Extended period of Limitation - whether invokable when Non-payment of service tax is due to interpretation of legal provisions

PJ/Case Laws/2012-13/1099

Case:M/S CHANSAMA TALUKA SARVODAY MAZOOR KAMDAR SAHAKARI MANDLI LTD V/S COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD

Citation:2012-TIOL-41-CESTAT-AHM

Issue:- Non-payment of service tax due to interpretation of legal provisions – extended period of limitation cannot be invoked.

Simultaneous penalty under Section 78 and 76 cannot be imposed even before specific provision w.e.f. 10.5.2008.

Brief Facts:- Appellants were registered with the department for providing services under “manpower recruitment and supply agency services” for which they had submitted ST-3 returns. During audit, it was noticed that service tax liability was not discharged on the cleaning service provided by them to M/s ONGC under contract.

Demand of service tax was raised by invoking extended period of limitation. The Demand was confirmed with interest and penalty was also imposed.

In appeal, the Commissioner (Appeals) held that non payment of service tax during the impugned period came to light only as a result of audit checks conducted by the departmental officer. That the appellant have failed to intimate that the activities amounting to the cleaning services, which was based on a contract they had entered into with the M/s ONGC, the entire service tax liability for providing ‘cleaning services’ was not paid by the appellant till it was detected in the audit checks and therefore extended period invoked and imposition of penalty under Section 78 and 76 of Finance Act, 1994 on the ground of suppression of the fact, is valid and proper. An option for payment of 25% of penalty confirmed under Section 78 was given if the entire amount including the penalty and interest is paid within 30 days was also given to appellant. The Commissioner has extended the benefit of cum-tax price to the appellants.

Appellant have filed appeal before the Tribunal.

Appellant’s Contention:- Appellant contended that since the issue pertains to interpretation of relevant clauses of the Finance Act, 1994 neither could penalty under Section 76, 77 and 78 of the act be imposed nor the extended period of limitation, for the purpose of confirming demand can be invoked.

It was submitted that the fact was found during audit however, the Audit officers themselves were not sure whether the activities under taken by appellants were covered under “manpower recruitment and supply agency services” or under “cleaning service”. It was submitted that it was alleged that appellant had provided “manpower recruitment and supply agency services” but in show cause notice is was alleged that they had provided Cleaning service. Thus, when there was confusion, wilful suppression could not be alleged against the appellant.

It was alternatively contended that penalties under Section 78 and 76 could not be imposed simultaneously and the penalty was wrongly imposed. In this regard, reliance was placed on following judgments:

- CCE Chandigarh v/s Krishna Automobile [2011-TIOL-877-CESTAT-DEL
- CCE, Ludhiana v/s Pannu Property Dealer [2008-TIOL-1750-CESTAT-DEL
-CCE Chandigarh v/s City Motors [2010 (19) STR 486 (P&H)
- The Financers v/s CCE, Jaipur [2007-TIOL-1778-CESTAT-DEL
- CCE Madurai v/s Ayya Communications [2011-TIOL-551-CESTAT-MAD

Reasoning of Judgment:- The Tribunal held that it is well settled law that even before specific amendment in the law on 10-5-2008 was made providing that penalty under Section 76 and 78 of the finance act, 1994 cannot be imposed simultaneously, the same shall be also applicable in those cases where the period of dispute is prior to the said date i.e. 10.5.2008.

Thus, it was held that as the period in dispute is before 10.5.2008, penalty cannot be simultaneously imposed under Section 76 and 78.

The Tribunal noted that the Commissioner (Appeal) has relied upon the judgment given in CCE v/s Krishna Poduval in imposing simultaneous penalties under Section 76 and 78. It was noted that in this regard, the appellant has relied on judgment in CCE, Lucknow v/s K. S. Engineers (India) [2009-TIOL-2217-CESTAT-DEL.

On facts, it was held that simultaneous penalties under Section 76 and 78 could not be imposed.

With regard to invocation of extended period of limitation, it was held that the matter involved was interpretation of relevant clauses of the Finance Act, 1994 to find out under which category of service the activity undertaken by appellant was classifiable. Relying on judgment in Laxness ABS Limited v/s CCE, Vadodara [2011-TIOL-145-CESTAT-AHM and observed that since the issues is of interpretation, appellant cannot be held responsible for interpreting the said provisions in a manner beneficial to them. No penalty imposable under Section 78 as extended period of limitation was not invokable.

Decision:- Appeal allowed.

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PJ/Case Laws/2012-13/1099

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