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OIO No. 42/STC/AHD/ADC(JSN)/2013-14
BRIEF FACTS OF THE CASE
M/s. Veeda Clinical Research Pvt. Ltd., Shivalik Plaza-A, 2nd Floor, IIM Road,
Ambawadi, Ahmedabad (hereinafter referred to as “the noticee” is engaged in Technical
Testing and Analysis, Scientific and Technical Consultancy Services for which they are having
Service Tax Registration No. AACCC3633QST001.
2.
During the course of audit and on verification of records, [Revenue Para-1 of the Audit
Report No. 165/2013-14], it was noticed that the noticee had discharged lesser Service Tax
liability during the year 2008-09, on some portion of the taxable value which was noticed on
reconciliation of figures of taxable income, as appearing in their Balance Sheets / P. & L.
Account vis-à-vis taxable value declared in their Half Yearly ST-3 returns filed. It was also
noticed that the noticeehad followed Mercantile System of Accounting and payment of
service tax on realization basis.
The details of short payment of service tax is calculated as below:
Period/Year
Taxable Value
as per Books
of A/c (Inc.
S.T)
Taxable Value
as per ST-3
Returns (Inc.
S.T)
Difference of
taxable
value(Inc.
S.T)
Service Tax
payable/short
paid
1
2
3
4
= (2-3)
5
2008-09
11,05,91,803/- 10,92,20,678/-
13,71,125/-
1,50,829/-
Total
1,50,829/-
2.1. The above said short paid service tax was required to be recovered from them along
with applicable interest. On being pointed out, the management of the company stated that
after due consultation with their directors who were based abroad, they will pay service tax
liability which is short paid as detailed above. Whereas the noticee had not informed
regarding the payment of service tax of Rs.1,50,829/-. Therefore, the short paid service tax
amounting to Rs.1,50,829/- which was not paid by the noticee was required to be recovered
from them Section 73 of Finance Act, 1994 and applicable interest under Section 75 of
Finance Act, 1994.
3.
During the course of audit and on verification of records, [as per Revenue Para-2 of the
Audit Report No. 165/2013-14], it was noticed that the noticee had made a mistake in
calculation while arriving at the value for payment of service tax. They calculated the value of
test, Inspection and Certification services as Rs. 73,92,407/- instead of Rs. 79,36,018/-. Thus,
there was a totaling mistake of Rs.5,43.611/- in arriving the value for payment of service tax
which had resulted in short payment of service tax of Rs.67,190/- [@12.36%].
3.1. It appeared that the noticee had not discharged their service tax liability on the amount
shown above. Thus, the said short payment of service tax was required to be recovered from
the noticee along with applicable interest. On being pointed out, the management of the
company stated that after due consultation with their directors who were abroad, they will
pay service tax liability which is short paid as detailed above. Whereas they had not informed
regarding the payment of service tax of Rs.67,190/-. Therefore, the short paid service tax
amounting to Rs.67,190/- which was not paid by the service provider is required to be
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recovered from them Section 73 of Finance Act, 1994 and applicable interest under Section
75 of Finance Act, 1994.
4.
Further, during the course of audit and on verification of records, [ as per Revenue
para-3 of the Audit Report No. 165/2013-14], it was noticed that the noticee had availed
credit of input service and also on capital goods received at the places other than registered
premises. On being asked about this issue, they stated that they had been issued a SCN by the
department and produced a copy of show cause notice wherein demand was raised for
wrongly availing credit on input services and on capital goods received at the places/premises
other than registered one. Further, on going through the copy of SCN and records of 2008-09,
it was revealed that in the SCN for the period 2008-09 the demand for recovery of wrong
availment of credit on the basis of documents pertaining to the expenses incurred at their
Mumbai, Nadiad and Mehsana branches was for Rs.16,447/- only. However, the credit of
input service and capital goods availed in the year 2008-09 was Rs.10,41,506/-. Further, it is
learnt that during the time of issuing SCN on above issue the noticee was called for recording
statements and in their statement dated 07.07.2011 they confirmed and agreed that the total
amount of credit taken by them against the expenses incurred by them at their Mumbai,
Nadiad and Mehsana branches came to Rs.16,447/-. Thus, it appeared that the noticee had
suppressed the facts from the department and misled the department on the issue. During
the audit period i.e. 2008-09, they had availed total credit of Rs.9,65,280/- on input services
and of Rs.76,226/ on capital goods received at the places other than registered one i.e.
Mumbai, Nadiad and Mehsana branches which did not appear to be admissible to them
(detailed in Annexure-A). Out of the total inadmissible cenvat credit of Rs.10,41,506/- , the
demand for Rs.16,447/- had already been issued by the department as discussed herein
above. Therefore, remaining wrongly availed cenvat credit amounting to Rs.10,25,059/- was
to be recovered from the noticee. On being asked to reverse/pay the said amount of wrongly
availed total credit of Rs.10,25,059/- which was not included in the SCN issued for the period
of 2008-09, they stated they will discuss with their Directors who were based abroad and
then will pay it. Whereas till date they have not informed regarding the payment of wrongly
availed total credit of Rs.10,25,059/- along with interest as applicable. Thus, the noticee had
wrongly availed cenvat credit in respect of premises which were not registered under service
tax Rules.
5.
During the further course of action, summons were issued on 03.10.2013 and on
07.10.2013 to M/s. Veeda Clinical Research Pvt. Ltd., Ahmedabad. In response to summons.
Statement of Shri Sujan Sunilbhai Shah, Executive (Finance & Accounts) & Authorized
Signatory of M/s. Veeda Clinical Research Pvt. Ltd., Ahmedabad was recorded on 09.10.2013
under Section 14 of Central Excise Act 1944, read with the provisions of section 83 of the
Finance Act, 1994, which is in Question-Answer form wherein he interalia stated as under:
Q.1
I show you Pending Revenue para-1, after carefully read it, do you confessed
that you have shown taxable value of Rs. 10,92,20,678/- in ST-3 Returns for the
F.Y.2008-09, however according to Balance Sheet of 2008-09 taxable value comes to
Rs. 11,05,91,803/-, thus in ST-3 Return you have shown less taxable value of
Rs.13,71,125/- on which you not paid Service Tax of Rs.1,50,829/-?
Ans. No. Regarding short payment of service tax on reconciliation of taxable income of
financial record with ST-3 returns, I state that, I herewith enclosing the reconciliation
statement for your kind pursue. Whereby it is clear that there is no short payment of
service tax. Department has wrongly taken in to account TDS receivable for unpaid
bills, which we are discharging as and when credited into our account.
Q.2
I show you Pending Revenue para-2, after carefully read it, do you confessed
that you have made calculation mistake in ST-3 Return for April, 2008 to September,
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OIO No. 42/STC/AHD/ADC(JSN)/2013-14
2008, as a result you have considered less taxable value of Rs.5,43,611/- and made
short payment of Service tax of Rs.67,190/-?
Ans. Yes, however, I state that service tax has been discharge on such value, and I
produce the proof of payment and interest on its as applicable rate and produce the
same within two days and also reconciliation statement alongwith the statement
which is part of the statement which is correct.
Q.3
I show you Pending Revenue para-3, after carefully read it, do you confessed
that in the year 2008-09, in respect of Mumbai, Nadiad and Mehsana branches your
company has availed Cenvat credit of Rs.10,41,506/-on input service and capital
goods?
Ans.
Yes. I confess.
Q.4
I show you statement of Shri Ronak Sureshbhai Shah recorded under section 14
of the Central Excise Act, 1944 on 07.07.2011 I have carefully read the entire
statement. Para 2 of page-2 of the said statement is as under;
“ Now I have been shown Revenue Para 07 of the above Audit Report and on being
asked , I state that we have availed cenvat credit on the basis of documents which are
issued against the expenses incurred at our other units at Mumbai, Nadiad and
Mehsana “. This was asked in the context of Para-07 of Audit Report No.15/2009-10
do you confirm it.
Further, I show you Para 07 of the audit report No. 15/2009-10 after carefully read it
do you confess that Para 07 clearly says regarding Credit availed in respect of Input
services as well as Capital goods and not in respect of Input services only? Do you
confess it?
Ans.
Yes. I confessed whatever asked.
Q.5
Now, I am being shown Para-4, Page-2 of the statement of Shri Ronak
Sureshbhai Shah under section 14 of the Central Excise Act, 1944 recorded on
07.07.2011, I have carefully read the same, Para-4 , page 2 is as under;
“The details of cenvat credit on the basis of documents pertaining to the expenses
incurred at our Nadiad and Mehsana units during the period 2007-08 to 2010-11, are
as under”.
Sr.No.
F.Y.
2
2008-09
Cenvat credit amount availed (In
Rs.)
16447/-
Do you confirm that the facts as mentioned, were in relation to Para 07 of the A.R. No.
15/2009-10 and Show cause Notice dtd. 30.09.2011 of F.No. STC/4-36/O&A/1112/1071 was issued by the Additional Commissioner Rs.16,447/- as far as cenvat credit
concerned for 2008-09 ?
Ans. Yes. I confirmed. It is in relation to Input service credit for Nadiad Branch only.
Q.6
Thus, do you confess that statement given by Shri Ronak Sureshbhai Shah
under section 14 of the Central Excise Act, 1944 recorded on 07.07.2011 regarding
Cenvat credit availed amt. to Rs.16,447/- in F.Y.2008-09 was wrong, but correct
amount was Rs.10,41,506/-(total input service credit Rs.9,65,280/- + total cenvat
credit on capital goods Rs.76,226/-), therefore if correct amount Rs.10,41,506/- could
have been reported while recording statement dtd.07.07.2011 Show cause Notice
could have been issued for Rs. Rs.10,41,506/-?
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OIO No. 42/STC/AHD/ADC(JSN)/2013-14
Ans. I state that during relevant period Shri Ronak S. Shah has submitted details of
input service in relation to Nadiad Branch only whereas in the instant audit report,
audit wing has considered cenvat credit availed in respect of the Mumbai, Nadiad and
Mehsana Branch with regards to cenvat credit of Capital goods & Input services. So,
different was arise in previous statement and present audit.
Q.7
I show you Pending Revenue para-4, after carefully read it, state whether you
have paid Service tax and submit proof of payment in respect of debit note No.19 &
20 both dtd.07.07.2008 issued to M/s. Wockhardt Ltd., for Rs.7,77,600/- and
Rs.8,64,000/- respectively and also recovered service tax of Rs.96,111/- and
Rs.1,06,791/- i.e. total Rs.2,02,902/-.
