whether interest and penalty imposable when the assessee collects Service Tax but does not appropriates to Government?

PJ/Case Law /2016-17/3366

Case:-CHHATTISGARH STATE CO-OP. MKTG. FEDERATION LTD. Versus C.C.E. & S.T., RAIPUR

Citation:-2016 (45) S.T.R. 194 (Tri. - Del.)
Issue:- whether interest and penalty imposable when the assessee collects Service Tax but does not appropriates to Government?
Brief Facts:-The appeal was against order dated 15-10-2015 of Commissioner (Appeals), Raipur. The issue involved in the present case was that the appellant were collecting service tax from the transporters and were not depositing to the Government. After enquiry with the officers of the appellant, proceedings were initiated against them which resulted in the original order dated 18-2-2015. The Original Authority confirmed a demand of Rs. 9, 50,246/- which was collected as a service tax by the appellant during 2010-2011. The Original Authority confirmed the demand under Section 73A (2) of the Finance Act, 1994. Since, the amount had already been paid by the appellant the same was appropriated. The Original Authority ordered for recovery of interest on the above-mentioned amount in terms of Section 73B of the Finance Act, 1994. He imposed a penalty of Rs. 10,000/- under Section 77(2) of the Finance Act, 1994. On appeal, the Commissioner (Appeals) vide his impugned order upheld the original order. However, he reduced the penalty to Rs. 5,000/- in view of the statutory limit prescribed during the relevant time under Section 77(2) of the Act. Aggrieved by this, the appellant preferred this appeal.

Appellant’s Contention-The learned Counsel for the appellant submitted mainly on the following grounds:-
(a)    Section 73B provides for paying of interest on amount which had been collected in excess of the tax assessed or determined and paid for any taxable service from the recipient of such service as determined under sub-section (4) of Section 73A. Their case was covered under sub-section (2) of Section 73A and not under sub-section (1) of the said Section. There was no provision under Section 73B to cover their case;
(b)    The service tax collected had been remitted to the Government after the error was pointed out by the officers. Hence, there was no need for proceedings under sub-section (3) and for determination of liability under sub-section (4) of Section 73A;
(c)    Section 11D and Section 11DD of Central Excise Act, 1944 dealing with similar provisions of law has above a specific reference to amount collected as representing excise duty to be paid to the Government. Interest liability also arises on such payment. This is because of insertions made in the relevant provisions w.e.f. 10-5-2008. Similar provisions were not made in Section 73B of the Finance Act, 1994.

Respondent’s Contention-The learned AR submitted that the Lower Authorities correctly confirmed the demand of service tax which was collected unauthorized by the appellant. The interest liability will arise because an order had been issued under Section 73A(4) of the Finance Act, 1994. Such order of determination of liability will automatically attract interest in terms of Section 73B. The appellant who collected the service tax which was not due should have deposited the amount forthwith to the credit of the Government. Failure to do so attracted interest as well as penalty.

Reasoning Of Judgement-Heard both the sides and examined the appeal records. The admitted facts of the case were that during the year 2010-2011 the appellant collected service tax from the transporters when no service tax was payable to the Government in view of a specific exemption provided. They had not remitted the said amount to the Government. The irregularity was pointed out by the Department in April, 2012 and the appellant paid the amount to the Government account in May, 2012. After almost 16 months a notice was issued to the appellant for appropriation of already paid amount; to recover interest and to impose penalty. On this factual background, it was seen that proceedings against the appellant under sub-section (3) of Section 73A itself was not required. The said sub-section clearly stated that any amount required to be paid under sub-section (1) or sub-section (2) under the same had not been so paid only will result in issue of show cause notice. In the present case as already noted a notice was issued after almost 16 months after the payment of the amount collected by the appellant. The appellant’s case was covered under sub-section (2) of Section 73A was not disputed. Now, the question was whether the provision of Section 73B will apply for payment of interest in the present case. A close reading of the said section indicates that the situation as covered under sub-section (1) of Section 73A and determination of liability under sub-section (4) of the said section were only covered by the interest provision. Apart from the fact that no proceeding required to have been initiated against the appellant for recovery of amount not paid to the Government, the proceedings in this case apparently covered the amount in terms of sub-section (2) of Section 73A not sub-section (1) of the said section. Even comparing with the similar provisions in Central Excise Act, 1994, it is apparent from the wordings of Section 73B that amount covered under sub-section (2) of Section 73A was not covered by Section 73B. Even otherwise the fact remained that proceedings under sub-section (3) and determination thereupon under sub-section (4) was not warranted in the present case as the amount had already been remitted to the Government. Considering the above position, the Tribunal found that impugned order insofar as it relates to interest demand was not sustainable. However, regarding penalty of Rs. 5,000/- under Section 77(2), the Tribunal found that the appellant had not remitted the amount collected representing service tax forthwith to the credit of Central Government. The payment was made only after follow up by the Department and as such, the penalty in such situation is justifiable. Accordingly, the payment of amount representing service tax and the penalty are upheld. The appeal is disposed of in the above terms.

Decision- Appeal partly allowed.
Comment- The gist of the case is that as the assessee collected service tax from the transporters even though it was not payable to the Government. The assessee paid the service tax to the Central Government after the error was pointed out by department. The Department issued a SCN, 16 months after said remittance for appropriation of amount paid and recovery of interest thereon. It was held that proceedings under Section 73A(3) of Finance Act, 1994 were not required as amount was already remitted to Government. Interest provision is applicable only if situation is covered under Sec 73A (1) and 73A (4) of said Act whereas present matter fell under Sec 73A(2) of said Act. Hence, interest demand was not sustainable. Since, the assessee unauthorizedly collected service tax from transporters and also, the amount irregularly collected was not remitted to Central Government forthwith and payment made only after error pointed out by the department, imposition of penalty was justifiable.

Prepared By- Praniti Lalwani

Comments

PJ/Case Law /2016-17/3366

Post a Comment

Query