These Appeals Filed By The Assessee As ... vs Unknown

[Arising out of Order-in-Appeal No. PIII/RP/113/2013 dtd. 16/4/2013 passed by the Commissioner (Appeals-III), Central Excise, Pune]

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

Commissioner of Service Tax, Cell Pune : Revenue

VS

M/s. R.K. Enterprises : Assessee

M/s. R.K. Enterprises : Assessee

VS

Commissioner of Service Tax, Cell Pune : Revenue Appearance

Shri V.M. Chavda, Advocate for the Assessee Shri Nair, Superintendent (A.R.) for the Revenue

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 5/6/2015 Date of decision: /2015

ORDER NO.

Per : Ramesh Nair

These appeals filed by the assessee as well as Revenue against common Order-in-Appeal No. P-III/RP/113/2013 dated 16/4/2013 wherein Ld. Commissioner (Appeals) passed following order:

The Order-in-Original No. PI/ADC/Service Tax/36/2011 dated 14/12/2011 passed by Additional Commissioner, Central Excise, Pune III Commissionerate is modified to the extent of imposition of penalty under Section 78 of the Act as under:

* Imposition of penalty equal to 50% of the Service Tax amount not paid, i.e. penalty of Rs.12,60,201/- under Section 78 of the Act is upheld. Further, as per second proviso to Section 78(1) of the Act, the Respondent was eligible for paying penalty equal to 25% of the Service Tax amount confirmed i.e. 25% of Rs.25,20,402/- which comes to Rs.6,30,100/- if the same was paid within 30 days from the date of communication of the Order-in-Original alongwith service tax and interest amount confirmed. However, since the Respondent has paid penalty of only Rs.3,15,050/- out of the said reduced penalty of Rs.6,30,000/- payable by him at that time, and the period of 30 days prescribed under the third proviso to Section 78(1) of the Act is already over, the Respondent is held liable to pay the entire penalty amount of Rs.12,60,201/- as imposed by the Ld. Adjudicating Authority.

2. The fact of the case is that the assessee M/s. R.K Enterprises engaged in proceeding taxable service under the manpower recruitment service and holding service tax registration w.e.f. 4/7/2005. It was noticed by the department that assessee was evading payment of service tax on the services provided during the period from July, 2005 onwards; therefore investigation was carried out which revealed that appellant is charging and recovering service tax from their client. It was noticed that they had not deposited service tax collected from their client to the government account. Therefore, a show cause notice dated 21/4/2010 was issued to the assessee demanding service tax of Rs.25,20,402/- under Section 73(1) of the Finance Act, 1994. Service tax amount of Rs.19,34,173/- already paid by the assessee was proposed to be appropriated against the said demand of service tax. Further, recovery of interest under Section 75 of the Act and imposition of penalty under Section 76, 77 and 78 of the Act was also proposed vide the said show cause notice. The adjudicating authority adjudicated the show cause notice vide order-in-original, wherein inter alia confirmed the demand of service of Rs.25,20,402/- under Section 73 of the Act; ordered appropriation of Rs.19,34,173/- already paid by the Respondent against the said confirmed demand, also ordered recovery of interest under Section 75 and appropriated Rs.34,687/- against interest already paid.

Penalty of Rs.5,000/- under Section 77 of the Act and penalty of Rs.12,60,201/- under Section 78 was imposed with an option to pay 25% of the penalty if the amount of Service Tax, interest and 25% of the penalty is paid within 30 days from the date of receipt of the said order-in-original. Aggrieved by the said order, Revenue filed appeal before the Commissioner (Appeals). Revenues appeal on the ground that it is improper and without any legal authority on the part of the Ld. Commissioner (Appeals) who given benefit of 50% penalty of tax amount under the amended provision of Section 78 on the ground that all the transaction of the assessee recorded in their books of account. Ld. Commissioner (Appeals) should not have given this benefit for the reason that period involved in the transaction is prior to amendment of Section 78 benefit of 50% penalty could not have been extended for period which is prior to amendment of Section 78. According to the Revenue Addl. Commissioner should have imposed of equal amount of penalty on the assessee under the unamended Section 78 of the Act, instead of the substituted Section 78 of the Act which was incorporated in the current budget.