Ans. Yes. Regarding service tax has not been discharge on debit note issued as stated
in the instant service tax audit report, I state that no collection of such debit notes was
realised during the year 2008-09, hence as per Rule 6 of Service Tax Rules, 2002 we
have not discharge service tax during the period and we have paid the service tax in
the month of May, 2009 when the amount was realised and duly reflected in the ST-3
return of the relevant period. Details of the same is enclosed.
7.
Therefore, it appeared that the credit availed for the expenses incurred at other than
registered premises totally amounting to Rs.10,25,059/- in violation of Service Tax Rules, 1994
is not admissible to them and the same was required to be recovered from the noticee
alongwith interest at applicable rate under the provisions of Rule 14 and 15 of Cenvat Credit
Rules, 2004 and applicable interest under Section 75 of Finance Act, 1994.
8.
During the course of recording of statement of Shri Sujan S Shah, he was shown the
statement of Shri Ronak Sureshbhai Shah recorded under section 14 of the Central Excise Act,
1944 on 07.07.2011 and Revenue Para 07 of Audit Report No. 15/09-10, he has stated that
they had availed cenvat credit on the basis of documents which are issued against the
expenses incurred at their other units at Mumbai, Nadiad and Mehsana “. Further he
confessed that in the year 2008-09, in respect of Mumbai, Nadiad and Mehsana branches
they availed Cenvat credit of Rs.10,41,506/-on input service and capital goods. Therefore, he
agreed that in the statement of Shri Ronak Sureshbhai Shah recorded 07.07.11 wherein he
stated that they had availed credit of Rs. 16447/- was totally wrong and this fact has been
mis-stated by him.
9.
During the course of audit and on verification of records, [as per revenue para-4 of the
Audit Report No. 165/2013-14], it was noticed that the noticee had issued debit note bearing
no. 19 & 20 both dated 07.7.2008 to M/s. Wockhardt Ltd. for Rs.7,77,600/- and Rs.8,64,000/respectively. They had also recovered service tax of Rs.96,111/- and Rs.1,06,791/respectively by again issuing debit notes no. 35 & 36 both dated 22.9.2008, from the recipient
but they could not provide the proof of payment of the same to the government exchequer.
9.1. Whereas it appeared that the noticee had not discharged their service tax liability on
the amount as shown above. Thus, short paid service tax was required to be recovered from
the noticee along with applicable interest. On being pointed out, the management of the
company stated that after due consultation with their directors who are sitting at/based
abroad, they will pay service tax liability which is short paid as detailed above. Whereas they
had not informed regarding the payment of service tax of Rs.2,02,902/-. Therefore, the short
paid service tax amounting to Rs.2,02,902/- which was not paid by them was required to be
recovered from them Section 73 of Finance Act, 1994 and applicable interest under Section
75 of Finance Act, 1994.
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10. From the above facts mentioned in the forgoing paras and above discussion, it appeared
that the noticee had contravened the provisions of Sec. 68 of the Finance Act, 1994 read with
Rule 6 of the Service Tax Rules, 1994 & Sec. 67 of the Finance Act 1994 in as much as that
they failed to determine the correct value of taxable service provided by them and failed to
determine and pay the service tax amounting to Rs.4,20,921/- (Rs.1,50,829/-; Rs.67,190/- and
Rs.2,02,902/-)(including Education cess & S & H Ed cess) as detailed in paras supra within the
stipulated time limit. Further, it appeared that the noticee had irregularly/wrongly availed
cenvat credit amounting to Rs.10,25,059/- as mentioned in para hereinabove. The cenvat
credit of Rs.10,25,059/- wrongly availed as mentioned in para 6 above was required to be
reversed/recovered from them as per Rule 14 of Cenvat Credit Rules, 2004 read with proviso
to Section 73(1) of Finance Act, 1994.
11.
In view of the above discussion, it appeared that the noticee had contravened the
provisions of the Section 67, Section 68 of Finance Act, 1994 as amended read with Rule 6 of
the Service Tax Rules, 1994 and short paid service tax of Rs.4,20,921/- (as per para 2, 3 and 9
supra). It was evident that the noticee had escaped the assessment and not furnished the
actual value while discharging Service Tax liability and thus as per Section 73 of the Finance
Act, 1994 as amended, short payment of service tax amounting to Rs.4,20,921/- was required
to be recovered.
12.
Further, it appeared that the noticee had not disclosed the abovesaid these facts to
Service Tax Department in their S.T.-3 returns filed by them and are liable to be recovered
from them under Section 73(1) of Finance Act, 1994 by invoking extended period of five
years. Further, the noticee had also suppressed the material facts from the department with
an intention to avail and utilize cenvat credit wrongly and therefore, the said cenvat credit
was required to be reversed/recovered from them under Rule 14 of Cenvat Credit Rules, 2004
read with proviso to Section 73(1) of Finance Act, 1994 by invoking extended period of five
years. The noticee was also liable for payment of interest on the cenvat credit wrongly availed
by them as per Rule 14 of Cenvat Credit Rules, 2004 read with Section 75 of Finance Act, 1994
as amended. The above acts of contravention of the provisions of Cenvat credit Rules, 2004
render themselves liable for penalty under Rule 15(3) of Cenvat Credit Rules, 2004 read with
Section 78 of Finance Act, 1994.
13. Now therefore M/s. Veeda Clinical Research Pvt. Ltd., Shivalik Plaza-A, 2nd Floor, IIM
Road, Ambawadi, Ahmedabad was issued with a show cause number STC/4-35/O&A/201314 dated 22.10.2013 by the Additional Commissioner of Service Tax, Ahmedabad as to why:
(i)
Service Tax amounting to Rs.4,20,921/- (Four Lacs Twenty Thousand Nine Hundred
Twenty One Only) (Rs.1,50,829/-; Rs.67,190/- and Rs.2,02,902/-)(including
Education cess & S & H Ed cess) should not be demanded and recovered under
Section 73(1) of the Finance Act, 1994 as amended by invoking extended period of 5
years.
(ii)
Wrongly/irregularly availed Cenvat credit amounting to Rs.10,25,059/- (Rupees Ten
Lacs Twenty Five Thousand Fifty Nine Only), as detailed in Annexure ‘A’, should not
be reversed/recovered from them as per Rule 14 of Cenvat Credit Rules, 2004 read
with proviso to Section 73(1) of Finance Act, 1994.
(iii)
The interest should not be demanded on Service tax Rs.4,20,921/- (Rupees Four lacs
Twenty thousand Nine hundred Twenty one only) under the provision of Section 75
ibid.
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(iv)
The interest should not be demanded on wrongly availed cenvat credit of
Rs.10,25,059/- under the provision of Section 75 ibid read with Rule 14 of Cenvat
Credit Rules, 2004.
(v)
Penalty under Sec. 76 of the Finance Act, 1994 should not be imposed on them for
the failure to pay service tax.
(vi)
Penalty under Sec. 77 of the Finance Act, 1994 should not be imposed on them for
the failure to self assess the taxable value in their ST 3 returns filed.
(vii)
Penalty under Sec. 78 of the Finance Act, 1994 as amended should not be imposed
on them for suppressing and not disclosing the value of the said taxable service
provided by them before the department with an intent to evade payment of
service tax as mentioned above.
(viii)
Penalty under Rule 15(3) of Cenvat Credit Rules, 2004 read with Section 78 of
Finance Act, 1994 should not be imposed on them for contravention of the
provisions of Cenvat Credit Rules, 2004.
DEFENCE REPLY:
14.
The noticee vide letter dated 1.11.2013 has submitted their reply which is as under:
14.1
They submitted that the SCN was issued in sheer disregard of facts on record which clearly
show that they had availed cenvat credit of branches & work office wrongly & but in fact they had
followed the procedure & avail rightly. So there were no short payment of service tax & only by any
stretch of imagination and accordingly the demand under the SCN was not sustainable on merit. Further,
there was no fraud, or collusion or willful misstatement or suppression of facts or contravention of any
of the provisions of the Act, or the rules made there under with intent to evade payment of service tax
on our part. and hence the demand was not sustainable on the ground of limitation also as the SCN is
issued after a limitation period of one year from the relevant date. That the SCN was issued to them on
17.10.2012, covering period of 2011-12. This clearly shows that the same was issued beyond a period of
one year from the relevant date.
15.
That they are registered with dept. under “‘Technical Testing and Analysis, Scientific and
Technical Consultancy Services’”. They have also filed ST-3 return regularly with the dept. Despite these
facts being clearly have in knowledge of dept since 2007-08 & onwards, saddling with the SCN issued in
the year 2013 alleging suppression of the fact is itself a ground on which the SCN is illegal, unfair and
uncalled for. Confirmation of having knowledge about the practice of the assesses since 2003-04 &
onwards and issuing SCN on the same issue in 2011 alleging suppression proves clear contradiction of
the stand taken in the SCN and thus the SCN is capricious. In the light of above Noticee have therefore to
request you to drop the proceedings under SCN on the ground of being vague and capricious.
16. Regarding whether demand of service tax amt to Rs.1,50,829/- on the basis of reconciliation of
income with the books of account without taking fact in to account are sustainable or not, they drew
attention that, department has raised demand on the basis that audit party has found difference in
Reconciliation of the period 2011-12 in the audit para as under:
8
Period/Year
Taxable Value
as per Books of
A/C(Incu.S.T)
Taxable Value
as per ST-3
Returns(Incl.S.t)
2
1
2008-09
OIO No. 42/STC/AHD/ADC(JSN)/2013-14
3
11,05,91,803/-
10,92,20,678/-
Difference of
Taxable Value
(Inclu.S.T)
Service Tax
payable/short
Paid
4 =(2-3)
5
13,71,125/-
1,50,829/-
Total
1,50,829/-
Final reconciliation as per noticee is as under;
Sr.No.
Particulars
2008-09
Source
of data
as
shown
in the
col.-6
7
1
A
2
B
3
Gross income as per all income ledgers (Credit side)
Add:
Service Tax charged, if not included in
Ledgers' income.
Less:
Amount of entries reversed / debited other
than related to expenditure.
(=)
Gross Ledgers' income inclusive Service
Tax.
Gross Income as per Balance Sheet (P.& L. A/c)
Add:
Service Tax charged, if not included in the
income.
Less:
Amount of entries reversed / debited other
than related to expenditure.
(=)
Gross Balance Sheet income inclusive of
Service Tax.
