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TMI Blog2025 (5) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... re that based on certain intelligence, investigation was initiated by way of summons dt.29.10.2015 by the department seeking certain documents/ information from the appellant. The department, based on said documents and statement dt.20.11.2015 of Mr. K.V. Vasantha Rao, Senior Manager and Authorized Signatory of the appellant, inter alia, felt that the appellant had charged/received consideration for providing taxable service but failed to remit service tax and also failed to file ST3 return for the period April, 2015 to September, 2015 on or before the stipulated date as per Rules. It was also alleged that appellant had also failed to pay the service tax already collected, which resulted in short payment of service tax for the period April, 2014 to March, 2015. Further, it was also noted that for the period October, 2015 to March, 2016, the appellant had claimed ineligible exemption resulting in non/short payment of service tax to the tune of Rs.35,39,391/- during the period April, 2015 to September, 2015. In all, it was alleged in the SCN that the appellants were providing Manpower Supply service to M/s Power Mech Projects Ltd, Vijayawada, however, they have not paid/short paid se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , inter alia, he observed that the appellant had collected service tax but failed to deposit the tax by the due date and failed to file return by due date, which amounts to suppression of facts and therefore, in view of the provisions of section 73(4) and once suppression is established, the provisions of section 73(3) are not applicable. Therefore, on this ground also, he did not find merit in the arguments of the appellant that issuance of SCN or penalty was not warranted in the facts of the case. 5. Insofar as the penalty under section 78A on Mr. K. Bhaskar Rao, Director of the appellant company is concerned, he has relied on the statement of one Mr. K.V. Vasantha Rao, Senior Manager of the appellant company dt.10.03.2018, wherein, inter alia, he stated that Mr. K. Bhaskar Rao used to give the direction with regard to payment of service tax and monitor and the fact that in his reply Mr. K. Bhaskar Rao has not adduced any substantiation against the imputations in the SCN and therefore, he held him responsible for failure to pay the collected service tax amount by the appellant company and therefore, liable for penalty under section 78A for his involvement in the evasion of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view is taken that every error made in the ST3 return is with an intention to evade payment of tax, attracting penalty under section 78, then it would render otiose the entire provision for rectification of errors and provision for filing revised returns, as provided under Rule 7B of the Service Tax Rules. 8. He has relied on various case laws in support that the words 'suppression' etc., are required to be construed strictly as held by Hon'ble Supreme Court in the case of Continental Foundation Joint Venture [2007 (216) ELT 177] (Para 10 & 12) and that mere a omission not accompanied by intention to evade duty is not suppression. It is on record that appellants were in the process of discharging their liabilities by the time investigations started, which demonstrated their intention to pay their taxes. Therefore, the assertion that while they had paid substantial amount even before the start of investigation itself they would have omitted to pay remaining amount but for the initiation of investigation of the DGCEI, is only a presumption on behalf of the department. He has also relied on the judgment of Hon'ble Supreme Court in the case of Uniworth Textiles [2013 (288) ELT 191 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y participated in the investigation, in the meanwhile, they had paid the rest of their dues and the ST3 return for the period April, 2015 to September, 2015, which was due on 21.10.2015, was also filed on 04.12.2015 with a gap of about 40 days and in fact, a further revised ST3 was again filed on 21.01.2016 incorporating the left out taxable value initially claimed as exempted value and tax on account of such inadmissible exemption. All these actions are apparently taken suo moto and not because of any direction to do the same by any authority or department, who were basically reconciling the difference noticed by them in the Income Tax Returns and relevant ST3 filed by them based on documents, information provided by the appellant themselves. 12. We find that there is no dispute regarding classification, valuation or provision of service, etc. It is also a fact that they had not paid the service tax on the due dates but it is also an admitted fact that they had made good the non-payment of service tax along with applicable interest subsequently, even before the issue of SCN. We also find force in the argument that while the total interest has been worked out as Rs.69,02,146/-, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o September, 2015 but failed to deposit the same. However, from the SCN, we do not find any evidence or allegation that they had not only charged/collected consideration but in fact also collected service tax from the recipient of the service provided by them. Thus, to allege that they had also received or collected service tax from the recipient and not paid to Government without any tangible evidence on record is not correct and therefore, it is not sustainable. Thus, charge