TaxTMI 
TaxTMI 
2017 (7) TMI 603
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.... shows that the appeal was admitted on 03.11.2016, when, the following substantial questions of law were framed for consideration by this Court: i. Whether the Tribunal is correct in allowing the appeal of the assessee by deleting the mandatory penalty imposed on them ? and ii. Whether the Tribunal committed an error in concluding that the respondent is eligible for cenvat Credit on the service tax paid on the reverse charge mechanism ? 2.1. We must state at the very outset that after we had heard the submissions of learned counsels for parties, there was a consensus that apart from anything else, the following additional substantial question of law ought to have been framed. Accordingly, we would frame a question of law which would examine the tenability of the impugned judgment and order of the Tribunal, in the light of the provisions of Section 80 of the Finance Act. 2.2. Therefore, before we proceed further, it will be useful to formulate the said question of law : ''Whether in the facts and circumstances of the case, the Tribunal had misdirected itself in applying the provisions of Section 80 of the Finance Act ?'' 3. In order to adjudicate up....
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...., it appears, the ICICI Bank Limited, having its branch at Vadodara / Bangalore, served as its agent, for which purpose, it was paid a processing fee amounting to USD 3,00,000 (INR 1,38,12,000). The said processing fee was paid by the assessee on 29.09.2006. On this processing fee, the ICICI Bank Limited, paid service tax amounting to Rs. 16,90,589/-. 4.1. In addition to the processing fee, the assessee also paid USD 1200000 (INR 5,52,48,000) to ICICI Bank Limited having its branch in Singapore. The said sum was paid towards arrangment fee for arranging ECB, in terms of the Arrangement Fee letter dated 18.09.2006. This amount was paid on 29.09.2006. 4.2. As would be quite obvious, the service provider, i.e. ICICI Bank Limited, Singapore, was not resident in India and therefore, the assessee being the recipient of the service, under the extant provisions of the Act and Rules referred to above, was required to pay the requisite service tax. This aspect somehow escaped the assessee, even though under the Cenvat Credit Rules, 2004 (in short 'the 2004 Rules') it would perhaps have been entitled to credit, if it had paid service tax qua arrangement fee at the relevant point....
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....7. Apparently, on 29.11.2007, the assessee also furnished a copy of the arrangement letter dated 18.09.2006, to which we have made a reference above. 5. Despite the fact that the assessee had already paid the requisite service tax, the Revenue issued a Show Cause Notice dated 27.12.2007 (SCN). Via the said SCN, the Revenue proposed, to not only appropriate the service tax, which included the educational cess already deposited by the assessee, but also called upon the assessee to show cause as to why interest ought not to be levied under Section 75 of the Finance Act, coupled with penalties under Section 76 for failure to pay service tax and under Section 78 for suppressing the factum of receipt of taxable services from a non-resident service provider. 5.1. The SCN was adjudicated upon and an order-in-original dated 10.03.2008 was passed, whereby the sum of Rs. 67,62,355/- deposited by the assessee was appropriated in terms of the demand raised in the SCN. Furthermore, the assessee was called upon to pay the following: i.appropriate interest under Section 75 of the Finance Act; ii.penalty at the rate of Rs. 200/- per day from the date when the tax ought to have been paid....
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....hat the assessee had every intention to evade payment of service tax, as service tax was paid by it only after summons were issued by the Revenue on 15.03.2007. It was contended that for imposition of penalty under Sections 76, 77 and 78 of the Finance Act, it was not necessary to prove that mens rea obtained, i.e., that the assessee had intention to evade payment of service tax. The mere infraction of the provisions of the Act would lead to levy of penalty under the aforementioned provisions. In other words, the submission was that the levy of penalty was mandatory once infraction of the provisions of the Act and the Rules framed thereunder was established. 7.3. In support of these submissions, learned counsel relied upon the following judgments: A)Amco Batteries vs. CCE, 2003 (153) ELT 7 (SC) B)CCE vs. Mahindra & Mahindra, 2005 (179) ELT 21 (SC) C)CCE vs. Narayan Polyplast, 2005 (179) ELT 20 (SC) D)CCE vs. Narmade Chematur Pharmaceuticals Ltd., 2005 (179) ELT 276 (SC) E)Union of India vs. Rajasthan Spinning & Weaving Mills, 2009 (238) ELT 3 (SC) F)CCE vs. Prabhat Zarda Factory I Pvt Ltd., 2012 (281) ELT 665 (Del-DB) 8. As against the aforesaid, Mr.Venkatag....
