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2016 (5) TMI 902 - CESTAT MUMBAI

2016 (5) TMI 902 - CESTAT MUMBAI - TMI - Whether the unamended provision of Section 78 according to which 100% penalty or amended provision of Section 78 according to which 50% penalty is applicable in the case where transactions are recorded in the books of the assessee, when the offence was taken place during the period of unamended Section 78. - Held that:- neither there was any intention to save the tougher provisions of Section 78 of the Act after 8/4/2011, nor Section 38A of the CEA is .....

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amount not paid, is found legal and proper. - It is found that it was held that there is no saving clause in Section 38A of the Central Excise Act, for saving erstwhile Section 78 of the Finance Act, nor even anything provided in the amended Section 78 regarding the non applicability of the amended provisions in the case pertaining to the period prior to amendment. In such situation amended Section 78 shall clearly apply at the time of Adjudication of the show cause notice. Therefore, no inf .....

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asonable cause has been shown by the assessee in order to invoke the Section 80. The penalty was rightly imposed under Section 78 by the lower authority which is upheld. - Decided against the revenue - Appeal No.ST/86533/2015 & ST/CO-91140/2015, Appeal No. ST/86269/2015 - A/87336/16/SMB, A/87337/16/SMB, A/87338/16/SMB - Dated:- 25-4-2016 - SHRI RAMESH NAIR, MEMBER (JUDICIAL) For the Petitioner : Ms. P. Vinitha Sekhar, Dy.Commr. (A.R.) For the Respondent : None ORDER PER: RAMESH NAIR These two ap .....

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of Service Tax of ₹ 29,09,226/-, alongwith interest of ₹ 9,84,787/- payable thereon, is upheld. (ii) Penalty imposed under Section 77 of the Act is reduced to ₹ 10,000/- only. (iii) Penalty imposed under Section 78 of the Act is reduced to ₹ 14,54,613/- only . 2. The facts of the case is that the appellant are engaged in the activity of providing taxable services, viz. Manpower Recruitment or Supply Agency Services, Erection, Commissioning or Installation service and Mai .....

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id the entire service tax on the piecemeal during the course of inquiry and also paid the interest on the service tax. The adjudicating authority confirmed the demand and imposed the penalty including the equal amount of penalty under Section 78. In the appeal of the assessee before the Commissioner (Appeals), the Ld. Commissioner (Appeals) reduced the penalty of Section 78 to 50% of the service tax invoking the amended Section 78 which was effective from 8.4.2011, on the ground that as per Sect .....

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and Revenue also filed appeal against the reduction of penalty from 100% to 50%. The assessee also filed cross objection in the matter of Revenues appeal. 3. None appeared on behalf of the appellant nor any adjournment request is on record, this matter were listed a number of time on the earlier occasion on 13.11.2015, 1.1.2016, 5.2.2016, 17.2.2016 but none appeared on any occasion. I therefore, have no option except to decide the matter on merit. 4. Ms. P. Vinita Sekhar Ld. Deputy Commissione .....

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tion 38A does not provide the saving to the provision of old Section 78 but as per General Clauses Act, under Section 6 of the Act, the proceedings initiated under old Section 78 shall continue, accordingly, even after enactment of new Section 78 penalty shall be imposed as per old Section 78. In support she placed reliance on the following judgments: (1) L & T Ltd. Vs. Collector of Central Excise, Mumbai-2010 (119) ELT 51 (Tri. LB) (2) Commissioner of Central Excise Trichi Vs. Lakshmi Packa .....

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that it is not under dispute that the appellant had collected the service tax from their service recipient and not deposited to the Government exchequer, in such case no reasonable cause present in the act of evading payment of service tax. Therefore the appellant do not deserve any leniency. In support, she placed reliance on the following judgments : (i) Indsur Global Ltd. Vs. Additional Commissioner of Service Tax 2015 (38) STR 14 (Guj.) (ii) Master Marine Services Pvt. Ltd. Vs. Commissioner .....

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ndings of the impugned order, I find that the only issue to be decided by me is whether the unamended provision of Section 78 according to which 100% penalty or amended provision of Section 78 according to which 50% penalty is applicable in case the where transactions are recorded in the books of the assessee, when 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 .....

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ring the supply of said services and not paying the Service Tax payable thereon during the period covered by the Show Cause Notice/Order-in-Original clearly proves the Respondent's intent to evade Service Tax thereon. Their payment of a small portion of the Service tax, further confirms their intent to evade Service 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 Servic .....

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Act would be applicable in the present case as they existed during the period 2005-06 to 2009-10 (upto December, 2009) when the said services were received. Section 78 of the Act was substituted w.e.f. 8/4/2011. The appellant has relied upon Section 38A of the Central Excise Act, 1944, read with Section 83 of the Act, 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 intenti .....

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he Finance Act which is introduced every year. When, the Finance Act is introduced every year. When the Finance Act is introduced in the Lok Sabha by the Hon'ble Finance Minister, it is done alongwith a Budget Speech by the Hon'ble Finance Minister which explains the intention behind introducing the changes 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 .....

