CASE STUDY

Prepared by: CA Neetu Sukhwani &

Monika Tak

 
 
 
Introduction:- M/s L.M.J. Services Limited, Jodhpur, (hereinafter referred to as the appellant) are engaged in providing taxable service namely “Authorised Service Station” as defined under section 65(8) of Finance Act, 1994, on which service tax has been levied w.e.f. 16.07.2001 vide notification no. 4/2001-St dated 09.07.2001. The service provider is authorized service station of “Maruti” brand four wheeler, manufactured by M/s Maruti Udyog Ltd. The service provider has failed to pay service tax on the taxable services provided by them under the category of ‘Management, Maintenance or Repair Service’  and ‘Renting of Immovable Property Service’ during the period from 2005-06 to 2009-10 which resulted in delayed payment of service tax amounting to Rs. 11,86,375/-. However, as the service tax liability was pointed out by the revenue department, the same was paid along with interest and penalty. But, show cause notice was issued to the appellants for imposing penalties under section 76, 77 and 78 of the Finance Act which was adjudicated against them and even upheld by the Commissioner Appeals. Thereafter, the appellant preferred appeal to the Tribunal and outcome of the said appeal is the subject matter of the present case study.

M/s L.M.J Service Limited V/S C.C.E. & S.T.-Jaipur-II

[ORDER IN APPEAL NO. – A/54821/2014-SM[BR] DATED 26.12.2014]

Relevant Legal Provisions:

·          Provisions of section 76, 77 & 78 of the chapter V of the Finance Act, 1994
·          Provision of section 68 of the chapter V of the Finance Act, 1994
·          Rule 6 & 7 of the Service Tax Rules, 1994.

Issue Involved:
 
The following issue was involved in this case before the adjudicating authority:-

Whether penalties imposable even if the service tax along with interest was paid before issue of SCN on ground that there was delay in payment?
 
Brief Facts: 

M/s L.M.J. service Limited, 3, Pratap Nagar, Jodhpur, having service tax registration no. AAACL4868QST001 (hereinafter referred to as ‘service provider’ also), are engaged in providing taxable service namely “Authorised Service Station” as defined under section 65(8) of Finance Act, 1994, on which service tax has been levied w.e.f. 16.07.2001 vide notification no. 4/2001-St dated 09.07.2001. The service provider is authorized service station of “Maruti” brand four wheeler, manufactured by M/s Maruti Udyog Ltd. The service provider has not paid service tax on the taxable services so provided by them under the category of ‘Management, Maintenance or Repair Service’ and ‘Renting of Immovable Property’ during the period from 2005-06 to 2009-10 which resulted on late payment of service tax amounting to Rs. 11,86,375/-.

Whereas during the course of audit & on scrutiny of the records & balance sheet of the assessee, it was observed that the assessee has received the service charges income on account of maintenance and repair charges (from ING Vaishya Life Insurance Co. Kolkata). The impugned service charges income is liable to service tax under the head maintenance and repair service, therefore, service tax is required to be paid on the income along with interest. Therefore this service is covered under head maintenance and repair and is liable to service tax at the prevalent rate as per section 65(64) of the Finance Act, 1994. The details of amount received against providing of taxable services is detailed below for the period from 2005 to 2010 hereunder, which relates to audit para 8 of IPR no. 423/09-10.

They have deposited the service tax amounting to Rs. 6,84,250/- for the period June, 2007 to March, 2010 against services provided under the category of renting of immovable property service.
Whereas the assessee has intimated the service tax range office that they have deposited the due service tax for the remaining period under the category repair and maintenance service also i.e. from 10.4.2005 to 30.9.2005 amounting to Rs. 90,178/- (Challan dated 18.11.2010) and 1.10.2005 to 31.5.2007 amounting to 3,60,570/- (Challan dated 18.11.2010). The assessee has also paid the amount of interest on the said late deposition of service tax on 21.1.2011 amounting to Rs. 1,97,867/- and Rs. 64,151/-. As a whole the assessee has deposited the amount of the service tax of Rs. 6,84,250+3,60,570+90,178=11,34,998/- and interest amounting to Rs. 1,63,706+64,151+1,97,867=4,25,724/-.

It appears that the assessee have deposited service tax and interest amounting to Rs. 15,60,722/-(including cess) for the period from 2005-06 to 2009-10 under the category of “management, maintenance and repairs services” and “renting of immovable property services”.

However, show cause notice was issued to the appellant alleging that they have not shown the full details of receipt of taxable value and service tax in their statutory ST-3 returns to the department, hence, contravened the provision of Rule 7 of the Rules, 1994 read with section 70 of the Act. Therefore, they are liable to be penalized under section 77 of the Act. The assessee also appears liable for penal action under the provision of section 76 of the act for contravention of the provisions of Rules 4, 5 & 6 of the rules. They also appear liable for penal action under section 78 of Act for intentional evasion of service tax and for suppression of facts from the department.

Appellant’s Contention:- The following submissions were made before the Tribunal by the appellant-
1.            The appellant submit that the impugned Order in Appeal passed by the learned Commissioner (Appeals) is passed in contradiction to existing provisions of Finance Act, 1994 and in violation of a no. of judicial pronouncements. Such an order is not viable in the eyes of law and is liable to be quashed.
 
2.            It is submitted that the submission of the appellant that no show cause notice can be issued when the entire service tax alongwith interest has been deposited before issuance of the show cause notice has been brushed aside by stating that the grounds elaborated in paras 5-9 of the notice are enough to propose the imposition of penalty on the appellant. as, despite the request being made by the Range Superintendent to pay the service tax on the impugned services, the appellant did not relent to pay the taxes, and took one year time to pay the desired service tax. Hence, this act of defiance had rightfully invoked penal provisions of section 76, 77 and 78 of the Finance Act, 1994.
In this context, it is submitted that the contention of the impugned order that grounds elaborated in para 5-9 of the show cause notice are enough to impose the penalty is not sustainable. Though one part of the para 5 of the show cause notice states that the letters were issued to the appellant to deposit the service tax due to them; yet it is also a fact on record and also narrated in the same para that the total nine audit paras were raised against them which were duly settled by them. However, since the amount involved therein was quite high, it took some time to consult the same from their consultants and the service recipients involved in the same. They had promptly replied the audit paras and duly deposited the service tax due involved in most of the audit paras. However, they were in process of interacting with the service recipient M/s ING Vyashya Life Insurance Co. Pvt. Ltd. in order to settle down the claim of service tax. Also, this fact was brought to the notice of department in their replies submitted against the departmental letters. Further, in their reply to each departmental letter they intimated the department that they are going to deposit the service tax due to them for the previous financial years. The reason for delay was also intimated by them and this fact is also mentioned in the same para no. 5 of the show cause notice. Also, the fact of deposition of service tax has also been mentioned in the para no. 5 & 6 which supports the earlier contentions that the appellant was in process of depositing the service tax and the delay in payment was on account of the fact that they were interacting with their service recipient. But while referring to these paras from the show cause notice, the impugned order in appeal has the partly relied on the same. Only the part of the para 5 which says that the departmental letters were issued to them has been highlighted and the other part of the same para which proves their bonafide as discussed above has not even been referred while passing the impugned order in appeal. Such an approach is not sustainable and is liable to be quashed.
 
