bangalore, on 06.10.2004 calling upon the respondent to show cause as to why the service tax amounting to 79,43,346/- on the gross amount of 15,95,08,866/- realized by them, for security services tax amounting period from 16th October, 1998 to 31 st March, 2004, on which service tax had not been discharged, but had become payable under Section 68 of the finance Act, 1994 (for short Act) as amended should not be demanded under the provisions of Section 73(1) of the Act invoking the extended period of limitation, and why it should not be recovered under Section 73(2) (a) of the Act. The service tax, according to the appellants, was under the provisions of Section 73(1)(a) of the Act.

4. The provisions contained in Section 73(1) (a) of the Act were substituted vide Finance Act, 2004 with effect from 10/9/2004. The provision prevailing prior to 10/9/2004 was providing for value of taxable services escaping assessment, while after its substitution vide finance Act, 2004 it provided for recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. Admittedly, on the date of show cause notice I.e., 06/10/2004 the provisions contained in Section 73(1) (a) of the said Act, prevailing prior to 10/09/2004, were not in existence. In other words, the statutory provision under which the show cause notice issued was not in existence as on that date. The provision as on 06/10/2004 prevailing was inserted vide Finance Act, 2004 with effect from 10/9/2004 I.e., prior to 6/10/2004 on which date the show cause notice was issued. The Tribunal, on this ground, negated the contentions raised by the appellant. We do not find any reason to interfere with the same in view of the admitted facts, as aforementioned. Hence, we dismiss this appeal. Dismissal of the appeal, however, shall not preclude the appellant from proceeding against the respondent. In accordance with law.

5.1 The ratio laid by the Karnataka High court squarely applies to the present proceedings also. It is accordingly held that simultaneous penalty under Sec 76 is not imposable upon the appellant when show cause notice was issued after 16/05/2008 when amended provisions of Sec 78 of the Finance Act 1994 were existing. Revenues appeal is therefore, liable to rejection.

6. So for as imposition of Sec 78 penalty upon the appellant is concerned it is the case of the Learned consultant that true disclosure of duty paid made was reflected in the periodical ST-3 returns filed with the department. It was his case that where Service tax was not paid challan numbers were not indicated and penalty under Sec 78 is not imposable because there was no suppression with intention to evade payment of tax. It is also the alternative submission of the appellant that benefit of Section-80 of the finance Act 1994 is available to them as they had financial hardships as a reasonable cause for non/payment of tax. It is observed from the ST-3 return copies furnished by the appellant that against the Service tax payment column appellant has declared to have made full payment but under some months duty paying challan number are also indicated. In a true disclosure where such challan numbers are not mentioned appellant should have declared Service tax paid in the relevant months as NIL instead of stating that the entire service tax of that month is also paid. No other intimation was filed by the appellant with the department to clear the air or make his intentions clear. In view of the above facts it has to be held that there was suppression of material facts by the appellant with intention to evade payment of service tax, when appellant has already collected Service tax from the service recipients Appellant can not be said to have financial hardships when he has collected the service tax from the service recipient and did not pay the same to the department. Appellant thus does not have a reasonable cause for waiver of penalty under Sec 80 of the finance Act 1994.

7. So for as giving the benefit of cum-duty and giving option of 25% reduced penalty it is observed from the case records that the same have not been extended to the appellant. This aspect of cum duty benefit of service tax, and extending 25% reduced penalty option on reworked out amount under Sec-78 Finance Act 1994, is required to be decided by the original authority. The matter is accordingly remanded to the adjudicating authority to decide the case in denovo consideration after giving an opportunity of personal hearing to the appellant.

8. In view of the above observations made above appeal of the appellant is allowed by way of remand only to the extent indicated in Para- 7. Appeal filed by the Revenue is dismissed.

(Operative part of the order was pronounced in the open Court.)

(H.K. THAKUR) TECHNICAL MEMBER

Tushar kumar