Ld. Commissioner(Appeals) considering ground of the Revenues appeal as well as ground made by the assessee in their cross objection passed the impugned order-in-appeal wherein penalty equal to 50% of the Service Tax amount not paid, i.e. penalty of Rs.12,60,201/- under Section 78 of the Act was upheld. It was also ordered that if the assessee paid service tax amount and 25% of Rs.25,20,402/- which comes to Rs.6,30,100/- within 30 days from the date of communication of the order-in-original, then the assessee is eligible for paying penalty of equal amount to 25% of service tax amount confirmed. In the order it was also held that since the assessee has paid penalty only Rs.3,15,050/- out of the said reduced penalty of Rs.6,30,100/- payable by him at the time and period of 30 days prescribed under the third proviso to Section 78(1) of the Act is already over, the assessee is liable to pay the entire penalty amount of Rs. 12,60,201/- as imposed by the Ld. Adjudicating authority. Aggrieved by the aforesaid impugned order the Revenue as well as assessee filed the present appeal. The ground taken by the Revenue is that since the assessee has not paid the penalty of 25% of the service tax amount within the 30 days of adjudication order they are liable to pay 100% penalty i.e. Rs.25,20,402/- and provision of 50% penalty as per the amended Section 78 is not available to the assessee on the ground that period of non payment is prior to amendment in Section 78 and as per Section 38A of Central Excise Act there is no saving clause and according to which the option under unamended Section 78 can be given effect subsequent to the amendment under Section 78. Accordingly old Section 78 shall apply wherein 50% immunity from penalty was not provided.

In the assessees appeal ground was taken that in the order-in-original the adjudicating authority as held that they are liable to pay 25% of the penalty which is 50% of the service tax amount which stood paid within the 30 days of the order, therefore no further penalty over and above penalty ordered by the adjudicating authority should be demanded.

3. Shri V.M. Chavda, Ld. Counsel for the assessee submits that first of all 50% penalty as provided under the amended Section 78 was rightly applicable for the reason that in Section 38A, no saving clause was provided to the Revenue to apply the unamended Section after amendment in Section 78. As per Section 38A of Central Excise Act, the saving was provided only in respect of rules notification and order etc and not to the act, therefore unamended Section 78 cannot be made applicable while adjudicating the case at the time after the amendment in Section 78, therefore unamended section shall be applicable. He further submits that as regard the adjudication order the adjudicating authority has ordered for penalty equal to 25% of the penalty imposable under unamended Section 78 i.e. 50% of the tax amount. He submits that as per the order of the adjudicating authority, the assessee has paid service tax interest and 25% of the Penalty (50% of the Service tax) within one month from the date of the adjudication order therefore the assessee has scrupulously following the adjudication order, made compliance as ordered.

The revenue has not challenged before the Ld. Commissioner (Appeals) regarding the issue that adjudicating authority has demanded penalty equal to 25% of penalty (50% of the Service tax) and not 25% of the service tax. Therefore the order passed by the adjudicating authority wherein it was ordered that assessee is required to pay 25% of the penalty (50% of the Service tax) attained finality. Therefore the Revenue should not have raised this issue in their appeal before this Tribunal. He therefore submits that in these facts, the adjudication order should be upheld and the order of the Commissioner (Appeals) be set aside. He placed reliance on the judgment Krishna Processors Vs. Union of India [2012(280)ELT 186(Guj)]. With reference to that he argued that since there is no clause to save the provisions of unamended Section 78, therefore unamended Section 78 shall not apply, therefore amendment which provides for 50% penalty shall be applicable. He therefore submits that in view of this judgment, Revenues contention is not sustainable that any application or liability etc. accrued or incurred can be save by Section that is of General Clauses Act.

He further submits that in the case of M/s. Vinyl Chemicals India Ltd. & Anr Vs. The State of Maharashtra & Ors. in Writ Petition No. 2772 of 2014 the Honble High Court of Bombay vide order dated 28/4/2015 placing reliance on Apex court judgment in the case of Gursharan Singh and Others Vs. New Delhi Municipal Committee & Ors. (1996) 2 SSC 459, he submits that whether rightly or wrongly, original authority in the adjudication order held that assesse is required to pay 25% of the penalty (i.e. 50% of Service tax amount) the assesse acted on the bonafide belief following order of the adjudication authority. The revenue has not put any effort to get the order modified on this aspect by filing appeal, challenging this particular portion of the order therefore same attained finality and the order of the adjudicating authority holding that assessee is required to 25% of the penalty (i.e. 50% of Service tax amount) shall prevail. Without prejudice he also submits that even if it is held that the assessee is required to pay 25% of the total service tax amount confirmed within the period of 30 days according to him the service tax paid by them is in excess to service tax required to be paid, which if the same is adjusted against the balance of 25% penalty of the service tax amount then total amount of service tax, interest and 25% penalty shall stand paid.

Accordingly even if contention of the Revenue is accepted and even if amended provision is not invoked the matter can be concluded with the total deposit made by the appellant even in terms of unamended provisions of Section 78. In this context he submits that as against total service tax dues of Rs.25,20,402/- the assessee has paid Rs.32,09,680/- towards service tax and penalty was paid to the tune of Rs.3,20,050/- if the contention of the Revenue is accepted regarding the 25% of the penalty of service tax dues of Rs.25,20,402/- which comes to Rs.6,30,100/- then the short fall of pealty shall be 310050 assessee on account of service tax paid an excess amount of Rs.6,89,278/- which Ld. Counsel requested to adjust against short fall of the penalty amount i.e. Rs.3,10,050/- with this adjustment the charge of the Revenue shall not sustain and the assessee shall be entitle to the benefit of 25% penalty of the service tax amount as provided even in the amended Section 78 accordingly the order of the Ld. Commissioner (Appeals) not correct and required to be set aside.

