TMI Blog2018 (5) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 73[1] of the Act had been committed. Extended period of limitation of five years is available only in cases where the omissions or commissions enumerated in proviso to Section 73[1] are alleged. Section 73[4] further makes it clear that clauses enumerated in the proviso to Section 73[1] would not fall within the ambit of section 73[3]. Thus, tax, interest and penalty cannot be collected for five years period without alleging omission/commission of the clauses enumerated under the proviso to Section 73[1]. Explanation – 2 to Section 73[3] provides that no penalty under any of the provisions of the Act or the rules made thereunder shall be imposed in respect of payment of service tax under section 73[3] and interest thereon. Even assuming Section 73[3] is invoked by the revenue, no penalty can be leviable. Otherwise also, if Section 78[1] is invoked, show cause notice is mandatory. It is well settled legal principle that penalty is not automatic. If the Assessee is making payment within 30 days after issuance of show cause notice, the penalty prescribed is 15% of such service tax, opportunity to show cause cannot be denied to the petitioner who is disputing the liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 to refund the excess amount of ₹ 44,70,830/- paid or alternatively to issue a show cause notice under proviso to Section 73(1) of the Act, to determine tax demanded and recovered, which was not legally payable or barred by limitation under the provisions of the Act. Respondent No.1 conveyed that, proceedings had concluded at the option of the petitioner under second proviso to Section 78(1) of the Act, since petitioner had paid 15% of the service tax vide letter dated 28.7.2016 and that no further action is required under the provisions of Section 73(3) read with proviso to Section 78(1) of the Act, in his Audit report dated 01.8.2016. It is the grievance of the petitioner that no show cause notice was issued to the petitioner despite petitioner requesting the respondents to issue the same. The action of respondents in demanding the penalty at the time of audit and collected the same during the audit proceedings is also under challenge. Aggrieved by the action of respondent No.4, petitioner is before this Court. 4. Learned counsel Sri.A.Sai Prasad appearing for the petitioner submitted that the omission to issue show cause notice has deprived the petitioner of legal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. COLLECTOR OF CENTRAL EXCISE VS. HMM LIMITED, 1995 (76) ELT 497 (SC) 7. UNIWORTH TEXTILES LTD., VS. COMMISSIONER OF CENTRAL EXCISE, RAIPUR, 2013 (288) ELT 161 (SC) 8. COMMISSIONER OF CUSTOMS, MUMBAI VS. VIRGO STEELS, 2002 (141) ELT 598 (SC) 9. PRADEEP CO. VS. COLLECTOR OF CUSTOMS, 2003 (152) ELT 294 (CAL.) 6. Learned counsel appearing for the revenue filing statement of objections refuted the contentions raised by the petitioner. Placing reliance on Section 73(1) of the Act, it was argued that no show cause notice is necessary when the petitioner has given a written admission that they have discharged the tax liability with interest and reduced penalty, following the principles of natural justice is a subjective issue, the petitioner was informed by way of an audit query dated 19.2.2016 about their liability to pay availed Cenvat credit which they have admitted in writing and discharged the same. Ample opportunity was given to the petitioner to file their objections, if any, in respect of the liability. Had they not admitted the liability and contested the point in question, detailed show cause notice would have been issued to the petitioner de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (as the law then stood) i.e., within a prescribed period of limitation but only in exceptional cases, the said period could be extended to 5 years. When in the original notice, such an allegation had not been made, it was held that the same could not have been made subsequently as the facts alleged to have been suppressed by the appellant were known to them. 10. In RAJ BAHADUR NARAIN SINGH SUGAR MILLS LTD., supra , in para 9 and 10, it is held thus: 9. We have set out the relevant parts of the show cause notice. It speaks of an erroneously granted rebate. There is no mention in it of any collusion, wilful mis- statement or suppression of fact by the appellants for the purposes of availing of the larger period of five years for the issuance of a notice under Rule 10. The party to whom a show cause notice under Rule 10 is issued must be made aware that the allegation against him is of collusion or wilful mis- statement or suppression of fact. This is a requirement of natural justice. It is also the law, laid down by this Court in Collector of Central Excise v. H.M.M. Limited 1995 (76) E.L.T. 497 . It has been said there with reference to Section 11A of the Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uantification and the assessee indicates in writing that he has been informed about such grounds and he accepts the grounds and the quantification, is waiving the requirement of a written show cause notice, then a written show cause notice need not be issued. 13. It is true that vide letter dated 24.03.2016 (Annexure-B2), reply to the audit enquiry dated 19.02.2016, it is stated that may kindly be noted that the bank has paid additional tax of ₹ 58,08,851/- based on the provisional demand raised by the auditee (challan enclosed) pursuant to which the respondent authorities forwarded a communication stating that the liability amounting to ₹ 32,68,179/- has been admitted and has been paid along with interest and 15% penalty vide challan dated 14.03.2016; further it is also requested to drop the penal proceedings; in this regard, kindly find enclosed herewith the format letter to be submitted by the assessee under Section 73(3) of Finance Act, 1994 for waiver of show cause notice. The format may be duly filled and submitted to the office immediately for further needful action. Indisputably, this format has not been duly filled and submitted to the respondent office, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted for the period 1.4.2010 to 31.03.2016. The copies of service tax returns filed half yearly before the service tax department evinces the fact that petitioner had informed designated Officers and the Respondent No.2 from time to time during the impugned period, the petitioner had not reversed Cenvat Credit under Rule 6 of Cenvat Credit Rules. If so, prima facie, it can be inferred that there could be no allegation of omission/commission on the petitioner of suppression. In that event, extending the period of limitation of 18 months to 5 years to collect the short levy of tax may be subject to issuance of show cause notice. However, the same depends on the adjudication of the matter which could be concluded only after issuance of show cause notice as contemplated under section 73[1] read with Circular Instructions dated 18.08.2015 as well as judicial pronouncements made by the Hon ble Apex Court in the Judgments discussed above. 17. Much emphasis is placed on Section 73[3] of the Act and clause 3.2 of the Circular dated 18.08.2015 by the Revenue, to contend that no show cause notice is necessary when the petitioner has paid the tax and penalty on the basis of tax ascertained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so thereof contemplates that where service tax and interest is paid within a period of thirty days of the date of service of notice under the proviso to sub-section (1) of section 73, the penalty payable shall be fifteen percent of such service tax and proceedings in respect of such service tax, interest and penalty shall be deemed to be concluded. Explanation 2 to Section 73[3] provides that no penalty under any of the provisions of the Act or the rules made thereunder shall be imposed in respect of payment of service tax under section 73[3] and interest thereon. Even assuming Section 73[3] is invoked by the revenue, no penalty can be leviable. Otherwise also, if Section 78[1] is invoked, show cause notice is mandatory. It is well settled legal principle that penalty is not automatic. If the Assessee is making payment within 30 days after issuance of show cause notice, the penalty prescribed is 15% of such service tax, opportunity to show cause cannot be denied to the petitioner who is disputing the liability to tax extending the period of limitation. 20. For all these reasons, this Court is of the considered opinion that show cause notice is necessary for determining the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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