396,442,805
11,997,590
Balance
as per
Profit &
Loss
Account
+ Credit
Notes
As per
ST-3
-
408,440,395
389,067,145
11,997,590
As per
Balance
Sheet
As per
ST-3
-
401,064,735
Additions:
(i)
Opening debtors (Taxable Services related)
(ii)
Advance payments received (w.e.from
16.06.2005) related to services.
(iii)
TDS received related to unpaid bills
(iv)
Value of free material received, if any.
-
(v)
Receipt of re-imbursement of expense
(other than as a pure agent)
-
(vi)
Withheld retention money released by
clients.
-
(vii)
Recovery of Bad debts earlier written off,
related to taxable services.
-
20,749,492
-
As per
Annexure
-A
9
C
4
D
(x)
ERD on Goods Sales (Loss)
(=)
Total additions:
OIO No. 42/STC/AHD/ADC(JSN)/2013-14
20,749,492
Deductions:
(i)
Closing debtors (Services related)
(ii)
Exported service income
(iii)
Exempted service income
(iv)
Non-taxable service income
(v)
Commission Income
-
(vi)
Sales of excisable goods, if any
-
(vii)
Interest income
(viii)
Dividend income
(ix)
S.T./L.T. Capital gain (Profit on Sale of
Mutual Funds)
(x)
Income Tax refund
-
(xi)
Sales Tax refund
-
(xii)
TDS received in previous year related to
bills paid in current year.
(xiv)
Receipt of re-imbursement of expense
incured as a pure agent.
(xv)
Bad debts written off
(xvi)
Sundry balance written off/back
-
(xvii)
Profit on Sale of Fixed assests
-
(=)
Total deductions:
As per
Annexure
-A
38,257,574
135,973,270
As per
Ledgers
125,510,681
As per
Ledgers
As per
Note No.
13
13,038,661
337,149
As per
Note No.
13
89,555
As per
Note No.
13
As per
Credit
Notes
7,375,570
320,582,460
5
Taxable income as per Income ledgers (inclu. of S.T.)
(Details A+C-D)
108,607,427
6
Taxable income as per Balace sheet (inclu. of S.T.)
(details B+C-D)
101,231,767
7
Taxable Income Ledgers(Details 5) or B/s (Details 6)
whichever is higher (inclu. of S.T.)
108,607,427
8
Abatement admissible, if any ( %) Noti. No. & date
9
Net taxable income (incl. S.T.) as per Books of
Accounts (Details 7-8)
10
Taxable value (Inclu. S.T.) as per ST-3 returns.
11
Difference of taxable value (Details 9 -10)
108,607,427
109,220,678
(613,251)
10
12
Service Tax liability / payable, if any.
OIO No. 42/STC/AHD/ADC(JSN)/2013-14
(75,798)
16.1
From the above it was clear that, as per actual reco of books of account, there were no
short payment of service tax, while department had taken addition of TDS receivable &
deduction for the bad debts written off has not allowed, so differential service tax liabilities has
been arise, which is without going to the factual data & details. So demand of service tax amt to
Rs..150829/- has to be dropped in the interest of justice.
16.2 They also relied on the following case laws:
(i) 2013 (31) S.T.R. 673 (Tri. - Bang.) IN THE CESTAT, SOUTH ZONAL BENCH, BANGALORE S/Shri M.V.
Ravindran, Member (J) and P. Karthikeyan, Member (T) REGIONAL MANAGER, TOBACCO BOARD
Versus COMMR. OF C. EX., MYSORE Final Order No. 874/2010 and Stay Order No. 429/2010,
dated 17-5-2010 in Application No. ST/Stay/215/2009 in Appeal No. ST/369/2009
Demand - Quantification of - Auctioning service - Actual amount received from growers and buyers
of tobacco - Issue involved based on factual matrix of calculation of liability of Service Tax needs to
be appreciated on reconciliation of figures produced by assessee - Matter remanded for fresh
adjudication - Impugned order set aside - Section 73 of Finance Act, 1994. [para 6]
Appeal allowed
(ii) 2010 (20) S.T.R. 789 (Tri. - Mumbai) IN THE CESTAT, WEST ZONAL BENCH, MUMBAI Shri Ashok
Jindal, Member (J) ANVIL CAPITAL MANAGEMENT (P) LTD. Versus COMMR. OF S.T., MUMBAI Final
Order No. A/39/2010-WZB/C-IV/SMB and Stay Order No. S/6/2010-WZB/C-IV/SMB, dated 1-1-2010
in Application No. ST/S/1655/2009 in Appeal No. ST/237/2009
Demand - Quantum of - Service tax demand on differential amount between brokerage shown in ST3 returns and ledger account - Impugned orders containing
finding that relevant records or
documentary evidence not produced by appellant - Reconciliation statement produced and the
same requiring examination - Matter
remanded for fresh adjudication - Section 73 of Finance
Act, 1994. [paras 2, 5,
6]
Case remanded
(iii) 2010 (19) S.T.R. 242 (Tri. - Ahmd.) IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD [COURT NO.
II] Shri Ashok Jindal, Member (J) COMMISSIONER OF SERVICE TAX, AHMEDABAD Versus PURNI ADS.
PVT. LTD. Final Order Nos. A/372-373/2010-WZB/AHD, dated 23-4-2010 in Appeal Nos. ST/154155/2009
Demand - Assumptions and presumptions - Short payment of Service tax - Audit detected difference
between amounts shown in ST-3 return and balance sheet - Finding of
Commissioner (Appeals)
that method adopted for reconciliation of income incomplete and faulty, sustainable - Receipts held
as taxable, without adducing evidence - Tax cannot be assessed merely on assumptions and
presumptions Onus to prove with sufficient evidence not discharged by original authorityEntire demand based on assumption, without evidence - Explanation
given by assessee to
reconcile differences pointed out by Department, not considered by adjudicating authority Impugned order upheld - Section 73 of
Finance Act, 1994. [paras 7, 8]
Appeals rejected
(iv) 2009 (16) S.T.R. 63 (Tri. - Chennai) IN THE CESTAT, SOUTH ZONAL BENCH, CHENNAI Ms. Jyoti
Balasundaram, Vice-President and Shri P. Karthikeyan, Member (T) SIFY TECHNOLOGIES LTD.
Versus COMMISSIONER OF SERVICE TAX, CHENNAI Final Order No. 657/2009, Stay Order No.
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504/2009 and Misc. Order No. 309/2009, dated 4-6-2009 in Application Nos. ST/S/56/2009 and
ST/EH/42/2009 in Appeal No. ST/82/2009
Demand - Short payment - Demand of Service tax of over Rs. 1.86 crores - Details of tax paid on
disputed services and liability furnished in reply to show cause
notice- Discrepancies found by
adjudicating authority between figures furnished by appellants but no attempt made to verify and
ascertain correct figures - Reconciliation possible only after removal of details like realization from
exempted
services,export of services, sales, etc. - Variation between figures in reply to SCN and
ST-3 returns noticed in impugned order but demand confirmed ignoring one
class of variations Issue stated as arising due to errors in reporting and appellant
undertaking to reconcile figures Matter remanded for fresh adjudication - Section 73 of Finance Act, 1994. [paras 1, 4, 5, 7]
Case remanded
(v) 2013 (30) S.T.R. 62 (Tri. - Ahmd.) IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD [COURT NO. II]
Shri B.S.V. Murthy, Member (T) BHOGILAL CHHAGULAL & SONS Versus COMMISSIONER OF S.T.,
AHMEDABAD Final Order No. A/669/2012-WZB/AHD and Stay Order No. S/811/2012-WZB/AHD,
dated 10-5-2012 in Application No. ST/Stay/251/2012 in Appeal No. ST/107/2012
Demand - Short payment of Service Tax - Difference in value shown in Balance Sheet and declared
in ST-3 Returns as per CERA party audit report - Records of relevant period verified and
reconciliation of Balance Sheet and ST-3 returns conducted by Service Tax wing also - Tax liability
discharged along with interest HELD : Once records verified, reconciliation conducted and
period of short levy covered by verification, confirmation of demand amounts to duplication of
demand No reasons cited for non acceptance of impugned report and worksheet by lower
authorities - Also, amount actually paid lesser and short levy present for subsequent
period
Therefore, matter to be considered in light of audit report - Specific
observation to be given
for reasons of confirmation of amount demanded in CERA party’s report if same already verified by
Department - Impugned order set aside - Matter remanded for fresh consideration - Section 73 of
Finance Act, 1994. [paras 4, 5]
Appeal allowed
17.
So, from the above it was clear that department had not taken factual fact in to account &
added back TDS receivable as income in each year & demanded for the differential service tax, which has
not been demandable & justifiable, so notice for the differential service tax has to be quashed/dropped.
18.
Regarding whether demand of service tax on the basis monthly reconciliation without going
to the actual receipt was sustainable or not, they submitted that the department had carried out
monthly reconciliation of the April-2008 month , where by mistake in ST-3 return amt Rs. 5,43,611/-,
which has been already taken into total of april-2008 month calculation, even in St-3 return also noticee
has not taken such figure in calculation. They also produced the receipt statement in support of the
contention that, no such extra receipt during the impugned month. So department contention regarding
the liabilities of service was not sustainable. Further they drew attention towards the fact that, if any
difference has been there as contended by the department, then yearly reconciliation have a difference ,
but that is no so in their case & as per supra submission in para 3.1.So the contention of the department
for the demanding of the service tax is baseless & assumption basis required to be quashed.
19.
Regarding whether Demand of service tax was payable on the income accrual basis in the
year 2008-09 or on receipt basis in subsequent year, when service tax has been discharged on receipt
basis on the amounting to Rs.2,02,902/- in subsequent period, that during the impugned period have
followed to pay Service tax on as on date of receipt to their account, which notice are in receipt of credit
in the month of May-2009. So they have deposited service tax during the year 2009-10 & produce the
documentary evidence in that respect. While department has asked to pay service tax on the accrual
basis, which is not sustainable in the eyes of law & required to be dropped.
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20. Further they drew attention towards the statutory provision as applicable during the impugned
period are as under:
“Payment of service tax. - (1) The service tax on the value of taxable services received during
any calendar month shall be paid to the credit of the Central Government by the 5th of the
month immediately following the said calendar month:
Provided further that where the appellant is an individual or proprietary firm or partnership
firm, the service tax on the value of taxable services received during any quarter shall be paid
to the credit of the Central Government by the 5th of the month immediately following the
said quarter."