to the extent that they had charged/collected consideration for service and they did not discharge applicable service tax, by due date, is an admitted fact but their having specifically collected service tax from the recipient, which they failed to pay to Government is not substantiated on record in terms of any document. In para 4 of SCN, Department, based on all documents submitted by appellant and statements recorded, has alleged that appellant had rendered taxable service and charged/received consideration but failed to remit service tax. Thus, though the intelligence on basis of which investigation was initiated referring to the presumption that they had collected service tax but did not deposit all serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and Income Tax return for the year 2014-15 for which, he gave explanation that by the time of filing ST3 return for the HYE March, 2015, they had not finalized the accounts but they filed ST3 return as per Trial Profit & Loss account and later due to work pressure he was unable to pay differential duty and therefore, did not file the revised ST3 return and that in September, 2015, they paid all service tax dues with interest and filed Income Tax return for the FY 2014-15. Subsequently, for non-payment of applicable service tax and non-filing of ST3 return for the HYE September, 2015, he said that he had not reconciled the account for HYE September, 2015 but had paid continuously service tax payments month wise tentatively and sought certain time to reconcile accounts on various sites and pay the pending service tax liability and file the return and submit the ST3 return with documents. 17. Further it is also observed that based on scrutiny and reconciliation of documents and statements that the appellants have charged to have rendered taxable service and charged/received consideration but failed to remit service tax and to file the ST3 return for the period April, 2015 to Septem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the credit of the Government of India, for the period of delay at certain prescribed rate. Similarly, in terms of section 70 of the Finance Act, the returns may be furnished with late fee for the delayed furnishing of return. Section 75 provides for payment of interest in respect of failure to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum. Therefore, conjoint reading of all these provisions would indicate that there could be occasions when the assessee may not be able to file service tax return by due date or able to remit service tax by due date but can cure the same subject to payment of interest on delayed payment, late fee, etc., for filing the ST3 late. 19. Coming to the reliance placed by the appellant on various case laws, we have perused these case laws and find that in the case of Commissioner Vs Tirupathi Fuels Pvt Ltd [2018 (12) GSTL J179 (SC)], which upheld the Order dt.13.03.2017 of Hon'ble Andhra Pradesh High Court as reported in [2017 (7) GSTL 142 (AP)], the Hon'ble High Court of Andhra Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso to section 11A(1) of the Central Excise Act, 1944. 24. Therefore, essentially, for invoking extended period, as also for imposing penalty under section 78, it is incumbent upon the department to establish non-payment or short payment of service tax by reasons of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of this law with intent to evade payment of service tax, where SCN is issued in terms of the proviso to sub-section (1) of section 73. Therefore, in order to invoke section 78, the SCN issued under proviso to section 73(1) has to be sustained first. In this case, while the SCN has been proposed invoking proviso to section 73(1), we do not find any ingredient to sustain the invocation of extended period for recovery of demand notwithstanding the fact that the appellants are themselves not contesting the recovery of service tax not paid/short paid even for the period beyond the normal period of demand. It is apparently because they paid entire amount of service tax and interest much before the issue of SCN itself. Merely because they are not contesting the confirmation of demand and recovery thereof, it would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd all the amounts were already paid along with interest as well as returns were filed, but the department waited much beyond January, 2016 and issued SCN sometime in 2018 only with a view to invoke proviso to section 73(1) so as to invoke penal provisions of section 78. 27. In view of the same, we find that the impugned order is liable to be set aside to the extent of imposition of penalty of Rs.7,16,02,680/- under section 78 on the appellant. 28. Insofar as the imposition of penalty on Mr. K. Bhaskar Rao, Director of appellant company, is concerned, we find that penalty under section 78A can be imposed on any director, manager, secretary, officer, etc., of the company who at the time of such contravention was in-charge of and was responsible to the company for the conduct of business of such company and was knowingly concerned with such contravention. We find that there is no statement recorded in respect of Mr. K. Bhaskar Rao and the entire allegation that he was knowingly involved in the evasion/non-payment of service tax is based on the statements dated 20.11.2015, 08.11.2016 & 10.03.2018 of Mr. K.V. Vasantha Rao. From perusal of these statements, it is not forthcoming that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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