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GE Info Tech Pvt. Ltd. Versus The Customs Excise and Service Tax Appellate Tribunal, Commissioner of Service Tax

2017 (10) TMI 562 - MADRAS HIGH COURT

Levy of penalty at reduced rate of 25% of tax - Principles of Natural Justice - The appellant stated that the service tax and interest had been deposited prior to issuance of Show Cause Notice and Adjudication Order; the penalty under Sections 76 and 77 of the Finance Act is not mandatory - Whether the Show Cause Notice dated 29.09.2010 and the Order-in-Original dated 04.05.2012, wherein the Additional Commissioner reduced the penalty to 25% of the imposed penalty of ₹ 13,36,869/-, if .....

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rities, they have paid Service Tax vide five challans dated 31.12.2009, 06.01.2010, 07.01.2010, 01.01.2010 and 19.02.2010 along with ₹ 1,72,273/- towards interest and a sum of ₹ 71,566/- through utilization of CENVAT Credit towards their service tax dues - Moreover, though the appellant has collected the service charges along with the service tax amount during the period April 2008 to December 2009, appellant had not deposited such service tax into the Government Exchequer in time no .....

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ax. - In the Order-in-Original, the Additional Commissioner, only on the fact that the appellant herein have made payments during different periods within a span of four months that too, after the audit conducted by the Officers of the Internal Audit, Commissionerate of Chennai, had taken a lenient view by reducing the penalty to 25% of the imposed penalty amount of ₹ 13,36,869/- if the same is paid within 30 days. The Additional Commissioner has used his discretionary power, which he .....

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ppellant : Mr. S. Venkatachalam For the Respondent : Mr. A. P. Srinivas ORDER ( Order of the Court was delivered by V. Bhavani Subbaroyan, J. ) The appellant has preferred this Civil Miscellaneous Appeal under Section 35G of the central Excise Act, 1944 against the final order No.42061 of 2016 dated 28.10.2016 made in Appeal No.ST/40263/2016 on the file of the first respondent. 2. The brief facts of the case are as follows: The appellant, holders of Service Tax Registration Certificate No.AACCG6 .....

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mpose penalty under Sections 76, 77 and 78 of Finance Act 1994. A reply was furnished by the appellant on 03.11.2010 informing the Adjudicating Authority that the appellant had paid service tax along with interest on various dates under Section 73(3) of Chapter V of Finance Act, 1994. However, the learned Additional Commissioner confirmed the demand and appropriated the service tax amount of ₹ 13,36,869/- and interest of ₹ 1,88,952/- already paid and imposed equal penalty of ₹ .....

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rst respondent in terms of Section 86 of the Finance Act, 1994 on various grounds. But the first respondent / Appellate Tribunal, without recording any findings on the grounds raised by the appellant, dismissed the said Appeal. Against which, the appellant preferred this Civil Miscellaneous Appeal before this Court. 3. The learned counsel for the appellant would submit that the final order No.42061 of 2016 dated 28.10.2016 passed by the first respondent in Appeal No.ST/40263/2016 is contrary to .....

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ng on invocation of extended period inasmuch as penalty under Section 78 of the Finance Act, 1994 can be imposed only if there is suppression of facts with intend to evade payment of service tax. (d) There is no fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or Rules made thereunder with intent to evade payment of service tax and under such circumstances, imposition of penalty is not warranted. (e) The first respondent ough .....

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at the Show Cause Notice was issued for confirming the demand of service tax already paid and to impose penalty and not for recovery of any dues not paid. (h) The first respondent ought to have noted that the provisions of Section 73(3) of Finance Act, 1994 allows waiver of Show Cause Notice, if service tax and interest paid prior to Show Cause Notice. (i) The first respondent failed to note that the circular issued by Central Board of Excise and Customs allows non-imposition of penalty, when se .....

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econd respondent and also perused the materials available on record. 6. On perusal of the records, it is seen that the appellant herein was rendering the services of 'Consulting Engineer, Commercial Training or Coaching and Man Power Recruitment or Supply Agency Services' to various IT and Engineering Companies, like Satyam Computer Services, Titan Industries, various divisions of Ashok Leyland etc., and were registered with the Service Tax Department with Registration No. AACCG6156EST00 .....

