TMI Blog2023 (4) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... s very much aware that service tax was liable to be paid but they did not deposit the said amount so collected to the Government exchequer nor did they file their ST 3 returns. Penalty under section 78 upheld by Commissioner (Appeals) is correct - Appeal dismissed. - SERVICE TAX APPEAL NO. 51704 of 2015 WITH SERVICE TAX APPEAL NO. 53491 of 2015 - FINAL ORDER No.50424-50425/2023 - Dated:- 3-4-2023 - MR. DILIP GUPTA, PRESIDENT AND MS. HEMAMBIKA R PRIYA, MEMBER (TECHNICAL) Shri Harshvardhan, Authorized Representative of the Department Shri Dhruv Tiwari, Advocate for the Respondent ORDER The current appeals have been filed to assail the Order-in- Appeal No.03/2014 dated 29.12.2014 passed by the Commissioner of Central Excise Service Tax, Udaipur confirming the demand of Rs.42,91,058/- [Rs.40,62,724/- relating to coaching service and Rs.2,28,334/- relating to franchise service) along with interest under section 75 and penalty under section 76, 77 and 78 of Finance Act, 1994. An amount of Rs.3,00,000/- already paid by the appellant was appropriated. The Department has filed the appeal to contest the dropping of the demand to the extent relatable to the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able value of coaching service in terms of Para 2.2.3 and Para 2.9.1 of Circular No. 59/8/2003 dated 20.06.2003 ( Circular ); that amount of franchise fee and royalty fee received by BSL is taxable under the category of franchise service. 1.4 The Additional Commissioner vide Order-in-Original dated 29.12.2014 confirmed the demand of Rs. 40,62,724/- relating to coaching service and Rs. 1,46,327/- relating to franchise service by re-computing the same, totaling to Rs. 42,09,058/-, along with interest under the extended period of limitation and further appropriated Service tax amount of Rs. 9,50,000/- already paid by BSL. The Adjudicating Authority further imposed penalty equal to demand confirmed under Section 78 of the Finance Act and Rs.1,000/- under Section 77 ibid, while he dropped penalty under Section 76 ibid. 1.5 Aggrieved by the Order-in-Original, the assessee filed an appeal before the Commissioner (Appeals-I), New Delhi on 05.11.2013. 1.6 The Commissioner (Appeals) vide Order-in-Appeal dated 29.12.2014 ( impugned order ), partly allowed the assessee s appeal holding that the value of study material is not includible in the taxable value of coaching service as the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.12,34,767/-) and February, 2014 (Rs.4,00,000/-), totalling to Rs.25,84,767/- after availing the benefit of Cenvat credit. Thus, non-payment of Service tax collected by the assessee but not paid to Government Exchequer, was beyond the control of the assessee since it could not have paid tax without grant of registration. Hence, because of the said reasonable cause, the assessee is entitled to the benefit of Section 80 of the Finance Act which provides that penalty is not imposable under Section 78 if the assessee proves that there was reasonable cause for the said failure. He placed reliance on the decision of Tribunal in the case of Laxmi Color Pvt. Ltd. v. Commissioner of Central Excise, Jaipur [ 2006 (3) S.T.R. 760 (Tri.-Del.)]. 3.1 He further submitted that the assessee had indicated its Service tax liability in its audited financial statements for the financial year 2010-11 and 2011-12, which were duly filed with the Registrar of Companies, even when its Service tax registration application was pending with the Department. Thus, it cannot be said that the assessee had any malafide intention to evade payment of tax by reason of fraud, suppression, etc. 3.2 In suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the same may be set aside to the said extent, and the impugned order is required to be upheld to the extent of setting aside the tax demand relating to inclusion of value of study material. 6. The learned authorised representative appearing for the Department has submitted that issue of abatement of value for the supply of material of coaching centre is no longer res integra and has been settled by the following case laws: 1. M/s. Cerebral Learning Solutions Pvt. Ltd. vs. Commissioner [8] 2. M/s. Cerebral Learning Solutions Pvt. Ltd. vs. Commissioner [9] 3. Commissioner vs. M/s. Cerebral Learning Solutions Pvt. Ltd. [10] 4. M/s. Lakshya Education vs. Commissioner [11] 7. However, as regards the penalty under section 78, he stated that the assessee was collecting service tax and were not depositing it to the government exchequer. The assessees also did not file Service Tax returns and in fact took Service Tax registration only upon initiation of investigation by the department. Hence, both the learned Adjudicating Authority and learned Commissioner (Appeals) are justified in imposing penalty under Section 78. 8. We have heard Shri Harshvardhan, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n another fortnight. 02.03.2012 Centralised Service tax registration was granted to BSL, vide No. AAECB0530BSD001 We find from the table above that though the assessee had applied for Service Tax registration on 09.10.2010, there was no follow up done by the assessee. No attempt was made to seek any clarification from department as to why the registration had not yet been granted to them. In this regard, we find that section 69 of the Finance Act provides for registration, which is as follows: 69. Registration . (1) Every person liable to pay the service tax under this Chapter or the rules made thereunder shall, within such time and manner and in such form, as may be prescribed, make an application for registration to the Superintendent of Central Excise. (2) The Central Government may, by notification in the Official Gazette, specify such other person or class of persons, who shall make an application for registration within such time and in such manner and in such form as may be prescribed. The Service Tax Rules, 1994 in Rule 4 lays down the procedure for seeking registration under section 69 of the Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rule 4 of the Service Tax Rules (supra) categorically state that if the registration certificate is not granted within a period of 7 days of receipt of application, then the said registration is deemed to have been granted. Once the registration was not granted even after the lapse of 7 days, it is seen that the assessee did not make a single attempt for more than a year to seek clarification. It is evident that the assessee in the meantime was collecting service tax from his students for the services being extended by them. So it is apparent that the assessee was very much aware that service tax was liable to be paid but they did not deposit the said amount so collected to the Government exchequer nor did they file their ST 3 returns. We note that urgency for seeking the registration was shown only once the investigations was initiated by the department. In view of the above, we are not inclined to accept the arguments of learned Counsel that there was reasonable cause for the said failure. 14. In view of the above, we hold that penalty under section 78 upheld by Commissioner (Appeals) is correct. Accordingly, we dismiss the appeal No. 53491 of 2015. We also dismiss the Depar ..... 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