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The Commissioner of Central Excise, O/o. the Commissioner of Central Excise, Customs & Service Tax Versus M/s. Sasi Advertising Pvt. Ltd.

2018 (2) TMI 845 - MADRAS HIGH COURT

Penalty - Advertising Services - non-payment of tax within due dates - payment of tax dues within interest before issuance of SCN - Whether the CESTAT is correct in holding that penalty u/s 76 & 77 of the Service Tax Act is not leviable when part of the service tax due and the interest is paid before the issuance of show cause notice? - Held that: - Perusal of the material on record discloses that interest payable on the belated payment of service tax was ₹ 12,63,324/- and that even pr .....

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ions, if the assessee proves that there was reasonable cause for the said failure. - On belated payment, the assessee has substantiated reasonable cause for the failure in payment of service tax, within the stipulated time and hence, he is entitled to the benefit under Section 80 of the Finance Act. - There is no manifest error is committed by the CESTAT, Madras - appeal dismissed - decided against Revenue. - CMA No. 101 of 2018 - Dated:- 24-1-2018 - S. Manikumar And V. Bhavani Subbaroya .....

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"Advertising Services" had not remitted, service tax dues of ₹ 1,24,54,757/- within the stipulated dates, for the period from October 2002 to February 2009 and not paid the applicable interest for the delay in payment of service tax. A show cause notice was issued on 21.10.2009 to the respondent-company, proposing to demand interest of ₹ 12,63,324/- for the period from October 2002 to February 2009. Penalty was also proposed to be imposed, on the respondent-company, under S .....

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proceedings initiated in the show cause notice dated 21.10.2009 under Sections 76 & 77 of the Finance Act, 1994 on the grounds that (a) the service provider had discharged the outstanding service tax liability covered in the material period suo motto even before the issue of show cause notice and thus none of the circumstances envisaged under the relevant penal provisions is warranted for imposing penalty; (b) interest under Section 75 for delayed payment of service tax is mandatory; and (c .....

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ed 23.07.2010 passed by the Committee of Chief Commissioners, Coimbatore. CESTAT, Chennai, vide final order No.40639/2015 dated 18.06.2015 dismissed the Revenue's appeal on merits, stating that on the grounds that imposition of penalty shall not serve useful purpose of law. 6. Being aggrieved by the abovesaid order, Revenue has filed the instant appeal on the following substantial question of law. "Whether the CESTAT is correct in holding that penalty u/s.76 & 77 of the Service Tax .....

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he truncating volume of business during the period from 2004-05 to 2008-09. Whereas, respondent company has defaulted in monthly payment of service tax for the period October 2002 to February 2009; the Commissioner has relied on the data as regards volume of business only from 2005-06 leaving out the period October 2002 to March 2005. 8. Learned counsel further submitted that financial constraint cannot be held as a reasonable cause for the delay in payment of service tax. As per Rule 6 of the S .....

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dings since th entire service tax liability along with a substantial portion of the interest amount involved was paid suo motu well before the visit of the Audit party and also before the issue of show cause notice, is not well founded. 10. Learned counsel drew the attention of this Court to the Annexure I to the show cause notice dated 21.10.2009, wherein the details, of the delay in payment of service tax, has been extracted, Sl. No. Service Tax amount (Rs.) Service Tax Delay in Payment (no. o .....

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0 19,15,640 25.07.05 to 25.04.06 13.02.07 568 to 294 11 18,84,360 05.05.06 to 31.03.07 03.04.07 333 to 3 12 2,50,571 31.03.07 25.02.08 331 13 6,49,129 05.05.07 to 05.09.07 22.03.08 322 to 199 14 5,00,000 05.09.07 to 05.12.07 25.03.08 202 to 111 15 5,00,000 05.12.07 to 05.03.08 29.03.08 115 to 24 16 2,37,729 05.03.08 to 31.03.08 31.03.08 26 Sl. No. Service Tax amount (Rs.) Service Tax Delay in Payment (no. of days) Payable between / on Paid on 17 5,00,000 05.05.08 to 05.07.08 25.02.09 296 to 235 .....

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rty pointed out the same, as early as 22.03.2008. Thus, according to the learned counsel, it is clear that respondent company had delayed payment of interest, even after the audit party pointed out the same. He further submitted that respondent company had delayed payment of service tax, for the months from April 2008 to February 2009, even after audit party paid a visit. 12. Learned Senior Standing counsel for Customs, Central Excise and Service Tax submitted that the observation of the Commiss .....

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ned Senior Standing counsel for Customs, Central Excise and Service Tax submitted that the Commissioner has observed that the respondent company had suo motu discharged outstanding tax liability covered in the material period, before issue of show cause notice and none of the circumstances envisaged under the relevant penal provisions warrant imposition of penalty. According to the learned counsel, this is wholly misdirected, in as much the show cause notice dated 21.10.2009 was issued proposing .....

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vides for imposition of penalty only on service tax and not on interest, is not acceptable. When interest is held as mandatory, penalty imposable under Section 76 of the Finance Act, 1994 is also mandatory, as held by the Hon'ble High Court of Rajasthan in Union of India Vs. Aakar Advertising, reported in 2008 (11) STR 5 (Raj.). Referring to Section 76 of the Finance Act, 1994, he submitted that any person, liable to pay service tax in accordance with the provisions of person 68 or the rules .....