(2) The assessee shall deposit the service tax liable to be paid by him with the bank designated
by the Central Board of Excise and Customs for this purpose in Form TR-6 or in any other
manner prescribed by the Central Board of Excise and Customs.
(3) Where an assessee has paid to the credit of Central Government service tax in respect of a
taxable service, which is not so provided by him either wholly or partially for any reason, the
assessee may adjust the excess service tax so paid by him (calculated on a pro rata basis)
against his service tax liability for the subsequent period, if the assessee has refunded the
value of taxable service and the service tax thereon to the person from whom it was received.
(4) Where an assessee is, for any reason, unable to correctly estimate on the date of deposit
the actual amount payable for any particular month or quarter, as the case may be, the
assessee may make a request in writing to the Central Excise Officer to make a provisional
assessment of the tax on the basis of the amount deposited and the Central Excise Officer,
may, on receipt of such request, order provisional assessment of tax and where the Central
Excise Officer makes a provisional assessment, the provisions of Central Excise Rules, 1944
relating to provisional assessment, except so far as it relates to execution of bond, shall, so far
as may be, apply to such assessment.
(5) Where an assessee under sub-rule (4) requests for a provisional assessment he shall file a
statement giving details of the difference between the service tax deposited and the service
tax liable to be paid for each month in a memorandum in Form ST-3A accompanying the
quarterly or half yearly return, as the case may be.
(6) Where the assessee submits a memorandum in Form ST-3A under sub-rule (5), it shall be
lawful of the Central Excise Officer to complete the assessment, wherever he deems it
necessary, after calling such further documents or records as he may consider necessary and
proper in the circumstances of the case.
Explanation. - For the purpose of this rule and rule 7, “Form TR-6" means a memorandum or
challan referred to in rule 92 of the Treasury Rules of the Central Government”.
So from the above it was clear that service provider has been liable to discharge service tax only on
receipt basis, which they had complied & discharged regularly. So demand of service tax amt to Rs.
202902/- has to be dropped.
21. They also relied in support of the contention on the following CESTAT citation:
(i) 2011 (24) S.T.R. 723 (Tri. - Del.) IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI [COURT NO. II] S/Shri
D.N. Panda, Member (J) and Sahab Singh, Member (T) MOON NETWORK PVT. LTD. Versus
COMMISSIONER OF CENTRAL EXCISE, KANPUR Final Order No. ST/274/2011(PB), dated 1-6-2011 in
Appeal No. ST/16/2007
Broadcasting service - Cable operator - Section 2(c) of Prasar Bharti (Broadcasting Corporation of
India) Act, 1990 defining ‘broadcasting’ to mean dissemination of any form of communication like
signals, writing, picture, images and sound through space or cable, to general public directly or
indirectly through medium of relay - Cable operator providing viewables through cable found to be
providing broadcasting service liable to Service tax under Section 65(105)(zk) ibid, even though there
was no capturing of viewables from satellite - However, for period from 16-7-2001 to 9-7-2004, cable
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operator was entitled to exemption benefit under Notification No. 8/2001-S.T. and was liable to
Service tax w.e.f. 9-7-2004 till 31-7-2005, when said exemption notification was rescinded - Section
65(15) of Finance Act, 1994. [paras 13, 14]
Demand - Reconciliation of tax liability - Figures in balance sheet and books of account seized from
computer of assessee should not be in variance with those submitted by them, and in case of
variation, penalty has to be imposed - Since Service tax is levied on receipt basis, it excludes payment
for services provided in past and future - Receipts of current taxable period is to be determined to
avoid double taxation of figures of past or future realizations - Every care is to be taken to tax
receipts of the taxable period only in which service was provided - Section 73 of Finance Act, 1994.
[paras 12.1, 12.2, 12.6]
Penalty - Imposition of - No finding in adjudication order about mala fide or intention to evade
Service tax - Search of premises of assessee and use of some pass words to operate computer, could
not ipso facto give rise to penal consequences of law unless data in computer was widely different to
figures claimed by assessee - Section 78 of Finance Act, 1994. [paras 12.3, 12.4]
Penalty - Imposition of - Delay in payment of Service tax - New levy of Service tax and liability to be
ascertained by reconciliation of past, future figures and current receipts - Such delay needs to be
redressed by imposition of penalty of Rs. 100/- per day under Section 76 of Finance Act, 1994. [paras
12.5, 16]
Penalty - Imposition of - Classification dispute involving interpretation of law deserves lenient
consideration - In that view, full relief granted from penalty under Section 78 of Finance Act, 1994.
[para 15]
Interest - Liability of - It is payable after determination of actual liability of tax - Section 75 of Finance
Act, 1994. [paras 12.6, 17]
Appeal partly allowed
So on the above basis demand of service without receipt was not sustainable, requested to drop the
proceeding in the interest of justice.
22
Regarding whether when they had been following centralized accounting & billing from the
Ahmedabad , centralized registration require or not, if yes, then non registration were amount to
denial of cenvat credit amt to Rs.10,25,059/- or not.
23 They reiterated the basic provision as under:
“RULE [4. Registration. — (1) Every person liable for paying the service tax shall make an application to the
[concerned Superintendent of Central Excise] in Form ST-1 for registration within a period of thirty days from the date
on which the service tax under [section 66B] of the Finance Act, 1994 (32 of 1994) is levied :
Provided that where a person commences the business of providing a taxable service after such service has been levied,
he shall make an application for registration within a period of thirty days from the date of such commencement :
[Provided further that a person liable for paying the service tax in the case of taxable services referred to in sub-section
(4) or sub-section (5) of section 66 of the Finance Act, 1994 (32 of 1994) may make an application for registration on or
before the 31st day of December, 1998 :]
[Provided also that a person liable for paying the service tax in the case of taxable services referred to in sub-clause
(zzp) of clause (105) of section 65 of the Act may make an application for registration on or before the [31st day of
March, 2005.]]
[ *
*
*
*
*
*]
[(1A) For the purposes of sub-rule (1), the Central Board of Excise and Customs may, by an order specify the
documents which are to be submitted by the noticee alongwith the application within such period, as may be specified
in the said order.]
[(2)
Where a person, liable for paying service tax on a taxable service,
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(i)
provides such service from more than one premises or offices; or
(ii)
receives such service in more than one premises or offices; or,
(iii)
is having more than one premises or offices, which are engaged in relation to such service in any other manner,
making such person liable for paying service tax,
and has centralised billing system or centralised accounting system in respect of such service, and such
centralised billing or centralised accounting systems are located in one or more premises, he may, at his option, register
such premises or offices from where centralised billing or centralised accounting systems are located.
(3)
The registration under sub-rule (2), shall be granted by the Commissioner of Central Excise in whose jurisdiction
the premises or offices, from where centralised billing or accounting is done, are located:
Provided that nothing contained in this sub-rule shall have any effect on the registration granted to the premises or
offices having such centralised billing or centralised accounting systems, prior to the 2nd day of November, 2006.]
(3A) Where an noticee is providing a taxable service from more than one premises or offices, and does not have any
centralized billing systems or centralized accounting systems, as the case may be, he shall make separate applications
for registration in respect of each of such premises or offices to the jurisdictional Superintendent of Central Excise.]”
23.1
So from the above it was clear that it is optional for the registration of centralize, that they
have centralized billing & accounting so there were no need for the centralized registration in their
case ,that it was undisputed fact that service has been used for the providing of output service &
cenvat avail on the basis of the proper documents as per rule 9 of CCR-2004.So they have rightly
availed the cenvat credit as per rule CCR-2004. Demand of cenvat may be dropped.
23.2
Noticee also relied in support of the contention on the following cestat decision:
(i) 2010 (19) S.T.R. 506 (Tri. - Bang.) IN THE CESTAT, SOUTH ZONAL BENCH, BANGALORE
S/Shri M.V. Ravindran, Member (J) and P. Karthikeyan, Member (T) MANIPAL ADVERTISING
SERVICES PVT. LTD. Versus C.C.E., MANGALORE Final Order No. 1241/2009, dated 18-102009 in Appeal No. ST/654/2008
Cenvat credit of Service tax - Documents for availing credit - Credit availed on invoices issued
in the name of own branch offices denied as noticee not registered under centralised
registration and not possible to verify whether branch offices availed credit or not - Branch
offices not registered - No dispute that noticee having certralized billing and accounting
system at Manipal and same office registered - Service tax liability discharged from
registered premises - Documents on which credit taken paid from premises wherein
registration taken - Precedent Tribunal decisions though on Cenvat/Modvat credit on Central
Excise duty, applicable - Credit allowed - Rule 9 of Cenvat Credit Rules, 2004. [paras 6, 7, 8]
Appeal allowed
CASES CITED
(ii) 2011 (24) S.T.R. 628 (Tri. - Bang.) IN THE CESTAT, SOUTH ZONAL BENCH, BANGALORE
[COURT NO. II] Shri B.S.V. Murthy, Member (T) NUWARE SYSTEMS PVT. LTD. Versus
COMMISSIONER OF C. EX., BANGALORE
Stay Order Nos. 515-516/2011, dated 15-6-2011 in Application Nos. ST/Stay/571-572/2011 in
Appeal Nos. ST/908-909/2011
Stay/Dispensation of pre-deposit - Refund of credit for input services utilised in export of
software - Management and Repair services received in respect of car parking and common
area, whether has direct nexus with the export of software - Services used for repair and
maintenance of capital goods have direct nexus with the output service hence prima facie
credit of input service in question available - Dispensation of pre-deposit granted and
recovery of the amount in question stayed - Sections 65(64) and 65(105)(zzg) of Finance Act,
1994 and Section 35F of Central Excise Act, 1944 - Rule 5 of Cenvat Credit Rules, 2004. [2009
(16) S.T.R. 198 (Tribunal) followed]. [para 2]
Stay/Dispensation of pre-deposit - Cenvat credit - Credit for input services - Services neither
rendered from registered premises nor rendered from registered branch office - Noticee
having centralised billing and accounting system, non-registration of branch office would not
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effect availment of Cenvat credit - Prima facie credit of input service available - Dispensation
of pre-deposit granted and recovery of the amount in question stayed - Sections 65(64) and
65(105)(zzg) of Finance Act, 1994 and Section 35F of Central Excise Act, 1944. [para 3]
Stay/Dispensation of pre-deposit - Credit for input services - Renting of premises - Rent
agreement originally entered with husband but subsequently rent divided and paid equally to
husband and wife - Both husband and wife Registered with Service Tax Department and
collecting Service tax from the appellant and paying to the Department - Prima facie credit of
Service tax paid on rent as input service not deniable merely because the agreement was
entered only with husband and there is nothing on record that wife was not the owner nor
she has paid Service tax - Dispensation of pre-deposit granted and recovery of the amount in
question stayed - Sections 65(64) and 65(105)(zzg) of Finance Act, 1994 and Section 35F of
Central Excise Act, 1944. [para 5]
Stay granted
(iii) 2010 (17) S.T.R. 587 (Tri. - Ahmd.) IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD
[COURT NO. II] Ms. Archana Wadhwa, Member (J) COMMISSIONER OF CENTRAL EXCISE, VAPI
Versus ITW INDIA LTD.