3.            In continuation to above it is submitted that firstly the appellant paid whole service tax along with interest within a period of one year as the appellant was requested to deposit the due service tax vide letter no. GI-6/ST-II/IAR-423/55/2010/399 dated 17.05.2010, while the appellant vide their letter dated 18.06.2010, intimated that they have deposited their dues in respect of para 1 to 5 and also submitted the challans thereof. Thereafter, vide their letter dated 20.08.2010, it was intimated by the appellant that the calculation of tax in the chart has not been done on cum duty basis and so the figures needs to be corrected. The appellant further informed that they would deposit the service tax w.e.f. 1.3.2007 to 31.3.2010 only after the figures have been corrected by the revenue. Thereafter, the appellant vide their letter dated 30.09.2010 intimated that they have deposited the service tax amounting to Rs. 6, 84,250/- for the services under Renting of Immovable Property. Furthermore, the remaining dues of service tax along with interest were deposited by them by 21.01.2011. From the above narrated facts, it is very clear that the appellant is a law abiding assessee as the liability with respect to para 1 to 5 was deposited within a month and that with respect to the Management, Maintenance and Repair Services and Renting of Immovable Property was also paid within a period of one year of the determination of service tax liability. Moreover, the delay was on account of the fact that the calculations were required to be made on “cum-receipt” basis. Hence, there was a reasonable cause for the delay in deposition of service tax dues as the appellant contested the mode of calculation of their service tax liability and such a delay cannot be attributed to prove the allegation of “intention to evade payment of duty” so as to invoke the provisions of section 73(4) of the Finance Act disallowing the benefit of non-issuance of show cause notice when the service tax along with interest has been paid before issuance of show cause notice. Thus, the impugned order in appeal is not justified and is liable to be set aside.
 
 
4.            In continuation to the above, it is also submitted that it has been merely stated that the grounds elaborated in paras 5-9 of the show cause notice are enough to propose the imposition of penalty on the appellant. In this respect, the appellant submit that such an allegation is worthless when only a part of these paras have been highlighted, the other part proving the bonafides on part of the appellant have not even been touched while passing the impugned order. Even otherwise also, the paras 5-9 of the impugned show cause notice merely narrate the facts of the case and the sequence of events that occurred (a part of which is highlighted in the impugned order) and the narration made which in no way can be taken as the grounds sufficient to propose penalties under section 76, 77 and 78 of the Finance Act, 1994 when there is clear cut provision in favour of the assessee under section 73(3) of the Finance Act. The appellant wish to discuss the provisions of section 73(3) in detail so as to build a correct and clear understanding of the provisions in this regard as follows:-

Section 73(3):-
 
Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the [Central Excise Officer] of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid :
 
Provided that the [Central Excise Officer] may determine the amount of short payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the [Central Excise Officer] shall proceed to recover such amount in the manner specified in this section, and the period of “one year” referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.
 
[Explanation-1] For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the [Central Excise Officer], but for this sub-section.
 
[Explanation-2]—For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service-tax under this sub-section and interest thereon.]
 
The bare reading of this section makes it ample clear that the show cause notice is not to be issued if there is no non-payment or short payment of service tax. This section does not specify when the service tax should have been paid. It simply says that where the service tax dues are not pending, the show cause notice need not be issued. In the instant case, the appellant has also deposited the service tax due against them well before the show cause notice. Thus, the condition laid down in the section 73(3) that there should be a non-levy or short-levy of service tax so as to issue the show cause notice, is not satisfied, therefore, show cause notice cannot be issued even if the service tax was paid after a certain time period of being aware of their liability. Therefore, the contention of the impugned order that they have belatedly deposited the service tax does not sustain in view of the fact that even though it was late, the tax stands deposited prior to issuance of show cause notice. Thus, the show cause notice could not have been issued in terms of language contained in section 73(3). As such, the impugned order in appeal deserves to be set aside.
 
5.            The appellant further submit that the impugned order has held that the adjudicating authority has concluded that the case was not covered under section 73(3) of the Finance Act, 1994, instead it was case squarely covered under section 73 (4) ibid, inasmuch the impugned services never found abode in its regular returns submitted by the appellants but unearthed by the departmental audit, which implied the malafide intention of the appellants with the intend to evade payment of service tax. Thus, it was concluded that there was no infirmity in confirming the demand under proviso to section 73 (1) of the Act as it was case of section 73(4) of the Finance Act, 1994 instead of section 73(3) ibid and in imposing penalties under section 76, 77 and 78 of the Finance Act, 1994.

In this respect, the appellant submit that the impugned order in appeal has not proved presence of any of the ingredients present in section 73(4) while confirming the demand. It has simply placed reliance on the para 5 to 9 of the show cause notice to held that it is the case of section 73(4) of the Finance Act. On the other hand, the appellant have already discussed in the forgoing paras that the impugned order is not justified in placing reliance on a part of para 5 of the show cause notice when the other part proving the bonafides on part of appellant has not been mentioned. Thus, merely by saying that it is the case of invocation of section 73(4), is not sufficient; and the impugned order should bring concrete evidence to this fact. This responsibility has not been discharged by the impugned order as it has not proven that there was any fraud, collusion or willful misstatement on part of the appellant. Moreover, mere fact that the service tax liability was unearthed during the course of audit proceedings would not take away the right of the appellant to avail the benefit of section 73(3) when the impugned show cause notice and consequently the order has failed to prove with substantial evidences that the short payment or non-payment of service tax was with intend to evade payment of duty. In this context, it is also worth mentioning that the appellant is registered assessee and is regularly discharging its service tax liability and also regularly filing the returns and the fact that service tax is consumption based tax and ultimately the burden of service tax is on the service recipient, there is no good reason to evade the liability for the same. Moreover, acceptance of liability and payment thereof subsequently are clear indicators of the bonafides of the appellant. Thus, the allegations raised in the impugned order remains allegations only which have not been proved while confirming the penalties. As such, the impugned order should be set aside and the appeal should be allowed.
 
6.            It is further submitted that the impugned order has also placed reliance on the decision given by the Hon’ble Rajasthan High Court in the case of Vodafone Digilink Ltd. Vs CCE, Jaipur-II reported in 2013 (29) STR 229 (Raj.). It is submitted that wrong reliance has been placed by the learned Commissioner Appeals and that the facts and circumstances of the present case are clearly distinguishable with that from the case cited above. The appellant submit that in the cited case, the assessee had submitted false information in the return regarding the exempted services and consequently availed inadmissible cenvat credit and it was concluded that the provisions restricting the admissibility of cenvat credit with respect to exempted services were very clear and the appellant ought to have taken the eligible cenvat credit only. However, in the present case, there has not been any false declaration in the return and there has not been any suppression with intend to evade payment of duty as it is clear that all the details demanded were duly submitted and the liability emerged during the course of audit wherein all the records have been examined. As such, placing erroneous reliance on the above case to allege suppression of facts in the instant case is not sustainable and accordingly, the impugned order in appeal should be set aside and the appeal should be allowed.
 
