TMI Blog2015 (12) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... e service tax and interest but also the reduced penalty within 30 days of the “communication of the order” of the adjudicating authority. The SCN issued to an Assessee invariably mentions the statutory provisions under which the demand for service tax, interest and penalty is proposed to be raised. There can be no question, therefore, of the Assessee being unaware of the provisions of the statute. It is also very likely that in the adjudication proceedings the Assessee, who invariably has an authorised representative to put across its case to the adjudicating authority, will make a reference to the statutory provisions. In particular if the submission relates to penalty it is unlikely that an Assessee will not even refer to the relevant statutory provisions. The question of an Assessee, therefore, pleading ignorance of the law governing the adjudication proceedings cannot arise. There is no statutory requirement that the adjudication order itself should remind the Assessee of the option available of paying a reduced penalty in terms of the second and third proviso to Section 78 (1) of the Finance Act 1994. In the instant case, the CESTAT could not have permitted the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax amounting to ₹ 8,15,44,386/- for the period 2004-05 to 2008-09 by invoking the extended period and proposing penalty under Section 78 of the Finance Act, 1994. Subsequently, SCN dated 10th April, 2011 demanding differential service tax of ₹ 89,76,597/- for the period 2009-10 and another SCN dated 20th October, 2011 demanding differential service tax of ₹ 81,07,919/- to the period 2010-11 were also issued. In these SCNs penalty under Section 76 of the Finance Act, 1994 was proposed. 6. Consequent upon the above SCNs, an Order-in-Original was passed by the Adjudicating Authority, i.e. the Commissioner (Adjudication), on 6th November, 2012 confirming the above demand of service tax with interest. As regards the first SCN the said Order-in-Original levied penalty equivalent to the service tax amount in terms of Section 78 of the Finance Act, 1994. As regards the other two SCNs, the service tax demand along with interest was confirmed and penalty under Sections 76 and 77 of the Finance Act, 1994 was levied. 7. Aggrieved by the above Order-in-Original, the Respondent filed appeal Nos.54595-54597/2014 before the CESTAT. The said appeals along with applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . She informed the Court that upon failure of the Respondent to avail of the benefit granted to it by the CESTAT by the impugned order, the Department has initiated steps for recovery of the service tax, interest and penalty by inter alia freezing the accounts of the Respondent. She urged that in view of this development, the question urged by the Department in the present appeal has been rendered academic and should be left open for decision in an appropriate case. 10. This Court is not inclined to accept the plea of the Respondent since the question of law that arises is of considerable importance and is likely to arise in several similar appeals before the CESTAT under the Finance Act 1994. 11. At the outset, it requires to be noticed that although under Section 83 of the Finance Act, 1994 many provisions of the CE Act (for which corresponding similar provisions do not exist in the Finance Act) have been made applicable in relation to service tax as they apply in relation to duty of excise a significant omission is Section 11AC of the CE Act which also deals with levy of penalty for short-levy or non-levy of excise duty in certain cases. While the reason for this may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date of communication of order of the Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under the first proviso shall be twentyfive per cent of such service tax; Provided also that the benefit of reduced penalty under the second proviso shall be available only if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso. Provided also that in case of a service provider whose value of taxable services does not exceed sixty lakh rupees during any of the years covered by the notice or during the last preceding financial year, the period of thirty days shall be extended to ninety days. 13. Under Section 78 (1) of the Finance Act 1994, there are five alternative instances where in terms of the above proviso a person who is liable to pay service tax as determined under Section 73(2) would also be made liable to pay penalty, in addition to the service tax and interest equal to the amount of the service tax so not levied or paid or short-levied or short-paid . In other words, a penalty of 100% of the service tax amount determined to be paid by an Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 100% of the duty was levied under Section 11AC of the CE Act. After losing the appeal before the CESTAT, the Assessee contended before this Court that in view of the first proviso to Section 11AC of the CE Act as it then stood, penalty in excess of 25% of the duty could not have been levied since the entire duty was paid by the Assessee on the date of search and seizure i.e. well before the date of the SCN. In the above circumstances, this Court was of the view that in the absence of the adjudicating order mentioning that the Assessee was entitled to the benefit of the reduced penalty in terms of the first proviso to Section 11AC of the CE Act, the Assessee could not have been denied that benefit at the appellate stage only because it failed to pay the reduced penalty within 30 days of the date of communication of the adjudication order. This Court in K. P. Pouches (P) Ltd. v. Union of India (supra) further observed as under: 27. To obviate any similar situation from arising in future, we are of the opinion that in its adjudication order the adjudicating authority under the Act should explicitly state the options available to the Assessee under Section 11AC of the Act. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the order in original on merits. In case the Appellant Assessee had any grievance with regard to non-compliance of Section 11AC, the said grievance should have been raised at the earliest opportunity. The Appellant should have deposited the duty amount. Effectively, therefore, the decision in K. P. Pouches (P) Ltd. (supra) has been limited to a situation where the entire excise duty leviable has been paid upfront by the Assessee even before issuance of the SCN. 18. In CCE, Raigad v. Castrol India Ltd. 2012 (286) ELT 194 (Bom HC), the Bombay High Court took note of the decision of this Court in K. P. Pouches (P) Ltd. (supra) as well as of the CBEC circular and observed that although they required the adjudicating authority to make it explicitly clear in the operative part of the adjudication order regarding availability of paying 25% penalty in terms of the first and second proviso to Section 11AC of the CE Act, it did not mean that the statue casts such an obligation on the adjudicating authorities. Therefore, if the adjudicating authority fails to make a reference in its order regarding the availability of paying 25% penalty, the Assessee cannot agitate that there is violat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had not made such payment within the stipulated time. Therefore, it was held that the CESTAT could not have made available the option of payment of reduced penalty at the appellate stage. 21. To round up the discussion of the case law on Section 11AC of the CE Act, the predominant judicial view as evidenced by the decisions of the High Courts of Bombay, Allahabad and this Court is that, notwithstanding the circular requiring an adjudicating authority to indicate in the adjudication order the option available to an Assessee of paying reduced penalty, that option cannot be made available at the appellate stage by permitting the Assessee to pay the reduced penalty within 30 days of the order of the appellate authority. 22. As far as Section 78 (1) read with Section 83 of the Finance Act, 1994 is concerned, apart from the fact that Section 11AC of the CE Act is not ipso facto applicable, the circular of the CBEC issued in the context of that provision requiring the adjudicating authority to mandatorily state in the adjudication order the availability of the option of payment of reduced penalty, is also not applicable. In other words, an adjudication order levying penalty unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, file an appeal. However, even if the covering letter failed to mention it, an Assessee would not be able to plead ignorance of such provision and seek extension of the period of limitation on that score. Even for the purposes of an appeal, the date on which an order is 'communicated' to the party who seeks to file the appeal is the crucial date. That period cannot get extended only because the appellant was not told of the statutory provision under which he can file an appeal. 26. The upshot of this discussion is that an appellate authority cannot at the appellate stage give the option to an Assessee to pay the reduced penalty within a time that is beyond what is stipulated in the third proviso to Section 78 (1) of the Finance Act, 1994. The statute is explicit. The second proviso states that the payment of the service tax and interest has to be paid within paid within thirty days from the date of communication of order of the Central Excise Officer determining such service tax and the third proviso states that the reduced penalty that has been determined also has to be paid within the period of thirty days referred to in the second proviso. The option to pay th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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