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PJ/CASE STUDY/ 2012-13/31
10 November 2012

Whether penalty can be imposed even when no there was no violation of provisions under section 77(1)(c) of the Finance Act ?
PJ/Case Study/2012-13/31
 
 
 

CASE STUDY

 

Prepared By: CA Neetu Sukhwani
and Shreena Anchaliya

 
 
Introduction:-
 
M/s Dealwell Enterprises were issued a show cause notice alleging that they have not submitted the documents as desired by the Department and hence, have contravened the provisions of Section 77 of Finance Act, 1994. The Show cause notice was issued on 08.01.2010 and M/s Dealwell Enterprises had replied to the same vide their letter dated 08.02.2010 that they had already submitted the audited Balance Sheet , P & L and It return for the last five years vide their letter dated 23.06.09 but the same was not considered and OIO No. 448-476/ST/2009-10 dated 17.06.2010 was passed imposing the said penalty under section 77 on the assessee alongwith 27 other noticees. Thereafter, when the letter regarding “Recovery of Government Dues” was received by the assessee, it was brought to the notice of the assessee that the impugned order had been passed against the assessee. The assessee, then demanded the copy of Order passed and filed the appeal to the Commissioner (Appeals).
 
 
 

M/s Dealwell Enterprises v/s Deputy Commissioner, Central Excise Division, Jodhpur
[Order-In-Appeal no. 112(RDN) ST/JPR-II/2012 dated: 11.10.2012]
 
 

Relevant Legal Provisions:
 
Section 77 of Finance Act, 1994:
 

  1. Any person,-

 
(c) who fails to,-

  1. furnish information called for by an Officer in accordance with the provisions of this chapter or Rules made thereunder; or
  2. produce documents called by a CE Officer in accordance with the provisions of this Chapter or Rules made thereunder; or
  3. appear before the CE Officer, when issued with a summon for appearance to give evidence or to produce a document in an enquiry,

 
Shall be liable to a penalty which may extend to Five Thousand Rupees or two Hundred Rupees for every day during which such failure continues, whichever is higher, starting with the first day after the due date, till the date of actual compliance.
 
 
Brief Facts:-
 
The appellant is a registered service provider holding service tax registration, for discharging service tax liability under the contract of ‘Works Contract services’. The appellant was issued a show cause notice asking him as to why penalty should not be imposed under sub clause (i) (ii) (iii) of clause (c) of section 77(1) of the Finance Act, 1994, for non submission of the information desired by the Central Excise Officer. The notice was adjudicated by the impugned order along with 27 other noticees and penalty was imposed under section 77 of the Act. The appellant did not even received the copy of the order passed and came to know of the fact that the said order imposing penalty has been passed when the letter regarding recovery of government dues was received by him.
 
 
Assessee’s Contentions:-
 
Assessee made following submissions before the Commissioner (Appeal):-
 
The appellant submitted that though the order in original was passed on 17.6.2010 but the same was received by the appellant only on 26.11.2010 and that too on the request made by them vide their letter dared 15.11.2010.ie. a lapse of almost 5 months of passing the order.
 
They further submitted that, the allegation made by the respondent that the appellant did not reply to the department was not true as they responded to the department vide letter dated 8.2.2010. Moreover, in the letter it was also mentioned that the appellant had already submitted the Audited Balance Sheet, Profit & Loss and Income Tax Return for the last 5 years through Registered A/D dated 23.6.2009. The appellant once again submitted the said documents along with the reply on 8.2.2010, but the impugned order was passed without considering the reply and the documents submitted by the appellant. Therefore, the order was gross violation of natural justice. This contention of the appellant was supported by the decision given in various cases. Further, as the appellant did not violate any of the provisions of the section, the penalty under section 77 of the Act, was not sustainable.
 
Further the order in original has been passed saying that the assessee has not applied for service tax registration nor filed the ST-3 return. But the show cause notice issued to the appellant had no such allegations of obtaining Service tax registration. Further the appellant was already registered with the good office. The appellant contended that the order passed was contradictory to the grounds proposed in the Show Cause Notice and therefore, was liable to be set aside. This contention of the appellant was also supported with various cases.
 
Reasoning of the Commissioner (Appeals):-
 
Firstly, the issue of late filing of the appeal was examined and it was found that the order was received by the appellant only on 26.11.2010 on the request made by the appellant vide its letter dated 15.11.2010, i.e. after a lapse of almost 5 months of the passing of the impugned order.
 
The Commissioner (Appeals) found that the notice was served by speed post as against the prescribed registered post with acknowledgement due; therefore the manner of service of the impugned order was not just and proper. Hence the appeal filed by the appellant within prescribed limit of three months after the receipt of the order is admitted on this count.

Thereafter, the correspondence made between the appellant and the department regarding the submission of documents and reply was duly examined by the Commissioner (Appeals) and was found to be correct and in order. It was found that the appellant had submitted the required documents much earlier and before the show cause notice was served to the appellant and the same were again submitted by them along with their reply to the Show cause notice. Further, the report of the Deputy Commissioner of the Central Excise Division, also acknowledged the receipt of the said letter dated 08.02.2010 submitted by the appellant although the same letter was not traceable. Therefore, it was concluded that the allegations and charges raised against the appellant were not sustainable and therefore, no penalty was imposable.
 
Decision:-
 
The appeal is allowed.
 
 
Conclusion:-
 
The case was strongly in favour of the appellant as there was no violation on the part of appellant regarding the provisions of section 77(1)(c) of the Finance Act, 1994. Further, from this case, it was also concluded that notice/ order is said to be properly served only if it is sent through registered post. It is also settled position of law that the penalty cannot be imposed when there is no contravention of the provisions of law.

 
 

******
 

 
 

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