7.            Aligning with the above, it is reiterated that the above referred decision of M/s Vodafone is clearly distinguishable from the fact and circumstances of the instant case. Thus, this decision is not applicable on them. Notwithstanding this fact, the appellant wishes to place reliance on the decision given in the case of Commissioner of C.Ex., Bangalore-III [2010 (262) E.L.T. 893 (Tri.-Bang)] wherein it has been held that:-
 
Penalty - Evasion of duty - Intention - Duty short paid on clearances to sister unit and made good with interest before issuance of SCN - Revenue’s ground that such payment not absolve the assessee from liability to penalty as short payment occurred on account of fraud or suppression with intent to evade duty - HELD : Initial short payment occurred on account of ignorance of assessee adopting price applicable to unrelated buyers, however, made good short paid duty with interest - Moreover, situation being Revenue neutral, no intention to evade duty can be inferred - No penalty under Section 11AC of Central Excise Act, 1944 imposable on assessee-company and under Rule 26 of Central Excise Rules, 2002 on its Managing partner. [para 5]
 
The appellant submit that in the instant case also, the appellant was ignorant of its service tax liability but as soon as it was pointed out by the departmental authorities, the same was made good by depositing the service tax dues along with interest and that too, before issuance of the show cause notice. Accordingly, the ratio of the above cited decision should be extended to the appellant.
 
8.            The appellant also wishes to place reliance on the decision of the Hon’ble Madras High Court, wherein the appeal filed by the Revenue for imposition of penalty under section 11AC was dismissed on account of the fact that there was no discussion as regards the various requirements which are necessary for the purpose of levy of penalty under Section 11AC of Central Excise Act 1944. The citation and the synopsis are reproduced as follows for the sake of convenient reference:

CCE vs M/s Crocodile India Pvt Ltd. [2013-TIOL-518-HC-MAD-CX]:

 
CE - Reversal of CENVAT Credit before issue of Show Cause Notice - SCN does not detail grounds for imposing penalty application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section - No penalty : A cursory reading of the notice shows that except for mere reference to the proposal to levy penalty under Section 13(1) of CENVAT Credit Rules, 2002, there is no discussion as regards the various requirements which are necessary for the purpose of levy of penalty under Section 11AB of Central Excise Act 1944. The Apex Court pointed out that the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable, the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. In so holding, the Apex Court held that in every case of non payment or short payment of duty, penal provisions cannot be automatically invoked; in other words, the conduct of the assessee in each of the case, before imposing penalty, has to be looked at on the bona fides of the assessee as regards his claim which otherwise would not be sustained in law. - Revenue Appeal Dismissed : MADRAS HIGH COURT.
 
Although the decisions pertains to the Central Excise Act, 1944, its analogy is equally applicable in the instant case as the provisions of section 78 and 11 AC are similarly worded. As such, the benefit of the above cited decisions should be extended and the impugned order in appeal should be quashed.
 
 
9.            It is further submitted that the impugned order has also placed reliance on the decision given in the case of UOI vs Dharmendra Textiles Processors reported in 2008 (231) E.L.T. 3 (SC) which has ruled that if a statue prescribes a penalty for breach of civil obligations, penalty is imposable irrespective of mens-rea and so penalty imposed on the appellant under section 78 of the Act needs no intervention. In this respect, the appellant submit that, as per language of the section, penalty can be imposed only if the short-payment is due to any of the ingredients referred in the section like fraud, collusion, willful misstatement or suppression of facts. However, in the instant case, none of these ingredients are present. As such, the judgment of the hon’ble Supreme Court has been delivered by ignoring the provisions of the section mentioned in the law. It has been held in the case of A-One Granites v State of U.P. (2001)3SCC537; AIR2001 SC 1203; Salmond on Jurisprudence, 12th Edn. Pg 167 that the decision given by the hon’ble Apex Court which has been rendered per incuriam, i.e. by ignoring the provisions of the Act, is not binding under article 141 of the Constitution. The doctrine of per incuriam is an exception of the rule of precedents and it says that any expression resulting from ignorance is not a binding authority and it may be ignored. In the instant case, the mens rea/willful suppression has been mentioned as essential ingredients for the purpose of imposing the penalty as contemplated by the provisions of the Central Excise Act, 1944. But the hon’ble Supreme Court has rendered decision of Dharmendra Textiles by ignoring this vital fact. As such, it is not binding precedent as per doctrine of per incuriam. In the instant case, there was no willful suppression by the appellant but this is a case where the appellant was ignorant of its service tax liability and subsequently, the same was discharged along with interest before issuance of the show cause notice. Further all the facts of the case were well within the knowledge of the department as its audit have been conducted from time to time. When every information was provided and known to department, there cannot be any suppression of facts. Thus, allegation of suppression is not leveled. As such, the penalty under section 78 that is leviable for the charge of suppression cannot be imposed upon them by relying on the case of Dharmendra Textiles. As such, the impugned order is not tenable and it should be set aside.    
 
 
10.          In continuation to above, it is submitted that the decision of hon’ble Supreme Court in the case of M/s Dharmendra Textiles has been referred by hon’ble Punjab and Haryana High Court in the following case:-
 

·         CCE, Chandigarh-II Vs M/s Sarvpriya Industries Ltd [2010-TIOL-523-HC-P&H-CX.]-

Central Excise - Supreme Court decisions in Dharmendra Textile as well as in Rajasthan Spinning & Weaving Mills do not lay down that for every short payment of duty, penalty is automatic: Dharmendra Textile as well as in Rajasthan Spinning & Weaving Mills is that mandatory penalty under Section 11AC of the Act was not applicable to every case of non-payment or short-payment of duty. Thus, even though the authorities may have no discretion once conditions stipulated under Section 11AC of the Act exist, in absence of fulfilment of such conditions, penalty could not be levied. In this view of the matter and the finding of the Tribunal that there was no allegation of suppression of facts with intent to evade the payment of duty, the penalty under Section 11AC of the Act was not warranted. No substantial question of law arises: PUNJAB AND HARYANA HIGH COURT
Thus, hon’ble High Court has ruled that penalty is not warranted in each and every case of non-payment of duty or short payment of duty. This should happen only due to suppression of facts with an intent to evade the payment of duty. In the light of this decision, since the impugned order has not been able to prove the ulterior motive, the penalty is not sustainable.
 
11.          The appellant further submits that the Section 76 and Section 78 are mutually exclusive provisions and penalty cannot be imposed simultaneously under the provisions of both the Sections. It is provided in section 78 of the Finance Act, 1994 that if penalty is payable under section 78 than penalty under section 76 will not leviable. They submit that the simultaneous imposition of the penalties under section 76 and 78 have been held as void in the following cases:-

·         M/s Anand Agencies v/s CCE (Service Tax), Coimbatore [2010-TIOL-364-CESTAT-MAD]:

·         M/s AR AS PV PV Motors Erode (P) Ltd v/s CCE, Salem [2010-TIOL-1241-CESTAT-MAD]:

·         COMMISSIONER OF C. EX., SALEM Versus PHOENIX MARKETING [2010 (19) S.T.R. 755 (Tri. - Chennai)]

·         JOE TRANSPORT Versus COMMISSIONER OF CENTRAL EXCISE, TRICHY [2010 (18) S.T.R. 646 (Tri. - Chennai)]

·         ANDHRA BANK Versus COMMISSIONER OF C. EX., HYDERABAD [2010 (18) S.T.R. 475 (Tri. - Bang.)]

·         COMMISSIONER OF CENTRAL EXCISE, SALEM Versus PKN BUS SERVICE [2010 (18) S.T.R. 424 (Tri. - Chennai)]

·         COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH Versus GREWAL TRADING CO.[ 2010 (18) S.T.R. 350 (Tri. - Del.)]