Final Order Nos. A/1657-1658/2009-WZB/AHD, dated 28-7-2009 in Appeal Nos. ST/180181/2009
Cenvat credit of Service tax - Documents for availing credit - Cenvat credit of Service tax held
as admissible in impugned order even if bills in the name of place of centralized registration No dispute that input services received and utilized - Well settled that substantive benefit not
deniable when name and address of head office or branch office absent in invoices Impugned order sustainable - Rules 9 and 14 of Cenvat Credit Rules, 2004. [para 2]
Cenvat credit of Service tax - Input service - Mobile phones - Issue settled by various decisions
- Impugned order extending credit of Service tax, sustainable - Rules 2(l) and 14 of Cenvat
Credit Rules, 2004. [para 3]
Appeals rejected
24 . That the Entire demand is time barred
24.1
That the show cause notice covers the period of 2008-09. The show cause notice had been
issued on 22.10.2013 & where as fact in knowledge of the dept’s w.e.f. 01.04.2008.Thus, the show
cause notice had invoked the extended period of limitation. The show cause had baldly alleged that the
Noticee have suppressed the information from the department; that that the extended period of
limitation cannot be invoked in the present case since there is no suppression, willful misstatement on
their part .That they submitted that they clearly indicated in ST-3 returns furnished by them clearly
that they are setting off excess service tax paid during the preceeding period. where as fact in
knowledge of the dept’s w.e.f. 01.04.2008. Therefore, question of any suppression, willful
misstatement on the part of the Noticee does not arise. The show cause notice had entirely failed to
make out any case of suppression, willful misstatement on the part of the Noticee.
24.2
Further, the department had issued circulars/ service tax rule / cenvat credit rule clarifying
the allow ability of cenvat credit , which has been used as an input service for the providing of output
service Therefore, the question of any willful suppression, misstatement does not arise in the present
case.
24.3
Penalty cannot be imposed under Section 78 of the Finance Act, 1994 in the present case.
That the show cause notice had proposed to impose penalty under Section 78 of the Finance Act, 1994.
They have demonstrated above that they had not suppressed any information from the department
and there was no wilful misstatement on their part .It was therefore clear from the statutory
provisions that for imposing penalty under section 78 of the Act it has to be established that there is a
short payment of service tax by reason of fraud, collusion, willful mis-statement, suppression of facts
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or contravention of any provisions of the Act or rules made there under with intent to evade payment
of service tax. It was submitted that the Show Cause Notice had not given any reason whatsoever for
imposing the penalty under Section 78 of the Act. The show cause notice merely alleging baldly that
there is suppression on the part of the Noticee. The present show cause notice had not brought any
evidence/ fact which can establish that they had suppressed anything from the department. Hence no
case had been made out on the ground of suppression of facts or willful misstatement of facts with the
intention to evade the payment of service tax. Hence the present case was not the case of fraud,
suppression, willful misstatement of facts, etc. Hence penalty under section 78 of the Act cannot be
imposed. The show cause notice was liable to be dropped on this ground also. Further, they are
entitled to entertain the belief that there activities were not taxable. That cannot be treated as
suppression from the department. The Noticee rely on Hon’ble Gujarat High Court decision in case of
Steel Cast Ltd. 2011 (21) STR 500 (Guj).
24.4
They also relied on following case law in support of our contention.
i. CCE, Bhopal V. Thyrocare Services [2006(4) STR 200 (Tri.-Del.)];
Genuine interpretational dilemma as to correct classification of service and possibility existing of
assessee being misguided – Assessee having justifiable reasons to believe that they appellantre
not covered under service tax – Setting aside of penalty upheld.
ii. CCE, Jaipur V. Sikar Ex-Serviceman Appellantlfare Co-Op. Soc Ltd. [2006(4) STR 213 (Tri.-Del.)]; As
interpretation of law involved, setting aside of penalty upheld.
iii. Suri Colour Labs (P) Ltd. CCE, Meerut-II [2006(4) STR 96 (Tri.-Del.)]; Since appellants under
confusion in respect of eligibility to benefit of notification 12/2003-ST, imposition of penalty not
warranted.
iv. Surat Municipal Corpn. V. CCE, Surat [2006(4) STR 44 (Tri.-Del.)] Appellant appellantre under
bonafide belief that they are not liable to pay service tax penalty not imoposable in view of
section 80.
v. BST Ltd. V. CCE, Cochin [2006(4) STR 40 (Tri.-Bang.)] Penalty not justified when activity not
taxable
vi. Cosmic Dye Chemical V. CCE, Bombay [1995(75) ELT 721(SC)] When bonafide impression is gained
from 2 CBEC Circulars, no penalty can be imposed. In our case also, based on bonafide
dependence on circular issued by CBEC, appellant had determined the classification and hence
cannot be imposed.
25. That Penalty cannot be imposed under Section 76 & 77 of Finance Act, 1994
25.1
That they submitted that the penalty under Section 76 & 77 was not imposable since there
was no short payment of service tax. As per the merits of the case, they are not liable for payment of
Service tax.
25.2
It was submitted that for imposing penalty, there should be an intention to evade payment
of service tax on their part of. The penal provisions are only a tool to safeguard against contravention
of the rules. They submitted that they have always been and are still under the bonafide belief that
they are not liable for payment of service tax. Such bonafide belief was based on the grounds given
above. There was no intention to evade payment of service tax as mentioned in the ground above.
Therefore, no penalty was imposable in the present case.
25.3
In support of their above view, reliance was placed on the decision of the Hon'ble Supreme
Court in the case of Hindustan Steel Ltd. v The State of Orissa reported in AIR 1970 (SC) 253. The above
decision of the Apex Court, was followed by the Tribunal in the case of Kellner Pharmaceuticals Ltd. Vs
CCE, reported in 1985 (20) ELT 80, and it was held that proceedings under Rule 173Q are quasi-criminal
in nature and as there was no intention on the part of the Noticee to evade payment of duty the
imposition of penalty cannot be justified. That the ratio of these decisions squarely applied in all force
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to the present case. In the present case, there was neither any mala fide intention nor any intention to
evade payment of tax. In view of the foregoing, no penalty is imposable.
25.4
The Noticee submitted that even if any contravention of provisions the same was solely on
account of their bonafide belief and such bonafide belief was based on the reasons stated above. The
contraventions, if any, were not with the intention to willfully evade payment of service tax. Reliance is
placed on the judgment of the Hon’ble Supreme Court in the case of Pushpam Pharmaceuticals
Company v CCE 1995 (78) ELT 401 (SC) wherein it was held as follows:
4. Section 11A empowers the Department to re-open proceedings if the levy has been short
levied or not levied within six months from the relevant date. But the proviso carves out an
exception and permits the authority to exercise this power within five years from the relevant date
in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of
the word both in law and even otherwise is well known. In normal understanding it is not different
then what is explained in various dictionaries unless of course the context in which it has been used
indicates otherwise. A perusal of the proviso indicates that it has been used in company of such
strong words as fraud, collusion or willful default. In fact it is the mildest expression used in the
proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not
mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the
correct information was not disclosed deliberately to escape from payment of duty. Where facts
are known to both the parties the omission by one to do what he might have done and not that he
must have done, does not render it suppression.
[Emphasis Supplied]
25.5
Similar was the view of the Hon’ble Supreme Court in the case in CCE Vs. Chemphar Drugs
and Liniments 1989 (40) ELT 276 (SC), (Supra).
25.6
That the issue involved in the present case was of interpretation of statutory provisions. For
that reason also, penalties cannot be imposed.
Without prejudice to the above submissions, it was submitted that it is a settled principle of law
that if a dispute is arising out of interpretation of the provisions of statute or exemption notification,
no penalty can be levied. If at all it is held that the service tax is payable as demanded by the Show
Cause Notice, then also it can be said that it is a dispute arising out of interpretation of the provisions
of the law and not because of any intentional avoidance of tax. The Noticee place reliance on the
following case laws in this regard:
a)
Bharat Wagon & Engg. Co. Ltd. v. Commissioner of C. Ex., Patna, (146) ELT 118 (Tri. – Kolkata),
b)
Goenka Woollen Mills Ltd. v. Commissioner of C. Ex., Shillong, 2001 (135) ELT 873 (Tri. –
Kolkata).
c)
Bhilwara Spinners Ltd. v. Commissioner of Central Excise, Jaipur, 2001 (129) ELT 458 (Tri. – Del.),
For this reason also, the present show cause notice was liable to be dropped.
26. That Section 80 will be applicable in the present case
That moreover, Section 80 of the Act provides that no penalty shall be imposed on the Noticee for
any failure referred to in sections 76, 77 or 78 of the Act, if they prove that there was reasonable
cause for the said failure. Thus, the Act statutorily provides for waiver of penalty. In the present
case, there was a bonafide belief on their part that the activities carried out by them are not
taxable. Therefore, there was reasonable cause for failure, if any, on their part to pay service tax
and to file service tax return. Hence, in terms of section 80 of the Act, penalties cannot be imposed
under Sections 76, 77 and 78 of the Act. In this regard, reliance was placed on the following
judgments:
(i)
ETA Engineering Ltd. vs. CCE, Chennai, 2004 (174) E.L.T 19 (T-LB)
18
(ii)
(iii)
OIO No. 42/STC/AHD/ADC(JSN)/2013-14
Flyingman Air Courier Pvt. Ltd. vs. CCE 2004 (170) ELT 417 (T)
Star Neon Singh vs. CCE, Chandigarh, 2002 (141) ELT 770 (T)
For this reason also, the show cause notice was liable to be dropped.
PERSONAL HEARING :
27.
