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Commissioner of Central Excise, Pune-1 Versus M/s Shrikrishna Associates

2016 (3) TMI 575 - CESTAT MUMBAI

Imposition of penalty - Whether unamended provision of Section 78 according to which 100% penalty or amended provision of Section 78 according to which 50% penalty is applicable - Adjudication was done after 8.4.2011 but offence of evasion of service tax has taken place prior to 8.4.2011 - Transactions are recorded in the books of the assessee, when the offence was taken place during the period of unameded Section 78 - Held that:- there is no saving clause in Section 38A of the Central Excise Ac .....

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2016-WZB/SMB - Dated:- 29-2-2016 - Ramesh Nair, Member (J) For the Appellant : Shri A B Kulgod, Asstt. Commissioner (AR) For the Respondent : None ORDER Per Ramesh Nair This Revenue's appeal is directed against PUN-EXCUS-003-APP-265-13-14 dated 16/9/2013 passed by the Commissioner of Central Excise (Appeals) Pune, wherein Ld. Commissioner (Appeals) rejected the appeal of the Revenue upholding Order-in-Original No. P-I/ADC/ST/60/2011 dated 28/12/2011. 2. The short issue involved in the presen .....

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on was done after this date but offence of evasion of service tax has taken place prior to 8/4/2011 and accordingly unamended provisions of Section 78 according to which penalty equivalent to the service tax is imposable, shall apply. 4. None appeared on behalf of the respondent. It was observed that on the earlier occasion on 18/3/2015 and 11/1/2016, no one appeared nor any request for adjournment was found on record. This clearly shows that the respondent is not interested in pursuing their ca .....

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the offence was taken place during the period of unameded Section 78. I find that in this issue Ld. Commissioner (Appeals) has given detailed findings which is reproduced below:- 6.1 I have carefully gone through the Appeal Memorandum and the case records. As the Appellant has filed this Appeal only in respect of quantum of penalty imposed under Section 78 of the Act, therefore, the only issue to be decided in the present appeal is whether penalty has been correctly imposed by the Ld. Adjudicat .....

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rvice Tax. Thus, I agree that the Respondent are liable for penalty under Section 78 of the Act, especially because the Respondent were operating under Self-Assessment regime of Service Tax and the entire onus of discharging correct Service Tax liability was on the Respondent. I have noticed that it is not disputed by the appellant that the Transactions on the basis of which Service Tax liability gas been ascertained/demanded by the records of the Respondent. Thus only question left in this Appe .....

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ct, in their Grounds of Appeals. 8. Section 38A of the CEA saves a legal provision contained in a rule, notification or order made or issued under such rule, unless a different intention appears. Thus, for the purposes of Section 38A, the intention behind the change in the legal provision has to be examined first. Whenever any legislation is introduced in the Parliament, the intention behind introducing the said legislation is given in the Statement of Objects' which is also placed before th .....

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in the Central Excise Act, 1944 and the Finance Act, 1994. The said intention & rationale is reflected in the Budget Speech of Hon'ble Finance Minister made in Lok Sabha on 28/2/2011, as contained in para 192 of the Budget Speech, which is reproduced as below: "192. In keeping with our thrust to encourage voluntary compliance, the penal provisions for Service Tax are being rationalised. A key component of this strategy would be to treat less harshly those who have maintained truthfu .....

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the rationale and intentions between the legislative changes introduced through the Finance Bill. In respect of amendment made vide Finance Act, 2011, which had substituted Section 78 of the Act w.e.f. 08.04.2011, the intention can be understood in detail from the letter D.O.F. no. 334/3/2011-TRU dated 28.2.2011-TRU dated 28.2.2011 of J.S. TRU-II, wherein the rationale behind the substituted Section 78 of the Act has been explained as under:- 4. Compliance Mechanism: 4.1 The existing scheme rela .....

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er abated if timely admission and payment is made; (iii) Intentional and unrecorded violations should be dealt with severely with no concession whatsoever. 4.3 Thus the undue advantage obtained by carrying on surreptious activities at the cost of law-abiding business is sought to be neutralized. The revised system also encourages informed decision-making by the taxpayers at the early stages of investigation orverification by the Department. Changes proposed in the compliance mechanism are given .....

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2) are proposed for deletion. As a result, the benefit of reduced penalty shall not be available in cases of fraud, mis-statement, suppression, collusion etc. in the ordinary course. However, revised benefit will be available under the new sub-section 4A of section 73 in situations where the true and complete account of transactions is otherwise available in the specified records and the assessee during the course of audit, verification or investigation pays the tax dues, together with interest .....