·         SAFE TEST ENTERPRISES Versus COMMR. OF C. EX., SALEM [2010 (18) S.T.R. 172 (Tri. - Chennai)]

·         COMMISSIONER OF C. EX., LUDHIANA Versus AKASH CABLE [2010 (19) S.T.R. 753 (Tri. - Del.)]

·         M/s SRI Selvam Agency Vs Commissioner of Central Excise, Salem [2010-TIOL-1616-CESTAT-MAD]

·         Commissioner of Central Excise, Chandigarh-I Vs M/s Cool Tech Corporation, Chandigarh [2011-TIOL-23-HC-P&H-ST]

In all the above decisions it is held that the penalty under section 76 and 78 are mutually exclusive and therefore cannot be imposed together. Therefore, the impugned order is not correct in imposing simultaneous penalties under these two sections and deserves to be set aside.

12.          It is further submitted that the impugned order in appeal has not considered most of the submissions made by the appellant and has not even discussed and distinguished the case laws cited by them. The impugned order has merely stated that the case laws cited by the appellant have been examined and are not applicable in the present circumstances. As such, the impugned order turns out to be a non-speaking and a non-reasoned order, which has no relevance in the eyes of law. The submissions that have not been considered while passing the impugned order are listed as follows:-
 
·         The appellant submitted that they were genuinely paying the service tax on the Authorized service station services provided by them. As the incidence of service tax is on the service recipient and the appellant had no problem in collecting the same as they were doing in case of other services provided by them. There was no reason of not paying the service tax on certain services provided by them other than that they were under belief that the same is not liable to tax. Even the service recipients were common and they were charging the service tax for some services and ignoring other services provided to similar category of the service recipients. This was only due to the fact that they were under presumption that these services are not liable to service tax. When the service recipients were willing paying the service tax to them, there was no reason of evading the tax on some portion of the services. Further, they did not know their liability about the renting of immovable property services. As soon as it was brought to their notice, they have approached their service recipient – M/s ING Vaishya which is a big name in the market and has paid the same to them. It is worthwhile to mention here that the corporate are always ready to pay the service tax and there was no reason of not charging the tax on the services other than that they were not aware about their liability. However, their bonafides are proven by the fact that as soon as the liability was brought to their notice, they have readily paid the same. Thus, the allegation of suppression is not proved on these grounds. If this was the case, the value of these services would have been hidden from the records of the assessees. But this is not the case here. Even this objection arose from the records of the appellant which shows that there was no suppression in this case as the Balance Sheet is a public document and allegation of suppression is not tenable for what is reflected in this publically available document. This has been held in the following cases:-

Ø     ROLEX LOGISTICS PVT. LTD. Versus COMMISSIONER OF SERVICE TAX, BANGALORE 2009 (13) S.T.R. 147 (Tri. - Bang.)

“Demand (Service tax) - Limitation - Suppression - Show cause notice based on balance sheet and other documents maintained by assessee - Service tax regularly paid and returns filed - No evidence to show facts suppressed with intent to evade - Extended period for demand not invocable - Section 73 of Finance Act, 1994. [para 6]”
Ø     KIRLOSKAR OIL ENGINES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, NASIK 2004 (178) E.L.T. 998 (Tri. - Mumbai)

“Demand - Limitation - Extended period - Invocation of - Suppression of facts - Demand raised on the basis of information appearing in the balance sheet - Balance sheet of the company being publicly available document, suppression of such information cannot be alleged - Extended period not invocable - Interest not demandable - Penalty not imposable - Sections 11A, 11AB and 11AC of Central Excise Act, 1944. [para 4]”
Ø     JINDAL VIJAYANAGAR STEEL LTD. Versus COMMISSIONER OF C. EX., BELGAUM 2005 (192) E.L.T. 415 (Tri. - Bang.)

“Demand - Limitation - Bona fide belief - Interest free advance received from another group company thought by assessee not to influence prices keeping in view statutory provisions and case laws - HELD : Extended period was not invocable especially as fact of giving of advance was declared in balance sheet of the company - Section 11A of Central Excise Act, 1944. [para 7]”
Ø     HINDALCO INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., ALLAHABAD [2003 (161) E.L.T. 346 (Tri. - Del.)]

Demand - Limitation - Extended period - Demand raised on the basis of information appearing in balance sheet - Balance sheet of companies being a publicly available document, allegation of suppression of such information, not sustainable - Extended period not invokable - Demand barred by limitation - Proviso to Section 11A(1) of Central Excise Act, 1944. [paras 6, 7]
 
Ø     Martin & Harris Laboratories Ltd v/s Commissioner of C. Ex., Gurgaon [2005 (185) E.L.T. 421 (Tri. - Del.)]

Demand - Limitation - Suppression - Balance sheet is a public document - Extended period cannot be invoked by alleging suppression based on it - Section 11A of Central Excise Act, 1944. [para 5]
Ø     M/s Gujarat Intelliegence Security v/s CCE, Vadodara [2010-TIOL-825-CESTAT-AHM]:

Service Tax – Security Agency – staff salary and other infrastructural expenses are not required to be added in the assessable value of services in view of Tribunal decisions in Malabar management Services Pvt Ltd (2007-TIOL-1949-CESTAT-BANG) S. Jayashree (2007-TIOL-486-CESTAT-BANG) – appellant not challenging duty liability – being a pure question of interpretation of law and figures having been reflected in he balance sheet, no malafide can be attributed o the appellant so as to invoke penal provisions: AHMEDABAD CESTAT;
Ø  COMMISSIONER OF CENTRAL EXCISE, RAIPUR Versus GANPATI MOTORS [2008 (12) S.T.R. 729 (Tri. - Del.)]

We find that Hon’ble Supreme Court in the case of Coaltar Chemicals Manufacturing Co. (supra) held that in a given case, something positive other than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information when the assessee knew otherwise, is required before the assessee is saddled with duty liability for longer limitation period and it is a question of fact to be established in each case.We find that in the present case, Commissioner (Appeals) has, without going into the issue whether the withholding of information was deliberate or conscious decision of the assessee held that when the amount is reflected in the balance sheet no suppression can be alleged against the present respondent. In these circumstances, the matter requires reconsideration by the Commissioner (Appeals) on the issue of limitation only. Hence, the impugned order whereby the demand is set aside on the ground of limitation is not sustainable and hence set aside and the matter is remanded to Commissioner (Appeals) to decide afresh after taking into consideration the decision of Hon’ble Supreme Court (supra). The appeal is disposed off, as indicated above.
 
In the above decisions, it was held that when the facts are disclosed in the Balance Sheet, allegation of suppression is not justified as no one can suppress anything which is reflected in the Balance Sheet. Thus, the penalty imposed on the appellant for suppression of facts is not justified.
 