The personal hearing in the matter was fixed on 26.2.2013 and Shri Vipul, Khandhar
CA appeared for the same on behalf of the assessee. He reiterated the written submissions
made in their reply dated 18.11.2013 which is taken on record. He stated that part of the
issues is already decided for earlier periods in their own case . He also submitted OIO No. 0506/ORS/STC-AHD/DSN/2013-14 dated 30.8.2013 in their favour..
DISCUSSIONS AND FINDINGS:
28
I have carefully gone through the case records and submissions made by the assessee.
The case on hand pertains on the following issues:
(i)
Whether Cenvat credit availed by the noticee on the basis of documents
pertaining to the expenses incurred at their Mumbai, Nadiad and Mehsana branches
totally amounting to Rs. 10,25,059/- (as detailed in Annexure-A) was admissible.
(ii)
Whether demand of service tax amount of Rs 1,50,829/- on the basis of
reconciliation of income with the books of accounts vis-a vis ST-3 returns, during the
year 2008-09 was sustainable.
(iii)
Whether there was a totaling mistake while arriving at the value for payment
of service tax on ‘Test, Inspection and Certification services’ and short payment of
service tax to the tune of Rs. 67,190/- thereof .
(iv)
Whether demand of service tax amounting to Rs. 2,02,902/- was recoverable
from the noticee, as they had issued debit note bearing No 19 & 20 both dated
7.7.2008 to M/s. Wockhardt Ltd for Rs 7,77,600/- and Rs 8,64,000/- and recovered
service tax of Rs 96,111/- and Rs 1,06,791/- but could not provide the proof of
payment to the Govt. exchequer.
29.
Now, I take on hand first issue with regard to admissibility of Cenvat credit availed by
the noticee ,on the basis of documents pertaining to the expenses incurred at their Mumbai,
Nadiad and Mehsana branches. In the instant case, the noticee was registered with the
Department , however, the said branches were not.
29.1 In this regard, I would like to reproduce the relevant provisions for registration under
Rule 4 of Service Tax Rules, 1994, which read as under:
"RULE 4. Registration. — (1) Every person liable for paying the service tax shall make
an application to the [concerned Superintendent of Central Excise] in Form ST-1 for
registration within a period of thirty days from the date on which the service tax under
[section 66B] of the Finance Act, 1994 (32 of 1994) is levied :
Provided that where a person commences the business of providing a taxable service
after such service has been levied, he shall make an application for registration within
a period of thirty days from the date of such commencement : [Provided further that a
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person liable for paying the service tax in the case of taxable services referred to in
sub-section (4) or sub-section (5) of section 66 of the Finance Act, 1994 (32 of 1994)
may make an application for registration on or before the 31st day of December,
1998:]
[Provided also that a person liable for paying the service tax in the case of taxable
services referred to in sub-clause (zzp) of clause (105) of section 65 of the Act may
make an application for registration on or before the [31st day of March, 2005.]]
[(1A) For the purposes of sub-rule (1), the Central Board of Excise and Customs may,
by an order specify the documents which are to be submitted by the assessee
alongwith the application within such period, as may be specified in the said order.]
[(2)
Where a person, liable for paying service tax on a taxable service,
(i) provides such service from more than one premises or offices; or
(ii) receives such service in more than one premises or offices; or,
(iii) is having more than one premises or offices, which are engaged in relation to such
service in any other manner, making such person liable for paying service tax,
and has centralized billing system or centralized accounting system in respect of such
service, and such centralized billing or centralized accounting systems are located in
one or more premises, he may, at his option, register such premises or offices from
where centralized billing or centralized accounting systems are located.
(3) The registration under sub-rule (2), shall be granted by the Commissioner of Central
Excise in whose jurisdiction the premises or offices, from where centralized billing or
accounting is done, are located:
Provided that nothing contained in this sub-rule shall have any effect on the
registration granted to the premises or offices having such centralized billing or
centralized accounting systems, prior to the 2nd day of November, 2006.]
(3A) Where an assessee is providing a taxable service from more than one premises or
offices, and did not have any centralized billing systems or centralized accounting
systems, as the case may be, he should make separate applications for registration in
respect of each of such premises or offices to the jurisdictional Superintendent of
Central Excise."
29.2 I find that the noticee vide a statement recorded under Section 14 of the CEA, 1944
made applicable to Service Tax vide Section 83 of the Finance Act, 1994, Shri Ronak
Sureshbhai Shah, Manager (Finance & Accounts) dated 7.07.2011, has contended that they
have centralized billing & accounting of Ahmedabad. It is not the case of the noticee that they
are paying service tax at Ahmedabad for all their services including services provided at their
Mumbai, Nadiad and Mehsana branches also. The only ground of having centralized billing or
accounting is of no consequence unless the service tax on all services in such centralized
billing is also paid at Ahmedabad. Mere centralized billing at Ahmedabad would not make
them entitled for cenvat credit on services received and used at their branches in Mehsana,
Nadia and Mumbai, so long it is not shown that the service tax for those services is also paid
at Ahmedabad.
29.3 In light of above, I am inclined to hold that the Cenvat credit on the basis of
documents pertaining to the expenses incurred at their Mumbai, Nadiad and Mehsana
branches totally amounting to Rs. 10,25,059/- ( as detailed in Annexure-A ) is not admissible
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and I confirm the same . Accordingly, I order it to be recovered under Rule 14 of Cenvat Credit
Rules, 2004 read with Section 73 of the Finance Act, 1994.
30.
Now I come to the second issue i.e. whether demand of service tax amount of Rs
1,50,829/- on the basis of reconciliation of income with the books of accounts vis-a vis ST-3
returns, during the year 2008-09 was sustainable or not.The noticee had contended that
there was no short payment of service tax, as the department has taken addition of TDS
receivable & deduction for the bad debts written off has not been allowed, so there is
difference of service tax. I find that the noticee has submitted that the difference was due to
addition of the TDS receivable and the deduction for the bad debts written off.
30.1 I find in the ‘reconciliation’ submitted for the year 2008-09 by the noticee in Para 3.1
of their defence reply, the addition of TDS receivable is NIL whereas the Bad debts written off
is shown as Rs. 73,75,570/- . Thus the noticee has claimed to have reduced the taxable
income by deducting the ‘Bad debt written off’. And, therefore the Net Taxable income
(inclusive of Service Tax) as per Books of accounts, after allowing other deductions comes to
Rs. 108,607,427/- whereas the taxable value ( inclusive of Service Tax) as per ST-3 returns
comes to Rs. 109,220,678/- , and thus the noticee claims to have paid Rs. 75,798/- excess
Service Tax, for the year.
30.2 I find that that the Audit has added ‘TDS received related to unpaid bills’ i.e Rs.
43,34,683/- and also allowed/deducted Rs. 23,50,217/- being the ‘TDS received in the
previous year related to bills paid in the current year’ . Thus I find that the head under ‘TDS’
has been accounted for by the Audit
30.3 However, I find that in situations of writing off bad debts, Rule 3 of Service Tax
Rules,1994 comes into play, which is reproduced as under :
(3) Where an assessee has issued an invoice, or received any payment,
against a service to be provided which is not so provided by him either wholly
or partially for any reason, [or where the amount of invoice is renegotiated due
to deficient provision of service, or any terms contained in a contract] the
assessee may take the credit of such excess service tax paid by him, if the
assessee [(a)
has refunded the payment or part thereof, so received for the service
provided to the person from whom it was received; or]
(b)
has issued a credit note for the value of the service not so provided to
the person to whom such an invoice had been issued.”]
30.4 I find that the noticee has neither produced any of the documents as envisaged under
clause (a) and (b) of the abovesaid Rule. In view of the above discussions, I cannot allow the
so-called ‘Bad debts written off’ to be waived of service tax and consider it as an integral part
of the taxable value. In view of the above, I hold that the noticee has short paid service tax
amount of Rs 1,50,829/- and order it to be recovered under Section 73 of the Act.
31.
Now I come to the third issue i.e whether there was a totaling mistake by the noticee
while arriving at the value for payment of service tax on Test, Inspection and Certification
services and short payment of service tax to the tune of Rs. 67,190/- thereof.
31.1 I find that the noticee had contended that the department had carried out monthly
reconciliation for the month of April 2008 whereby there was a mistake in ST-3 return
amount of Rs 5,43,611/- which has been already taken into total of April 2008 month
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calculation and that even in ST-3 return they have not taken such figure in calculation.
Further, they have produced the receipt statement in support of the contention that no such
extra receipt during the impugned month. On perusal of the ST3 for April 2008, I find that ,
the Gross Amount received (i) against service provided is Rs. 1,43,69,530/- , and (ii) in
advance for service to be provided is Rs. 5,43,611/-. While calculating the taxable value at
column (e), the value is shown as Rs. 73,92,407/- . However, it should be Rs. 79,36,018/(taking into account Rs. 5,43,611/-). The noticee has submitted an unsigned Annexure
wherein they have shown the details of total receipt during the month of April 2008, in which
the receipt is shown as Rs. 68,48,796/- and advance received is shown as Rs. 5,43,611/-. Thus
the total taxable receipts is shown as Rs. 73,92,407/-. On perusal of the Annexure, I find that
they have not provide the breakup of the Gross Amount received against service provided i.e.
Rs. 1,43,69,530/-, and therefore as to how the amount of Rs. 68,48,796/- has been
arrived/correct is not ascertainable. In view of the above, I come to the conclusion that Rs.
5,43,611/- has not been taken into account while arriving at the total taxable value in the
month of April 2008, and I confirm the service tax amounting to Rs. 67,190/- and order it to
be recovered under Section 73 of the Act.
32.
Now I come to the fourth issue i.e whether demand of service tax amounting to Rs.
2,02,902/- was recoverable from the noticee, as they had issued debit note bearing No 19 &
20 both dated 7.7.2008 to M/s. Wockhardt Ltd for Rs 7,77,600/- and Rs 8,64,000/- and
recovered service tax of Rs 96,111/- and Rs 1,06,791/- but could not provide the proof of
payment to the Govt exchequer
32.1 In above connection, I find that the issue here is that the noticee had issued debit
notes bearing No 19 & 20 both dated 7.7.2008 to M/s. Wockhardt Ltd for Rs 7,77,600 and Rs
8,64,000/- . They have also recovered service tax of Rs 96,111/- and Rs 1,06,791/respectively by issuing another debit notes No 35 and 36 both dated 22.9.2008 from the
recipient, and did not provide any proof of payment to the Govt exchequer. The noticee has
contended that deposited service tax during the year 2009-10 & that they have produced the
documentary evidence in that respect. I find that the the noticee has submitted another
unsigned Annexure as “MAY-09”. I have gone through the said Annexure and I cannot find
any correlation with the above issue, except that it says DN. No. 35 and DN No. 36 against
Wockhardt. The documentary evidence against the said deposit of service tax amount of Rs.
