M/S. Nawaz Shipping vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIA-RJT-EXCUS-000-APP-28-14-15 dated 13.05.2014, Passed by Commissioner (Appeals) Central Excise, & S.T., Rajkot)

M/s. Nawaz Shipping : Appellant (s)

VERSUS

Commissioner of Central Excise & S.T., Rajkot : Respondent (s)

Represented by :

For Appellant (s) : Shri Subhash Bordia, Chartered Accountant For Respondent (s) : Shri S.K. Shukla, Authorised Representative

For approval and signature :

Mr. P.M. Saleem, Honble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.M. Saleem, Honble Member (Technical)

Date of Hearing / Decision : 14.08.2015

ORDER No. A/11229/2015 Dated 14.08.2015

Per : Mr. P.M. Saleem;

The brief facts in this appeal are that on 30.06.2011, the officers of DGCEI while investigating a case against M/s. Dosti Fabricators came across the appellants who owned three barges and two tugs and were engaged in providing these barges and tugs on hire basis to various customers. Subsequently, a show cause notice F. No. DGCEI/AZU/36-88/2011-12/4020 dated 22.11.2011 was issued to the appellants on the ground that the appellants have not paid appropriate service tax in time. The adjudicating authority vide OIO dated 31.01.2013 confirmed the demand of service tax of Rs. 30,93,660/- and appropriated the amount of Rs. 21,84,494/- already by them. He also confirmed interest and appropriated an amount of Rs. 2,15,617/- already paid by them. He also imposed penalty of Rs. 5,000/- under Section 77 of the Finance Act, 1994 and a penalty of equivalent tax of Rs. 30,93,660/- on the appellants. Being aggrieved by the said OIO dated 31.01.2013, the appellants preferred appeal to the Commissioner (Appeals), who rejected the appeal filed by the appellant vide OIA No. RJT-EXCUS-000-APP-28-14-15 dated 13.05.2014. Hence, the appellants are before us.

2. Heard both the parties. Learned Chartered Accountant appearing for the appellants submitted at the outset itself that they are contesting the imposition of penalty only and they have never questioned the liability of the appellants to pay service tax, right from the beginning. He submits that though there was no clarity and there was confusion regarding taxability of the services under the category of Supply of Tangible Goods, which was first introduced with effect from 16.5.2008, the appellants had obtained service tax registration in July 2008 itself. It is submitted that the appellants admitted the tax liability and had expressed their willingness to make good the short levy or short payment right from the beginning, i.e. even before issuance of the show cause notice. He further submitted that their failure to pay service tax in time was due to financial difficulties as there was heavy outstanding debtors for an amount of Rs. 47,35,700/- as on 31.03.2011 and that there was no intention to evade tax and that they had admitted/ declared their liability in the six monthly returns, Profit and Loss accounts and balance sheets. He drew attention of the bench to the initial statement of Shri Jumma G. Sati, partner of the appellants recorded on 05.08.2011. He emphasized the relevant portion of the statement, reproduced at para 4.5 of the show cause notice dated 22.11.2011 which reads as follows:-

4.5 On being asked whether service tax was paid from time to time, he stated that they could not pay service tax within the due date due to financial constraint. However, they have paid service tax as per the details given below. (Copies of GAR challans are produced herewith):-

Sr. No GAR Challan Date Period for which paid Amount of service tax Edu. Cess & SHE Cess Interest 1 04.07.2011 July 2008 to Sept. 2008 63,540/-