·         The impugned order is further alleging that the submission of the appellant that their mistake was bonafide and unintended and it did not attract the provisions of section 73(4) of the Finance Act, 1994 is not sustainable. In this regard, it is submitted that merely by saying that their submission is not applicable and provisions of section 73 are attracted in the instant case is not sufficient. The assessing officer is required to prove how the provisions of section 73 are attracted particularly when the language of this section is clear and specific that show cause notice is issuable only if there is any short levy or short payment. When the service tax alongwith interest is paid before issue of show cause notice, there is no short levy or short payment for which the show cause notice is issuable. In this respect, the language of section 73(3) is reproduced as follows:-
 
“3) where any services tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded , the persons chargeable with the service tax, or the person to whom such tax refund has erroneously been made may pay the amount of such service tax, chargeable or erroneously refunded on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid;”
 
The above section is clear and specific and says that where the assessee has paid the service tax with interest and this fact is informed to the officer, the show cause notice need not be issued by him. This was done by the appellant and they have duly informed the relevant authority regarding the payment of service tax. This fact has been mentioned at para no. 8 of the impugned show cause notice that the service tax alongwith interest has already been paid before the date of show cause notice. But even then the show cause notice was issued which is in contradiction to provisions of above discussed section 73(3) of the Finance Act, 1994. This is not sustainable as the officers are bound by the legal provisions and they are not required to initiate proceedings contrary to these provisions. Where the service tax is paid before issue of show cause notice, the show cause notice is not required to be issued in terms of above section 73(3). This has been held in a no. of decisions as cited follows:-
 
Ø  C.C.E. & S.T., LTU, BANGLORE V/S ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD. [2012 (26) S.T.R. 3 (KAR)]:-
 
Penalty – Service tax and interest for delayed payments paid before issue of show cause notice – Authorities wasting their time in proceeding against persons who are paying Service tax with interest promptly – Authorities are paid salary to act in accordance with law and to initiate proceedings against defaulters who have not paid service tax and interest in spite of service of notice calling upon them to make payment and no to harass and initiate proceedings against persons who are paying tax with interest for delayed payment – As per section 73(3) of Finance Act, 1994, no notice shall be served against persons who have paid interest – If notices are issued contrary to section, the person to be punished is the person who has issued notice and not the person to whom it is issued. [paras 3, 4]
 
Strictures against Department – Authorities wasting their time in proceeding against persons who are paying Service tax with interest promptly  -  Authorities are paid salary to act in accordance with law and not to harass and initiate proceedings against persons who are paying tax with interest for delaying payment – Commissioner of Large Taxpayers Unit to issue proper circular to all concerned authorities not to contravene sub-section (3) of Section 73 of Finance Act, 1994. [para 5].”
 
Ø  COMMISSIONER OF SERVICE TAX, BANGLORE V/S PRASAD BIDAPPA [2012 (26) S.T.R. 4(KAR.)]:-
 
Penalty – Assessee paid both Service Tax and interest for delayed payments before issue of show cause notice – Authorities have no authority to initiate proceedings for recovery of penalty under section 76 of the Finance Act, 1994.
 
Ø  Santhi Casting Works v/s Commissioner of C. Ex., Coimbatore [2009 (15) STR 219 (Tri-Chennai)]-
 
Penalty (Service tax) - Delay on payment of Service tax - Service tax on Technical Testing and Inspection service not paid initially but paid later with interest - Section 73(3) of Finance Act, 1994 providing for non-issue of show cause notice when Service tax paid with interest voluntarily - C.B.E. & C. vide circular dated 3-10-2007 clarified conclusion of proceedings in such a situation - Penalty not imposable - Sections 73 and 76 ibid. [paras 1, 3]
 
Ø  U. B. Engineering Ltd v/s Commissioner of Central Excise, Rajkot [2009 (16) STR 457 (Tri-Ahmd)]-
 
Penalty - Delay in payment of tax - Service tax paid with interest but after delay - Returns belatedly filed - Show cause notice not to be issued as per Section 73 of Finance Act, 1994 unless there is offence or deliberate intention not to pay tax - No need to issue SCN in present case as Service tax paid with interest and also differential amount of Rs. 215/- paid when pointed out - Penalty for failure to pay tax not arises - Impugned order set aside - Sections 73 and 76 ibid. [paras 3, 5]
 
Ø  C Ahead Info Technologies India P. Ltd v/s CCE (A), Bangalore-II [2009 (14) STR 803 (Tri-Bang)]: -
 
Interest and penalty (Service tax) - Bona fide belief - Service tax with interest paid during investigation - Leviability not disputed by appellant - Issue covered under Section 73(3) of Finance Act, 1994 and appellant entitled to waiver of show cause notice - Records indicating absence of intent to evade - Bona fide belief on non-liability for software training - Penalties not imposable - Interest chargeable - Sections 73, 75, 76, 77 and 78 ibid. [paras 3, 4, 4.1]
 
Ø  Heera Metals Ltd v/s Commissioner of Service Tax, Kolkata-I [2006 (4) STR 540 (Tri-Kolkata)]:-
 
Penalty - Commission agent - Delayed payment of Service tax - Appellant failed to register and pay initially - Service tax paid with interest later - Penalty enhanced in revisionary proceedings by Commissioner - Tribunal in similar cases held earlier thatif Service tax is paid with interest before issue of show cause notice, then such notice not to be issued - Impugned revisionary order set aside - Sections 76 and 77 of Finance Act, 1994. [2006 (3) S.T.R. 443 (Tribunal) relied on]. [paras 2, 3, 4, 5]
 
Ø  CCE & ST, Bangalore v/s M/s Adecco Flexione Workforce Solutions Ltd [2011-TIOL-635-HC-KAR-ST]-
 
Service Tax – When tax with interest is paid under Section 73 (3), no notice to be issued. Sub-sec. (3) of Sec. 73 of the Finance Act, 1994 categorically states, after the payment of service tax and interest is made and the said information is furnished to the authorities, then the authorities shall not serve any notice under Sub-sec (1) in respect of the amount so paid. Therefore, authorities have no authority to initiate proceedings for recovery of penalty under Section 76of the Act: KARNATAKA HIGH COURT;
 
Thus, in the above cases, it is held that where the service tax has been paid before issue of show cause notice, the notice need not be issued. This is exactly their case, as such the issue of show cause notice is ultra vires the provisions of section 73.
 
·         The appellant further submit that the impugned order is alleging that the appellant have suppressed the facts from the department and the same were brought to their notice only after the audit of the records of the appellant. It is further alleged that since it is the case of suppression, the benefit of section 80 is not extendable to them. In this regard, the appellant submit that the interpretation of section 80 as taken by the learned Additional Commissioner is not sustainable as the section 80 has overriding effect on the section 76, 77 and 78 of the Finance Act, 1994 and it has effect even in the cases where the show cause notice was issued by invoking the extended period of limitation (i.e. where there is allegation of fraud, collusion or willful misstatement, etc.). For the sake of reference, the language of section 80 is reproduced as follows:-
 
“80. Penalty not to be imposed in certain cases. –Notwithstanding anything contained in the provisions of section 76, section 77 or section 78, no penalty shall be imposable on the assessee for any failure referred to in said provisions, if the assessee proves that there was reasonable cause for the said failure.
 