96,111/- and 1,06,791/- is absent, allegedly in the year 2009-10 is absent. In view of the
above, I come to the conclusion that Rs. 2,02,902/- has not been paid into the govt.
exchequer and I confirm the service tax amounting to Rs. 2,02,902/- and order it to be
recovered under Section 73 of the Act
33.
Further, I find that the noticee has contended that extended period was notapplicable in the present case. They have contended that the show cause notice covers the
period of 2008-09 , but was issued on 22.10.2013, and that all the facts were indicated in
their ST 3 returns. In this regard, I find that in this case, had the audit not been conducted by
the Department the short payment of service tax amounting to Rs. 4,20,921/- { Rs.1,50,829/+ Rs.67,190/- + Rs.2,02,902/-)(including Education cess & S & H Ed cess) and inadmissible
cenvat credit amounting to Rs. 10,25,059/- would have gone undetected. I find that the
noticee are a reputed organization and are well aware of the Rules & Regulations as laid
down under Service Tax Rules, 1994. I find that they were well aware of the facts regarding
such transactions thereof had not been disclosed before the department and therefore the
contention of the noticee that they have not suppressed the facts is not acceptable in this
case. Thus, the suppression with an intent to evade payment, on part of the noticee, is
proved beyond doubt and proviso to Section 73(1) of the Finance Act, 1994 has rightly been
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applied in the instant case and therefore, by their such act of omission and commission, the
noticee have rendered themselves liable for penalty. In this connection, I refer to the
judgment in the case involving Aircel Digilink India Ltd. v/s Commissioner of Central Excise,
Jaipur, as reported in 2006 (3) STR 386 (Tri.-Del) and the case involving Bharti Cellular Ltd. v/s
Commissioner of Central Excise, Delhi, as reported in 2006 (3) S.T.R. 423 (Tri.-Del). In both the
cases, the Hon. Tribunal upheld invocation of extended period after taking note of the fact
that appellants had not disclosed certain details and mode of computation in their ST-3
details and that there was nothing on record to suggest that appellants ever approached the
office of the service tax authorities to ascertain the details of their liability to pay the service
tax. Similarly, in case of Insurance & Provident Fund Department v/s. Commissioner of Central
Excise, Jaipur-I, 2006 (2) S.T.R. 369 (Tri.-Del.), Hon. Tribunal held that non-disclosure of full
amount of premium collected would attract invocation of extended period. The ratio of the
above judgments can be applied to the present case also as the noticee had had not only
suppressed the material facts from the department but has also failed to comply with law and
procedures, including payment of service tax. In view of the above, I hold that in the facts and
circumstances of the present case, proviso to section 73 (1) of Finance Act, 1994, is rightly
invoked for raising the demand for service tax against the noticee.
33.1 Hon’ble High Court of Gujarat in the case of CCE, Surat – I Vs Neminath Fabrics Pvt.
Ltd., reported at 2010 (256) ELT 369 (Guj), while deciding the similar issue in Central Excise,
has held that proviso can not be read to mean that because there is knowledge, suppression
which stands established disappears – concept of knowledge, by no stretch of imagination,
can be read into provisions – suppression not obliterated, merely because department
acquired knowledge of irregularities. The relevant para is reproduced below ;
“20. Thus, what has been prescribed under the statute is that upon the reasons
stipulated under the proviso being satisfied, the period of limitation for service of show
cause notice under sub-section (1) of Section 11A, stands extended to five years from
the relevant date. The period cannot by reason of any decision of a Court or even by
subordinate legislation be either curtailed or enhanced. In the present case as well as
in the decisions on which reliance has been placed by the learned advocate for the
respondent, the Tribunal has introduced a novel concept of date of knowledge and has
imported into the proviso a new period of limitation of six months from the date of
knowledge. The reasoning appears to be that once knowledge has been acquired by
the department there is no suppression and as such the ordinary statutory period of
limitation prescribed under sub-section (1) of Section 11A would be applicable.
However such reasoning appears to be fallacious inasmuch as once the suppression is
admitted, merely because the department acquires knowledge of the irregularities the
suppression would not be obliterated.”
33.2 In view of the above, I find that extended period for recovery of service tax short paid
by the noticee on rendering of said taxable services, under the proviso to section 73(1) of the
Finance Act, 1994 was rightly invoked and the SCN is sustainable on limitation. Therefore, the
service tax amount of Rs. 4,20,921/- is recoverable from the noticee along with Interest as
provided in proviso to Section 73(1) of the Finance Act, 1994 read with Section 75 of the Act
ibid & cenvat credit of Rs. 10,25,059/- is recoverable from the noticee along with Interest as
provided in proviso to Section 73(1) of the Finance Act, 1994 read with Rule 14 of the CCR,
2004.
34.
Since the noticee had not discharged service tax liability on the amount of taxable
value on the services mentioned in the foregoing paras and as demanded under the show
cause notice and therefore, they have contravened the provisions of Section 67 and 68 of the
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Finance Act, 1994 and thereby rendered themselves liable to penal action under Sections 76
& 78 of Finance Act 1994.
35.
As regards the issue of imposition of penalty under Section 76 of the Finance Act,
1994, I observe that penalty under Section 76 and 78 of the Finance Act, 1994 are mutually
exclusive w.e.f. 10.05.2008 and once penalty under Section 78 is imposed, no penalty under
Section 76 can be imposed in terms of the proviso inserted in Section 78 w.e.f 10.5.2008 in
this regard. Therefore, no penalty under Section 76 is imposable for the period from
10.5.2008 onwards. In the case before me, the demand of service tax is for the period from
2008 onwards, therefore, I hold that penalty under Section 76 of the said Act is imposable on
the noticee. I find that as the noticee has not paid service tax within the stipulated time
period as prescribed under Section 68 of the Finance Act, 1994 read with Rule 6 of the Service
Tax Rules, 1994, I hold them liable to penalty under Section 76 of the Finance Act, 1994. My
conclusion is also based on various decisions of Hon’ble High Courts & Tribunals as mentioned
below ;






CCE & ST Vs First Flight Couriers Ltd reported at 2007(8) STR 225 (Kar.)
UOI Vs Aakar Advertising, reported at 2008 (11) STR.5 (Raj.)
UOI Vs Shiv Ratan Advertisers reported at 2008 (12) STR 690 (Raj.)
Shiv Network Vs CCE, Daman reported at 2009 (14) STR 680 (Tri-Ahmd)
CCE, Vapi Vs Ajay Sales Agencies reported at 2009 (13) STR 40 (Tri–Ahmd)
Siddhi Motors Vs CCE, Rajkot reported at 2009 (15) STR 422 (Tri-Ahmd)
35.1 I further observe that the Hon’ble CESTAT in the case of M/s Gujarat Industrial
Security Force Society Vs CST, Ahmedabad, vide order No. A/1110/WZB/AHD/2010 dated
05.08.2010, has held that no lenient view can be taken under section 76 of the Finance Act,
1994. The relevant paras are reproduced below;
“2.
After hearing both the sides, I find that in this case, the assessee was registered
more than 6 years back and no explanation has been given by them for delayed filing of
return and delayed payment of service tax. Under these circumstances, I am not finding
fault in stand taken by the lower authority that penalty is imposable under section 76
and once it is held that penalty is imposable under section 76, the amount fixed as per
the provision of section 76 is required to be imposed. Under these circumstances, even
though the Ld. Advocate submitted that the appellant is a non profit organization, no
lenient view can be taken in view of the provisions of law.
3.
Accordingly, the appeal is rejected.”
35.2 Hon’ble High Court of Gujarat in the case of CCE & Cus. Vs Port Officer, reported at
2010 (19) STR 641 (Guj) has now settled the issue of penalty under Section 76. The relevant
para is reproduced below ;
“10. A plain reading of Section 76 of the Act indicates that a person who is liable to pay
service tax and who has failed to pay such tax is under an obligation to pay, in addition
to the tax so payable and interest on such tax, a penalty for such failure. The quantum
of penalty has been specified in the provision by laying down the minimum and the
maximum limits with a further cap in so far as the maximum limit is concerned. The
provision stipulates that the person, who has failed to pay service tax, shall pay, in
addition to the tax and interest, a penalty which shall not be less than one hundred
rupees per day but which may extend to two hundred rupees for everyday during
which the failure continues, subject to the maximum penalty not exceeding the
amount of service tax which was not paid. So far as Section 76 of the Act is concerned,
it is not possible to read any further discretion, further than the discretion provided by
the legislature when legislature has prescribed the minimum and the maximum limits.
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The discretion vested in the authority is to levy minimum penalty commencing from
one hundred rupees per day on default, which is extendable to two hundred rupees per
day, subject to a cap of not exceeding the amount of service tax payable. From this
discretion it is not possible to read a further discretion being vested in the authority so
as to entitle the authority to levy a penalty below the stipulated limit of one hundred
rupees per day. The moment one reads such further discretion in the provision it would
amount to re-writing the provision which, as per settled canon of interpretation, is not
permissible. It is not as if the provision is couched in a manner so as to lead to
absurdity if it is read in a plain manner. Nor is it possible to state that the provision
does not further the object of the Statute or violates the legislative intent when read as
it stands. Hence, Section 76 of the Act as it stands does not give any discretion to the
authority to reduce the penalty below the minimum prescribed.”
35.3 The Hon’ble High Court of Gujarat has further confirmed the above view in the case of
CCE Vs S J Mehta & Co., reported at 2011 (21) STR 105 (Guj.) and CCE Vs Bhavani Enterprises
reported at 2011 (21) STR 107 (Guj.).
36.
Now I come to the issue of imposition of penalty under Section 78 of the Finance Act,
1994. . I find that as the noticee had suppressed the facts with intention to evade payment
of service tax and avail inadmissible cenvat credit, penalty under Section 78 of the Finance
Act, 1994 read with Rule 15 of the CCR, 2004, is mandatorily imposable as has been held by
the Apex court in the case of Dharmendra Textile Mills Ltd-2008 (231) ELT 3 (SC) and
Rajasthan Spinning & Weaving Mills Ltd-2009 (238) ELT 3 (SC). Therefore, I hold that penalty is
imposable on the noticee under Section 78 of the Finance Act, 1994 read with Rule 15 of
CCR, 2004. I, therefore, hold that they have rendered themselves liable to penalty under
Section 78 of the Finance Act, 1994 and under Rule 15 of CCR, 2004. My above view also gets
support from below mentioned case laws;
 Shiv Network Vs CCE, Daman reported in 2009 (14) STR 680 (Tri.Ahmd.)