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up of Chennai Service Tax Commissionerate. During the said audit, it has been found that they have not remitted the service tax amount of ₹ 13,36,869/- collected from their customers into the Central Government account for the period from April 2008 to December 2009 and has withheld the same. The appellant has pleaded that due to financial crisis, they were not in a position to pay the tax within the prescribed due dates. It has also been found that for the period from May 2007 to March 20 .....

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t remit the Service Tax amount into the Government account during the period from April 2008 to December 2009. (ii) Section 70 of the Finance Act, 1994 read with Rule 7 of Service Tax Rules, 1994 inasmuch as they have not indicated the taxable value realized by them in their ST-3 Returns filed during the material period. 9. Since the appellant has contravened the above provisions, a Show Cause Notice has been issued on 29.09.2010 by the Additional Commissioner of Service Tax, calling upon the ap .....

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hem vide challans dated 31.12.2009, 06.01.2010, 07.01.2010. 11.01.2010 and 19.02.2010 and through Cenvat account should not be adjusted and appropriated against the demand made at clause a) above; (c) Interest should not be demanded from them under Section 75 of Finance Act, 1994 on the demand made at clause a) above; (d) The amount of ₹ 1,72,273/- (Rs. One lakh seventy two thousand two hundred seventy three only) paid by them towards interest vide challans dated 31.12.2009, 06.01.2010, 07 .....

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) Penalty should not be imposed on them under Section 76, 77 & 78 of the Finance Act, 1994 for the contraventions mentioned supra. 10. The appellant filed a reply on 03.11.2010, in which they have contended that they were regularly paying service tax and sometimes, they paid the service tax belatedly along with interest due to paucity of funds and promised to pay the amount as early as possible. The appellant also contended that as per Section 73(3) of Finance Act, if there is any shortage o .....

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and there is no circumstances of facts involved for the alleged commission of fraud, collusion, wilful mis-statement or suppression of facts. The delay in payment of service tax was due to unavoidable circumstances and cannot be equated with fraud, collusion, wilful mis-statement or suppression of facts or contravention of any provisions of Section 5 of the Finance Act and Service Tax Rules made thereunder with intention to evade payment of tax. 11. In the said reply, the appellant further stat .....

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re in the Tribunal held as under: "6. On a very careful consideration of the entire issue, we find that the contention of the learned Advocate is that the Service Tax itself is not liable to to paid in respect of the services rendered by the foreign agent abroad for procuring orders for export prior to insertion of Section 66A which came into force only w.e.f. 18-4-2006. He also relied on number of case laws which are cited supra. In any case, in this appeal, the main contention is with reg .....

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son 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 amou .....

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the Tribunal held as under: 4. On a very careful consideration of the entire issue, we find that in respect of each of the cases, due to bonafide belief, the appellants did not discharge the Service Tax liability in time. But, as soon as the lapse was pointed out by the departmental authorities, they remitted the Service Tax much before the issue of Show Cause Notice as given in detail in the above tabular column. This bench has held in large number of cases that if duty is paid before the issu .....

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n against them. In other words, all the proceedings against the appellants will be deemed to have been concluded. In view of the above position, we are of the view that the impugned revisionary orders, enhancing the penalties and imposing penalties under section 78, are not in order. Further, the impugned order in Sl.No.4 is also very harsh especially when the appellants had paid the entire amount of Service Tax and interest even before the issue of Show Cause Notice. In such circumstances, we a .....

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ction 76, is correct and does not require any interference. The Departmental appeal is dismissed. 6.4. Further, in case of M/s.Auto Transport Services Vs. Commissioner of Central Excise, Jaipur II 2006(3) STR 330 (Tri.Del.) the Tribunal held as under: 5. Considered the submissions of both sides and perused the record. It is not in dispute that the appellants have discharged their service tax liability and the interest leviable thereon before the issuance of show cause notice. Sub-section (2) A o .....

