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PJ/Case Law/2016-2017/3451

In what circumstances penalty under section 80 be waived?


Citation- 2016 (41) S.T.R. 233 (Tri. - Mumbai)

Brief Facts:-The appellant, who were engaged in the business of ‘Event Management’ started their operations in 1999 and took Service Tax Registration in the year February 2003 for service tax category “Event Management”, which came into effect on August 2002. Investigations by the department revealed that the appellant did not pay their service tax liability for the above mentioned period. They did not submit any documents such as contracts and invoices relating to the service provided to their clients. They only submitted a bank statement of M/s. UTI Bank which indicated that they had received gross value of Rs. 10, 51, 77,288/- during the said period. It was also noticed that apart from not paying service tax since 2002, they never filed any ST3 returns. Show cause notice dated 7-4-2008 was issued to them which culminated in the impugned order of Commissioner of Service tax.
Appellant’s Contention- . Counsel appearing on behalf of the appellant submitted that service tax was demanded on total gross value received by them which should be taken as cum-duty value because they neither collected nor received any amount over and above the amount shown in the Bank Statement. He relied on the Larger Bench decision in the case of Commissioner of Central Excise, Jaipur-II v. Roopa Ram Suthar [2014 (35)S.T.R.583 (Tri.-Del.]. He also prayed for waiver of penalty relying on the Hon’ble High Court of Karnataka judgment in the case of Commissioner of Service Tax, Bangalore v. Motor World [2012 (27)S.T.R.225 (Kar.)].

Respondent’s Contention-  On the other hand ld. A.R., appearing on behalf of Revenue expressed the non-cooperative attitude of the appellant right from the beginning in not receiving show cause notice, not replying to the show cause notice and not appearing for personal hearing on various grounds such as ill health. He emphasized that appellant did not produce any documents throughout the investigation and upto the time of adjudication. The duty has been demanded correctly on the total amount received by the appellant. On the aspect of penalty and time bar, he relied on the Tribunal decision in the case of Board of Control for Cricket in India v. C.S.T., Mumbai-I [2015 (37)S.T.R.785 (Tri. - Mumbai) [which was upheld by the Hon’ble Supreme Court reported in [2015 (37)S.T.R.J176 (S.C.)].

Reasoning of Judgment – The aspect of leviability of service tax was not disputed by the ld. Counsel only disputes that gross value received by them should be considered as cum-duty value. They found that the appellant at no stage made available any documents such as invoices and contracts with their clients which would indicate that value received by them is cum-duty value. They noticed that one of the clients was a well-known company i.e. Hindustan Unilever. They found no reason why any documents could not have been obtained from their client to show that the value received by them was actually cum-duty value. Appellant got enough opportunity to produce documents from their client even if their own documents were washed away in floods. The case of Roopa Ram Suthar (supra) does not come to the aid of the client because in that case documents existed and invoices clearly disclosed that no service tax component was added and collected from customer. Therefore authority was not inclined to agree with counsel’s contention and the same was rejected.
On the issue of extended time period and penalty, they noted that appellant was very well aware of their responsibility and liability, having taken service tax registration in Feb 2003. But appellant still chose to avoid all Legal obligations cast on them after taken service tax registration and not complying with the requirement of filing ST3 returns on periodical basis for a long period of six years till the time of issuance of show cause notice. In the appeal memorandum, it was submitted that Commissioner ought to have granted another date of hearing after the last date of hearing 16-12-2008 whereas impugned order was passed on 4-3-2009. They did not accept this contention in the light of appellant’s callous attitude from the beginning since they took registration. Considering that appellant had service tax registration but did not receive the show cause notice, did not submit reply to the show cause notice, did not even appear for personal hearings on various dates can only lead to the conclusion that their intentions were not bona fide. Considering the CESTAT judgment in the case of Board of Control for Cricket in India (supra) as affirmed by the Hon’ble Apex Court, they did not find it a fit case for waiving penalty. It was certainly not a case for waiver of penalties under Section 80 of the Finance Act. Penalty may not be imposed in terms of Section 80 if the assessee proves that there was reasonable cause for failure to pay service tax and file returns. No “reasonable cause” whatsoever had been shown to us to deserve the benefit of Section 80.
Appeal rejected.

Comment –  the gist of the case was that for invoices to be considered cum duty value there must be a valid proof with assessee to prove that they did not receive the tax amount separately. Further the case also held that for waiver of penalty assessee is ought to produce a reasonable cause and bonafide belief of not paying tax and filling returns. In absence of them penalty shall be levied

Prepared by- Neha bhansali

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