The use of words “Notwithstanding anything contained in the provisions of section 76, section 77 or section 78……” makes it clear that the benefit of this section can be extended even where the extended period of limitation is invokable provided the sufficient cause is shown. In the instant case, the appellant has paid the service tax when the liability was brought to their notice. Even their service recipient has co-operated with them. This proves that if they had knowledge of their liability prior to that date, they would have duly paid the same. This fact alone can prove the bonafides of their case. As such, it is ample clear that the delay in payment of service tax was only due to ignorance, rather than willful suppression. Thus, the benefit of section 80 is extendable in their case and merely because the show cause notice was issued by invoking the extended period of limitation is no ground to deny this benefit. The benefit of this section has been extended to a no. of assessees by the Tribunal even in the cases where the assessee has paid the service tax on the proceedings initiated by the department. In the following judgments, benefit of section 80 was extended to the assessees:-
 
Ø  CCE, Mangalore v/s Padma Cable TV [2009-TIOL-2106-CESTAT-MAD]
 
Service Tax – Cable Operator Service – Service tax paid along with interest before issue of show cause notice – Absence of any finding by lower authority for suppression of fact, willful misstatement, fraud with an intention to evade service tax – Failure to pay service tax dues on time occasioned by ignorance of statutory requirements on the part of assessee, eligible for relief under Section 80 – Impugned order setting aside penalty upheld – Interest payment mandatory for delayed payment of service tax – Order portion setting aside interest liability set aside: BANGALORE CESTAT. 
 
Ø  M/s Pushpan Travels v/s CST, Ahmedabad [2010-TIOL-123-CESTAR-AHM]wherein it was held as under: -
           
ST – Rent-a-cab Service – Assessee is an individual – buys a cab on loan – revenue raises demand and imposed penalty – as soon as tax liability is pointed out, the assessee pays the tax with interest – pleads invocation of Sec 80 – held, since the assessee owns a single cab and is not a very literate person and the fact that he paid tax on being pointed out, it may be inferred that he had no intention to evade tax – a fit case for invocation of Sec 80– Assessee’s appeal allowed: AHMEDABAD CESTAT;
 
Ø  Commissioner of Service Tax v/s Lark Chemicals [2008 (9) STR 230 (Bom)]–
 
Penalty (Service tax) - Quantum of - Penalty waived under Section 80 of Finance Act, 1994 by Commissioner (Appeals) - Impugned order upheld by Tribunal holding Section 80 ibid having overriding effect on Sections 76, 77 and 78 ibid - High Court in similar cases held that Section 76 ibid subject to Section 80 ibid and discretion to reduce penalty exists - Impugned order sustainable - Question of law not arises - Sections 76, 77, 78 and 80 ibid. [paras 1, 2, 3]
 
Ø  Akbar Travels India Pvt Ltd v/s Commissioner of S. T., Bangalore [2008 (12) STR 487 (Tri-Bang)]-
 
Penalty (Service tax) - Quantum of - Delay in payment of tax - Plea of bona fides, as under impression that Service tax paid by sub-agents - Same paid later by assessee along with interest when brought to notice - Original authority dropped penalty under Section 76 of Finance Act, 1994 and imposed less penalty under Section 78 ibid - Penalties revised on higher side by Revisionary Authority - HELD : Original authority exercised his powers under Section 80 ibid reasonably as bona fide action seen in belated deposit of tax - Appeal allowed. [2006 (3) S.T.R. 404 (Kar.) and 2008 (11) S.T.R. 609 (Tribunal) relied on]. [para 4]
 
In the above cases, the benefit of section 80 was extended and penalties were set aside in the cases where there was bonafide belief and the service tax was paid before issue of show cause notice alongwith interest.
 
·         In continuation to above decisions, the following recent decisions are also given by hon’ble High Court and hon’ble Tribunal which says that the penalty is imposable only if the ingredients of the section 76, 77 and 78 are present. However, even if the ingredients of these sections are present but the assessee proves their bonafide that there was genuine reason for such delay in payment of service tax, then the provisions of section 80 are invokable. This has been decided in the following recent decision:-
Ø  CST, Bangalore Vs M/s Motor World [2012-TIOL-418-HC-KAR-ST]:-
Service Tax - Penalty - Penalty is not automatic:The ingredients mentioned in the Section should exist. In respect of Sections 76, 77 and 78 of the Act, not only the ingredients of those Sections should exist, but also there should he absence of reasonable cause for the said failure; Sections 76 and 78 are mutually exclusive. If penalty is payable under Section 78, Section 76 is not attracted. Therefore, no penalty can be imposed for the same failure under both the provisions; Even if the ingredients stipulated in Sections 76 and 78 of the Act are established, if the assessee shows reasonable cause for such failure, then the authority has no power to impose penalty in view of Section 80 of the Act; Even after holding that the ingredients stipulated in Sections 76 and 78 exist, and there is no reasonable cause shown for failure to comply with the said provisions, the authority has the discretion regarding the quantity of the penalty to be imposed. However, the penalty to be imposed cannot be less than the minimum, or more than the maximum prescribed under the statute.
Penalty by Revision:If the penalty imposed is not less than the minimum prescribed under law, the revisional authority has no power to enhance the amount of penalty on the ground that it is less; When the assessing authority, in its discretion has held that no penalty is leviable, by virtue of Section 80 of the Act, the revisional authority cannot invoke its jurisdiction and impose penalty for the first time. - Revenue appeals dismissed : KARNATAKA HIGH COURT
Ø  M/S CITY UNION BANK VS CCE, TRICHY [2012-TIOL-406-CESTAT-MAD]:-
Service Tax – Penalty – Waiver under Section 80 – The jurisdictional Commissioner in his review order has given no satisfactory reason or any finding regarding any suppression, fraud etc to reverse the finding of the original authority in regard to extending the benefit under Section 80 to the appellants. Waiver of penalty upheld. (Para 2) - Appeal allowed:CHENNAI CESTAT
Thus, in the light of above recent decisions, for imposing the penalty, the ingredients mentioned in these sections should be present. Even if these ingredients are present, then too if there was genuine reason for delay in payment of service tax, the penalty can be waived under section 80 of the Finance Act, 1994. In the instant case, the impugned order has failed to prove the presence of suppression, etc. which are essence of imposing the penalty under section 78. But inspite of its presence the penalty is imposed. This is even worse that the default was on account of ignorance which was made good when it was brought to their notice. As such, the benefit of section 80 is extendable in the instant case and by allowing the same the impugned order is liable to be set aside.
 
·         The learned Additional Commissioner has imposed the penalty under section 76 simultaneously with penalty under section 78 upto 10.5.2008 placing the reliance on the decision of hon’ble Tribunal in the case of CC, Chandigarh vs M/s Grewal Trading Company [2009(IST)760/CESTAT-Delhi] wherein it is held that ‘on or after 10.5.2008 penalty under section 76 and 78 is not imposable simultaneously’. In this regard, it is submitted that the said date ’10.5.2008’ is the date when the proviso to section 78 was brought inserted therein which specifically says that the penalty under both of these sections is not imposable simultaneously. On the other hand, prior to this date also, the penalty under both of these sections could be imposed simultaneously. This is due to the fact that penalty under section 76 is imposable when there is non-payment or short payment of service tax and penalty under section 78 is imposable when the non-payment or short payment of service tax is due to fraud, collusion, suppression, etc. Thus, in both the cases, the reason for penalty is one and the same, i.e., non-payment or short payment of service tax. As such, logically also, both of these sections are mutually exclusive right from the beginning and the proviso inserted w.e.f. 10.5.2008 is merely clarificatory in nature. This fact is proven by the fact that the insertion of this proviso was due to a no. of judgments wherein tribunal ruled that both of these provisions are mutually exclusive. Thus, even though said proviso was added as from 10.5.2008; there were a no. of cases pertaining to prior period wherein it was held that both of these sections – 76 and 78 are mutually exclusive. Reliance is placed upon the following cases:-
 
·         Opus Media and Entertainment vs Commissioner of Central Excise, Jaipur [2007 (8) S.T.R. 368 (Tri.-Del.)]