 CCE, Vapi Vs Ajay Sales Agencies reported in 2009 (13) STR 40 (Tri. Ahmd.)
 Order No. A/754/WZB/AHD/2010 dt. 09.06.2010 / 23.06.2010 in the case of M/s
Bajrang Security Services Vs CST, Ahmedabad.
 Order No. A/1937/WZB/AHD/2010 dated 08.10.2010 / 20.12.2010 in the case of M/s
Dhaval Corporation Vs CST, Ahmedabad.
36.1 I further observe that recently hon’ble High Court of Punjab & Haryana, in the case of
CCE Vs Haryana Industrial Security Services reported at 2011 (21) STR 210 (P&H), has also
upheld the penalty equal to service tax imposed under Section 78 of the Finance Act, 1994.
Hon’ble Karnataka High Court has also taken similar view in the case of CCE, Mangalore Vs K
Vijaya C Rai reported at 2011 (21) STR 224 (Kar.)
36.2 I also find that penalty under Section 76 ibid is provided for failure to pay service tax
whereas penalty under Section 78 ibid is for suppressing value of taxable service. In the
instant case, service tax liable to be paid in terms of Section 68 read with Rule 6 of the Service
tax Rules, 1994, have not been found paid as well as service tax has not been paid by
suppressing value of taxable service by reason of wilful mis-statement and suppression of
facts. Of course these two offences may arise in the course of same transaction, or from the
same action of the person concerned. But the incidents of imposition of penalty are distinct
and separate and even if the offences are committed in the course of same transaction or
arises out of the same act the penalty is imposable for ingredients of both offences, this
aspect was also considered by the Hon’ble High Court of Kerala in the case of Assistant
Commissioner, C.Ex. Vs Krishna Poduval – 2006 (1) STR 185 (Ker). I also find that the Hon’ble
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Mumbai Tribunal in the case of Golden Horn Container Services Pvt. Ltd. v/s Commr. of C. Ex.,
Raipur reported at 2009 (16) S.T.R. 422 (Tri.-Mumbai), has held that Section 76 provides for a
penalty who commits default simpliciter in payment of the tax whereas section 78 is a more
stringent penal provision, which provides harsher penalty who commits default with mens
rea. Since in this case also, the noticee has committed default with mens rea, the decision of
the tribunal is squarely applicable.
37.
Further, as regards imposition of simultaneous penalty, I place my reliance on the
judgment of Hon’ble High Court of Kerala in the case of Assistant Commissioner of Central
Excise v. Krishna Poduval (supra) which is aptly applicable to the present case. I find that the
imposition of penalty under sections 76 and 78 of the Act is for non payment of service tax
and suppression of value of taxable service respectively which are two distinct and separate
offences attracting separate penalties. I find that the said assessee have committed both the
offences and therefore penalties under section 76 and 78 of the Finance Act, 1994 are
imposable on the said service provider for the period upto 9.5.2008. Therefore, I am of the
view that in the facts and circumstances of the case, it is justifiable, if the penalty is imposed
under the provisions of Section 76 and 78 of the Finance Act, 1994, separately, following the
decisions of Hon’ble Kerala High Court and Mumbai tribunal (supra). My views are also
further supported by various decisions of tribunals in the cases of ;
a) Shiv Network v/s Commissioner of Central Excise & Customs, Daman reported at 2009
(14) S.T.R. 680 (Tri.-Ahmd.)
b) Commissioner of Central Excise, Vapi v/s Ajay Sales Agencies reported at 2009 (13)
S.T.R. 40 (Tri.-Ahmd.), and
c) Mett Macdonald Ltd. v/s Commissioner of Central Excise, Jaipur reported at 2001
(134) E.L.T. 799 (Tri.-Del.).
d) M S Shah & Co., Vs CST, Ahmedabad – Order No. A/1328/ WZB/ Ahd/ 2010 dated
30.06.2010 / 26.08.2010.
e) Bajarang Security Services Vs CST, Ahmedabad – Order No. A/745/ WZB/Ahd/2010
dated 09.06.2010 / 23.06.2010.
f) CESTAT, Principal Bench, New Delhi in the case of Bajaj Travels Ltd., Vs CCE,
Chandigarh – 2009 (16) STR 183 (Tri.Del.)
38.
As regard imposition of penalty under Section 77 of the Finance Act, 1994, I find that
the noticee has failed to assess the correct value and short paid service tax. I therefore find
this case a fit case of imposition of penalty under Section 77 of the Finance Act, 1994.
39.
In light of the aforesaid discussions and findings, I hold that the service tax amount of
Rs. 4,20,921/- alongwith interest is ordered to be recovered under Section 73 of the Finance
Act,1994 read with Section 75 of the Act ibid. Further, I disallow the cenvat credit of Rs.
10,25,059/- alongwith interest and order it to be recovered under Rule 14 of CCR, 2004 read
with Section 73 of the Finance Act, 1994. I also hold the noticee is liable to penalty under the
provisions of Rule 15(3) of CCR, 2004 and under Sections 76,77 and 78 of the Finance Act,
1994.
40.
As regards invoking Section 80 of the Finance Act, 1994 for waiver of penalty, I find
that the noticee has not produced any reasonable cause for the failure to reverse the cenvat
credit or to pay the service tax, except that it was their bonafide belief that the amounts
were not payable by them. I have already discussed the issues in the foregoing paras. I
observe that if the noticee had any doubt with regard to them, then being a registered service
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tax assessee, they should have approached the service tax authorities for clarification of
doubt to ascertain the taxability of the service provided by them.
40.1 On this issue I find that the Hon’ble Tribunal { reported at 2013- TIOL—1160-CESTATAHM } on the issue whether “bonafide’ impression” would prevail over legislation observed
as under :
5. The learned counsel for the appellant strenuously contends that since provisions of
Section 66A were in challenge before various Courts, the appellant assessee was under
a bonafide impression that compliance with the said provisions is not mandatory. This
contention is stated to be rejected. It is axiomatic. Legislation is operative proprio
vigore on its enactment and effectuation. The operation of legislation is not
contingent upon affirmation by the judicial branch, even where a challenge to its
constitutionality is presented before the Courts. No person therefore, could
reasonably harbour any manner of doubt that when legislation is under challenge,
the challenged legislation is in eclipse to be upheld. Without doubt, the appellate
authority has rightly rejected the appellant's claim in this regard and has rightly
reversed the order of adjudicating authority on a true and fair construction of Section
73(4) of the Act. The order of the Appellate Commissioner is impeccable and warrants
no interference."
(emphasis supplied)
In view of the above, I consider it appropriate to hold the noticee liable to penalty
under Sections 76, 77 & 78 of the Finance Act, 1994. , and under Rule 15(3) of CCR, 2004 .
40.2.
41.
In view of the above discussion, I pass the following order:
ORDER
(i)
I confirm the demand of service tax amounting to Rs 4,20,921/- ( Four lacs
twenty thousand nine hundred twenty one only) ( Rs 1,50,829/-+ Rs 67,190/- +
Rs 2,02,902/- including E.Cess & S. and Higher Ed. Cess ) and order it to be
recovered from the noticee under Section 73 of the Finance Act, 1994.
(ii)
I disallow the Cenvat credit availed by the noticee amounting to Rs. 10,25,059/(Rupees Ten Lacs Twenty Five Thousand and Fifty Nine only) (as detailed in
Annexure-A to SCN) and order it to be recovered under Rule 14 of Cenvat
Credit Rules, 2004 read with Section 73 of the Finance Act, 1994.
(iii)
I also order to recover interest at the appropriate rate on the amount of Rs.
4,20,921/- under Section 75 of the Finance Act, 1994, and interest on the
amount of Rs. 10,25,059/- under Rule 14 of Cenvat Credit Rules, 2004 read
with Section 75 of the Act.
(iv)
I impose upon the noticee a penalty of Rs.10,000/- (Rupees Ten Thousand
Only) under Section 77 of the Act.
(v)
I impose a penalty of Rs. 200/- (Rupees Two Hundreds Only) per day/ or at the
rate of 2% of the service tax amount per month whichever is higher, subject to
maximum of the outstanding tax amount, from the date on which such tax was
due till 09.05.2008 or the actual payment of outstanding tax amount,
whichever is earlier, under the provisions of Section 76 of the Finance Act,
1994, as amended, for failure to pay Service Tax within the stipulated period as
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required under the provisions of Section 68 (1) of the Finance Act, 1994 read
with Rule 6 of the Service Tax Rules, 1994, as amended.
(vi)
I impose upon the noticee a penalty of Rs 4,20,921/-, under Section 78 of the
Act , for suppressing the value of taxable service provided by them before the
Department with intent to evade payment of Service Tax. If the service tax
amount is paid along with appropriate interest as applicable, within 30 days
from the date of receipt of this order, then the amount of penalty under
Section 78 shall be reduced to 25% of the service tax amount, provided if such
penalty is also paid within such period of 30 days.
(vii)
I also impose upon the noticee a penalty of Rs 10,25,059/-, under Rule 15(3) of
Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994. If the
amount is paid along with appropriate interest as applicable, within 30 days
from the date of receipt of this order, then the amount of penalty under
Section 78 shall be reduced to 25% of the service tax amount, provided if such
penalty is also paid within such period of 30 days.
(J.S. NEGI)
ADDITIONAL COMMISSIONER
SERVICE TAX, AHMEDABAD.
Regd. Post. AD./Hand delivery
F.No
STC/4-35/O&A/13-14
Date: 28.02.2014
To,
M/s. Veeda Clinical Research Pvt Ltd,
Shivalik Plaza-A,2nd Floor, IIM Road,
Ambavadi, Satellite, Ahmedabad.
Copy to:
1.
2.
3.
4.
The Commissioner, Service Tax, Ahmedabad [ Attn. RRA Cell]
The Assistant Commissioner of Service Tax Division-II, Ahmedabad.
The Range Superintendent, Range-VI, Division-II, S.Tax, Ahmedabad
The Guard File.