4. On the other hand, Shri. S.V. Nair, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue submits that adjudicating authority has made apparent error in the order that despite there is no provision for penalty of 25% of the penalty amount whereas the statutory provisions stipulate that 25% of the service tax amount, therefore it is nothing but typographical error which needs to be corrected in spirit of the statutory provision for imposition of penalty. He further submits that as regard the adjudication order as well as the Ld. Commissioner (Appeals) order imposing penalty 50% of the Service tax amount in terms of amended provisions of Section 78, he submits that period of the offence involved is prior to the amendment of Section 78 and therefore even after substitution of Section 78, the action can be taken under the unamended Section 78 for the reason that Section 38 of Central Excise Act provide saving and provision of unamended section 78 should have been invoked by the lower authority and accordingly instead of 50%, 100% penalty should have been imposed for the reason that assessee did not deposit 25% of the service tax amount confirmed.

5. I have carefully considered the submissions made by both sides and perused the record.

6. The issue to be decided by me is three folds; (1) Whether the adjudicating authority holding imposition of penalty of 25% of the penalty (50% of service tax amount) is correct and legal.

(2) Whether adjudicating authority as well as the Commissioner (Appeals) are correct in invoking the amended provision of Section 78 where under the provision 50% penalty is provided. (3) Whether the assesees alternative submission that they have paid excess amount of service tax and if the same is considered as payment against short fall of interest and even penalty at 25% of Service tax is held to be correct, whether, the same can be allowed. I find that in the adjudication order the adjudicating authority has by mistake stated that 25% of the penalty (50% of the Service tax amount) whereas it is observed that there is no such provision under any statute for imposition of penalty of 25% of the penalty amount. The provision of lesser penalty provided under the proviso to Section 78 which is reproduced below:

78. Penalty for suppressing value of taxable service. -

4[(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of -

4 Substituted (w.e.f. 8.04.2011) by s.74 of the Finance Act, 2011(8 of 2011)

(a) fraud; or

(b) collusion; or

(c) wilful mis-statement; or (d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall be equal to the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded:

Provided that where true and complete details of the transactions are available in the specified records, penalty shall be reduced to fifty per cent. of the service tax so not levied or paid or short-levied or short-paid or erroneously refunded:

Provided further that where such service tax and the interest payable thereon is paid within thirty days from the date of communication of order of the Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under the first proviso shall be twenty-five per cent. of such service tax:

Provided also that the benefit of reduced penalty under the second proviso shall be available only if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso:

Provided also that in case of a service provider whose value of taxable services does not exceed sixty lakh rupees during any of the years covered by the notice or during the last preceding financial year, the period of thirty days shall be extended to ninety days.

From the reading of the above provision it is very clear that 25% is not of penalty but of service tax. Therefore it is apparent error and the assesee could not be allowed to take benefit of any such mistake, therefore I am of the view that the term used by the adjudicating authority i.e. 25% of the penalty should be read as 25% of the Service tax, if that is so, on going through alternative submission of the Ld. Counsel that the assessee has paid total amount as under:

Service tax - 32,09,680/-

Interest - 3,82,687/-

Penalty - 3,20,050/- ____________________________________________ Total - 39,12,417/-

If the Revenues contention is accepted regarding the payment of service tax dues, interest and 25% of service tax as penalty then the total amount as under:

Service tax - 25,20,402/-

Interest - 3,82,687/-

Penalty 25% of Service Tax amount of Rs, 25,20,402/- - 6,30,100/-

_______________________________________________________ Total = 35,33,189/-

From the above it is seen that against Revenues claim of Rs.32,63,189/- the assessee has paid total amount of Rs.35,33,189/- which is much higher than amount required to be paid. Only point is that assessee has paid excess amount of Service tax which in my considered view should be considered and adjusted against the short payment of penalty. However, Ld. Counsel has fairly agreed that they under take not to claim any refund if any amount found to be paid in excess. In view of the above position, I agree with the contention of the Ld. Counsel that the assessee has paid excess amount in to as compared to total amount required to be paid as per the revenue. Therefore, I do not find any reason to demand any further amount form the assessee. Since in my above view both the appeals can be disposed of, I do not go into the issue whether amended provisions of Section 78 or unamended Section 78 shall apply or otherwise. This issue is kept open. In view of the above I allow the appeal of the assessee and dismiss the appeal of the Revenue subject to verification to be done by the adjudicating authority on the quantification as discussed above. If it is found above data submitted by the assessee is not correct the adjudicating authority is free to re-adjudicate the matter and take appropriate decision accordingly. Appeals are disposed of in above terms.

(Order pronounced in court on _______________)

Ramesh Nair Member (Judicial)

sk

13