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company had not paid service tax within the stipulated time for over 5 years, month after month and in most of the cases paid such service tax, much later than the prescribed due dates, without making payment of interest, at the applicable rates. In this context, he submitted that respondent company had obtained service tax registration, as early as 12.12.1996. It is also on record that respondent company had filed ST 3 returns due on 25th April and 25th October of the years 2003 to 2007 only o .....

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9.04.2009 and 25.04.2009, respectively, i.e. prior to the issue of show cause notice. But the balance amount of ₹ 7,40,173/- has been paid only on 03.11.2009 ie. after the issue of show cause notice. Learned counsel for the appellant submitted that Majestic Mobikes Pvt. Ltd., reported in 2008 (11) STR 609 (Tri.Bang.) relied on by the Commissioner, is a case, where only service tax and part of interest had been paid before issue of show cause notice, and the Hon'ble Tribunal, has upheld .....

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of the Finance Act, 1994 provides for conclusion of adjudication proceedings on payment of service tax and interest before service of show cause notice. In the present case, major portion of the interest has been paid only after the issue of the show cause notice and as such, neither the provisions of sub-section (3) of Section 73 of the Finance Act, 1994 nor the instructions contained in Board's letter F.No.137/167/2006-CX.4 dated 03.10.2007 are applicable to the present case. 17. Learned .....

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notice, there cannot be any automatic waiver of penalty. In the above case, for the delay in payment of service tax, penalty imposed under Section 76 has been upheld, even when service tax is paid before issue of show cause notice. While doing so, Hon'ble Tribunal has relied on the judgment of a Division Bench of the Hon'ble High Court of Punjab and Haryana in Machino Montell (I) Ltd reported in 2006(4) STR 177(P&H). The Hon'ble High Court of Rajasthan, in Union of India Vs. Aaka .....

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-Bang) and Yogi Auto Care Pvt. Ltd. Vs. Commissioner of Central Excise, Ahmedabad reported in 2009 (13) STR 428 (Tri.Ahmd.). 18. Learned counsel also relied on the decision of the Hon'ble Supreme Court, in the case of UOI Vs. Dharamendra Textile Processors, reported in 2008 (231) ELT 3 (SC), wherein it is held that where the penalty is mandatory, there is no scope for any discretion. He therefore submitted that the Commissioner ought to have imposed minimum penalty for non-payment of service .....

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e considered the issue and rendered a finding on the same. Without doing so, the tribunal, merely observed that the respondent had rendered cooperation to the department to discharge not only tax liability but also interest liability. Law provides mandatory penalty equal to unpaid service tax which also covers unpaid intent and there is no discretion vested with the authority to reduce the quantum of penalty. The order passed by the tribunal without considering the grounds raised by the revenue .....

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rroneously refunded, for any reason, other than the reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made there under with the intent to evade payment of service tax, the person who has been served notice under sub-section (1) of section 73 shall, in addition to the service tax and interest specified in the notice, be also liable to pay a penalty not exceeding ten per cent. of the amount of such .....

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imposed in that order, only if such reduced penalty is also paid within such period. 2) Where the amount of penalty is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be, over the above the amount as determined under sub-section (2) of section 73, the time within which the reduced penalty is payable under clause (ii) of the proviso to sub-section (1) in relation to such increased amount of penalty shall be counted from the date of the order of the C .....

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ho fails to keep, maintain or retain books of account and other documents as required in accordance with the provisions of this Chapter or the rules made there under, shall be liable to a penalty which may extend to [ten thousand rupees]; (c) who fails to (i) furnish information called by an officer in accordance with the provisions of this Chapter or rules made there under; or (ii) produce documents called for by a Central Excise Officer in accordance with the provisions of this Chapter or rule .....

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ay the tax electronically, shall be liable to a penalty which may extend to [ten thousand rupees]; (e) who issues invoice in accordance with the provisions of the Act or rules made there under, with incorrect or incomplete details or fails to account for an invoice in his books of account, shall be liable to a penalty which may extend to [ten thousand rupees]. 2. Any person who contravenes any of the provisions of this Chapter or any rules made there under for which no penalty is separately prov .....

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ted 21.10.2009 as to why, a) an amount of ₹ 12,63,324/- (Rupees Twelve lakhs sixty three thousand three thousand three hundred and twenty four only) being the interest on belated payment of Service Tax should not be demanded under Section 75 of the Finance Act, 1994. b) an amount of ₹ 5,23,151/ paid towards interest should not be appropriated for the interest payable. c) penalty amount of ₹ 19,75,894/- as detailed in Annexure III to the SCN should not be imposed on them under S .....

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re, ordered as hereunder "(i) I confirm the proposal to demand interest of ₹ 12,63,324/- under Section 75 of the Finance Act, 1994 and I order recovery of the same under Section 75 of the Finance Act, 1994. (ii) I order appropriation of ₹ 5,23,151/- already paid by them towards part of the interest liability prior to issue of show cause notice and also the balance interest amount of ₹ 7,40,163/- paid by M/s.Sasi Advertising Private Ltd on 3.11.2009. (iii) The penalty proce .....

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osition of penalty which was not done by the adjudicating authority. Perusal of the adjudication order discloses that there was no service tax liability demand to be discharged at the time of adjudication. The respondent has also discharged interest liability prior to issuance of show-cause notice partly. The rest of that was discharged within few days of issuance of show cause notice. This is apparent from para 4.12 of the adjudication order. 2. The conduct of the respondent does not appear to .....

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