·         Commissioner of Central Excise, Raigad vs Shield Security Force [2007-TIOL-1084-CESTAT-MUM]

·         Recmac Marketing (P) Ltd. vs Commissioner of Service Tax, Kolkata [2008-TIOL-2050-CESTAT-KOL]
 
The above decisions pertain to the period prior to said amendment. Therefore, it is ample clear that even before this amendment; it was well settled law that the penalties under section 76 and 78 are mutually exclusive. Thus, contention of the impugned order is not sustainable and simultaneous penalties under section 76 and 78 are not imposable even before 10.5.2008. As such, the impugned order is liable to be quashed.
 
·         It is further submitted that the impugned order has imposed the penalty under section 78 without proving the suppression or willful misstatement of facts with an intention to evade payment of service tax. This approach is not sustainable as the penalty under section 78 is imposable only if these factors are present. In this regard, the Section 78 is produced below-

“Section 78 Penalty for suppressing value of taxable services-

Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of —
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall not be less than, but which shall not exceed twice, the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded:”;

Thus, penalty under section 78 is imposed if the assessee has been indulged in fraud, collusion, misrepresentation, wilful misstatement or committed the contravention as prescribed in the section. In this regard, it is submitted that they have not indulged in fraud, collusion, misrepresentation, wilful misstatement etc. This is not their case as the facts were already disclosed in the Balance Sheet wherein and they were unaware that the said service tax was due on their part. However, as soon as they were informed about our liability, they have paid the same. This proves that there was no ulterior motive on their part. In absence of the same, no penalty is imposable on them under section 78. The appellant has proved their case by citing a no. of decisions wherein it is held that the penalty is not imposable under section 78 where charge of suppression is not proved. They have also cited the decisions wherein it was held that the suppression is not sustainable where the demand is based upon the figures reflected in the Balance Sheet. This is the case here, therefore, the charge of willful misstatement or deliberate suppression has not been proved, as such, the penal provisions cannot be invoked in the light of the judgment given in Commissioner of Central Excise v/s ESS ESS Engineers [2011 (23) S.T.R. 3 (P & H)] wherein it is held as follows:-
 
            “The High Court observed that the Tribunal had held that short payment was mainly due to the appellant’s understanding that they were not liable to pay service tax on fabrication and dismantling charges. As regards penalty under Section 78 is concerned, the same is imposable in a case where service tax has not been levied or paid or has been short levied or short paid or erroneously refunded, by reason of fraud; or collusion; or willful misstatement; or suppression of facts; or contravention of any of the provisions of this Chapter or of the rule made thereunder with intent to evade payment of service tax. It was noted that the fact of non-payment of service tax was discovered during the course of audit.

 The High Court held that the submission of Revenue that appellant was guilty of mis-declaration was not acceptable as the Tribunal had given a finding of fact that assessee did no have requisite mens rea to evade payment of service tax. The assessee had duly paid the service tax with interest and also made full and true disclosure in the return. The finding of fact of Tribunal was not shown to be perverse in any manner. Hence no question of law arises.”
 
Reliance is also placed on the following cases:-
 
·         2009 (238) ELT 3 (SC) – Rajasthan Spinning & Weaving Mills

·         2009 (238) ELT 209 (P&H) – J. R. Fabrics

·         2009 (238) ELT 226 (Mad) – Thirumala Alloys Castings

·         2008 (228) ELT 31 (Del) – K. P. Pouches

It is also submitted that for imposing penalty, presence of mens-rea is a mandatory requirement and in the absence of which imposition of penalty is unjustified, as enshrined by the Hon'ble Supreme Court in the case of Hindustan Steel Ltd v/s. State of Orissa - [1978 (2) ELT (J-159)] and number of subsequent judgments from various judicial fora based thereupon. It is submitted that none of the acts were backed up with any ulterior motive or malafide intention to evade duty and therefore, imposition of penalty is incorrect and uncalled for based on settled position on the issue.  It is further submitted that the Hon’ble Punjab & Haryana High Court, following the ratio of Apex Court judgment in Hindustan Steel Ltd. (supra), has held that mens-rea is a mandatory requirement for imposition of penalty, in support of which reliance is placed on the ratio of following judgments:
 
2010 (258) ELT 465 (SC) – Sanjiv Fabrics

2007 (207)  ELT 27 (P &H) – UT Ltd

2007  (5) STR 251 (P & H) – Kamal Kapoor

In the above decisions, it was held that the penalty is imposable only if there was malafide intention on part of the assessee, else it will not sustain. In the instant case, no malafide intention is proved but they have proved their case that there was no ulterior motive. They were simply unaware about their liability but as soon as they came to know about their liability they have readily paid the service tax. This proves their case.  In view of the above submissions, the impugned order is not sustainable and no penalty is imposable.
 
·         The appellant further submit that a large no. of audit and preventive visits by the officers of Central Excise Commissionerates, Jaipur-II have been conducted prior to 8.4.2011 wherein the short levy of service tax had been detected. In many of such cases, where the service tax alongwith interest has been paid for a period of more than one year, no show cause notice proposing penalty under section 76, 77 and 78 has been issued. But in their case, even though they have paid the service tax alongwith interest before issue of show cause notice, yet the penal provisions have been invoked. Such a discriminatory approach is not justified in the light of decision of hon’ble Calcutta High Court in the case of FITWELL FASTNER (INDIA) PVT. LTD. VERSUS COLLECTOR OF CUSTOMS [1993 (68) E.L.T. 50 (CAL.)]. In this case it is held that the discrimination as between two assessees located in two different cities is unfair and improper and violative of Article 14 of Constitution of India. There cannot be discrimination between the assessee who are similarly placed and Department cannot take a different stand for different assessee. Law is also settled that if the Department is not challenging a particular case on the same issue, it cannot pursue other case for different assessees. Reliance is placed on the following case laws:-
 
·         DAMODAR J. MALPANI V. CCE [2002 (146) ELT 483 (SC)]

·         MALLUR SIDDESWARE SPINNING MILLS (P) LTD. VS. CCE [2004 (166) ELT 154 (SC)]

·         QUINN INDIA LTD. VS. CCE [2006 (198) ELT 326 (SC)]

·         SPL SIDDHARTHA LTD. VS CCE [2006 (204) ELT 135 (TRI.-DEL.)]

·         JAYASWALS NECO LTD. VS. CCE [2006 (195) ELT 142 (SC)]

·         CCE VS. AMAR BITUMEN & ALLIED PRODUCTS PVT. LTD. [2006 (202)ELT 213(SC)]

·         INDIAN OIL CORPORATION LTD. VS CCE [2006 (202) ELT 37 (SC)]

·         U.O.I. & OTHERS VS. KAUMUDINI NARAYAN DALAL & ANOTHER [2001 (10) SCC 231]

·         CCE VS. TATA ENGINEERING & LOCOMOTIVES CO. LTD. [2003(158) ELT 130 (SC)]

·         BIRLA CORPORATION LTD. VS. CCE [2005 (186) ELT 266 (SC)]

Similar views has been held by the Hon’ble CESTAT in the case of COLLECTOR OF CENTRAL EXCISE, BANGLORE AND OTHERS VERSUS UNITED GLASS AND OTHERS [1987 (31) ELT 786 (Tribunal)] as follows:-
 
“Excise is an indirect tax, uniformity in valuation and assessment of the goods ought to be ensured so that different manufacturers producing similar goods in the country are not discriminated. With this object in view, it has been the practice of the Tribunal to respectfully follow the Judgment delivered by a High Court on particular issue so long as there is no contrary Judgment by another High court on the same issue. [para 10]”
 
In the light of above decisions, no discrimination is required to be made between the assessees placed under similar circumstances. On the issue where the service tax has been deposited before the issuance of show cause notice, penal provisions have not been invoked in most of the cases. However, in their case, the discriminatory stand have been taken and show cause notice has been issued for imposing penalty under section 76, 77 and 78. Such a discriminatory stand is not justified in the light of above decisions.
 