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rs covered in the notice or the preceding financial year is below ₹ 60 lakh. 4.7 Penalty for failure to pay tax under section 76 is being halved. 4.7 Penalty for failure to pay tax under section 76 is being halved. 4.8 The maximum penalty under section 77 for contravention of various provisions is proposed to be increased from ₹ 5000/- to ₹ 10000/-. However, the daily rate of penalty, wherever applicable, is being retained. 4.9 Penalty under Section 78 is being altered from upt .....

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g amended by substituting section 78 with the words "proviso to section 78" and thus the power to waive penalty shall be available only in cases where the information is captured properly in the specified records. 4.11 The revised position relating to penalties and their mitigation or waiver is summed up in the following table (portion in italics being the changes): Situation Position in records Penalty & Provision Mitigation Complete Waiver No fraud, suppression etc. Captured 1% o .....

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ual amount: Section 78 No mitigation at all Not possible From the above explanation, the intention of the new Section 78 clearly emerges, which is to bring a qualitative change in the regime of imposition of penalty on service tax evaders by differentiating between (i) those who had not paid service tax under a mistake bonafide belief that no service tax is payable or incorrect interpretation of provisions of law but had recorded and captured the relevant transactions in their specified records; .....

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tion of penalty under the provisions of Section 78 of the Act, was different from the intention or rationale as was contained in the said Section 78, as it existed prior to 8/4/2011. Therefore the saving provisions under the said Section 38A of the CEA are not capable of saving the provisions of erstwhile Section 78 of the Act, as they existed prior to their substitution w.e.f. 08.04.2011. 10. IN addition, I have also noticed that what can be saved under Section 38A of the CEA can only be any Ru .....

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on (vizz. Rule, Notification, Order) and is not capable of saving any action under any Section of the CEA or any action under the Act. The present Appeal has lost sight of the fact that the scope of Section 38A is very limited and the said Section 38A can be pressed into service only when a rule, notification or order made or issued under the Central Excise Act or any Notification or Order issued under such rule is amended, repealed, superseded or rescinded'. In the present case, any Rule, N .....

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are intended to be saved, then the law usually provides for such specific provision, as seen in the case of Sub-Section (5) of Section 73 of the Act, which was substituted w.e.f. 10.9.2004. The said Sub-Section (5) reads as under: "(5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003." I find no similar saving provision was inserted in Section 78 of the Act, when it was sub .....

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en the earlier legal provision is obliterated. 12. Further, I find that in the present case, the Rule of beneficial construction is also applicable. In the present case, it is fact that the offence has remained the same, but the effect of the substituted provisions of law has a beneficial effect and in fact that is the ground of the present appeal. The Rule of the Beneficial Construction was upheld by the Hon'ble Supreme Court, in respect of the effect of amendment of law, in the case of T.B .....

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in force at the time of the commission of the offence. It is quite clear that in so far as the Central Amendment Act creates new offences or enhances punishment for a particular type of offence no person can be convicted by such ex post fact law nor can the enhanced punishment prescribed by the amendment be applicable. But insofar as the Central Amendment Act reduces the punishment for an offence punishable under Section 16(1)(a) of the Act, there is no reason why the accused should not have the .....

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uot;must necessarily be retrospective, but every retrospective law is not an ex post facto law. Every law that takes away or impairs rights vested agreeably to existing laws is retrospective, and is generally unjust and may be oppressive; it is a good general rule that a law should no retrospect, but in cases in which the laws may justify and for the benefit of the community and also of individuals relate to a time antecedent to their commencement; as statutes of oblivion or of pardon. They are .....

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23. To illustrate, if parliament were to re-enact Section 302 of the Indian Penal Code, 1860 and provide that the punishment for an offence of murder shall be sentence for imprisonment for life, instead of the present sentence of death or imprisonment for life, then it cannot be that the Courts would still award a sentence of death even in pending cases. 24. In Rattan Lal vs. The State of Punjab , [AIR 1965 SC 444], the question that fell for consideration was whether an appellate court can ext .....

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t when a later statute again describes an offence created by a former statute and affixes a different punishment, or varies the procedure, the earlier statute is repealed by implication. In Michell vs. Brown (1958) 120 SCR 676] Lord Cambel put the matter thus: It is well settled rule of construction that, if a the later statute again describes an offence created by a former statute and affixes a different punishment, varying the procedure, the earlier statute Is repealed by the later statute see .....

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