Whether Penalty would be leviable if the assessee is under belief that service tax not payable as individual based upon the board’s circular? {See Case law section in what’s new}

PJ/Case Laws/2011-12/1417

Citation: -2011 (24) S.T.R. 304 (Tri. - Del.)

Case:- VICKY ENTERPRISES Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR

Issue:- Whether penalty will be payable when the assessee was under belief that service tax was not leviable on services provided by him as individual based upon Board’s circular?

Brief Facts:The appellant is a proprietorship concern of Shri Gobind Singh Parmar and during period of dispute i.e. during period from 16-8-02 to 31-12-06, was providing the service of loading of urea to M/s. DSCL, Shriram Nagar, Kota, which according to the department was covered by the service tax entry "cargo handling service" and was taxable w.e.f. 16-8-02.

However, they were not paying the service tax and this non-payment was detected only in course of scrutiny of records of M/s. DSCL. When this non-payment was pointed out to the appellant, they voluntarily paid an amount of Rs. 2,77,657/- towards service tax and an amount of Rs. 75,000/- towards interest, as according to them, this was their service tax liability alongwith interest.

However, subsequently a show cause notice dated 10-7-07 was issued for demand of service tax of Rs. 2,86,691/- alongwith interest and appropriation of the amount already paid by them and also imposition of penalty on them. The Assistant Commissioner vide order-in-original dated 9-7-08 confirmed the service tax demand of Rs. 2,86,691/- along- with interest, appropriated the amount already paid by them and imposed penalties on them under Sections 76, 77, 75A and 78 of the Finance Act, 1994.

According to the appellant, the balance amount of service tax of Rs. 1905/- and has also been paid by them.

On appeal to Commissioner (Appeals), the Commissioner (Appeals) vide order-in-appeal dated 25-1-10 upheld the order-in-original. Before the Commissioner (Appeals), the appellant pleaded that during the period of dispute there was doubt as to whether the individual providing the cargo handling service liable to pay service tax or not and for this reason only the service tax was not paid and prayed for waiver of the penalty under Section 80 of the Finance Act, but this plea was not accepted.

Against this order of the Commissioner (Appeals), the present appeal has been filed for setting aside the penalty on the appellant under Sections 75A, 76, 77 and 78 of the Finance Act, 1994.

Appellant’s Contention:Appellant pleaded that the appellant are only contesting the penalty imposed on them, that the entire amount of service tax alongwith interest has been paid by them, that non-payment of service tax by the due date was for the reason that during the period of dispute on account of Board's Circular No. B11/1/2002-TRU, dated 1- 8-02, wherein it had been clarified that the cargo handling service provided by a person in individual capacity would not be taxable and since the appellant are a proprietorship concern, they were under belief that they are not liable to pay the service tax and for this reason no service tax registration has been obtained, that in these circumstances, the Tribunal in the case of Jagdeep Singh Saluja v. CCE, Bhopal 2008 (12) S.T.R. 309 (Tri. - Del.) and also in the case of Kannappa Corporation v. CCE, Trichy2010 (19) S.T.R. 768 (Tri.-Chennai), has set aside the penalty on the individuals/proprietorship concern providing cargo handling service, and that in view of this, the impugned order upholding the penalty on the appellant is not correct.

Respondent’s Contention:Respondent defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that no satisfactory reason has been given by the appellant for failure to discharge their service tax liability and hence the provisions of Section 80 of the Finance Act cannot be invoked. The respondent also cited the judgment of Hon'ble Kerala High Court in the case of Assistant Commissioner ofaCentral Excise v. Krishna Poduval 2006 (1) S.T.R. 185 (Ker.), wherein it was held that separate penalty under Section 76 and 78 of the Finance Act, 1994a is imposable even if the offences committed as in course of same transaction or arise out of the same act.

Reasoning of the Judgment:There is no dispute about the fact that the appellant is a proprietorship concern of Shri Gobind Singh Parmar, who was providing the cargo handling service and also Circular No. 11/1/2002-TRU, dated 1-8- 2002 is also relied upon.

It is, however, pleaded that since the appellant being proprietorship concern being an individual, according to the above-mentioned circular of the Board, were under impression that they were not liable to pay the service tax. It is in view of this circular, that the Tribunal in the case of Jagdeep Singh Saluja v. CCE, Bhopal(supra) and Assistant Commissioner of Central Excise v. Krishna Poduval (supra) has set aside the penalty on the individuals/proprietorship concerns providing cargo handling service. In view of this position, Tribunal is of the view that there was justification for invoking Section 80 of the Finance Act, 1994 and waiving the penalty imposed on the appellant under Sections 75A, 76, 77 and 78 of the Finance Act; as the above-mentioned Circular of the Board gives an impression that an individual providing cargo handling service would not be covered under the service tax. In view of this, the impugned order upholding the penalty on the appellant is not correct, the same is set aside.

Decision:The appeal is allowed.

*****

Comments

PJ/Case Laws/2011-12/1417

Post a Comment

Query