Whether penalty can be imposed if assessee had asked the clarification from revenue, and whether the denial of benefit of notification no. 12/2003 is correct?

PJ/Case Laws/2012-13/1131

Case: COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, INDORE V/S M/S HOTEL PRESIDENT PLANET

Citation: 2012-TIOL-750-CESTAT-DEL

Issue:- Whether penalty can be imposed if assessee had asked the clarification from revenue, and whether the denial of benefit of notification no. 12/2003 is correct?

Brief Facts: - Being aggrieved with that part of the order in Commissioner (Appeals) vide which while confirming the demand against the respondents denying them the benefit of exemption Notification No. 12/03 dated 12.6.03 in respect of food items sold by them, he has set aside the penalty imposed upon them. The penalties were set aside by the appellate authority on the following grounds:
“Any order for imposing penalty specially the heavy once was provided under Section 76 and 77, of the Act should show the reason justifying the imposition of penalty and thus following the principles of justice one. It is a fact on record that the Appellants had asked for clarification regarding availability of benefit of exemption Notification No. 12/2003dated 20.6.03 from the department time and time again but as no response was made. Under a bonafide belief of availability of said exemption notification had availed the benefit of said exemption notification. Even at the time of submission of quarterly returns no query was raised with the Appellants regardingamount shown as "Amount billed for Exempted services”. Which gives sufficient reasons in favour of the Appellants to waive the penalty imposed and accordingly the penalty imposed under Section 76 is waived off in terms of Section 80 of the Finance Act, 1994. For imposition of the penalty under Section 78 of the Act suppression of the fact is must but the department has no where established suppression by the Appellants and on the contrary the records available before authorities like copy of Service Tax-3 return. Shown in the ST-3 "As amount billed for exempted services” other than export are sufficient evidence to prove that the Appellants had neither suppressed the facts nor had any intention to suppress the material facts from the department so as such there was no suppression on the Appellants part. Further, the most important thing in the case is that there was no proposal in the show cause notice for imposition of penalty under Section 78 of the Act, the impugned Order-in-original has gone beyond its limit by imposing penalty under Section 78. The appellant cited the case in which the Hon'ble Apex Court has decided that penalty will not be ordinarily imposed unless the party either acted deliberately and defiance and the law or was guilty of conduct contentious or dishonest or acted in conscious disregard of the obligation. As all these factors are absent in the instant case there is no reason to penalise the Appellants under Section 78 of the Act and accordingly, the penalty imposed under Section 78 vide the impugned order is waived of in terms of Section 80 of the Act.”

Reasoning of Judgment: - The Hon’ble Tribunal held that as is seen from the above Commissioner (Appeals)'s order, he has extended the benefit of Section 80 by observing that they were seeking clarification from the Revenue which was not responded. He also recorded that there was no suppression on the part of the respondents. The Revenue in their memo of appeal have nowhere challenged that the appellant was not seeking clarifications from the Revenue. There are many decisions holding to the effect that food items sold by an assessee are exempted from payment of Service Tax. However, as the respondents have not come in appeal the benefit of said decision cannot be extended to them for holding that no Service Tax is required to be paid. However, the said fact can be taken into consideration for arriving at a finding of non-imposition of penalty upon them.

Decision: - The appeal was rejected.

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PJ/Case Laws/2012-13/1131

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