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of <h1>Appeal partly successful: Service tax demand & interest set aside, penalty upheld for late return filing</h1> <h3>HEG Limited Versus Commissioner (Appeals) GST, Customs and Central Excise, Bhopal (M.P.)</h3> HEG Limited Versus Commissioner (Appeals) GST, Customs and Central Excise, Bhopal (M.P.) - TMI Issues Involved:1. Demand of Service Tax and Interest2. Penalty under Section 77 and Section 78 of the Finance Act, 19943. Procedural Lapse in Filing Returns and Documents4. Applicability of Exemption Notifications No. 18/2009-ST and No. 31/2012-STSummary:1. Demand of Service Tax and Interest:The Appellant, engaged in manufacturing graphite electrodes, filed an appeal against the Order-in-Appeal dated 31.07.2017, which confirmed the demand of service tax of Rs. 37,89,292/- and Rs. 16,82,906/- for the periods from April 2012 to March 2013 and April 2013 to September 2013, respectively, along with interest under Section 75 of the Finance Act, 1994. The Appellant had claimed exemption from service tax under Notification No. 18/2009-ST and Notification No. 31/2012-ST for services used in the export of goods. The Department issued two Show Cause Notices alleging that the Appellant wrongly claimed exemptions due to untimely and improperly filed EXP-2 returns.2. Penalty under Section 77 and Section 78 of the Finance Act, 1994:The original order imposed penalties under Sections 77 and 78 but refrained from imposing a penalty under Section 76. The Commissioner (Appeals) upheld this, confirming penalties for alleged procedural lapses. The Tribunal noted that the delay in filing returns could not be termed as willful intention to evade tax, thus setting aside the penalty under Section 78 but upholding the penalty under Section 77 for failure to file returns in time.3. Procedural Lapse in Filing Returns and Documents:The Appellant argued that the procedural lapses, such as delayed filing of EXP-2 and not enclosing mandatory documents, should not deny the substantive benefit of the exemption notifications. The Tribunal acknowledged that procedural lapses are condonable if the substantive conditions are met. The Appellant had complied with the primary condition of producing consignment notes and exporting goods, thus satisfying the essential condition for exemption.4. Applicability of Exemption Notifications No. 18/2009-ST and No. 31/2012-ST:The Tribunal referred to relevant case laws, including Coromandel Stampings & Stones Ltd. and Radiant Textiles Ltd., which supported the view that procedural lapses should not deny substantial benefits if the primary conditions of the notification are met. The Tribunal found that the Appellant had complied with the essential conditions of the notifications and thus set aside the demand of duty and interest upheld in the impugned order.Conclusion:The Tribunal partially allowed the appeal, setting aside the demand of service tax and interest, and the penalty under Section 78. However, the penalty under Section 77 was upheld due to the Appellant's failure to file returns in time. The order-in-appeal was modified accordingly.
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