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t of service tax, and inform the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of service tax so paid :" .......... From the above it is very clear that there need not be any show cause notice issued to the appellants even when the service tax has escaped assessment, and if the same has been paid by the appel .....

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the provisions of sub-section (2A) of Section 73 for non-issuance of show cause notice to the appellants. When the provisions themselves do not contemplate issuance of show cause notice when tax liability is discharged to my mind, the issuance of show cause notice in this case by the department is beyond the provisions of the Act. 12. The appellant also stated that the service tax and interest had been deposited prior to issuance of Show Cause Notice and Adjudication Order; the penalty under Sec .....

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amp; Date Service Tax Interest Total Period 1 6/31.12.2009 2575 192 2767 2009-10 (I half-yearly Return) 2 4/31.12.2009 10266 1331 11597 2008-09 (II half-yearly Return) 3 3/31.12.2009 23305 4633 27938 2008-09 (I half-yearly Return) 4 15/27.03.2012 4944 - 4944 E-payment 5 159/27.03.2012 6156 - 6156 E-payment Total 53402 14. The Additional Commissioner has also found that in respect of the interest amount of ₹ 1,00,820/- pertaining to the period from May 2007 to March 2008 as demanded in Anne .....

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10 49669 1070 2 challans 6 31/12/09(*) 36146 6156 3 challans 7 27/03/12 577 10523 2 challans 8 Cenvat payment 71566 - Total 1336869 188952 - Payments made earlier in respect of Commercial Training and Coaching, not proposed for appropriation in the notice. Payment details in respect of Annexure 'B' to notice, are as under:- Sl. No Challan Date Interest 1 25/04/12 40820 2 27/04/12 60000 Total 100820 15. The Additional Commissioner also found that there was no dispute regarding payment of .....

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ction 73(3), which were not applicable to the case where Show Cause Notice has been issued invoking Section 73(1). The provisions of Section 73(4) clearly make it clear that nothing contained in sub-section (3) shall apply to a case, where any service tax has not been levied or paid or has been short-levied or short-paid erroneously refunded by reason of fraud or collusion or wilful mis-statement or suppression of facts etc., The Additional Commissioner also held that in the present case, notice .....

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994 to waive the entire penalty proposed to be imposed on them. In this regard, the Additional Commissioner held that as per Section 80 of the Finance Act, the Department has got power not to impose any penalty if the assessee proves that there is reasonable cause for the failure to comply with the provisions of the Act. But the appellant was aware that they are liable to pay service tax on the income received for services rendered, within a prescribed date and they have also collected the servi .....

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Additional Commissioner has passed an order, by reducing the penalty amount to 25%, if the appellant pays the same within 30 days. The said order is extracted hereunder:- 8.4. The assessee has requested to invoke the discretionary power under Section 80 of the Finance Act, 1994 to waive the entire penalty proposed to be imposed on them. Section 80 of the Finance Act, 1994 provides for not imposing penalty if the assessee proves that there is a reasonable cause for the failure to comply with the .....

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ing this information. Hence, I hold that penalty under Sec.78 is leviable on the assessee as they deliberately breached the law with conscious suppression of material facts with intent to evade tax. However, as they have paid the entire tax and interest, if the assessee pays 25% of the penalty amount imposed under Sec. 78, within thirty days of communication of this order, the penalty under Sec.78 shall be restricted to the said 25% amount. 9. ..... 10. In view of the foregoing, I pass the follo .....

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,36,869/- paid by the assessee vide challans dated 31.12.09, 06.01.10, 07.01.10, 11.01.10, 19.02.10 and 27.03.2012 (amounting to ₹ 12,65,303/-) and in cenvat account (Rs.71,566/-), towards the demand at para 10.1 above. 10.4 I order appropriation of ₹ 1,00,820/- paid vide challans dated 31.12.09, 06.01.10, 07.01.10, 11.01.10, 19.02.10, and 27.03.2012 towards the interest payable as per para 10.2 above. 10.5 I further order appropriation of ₹ 1,00,820/- paid by the assessee vide .....