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changes are being carried out in Central Excise and Customs laws. The details of the provisions are in the Finance Bill." Along with presentation of Budget in Lok Sabha by Hon'ble Finance Minister, Simultaneously, the joint Secretary (TRU) in the Ministry of Finance issues a D.O. letter which also explains 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 .....

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4.2 As a result a number of changes have been proposed with the following philosophy: (i) Improve voluntary compliance by encouraging self-correction, wherever the deviations are unintentional omissions; (ii) Reduced penalties may be imposed if the transactions are captured fully and truthfully in records and further 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 advantag .....

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existing rate of penalty is being retained under rule 7C of the Service Tax Rules, 1994. The maximum penalty is presently reached after a delay of 40 days. The new limit will impact only those who delay filing of return for longer durations. 4.5 The provisions of section 73 (1A) and both the Provisos of section 73 (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. .....

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t for the duration of default, with an upper ceiling of 25% of the tax amount. 4.6 Interest rate for delayed payment of service tax is being increased to 18% per annum, effective 01.04.2011 (Notification 15/2011-ST). A concession of 3% has been proposed in the Bill for tax-payers whose turnover during any of the years 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 .....

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all be 50% of the tax amount. The latter penalty (only) shall be further reduced to 25% if the tax dues are paid within a period of one month together with interest and reduced penalty. For assessees with turnover upto ₹ 60 lakh the period of one month shall be increased to ninety days. 4.10 Section 80 is being 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 cap .....

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0 Cases of fraud, suppression etc. Captured true & complete position in records 50% of tax amount: Proviso to Section 78 (a) 1% per month; max of 25% if all dues paid before notice: Sec 73(4A); (b) 25% of tax if all dues paid within 30 days (90 days for small assesses): Provisos to Section 78 -do- Not so captured Equal 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 .....

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ot recording and capturing the relevant transactions in their specified records. 9. Thus, in the context of Section 38A of Central Excise Act, 1944, it is clear that when Section 78 of the Finance Act,1994 was substituted w.e.f. 8/4/2011, the intentin in respect of the mechanism for ensuring compliance, by way of imposition 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 8/4/20 .....

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. Since the relevant Section of the Act (ie. Section 78) has itself been substituted, this substitution goes out of the purview of said Section 38A which is not applicable in respect of any Section of the Act or any Section of the CEA. In other words, Section 38A of the CEA enables saving of only the delegated legislation (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 fac .....

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Act, as substituted w.e.f 8.4.2011 has been applied by the Ld. Adjudicating authority while passing the impugned Order-in-Original dated 14/12/2011. Thus, I find that the present Appeal is based on erroneous reading of the provisions contained in Section 38A of the Central Excise Act, 1944. If Provisions of any section 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. .....

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t been amended, but has been substituted. Therefore, the provisions of Section 78 as they existed prior to 8/4/2011, cannot be applied while imposing penalty under Section 78 of the Act after 8/4/2011. It is settled law that when a new penal provision substitutes an earlier provision, and the offence remains the same, then 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 fa .....

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20(1). The prohibition contained in Article 20(1) is that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence prohibits nor shall he be shall be subjected to a penalty greater than which might have been inflicted under the law 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 .....

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The Principle is based both on sound reason and common sense. This finds support in the following passage from Craies on Statute law, 7 th Edn. At pp. 387-88; A retrospective statute is different from an ex post facto statute, "Every ex post facto law" Chase J. in the American case of Calder vs. Bull "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 retrospec .....

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criminal law, but only those that create or aggravate the crime, or increase the punishment or change the rules of evidence for the purpose of conviction . There is a great and apparent difference between making an unlawful act lawful and the making an innocent action criminal and punishing it as a crime. 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 .....

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irmative. Subha Rao, J, who delivered a majority opinion, concluded that in considering the question, the rule of beneficial construction required that even ex post facto law of the type involved in that case should be applied to reduce the punishment. 25. It is settled both on authority and principle that 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 Mich .....

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ent Act is passed which deals with precisely the same offences, and a different punishment is imposed by the later Act, I think that, in effect, the legislature has declared that the new Act shall be substituted for the earlier Act. The rule is however subject to the limitation contained in Art. 20(1) against ex post facto law providing for a greater punishment and has also no application where the offence described in the later Act is not the same as in the earlier Act i.e. when the essential i .....

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of the Act. Further in the present case, the Principle of Beneficial Construction also does not allow imposition of higher penalty under the provisions of erstwhile Section 78 of the Act. Thus, in the present case, the imposition of penalty equal to 50% of the Service Tax amount not paid, i.e. Penalty of ₹ 12,15,924/- is found legal and proper. From the above detail findings of the ld. Commissioner (Appeals), I find that it was held that there is no saving clause in Section 38A of the Cen .....

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nal dealing with identical issue held that in the absence of savings clause in respect of erstwhile Section 78, the new Section 78 shall apply and accordingly the penalty of 50% is imposable. As regard judgments relied upon by the Ld. AR, I find that in the case of L & T Ltd. (supra) the issue relates to amendment of Modvat Rule 57 C. As per Section 38A the amendment of any Rule or notification is saved. However in the present case, the issue relates to the repeal of Act, i.e. Section 78 the .....

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