1,906/-

20,676/-

2 04.07.2011 Oct. 2008 to Dec 2008 40,863/-

1,226/-

11,918/-

3 31.03.2011 Jan 2009 to Mar 2009 2,51,323/-

7,539/-

67,304/-

4. 31.03.2011 April 2009 to June 2009 1,24,735/-

3,744/-

26,678/-

5. 31.03.2011 July 2009 to Sept. 2009 4,000/-

120/-

475/-

6. 04.07.2011 Oct. 2009 to Dec 2009 1,251/-

38/-

207/-

7. 31.03.2011 Jan 2010 to March 2010 37,930/-

1,137/-

5,079/-

8. 04.07.2011 April 2010 to June 2010 1,42,318/-

4,270/-

13,992/-

9. 04.07.2011 July 2010 to Sep 2010 2,68,777/-

8,064/-

17,452/-

10. 03.08.2011 Oct. 2010 to Dec 2010 3,76,127/-

11,285/-

25,389/-

11. 03.08.2011 Jan 2011 to March 2011 8,10,000/-

24,301/-

26,646/-

Total

21,20,864/-

63,630/-

2,15,616/-

3. Learned Chartered Accountant pointed out that appellants had paid service tax of Rs. 21,20,864/- alongwith Cess of Rs. 63,630/- and had also paid interest of Rs. 2,15,616/- for the delayed payment of service tax at the commencement of investigation itself, and much before issuance of show cause notice. He points out that according to Appellants there was no service tax liability on a few invoices/ debit notes, many of which contentions were accepted by the adjudicating authority. He also submitted that another amount of Rs. 2,38,607/- which was refund sanctioned to the Appellants were also appropriated by the Revenue vide order F.No. V/18-27/ST/REF/2013-14 dated 03.07.2013 of Assistant Commissioner of Service Tax, Rajkot (Copy filed with Appeal Memorandum). He also submitted that the appellants had also paid Rs. 1,11,988/- vide challan No. 00438 dated 13.08.2015 (copy submitted). It is his submission that there was no intention to evade payment of tax.

4. The learned Chartered Accountant further submitted that there was no necessity to issue show cause notice to the appellants, far less any question of imposition of penalty on the appellants. He also drew attention of the Bench to the provisions of Section 73(3), which are reproduced below:-

(3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the [Central Excise Officer] of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid :

Provided that the [Central Excise Officer] may determine the amount of short-payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the [Central Excise Officer] shall proceed to recover such amount in the manner specified in this section, and the period of [eighteen months] referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.

Explanation [1]  For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the [Central Excise Officer], but for this sub-section.

[Explanation 2.  Fro the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made there under shall be imposed in respect of payment of service tax under this sub-section and interest thereon.]

5. Learned Authorised Representative for the Revenue on the other hand strongly refuted the arguments of the learned Chartered Accountant. He reiterated the findings of the lower authorities and submitted that since the appellants had not paid the service tax in time, they had violated the provisions of the Act, and therefore penalty imposed on the appellants is proper and justified.

6. On perusal of the records and considering the submissions made by both sides, it is seen that the matter is no more res-integra. The Division Bench of the Karnataka High Court in the case of CCE & ST, LTU, Bangalore vs. Adecco Flexione Workforce Solutions Limited  2012 (26) STR 3 (Kar), had held that assessee is not liable to pay any penalty under such circumstances. For better appreciation, relevant portion of the said decision is reproduced below:-

2.?Facts are not in dispute. The assessee has paid both the service tax and interest for delayed payments before issue of show cause notice under the Act. Sub-sec. (3) of Section 73 of the Finance Act, 1994 categorically states, after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under sub-sec. (1) in respect of the amount so paid. Therefore, authorities have no authority to initiate proceedings for recovery of penalty under Sec. 76 of the Act.

3.?Unfortunately the assessing authority as well as the appellate authority seem to think. If an assessee does not pay the tax within the stipulated time and regularly pays tax after the due date with interest. It is something which is not pardonable in law. Though the law does not say so, authorities working under the law seem to think otherwise and thus they are wasting that valuable time in proceeding against persons who are paying service tax with interest promptly. They are paid salary to act in accordance with law and to initiate proceedings against defaulters who have not paid service tax and interest in spite of service of notice calling upon them to make payment and certainly not to harass and initiate proceedings against persons who are paying tax with interest for delayed payment. It is high time, the authorities will change their attitude towards these tax payers, understanding the object with which this enactment is passed and also keep in mind the express provision as contained in sub-sec. (3) of Sec. 73. The Parliament has expressly stated that against persons who have paid tax with interest, no notice shall be served. If notices are issued contrary to the said Section, the person to be punished is the person who has issued notice and not the person to whom it is issued. We take that, in ignorance of law, the authorities are indulging in the extravaganza and wasting their precious time and also the time of the Tribunal and this Court. It is high time that the authorities shall issue appropriate directions to see that such tax payers are not harassed. If such instances are noticed by this Court hereafter, certainly it will be a case for taking proper action against those law breakers.

4.?In that view of the matter, we do not see any merit in these appeals. The appeals are dismissed.

5.?Mark a copy of this order to the Commissioner of Large Tax Payers Unit who is in charge of collection of service tax to issue proper circular to all the concerned authorities, not to contravene this provision, namely sub-section (3) of Section 73 of the Act.

7. In view of the above, the impugned order-in-original is modified to the extent that penalty of Rs. 5,000/- imposed under Section 77 of the Finance Act, 1994 and the penalty equivalent to the tax amount of Rs. 30,93,660/-, imposed under Section 78 of the Finance Act, 1994 are set-aside. Appeal is disposed of in the above terms. (Operative portion of the order dictated and pronounced in the Court)

(P.M. Saleem) Member (Technical) .KL

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