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his order in terms of proviso to Section 78 of the Finance Act, 1994. 10.7 I drop the penal proceedings initiated under Sec.76 and 77 of the Finance Act, 1994. 18. The appellant reiterated the same grounds before the Commissioner of Central Excise (Appeals) and the Commissioner upheld the orders of the Additional Commissioner in toto and aggrieved against the same, the appellant appealed before the CESTAT and by citing various decisions, raised the ground that if duty is paid before the issue of .....

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to be decided in the present appeal is whether the Show Cause Notice dated 29.09.2010 and the Order-in-Original dated 04.05.2012, wherein the Additional Commissioner reduced the penalty to 25% of the imposed penalty of ₹ 13,36,869/-, if the same is paid within 30 days, which came to be confirmed by the order impugned in the present appeal, are sustainable. 21. As per Section 68 of the Finance Act, 1994, read with Rule 6(1) of the Service Tax Rules, 1994, service tax shall be paid to the c .....

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if the duty is deposited electronically through internet banking, or, in any other case, the 5th day of the month as the case may be, immediately following the quarter in which the payments are received, towards the value of the taxable services. In respect of payments received for the month of March or the quarter ending in March, as the case may be, Service Tax shall be paid to the credit of the Central Government by the 31st day of March of the calendar year. Any failure on the part of the s .....

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t Exchequer and only after pointing out by the Audit authorities, they have paid Service Tax vide five challans dated 31.12.2009, 06.01.2010, 07.01.2010, 01.01.2010 and 19.02.2010 along with ₹ 1,72,273/- towards interest and a sum of ₹ 71,566/- through utilization of CENVAT Credit towards their service tax dues. 23. Moreover, though the appellant has collected the service charges along with the service tax amount during the period April 2008 to December 2009, appellant had not deposi .....

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e in the Central Government's Account for the period 2008-09, with an intention to evade payment of tax. 25. On perusal of records, it is seen that the categorical and undisputed facts are that having collected service tax from its customers, the appellant failed to remit the same in the Central Government's Account for the period 2008-09, but during the Audit, they pleaded that due to financial crisis, they were not in a position to pay the tax within the prescribed due dates. From whic .....

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ncial problem in the company, cannot be accepted. Having received the service tax from their customers, the moment such amount was received, the person who receives such amount, as a custodian of the Government amount, ought to have remitted the same in the Government Account and he is not expected to utilize the same for his own purpose or business and later on plead that due to paucity of funds, they were not able to remit the same before the authorities, that too, only when the authorities ha .....

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a span of four months that too, after the audit conducted by the Officers of the Internal Audit, Commissionerate of Chennai, had taken a lenient view by reducing the penalty to 25% of the imposed penalty amount of ₹ 13,36,869/- if the same is paid within 30 days. The Additional Commissioner has used his discretionary power, which he is empowered under Section 78 of the Act, which reads as under:- Penalty for failure to pay service tax for reasons of fraud, etc. 78. (1) Where any service t .....

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ay a penalty which shall be equal to hundred per cent of the amount of such service tax: Provided that in respect of the cases, where the details relating to such transactions are recorded in the specified record for the period beginning with the 8th April, 2011 upto the date on which the Finance Bill, 2015 receives the assent of the President (both Days inclusive), the penalty shall be fifty per cent of the service tax so determined. . Provided further that where service tax and interest is pai .....

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tax so determined: Provided also that the benefit of reduced penalty under the second proviso shall be available. . Explanation.-For the purposes of this sub-section, specified records means records including computerised date as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of accounts shall be considered as the specified records. . (2) Where the Commis .....

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ed. (3) Where the amount of service tax or penalty is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be, over and above the amount as determined under sub-section (2) of section 73, the time within which the interest and the reduced penalty is payable under clause (ii) of the second proviso to sub-section (1) in relation to such increased amount of service tax shall be counted from the date of the order of the Commissioner (Appeals), the Appellate T .....

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assent of the President; or (b) service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded and a notice has been served under sub-section (1) of section 73 or under the proviso thereto, but no order has been passed under sub-section (2) of section 73, before the date on which the Finance Bill, 2015 receives the assent of the President, then, in respect of such cases, the provisions of section 76 or section 78, as the case may be, as amended by the Fin .....

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