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.... vs. Tenneco RC India Pvt. Ltd., 2015 (323) ELT 299 (Mad.) 9. Having heard the learned counsel for parties and on perusal of the record, what emerges is as follows: (a) That the assessee paid service tax, inclusive of educational cess, in the sum of Rs. 67,62,355/-, albeit, upon issuance of communication dated 15.03.2007 by the Revenue, but prior to the issuance of SCN, which is dated 21.05.2007. (b) The SCN, apart from seeking confirmation and appropriation of the service tax deposited by the assessee, also sought to impose interest and penalties under Section 75, and Sections 76 and 78 of the Finance Act respectively. (c) There was no proposal in the SCN to levy any penalty under Section 77 of the Finance Act. (d) The demand raised in the SCN under various heads was confirmed by the order-in-original dated 10.03.2008. (e) The assessee paid interest in a sum of Rs. 5,73,225/- on 25.11.2008. (f) The assessee has, on its own showing, claimed cenvat credit qua the service tax paid in respect of the arrangement fee, in its capacity as the recipient of the service, in line with the provisions of Section 66A of the Finance Act and the Rules framed thereunder. (g)....
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.... the assessee had already paid the service tax and the interest), the challenge was laid to the entire order-in-original which, not only confirmed the demand qua service tax, but also went on to impose interest and penalties under various provisions to which we have made a reference hereinabove. 11.2. The Tribunal, however, as alluded to above, allowed the assessee's appeal only partially and while doing so, gave the following operative reasons in paragraph 5 of the impugned judgment and order: ''5. Heard both sides in detail and on perusal of the documents, we find that the appellants having come to know about their liability to pay service tax as the recipient of the service, immediately paid the entire amount of service tax along with education cess amounting to Rs. 67,62,355/-. We also find that the appellant have remitted the interest amount of Rs. 5,73,225/- on 25.11.2008, for delayed payment of service tax. The have filed challan for proof of payment of interest. The appellant assessee on being informed about their liability to pay service tax have readily accepted and discharged their liability in full, which is not in dispute. Having regard to the facts a....
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....eal filed with the Tribunal, the Tribunal some how did not specifically advert to these aspects. Be that as it may, the point, however, remains, is that, time was available for payment of service tax, on arrangement fee, till 05.10.2006, which was not disputed before us, by the Revenue. 11.8. As regards penalty levied under Section 78 of the Finance Act is concerned, the same kicks in, only if, there is an element of fraud or collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of Chapter V or the Rules made thereunder, with intent to evade payment of service tax. The said provision is triggered in circumstances where service tax has not been levied or paid or has been short levied or short paid or erroneously refunded. 11.9. An assessee, whose case purportedly falls within the purview of provisions of Section 78 of the Finance Act, is required to be served with a notice under sub-section (1) of Section 73 calling upon it, to pay, in addition to service tax and interest specified in such notice, penalty which is equivalent to 100% of the amount of such service tax demanded thereof. 12. The record shows that in the order-in-or....
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.... and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One can not fail to notice that both the proviso to sub section 1 of section 11A and section 11AC use the same expressions: "....by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,...". In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under section 11A (1) states that the escaped duty was the result of any conscious and deliberate wrong doing and in the order passed under section 11A (2) there is a legally tenable finding to that effect then the provision of section 11AC would also get attracted. The converse of this, equally true, is that in the absence of such an allegation in the notice the period for which the escaped duty may be reclaimed would be confined to one year and in the absence of such a finding in the order passed under section 11A (2) there would be no applic....
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.... the Income Tax Act, 1961 (in short the `IT Act') taking the stand that Section 11AC of the Act is identically worded and in a given case it was open to the assessing officer not to impose any penalty. The Division Bench made reference to Rule 96ZQ and Rule 96ZO of the Central Excise Rules, 1944 (in short the `Rules') and a decision of this Court in Chairman, SEBI vs. Shriram Mutual Fund & Anr.[2006(5) SCC 361] and was of the view that the basic scheme for imposition of penalty under section 271(1)(c) of IT Act, Section 11AC of the Act and Rule 96ZQ(5) of the Rules is common. According to the Division Bench the correct position in law was laid down in Chairman, SEBI's case (supra) and not in Dilip Shroff's case (supra). Therefore, the matter was referred to a larger Bench." After referring to a number of decisions on interpretation and construction of statutory provisions, in paragraphs 26 and 27 of the decision, the court observed and held as follows: "26. In Union Budget of 1996-97, Section 11AC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In para 136 of the Union Budget reference has been made to the p....
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....ed counsel what was inferentially provided in some respects in Rule 173Q, now stands explicitly provided in Section 11AC. Where the outer limit of penalty is fixed and the statute provides that it should not exceed a particular limit, that itself indicates scope for discretion but that is not the case here." 23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of section 11A. That is what Dharamendra Textile decides. (emphasis is ours) 12.5. The aforesaid observations made in Rajasthan Spinning and Weaving Mills Ltd case, would clearly indicate that penalty under Section 78 of the Finance Act is mandatory subject to the caveat that the adjudicating authority comes to the conclusion that non-payment of service tax was a conscious and/or deliberate act of wrong doing and deception. 12.6. Furthermore, in the facts and ....