·         To substantiate the above claim of discrimination made to them, they submit that they have obtained the information under Right To Information Act, 2005 from various Central Excise offices under the jurisdiction of Jaipur Commissionerate regarding the status of audit paras raised in case of other assessees having the similar facts to their case. They have obtained the said information under Right to Information Act, 2005 from the Central Excise Offices of various districts falling under the jurisdiction of Jaipur Commissionerate. These details were enclosed with the written submissions filed during personal hearing. An analysis of these details makes it clear that in most of the cases where the service tax was deposited alongwith interest before issue of show cause notice, no penal provisions are invoked under section 76, 77 and 78 of the Finance Act, 1994. On the other hand, they have been issued the show cause notice on the discriminatory basis. It is worthwhile to mention here that out of the above details, no show cause notice have been issued in the Ajmer, Udaipur and Bhilwara district in the cases where the service tax and interest were deposited on being point out by the department. As per details obtained from the Chittorgarh district, only one show cause notice was issued for imposing penalty as per audit para raised by the audit party, but the same was dropped by the adjudicating authority. However, in all the other cases where service tax was paid alongwith interest, no show cause notice has been issued till date for invoking the penal provisions. These Central Excise and service tax offices are located within the jurisdiction of the same Commissionerate and have opted to follow the section 73(3) according to which no show cause notice is to be issued where the service tax alongwith interest is deposited before issue of show cause notice. But in their case, discriminatory stand has been taken and show cause notice have been issued for invoking the penal provisions in contradiction to provisions of section 73(3) of the Finance Act, 1994 which is not justified.
 
13.          With reference to submissions made herein para no. (12) above, it is submitted that these are the submissions that were made before learned Commissioner (Appeals) in the appeal memorandum and during personal hearing. However, none of these submissions have been discussed and distinguished by the learned Commissioner (Appeals) while passing the impugned order in appeal. Thus, the order has proved to be a non speaking and non-reasoned order which is not sustainable in the light of following decisions:-

·         Commissioner of Central Excise, Bangalore versus Srikumar Agencies [2008 (232) E.L.T. 577 (S.C.)]

·         CC Vs Essar Oil Limited [2010-TIOL-560-HC-AHM-CUS]

·         State of Himachal Pradesh Vs Sardara Singh [2008-TIOL-160-SC-NDPS]:-

The analysis of this decision makes it clear that the order passed without giving reasons of decision is not justified in the eyes of law. In the case of appellant also, no reasons has not also been assigned why the case laws cited by them are not applicable. As such, the impugned order passed without assigning the reasons is not justified and is liable to be quashed. The appeal should therefore be allowed.
 
 
Reasoning of the Tribunal:- The Hon’ble Tribunal heard both sides and perused records. Regarding non-payment of service tax on maintenance and repair service, it is noted that service tax was levied from 2000 onwards. Period involved in the demand is relating to 2005-2007. No bona fide can be these for non-payment as levy of tax has been these for a long period. In this regard, they have also perused para 7 of Hon’ble Tribunal’s judgment in the case of Vodafone Digilink Ltd (referred supra) which is quoted for ready reference:-
 
“However, the authority shall examine whether concession in penalty is permissible under second proviso to section 78 of the Act. Interest as required under section 75 shall be payable on the tax due. Had the appellant disclosed that it was under bona fide belief that service provided by the appellants as visiting network service provider was exempt and not taxable, the appellant would have clearly guided the department to understand its claim on set off Cenvat Credit. Failure to make such disclosure in return for submitting entire fact by any letter accompanying its return appears to be a case of wilful suppression. Suppression does not vanish by mere passage of time to issue of show cause notice and contravention of law gets no immunity from penal consequences. Suppression corroborated by an untrue declaration in the return filed calls for levy of penalty. When the return contains a declaration as to the self assessment particulars stating that the assessee had paid service tax correctly in terms f provisions of the act and rules made there under such declaration becomes faulty in absence of bona fide statement either on the return or made through a letter accompanying the return. Once the appellant has claimed that service tax has been paid in accordance with the law and this is not paid, that imputes the appellant to the charges. Show view brings harmony in construction of law ad for effective implementation therefore in respect of self assessment procedure. The act of false declaration can be remedied by levy of penalty. Thus penalty levied under section 76 is confirmed and so far as penalty under section 78 is concerned that shall be limited to the quantum of tax payable upon re-computation as directed aforesaid. So far as levy of penalty is concerned the case of the appellant is that Cenvat credit of a higher amount was unduly claimed. Sample copy of the return is available in appeal folder at page 23 of the paper book. That nowhere discloses bona fide of the appellant.”
 
In view of above facts, it clearly comes out that appellant has made case for waiver of penalty in respect of service of renting of immovable property. However relating to failure to deposit of service tax in respect of management, maintenance and repair services, no justification has come forward as it came out that levy of service tax was there w.e.f. 2001. However neither tax was paid nor information relating to disclosure of the availment of the credit in excess was mentioned in returns. Hon’ble High Court of Rajasthan’s judgment squarely fits into the facts of present case of suppression which is wilful. Extended period is rightly invokable and appellant is liable for penal action.
 
Keeping in mind totality of facts orders are passed. In respect of imposition of penalty relating to delay in payment of service tax on the service of renting of immovable property, no mala fides are proved and issue being of interpretation nature, penalty is not imposable. There is no case of leviability of penalty under section 78 of the Finance Act, 1994. No interference is warranted in penalty of Rs. 5000/- imposed under section 77. Order of commissioner (Appeals) upholding the order in original in respect of management, maintenance or repairs service is upheld and no interference is made.
 
The appeal was disposed off in above terms.
 
Decision:- Appeal partly allowed.

Conclusion:- The provision contained in section 73(3) that if service tax along with interest is being paid before issuance of show cause notice, then no show cause notice would be issued and the proceedings will be deemed to have been concluded is although provided in the statue but its benefit is hardly extended to assessees. In the present case also, the assessee had paid service  tax along with interest before issue of show cause notice to them but the penalties under different sections of the Finance Act, 1994 have been confirmed against them on the contention that they had taken time to pay the service tax and interest after being pointed out. The benefits extendable to the assessees are denied for reasons nowhere mentioned in the statue. Not only this, simultaneous penalties under section 76 and 78 have been upheld for the period upto 10.05.2008 by contending that the restriction to impose penalties under both sections was introduced from 10.05.2008 and so for the prior period, assessee is liable for penalties under both the sections. The assessee has been fastened with huge penalties running into lakhs even when there is express provision that if service tax along with interest is paid before issuance of show cause notice then all the proceedings will be concluded against the assessee. The assessees in such cases are left with no option but to knock the doors of High Court with hefty litigation costs.
 
 

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