AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2008 (5) TMI 99
X X X X Extracts X X X X
X X X X Extracts X X X X
....4. The appellants challenged the enhancement of penalty on various grounds. As regards the cases appearing in Serial Nos. 15, 16 & 17 the penalties imposed are under challenge on the ground that the duty has been paid before the issue of Show Cause Notice. The details of the cases are given in the tabular column below. Sl. No. Appeal No. Name of the Party Impugned Order No. & Date Remarks Advocate/ DR 1. ST/85/07 M/s. Majestic Mobikes Pvt. Ltd. v. CST RA No. 29/2007 Dt: 5-3-2007 It is a case of enhancement of penalty Shri V. Raghuraman, Adv. Smt. Sudha Koka, SDR 2. ST/311/07 M/s. S Rama Enterprises v. CST RA No. 49/2007 Dt: 23-4-2007 It is a case of enhancement of penalty Shri S. Raghu Adv. Shri Hitesh Shah, SDR 3. ST/215/07 ST/216/07 ST/217/07 ST/218/07 M/s. Sai Motors M/s. Prakash Motors, M/s.Planet Agencies Pvt. Ltd. M/s. Dhruvdesh Honda v. CST RA No. 52/2007 Dt: 26-4-2007 RA No. 53/2007 Dt: 27-4-2007 RA. No. 50/2007 Dt: 24-4-2007 RA No. 55/2007 Dt: 1-5-2007 It is a case of enhancement of penalty S/Sb. K.S. Ravi Shankar, K.S. Naveen Kumar & Ashok Deshpande, Adv. Sh. R.P. Raheja JCDR 4. ST/375/07 M/s. Motor World....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner, LTU OIO No. 85/07 Commr. Dt: 22-10-2007 OIO No. 57/2007 -Commr. Dt: 25-7-2007 OIO by Commissioner. Duty paid Before issue of SCN. SDR files parawise comments Sh.G. Natarajan, Adv. & K.S. Ramesh Consultant Smt. Sudha Koka, SDR 17. ST/399/07 M/s. Marshal Security v. CC & CE, Hydbd-II OIA No. & 34/2007(H-II) ST Dt: 29-8-2007 - C(A)'s Order -Duty paid before issue of SCN. -SDR states that the aspect pertaining to suppression of facts has not ben countered. -Counsel states that he is pleading that paymet of Tax has been done before the issue of SCN Sh. G. Natarajan, Adv. Sh. Hitesh Shah, SDR 2. We heard the learned Counsels/Chartered Accountants who appeared on behalf of the appellants. We also heard the Departmental Representatives. The facts of the case in each appeal are briefly given in serially. M/s. Majestic Mobikes Pvt. Ltd. v. CST, Bangalore 3. In this case, the appellant voluntarily came forward with a plea that due to ignorance they did not discharge the service tax liability under the category of "Business Auxiliary Services." The Original Authority has given a finding that the appellant has dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this case the appellant is a lady running security service. She has pleaded ignorance of the legal provisions. Moreover, she has stated that the service tax had not been collected from her clients. The Original Authority passed the Order-in-Original dated 3-5-2005. The Commissioner Service Tax initiated revision proceeding and imposed the following penalties. (a) A penalty of Rs. 200/- per day was imposed under Section 76. (b) A penalty of Rs. 1000/- was imposed under Section 77. (c) The Commissioner in his impugned order dated 23-4-2000 enhanced the penalty of Rs. 2000/- imposed under Section 78 to Rs. 59,000/- M/s. Sai Motors, M/s. Prakash Motors, M/s. Planet Agencies Pvt. Ltd. & M/s. Dhruvdesh Honda v. CST 5. In all the above mentioned cases, Original Authority dropped the penal action under Section 76 & 77 as the appellants paid the service tax before the issue of Show Cause Notice. He limited the penalty under Section 78 to Rs. 4000/-, 8000/-, 6000/- & 8000/- respectively in the above mentioned cases. The Revisionary Authority in the impugned Orders-in-Revision, apart from imposing penalties under Section 76 & 77 enhanced the penalties under Section 78 in the following m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h) Pink City Communications v. CST, Delhi-III - 2007 (7) S.T.R. 698 (Tri. - Del.) (i) CCE, Indore v. Deepak Spinners Ltd. - 2005 (179) E.L.T. 93 (Tri. - Del.) (j) Pratibha Processors v. Union of India - 1996 (88) E.L.T. 12 (S.C.) (k) Insurance & Provident Fund Department v. CCE, Jaipur-I - 2006 (2) S.T.R. 369 (Tri.-Del.) = 2001 (132) E.L.T. 726 (Tri. - Del.) (1) CCE, Mumbai v. Jas One Securities - 2006 (2) S.T.R. 80 (Tri. - Mumbai) (m) ACME (India) Marketing & Services Pvt. Ltd. v CCE, Chennai - 2006 (3) S.T.R. 700 (Tri. - Chennai) = 2005 (187) E.L.T. 285 (Tri. - Chennai) (n) The Union of India v. M/s. Kennametal Widia India Ltd. - 2008-TIOL-169-HC-KAR-CX (o) CCE, Ludhiana v. Omkar Steel Tubes (P) Ltd. - 2008 (221) E.L.T. 200 (P & H) (p) CCE & C, Aurangabad v. Bageshwari Sahakari Sakhar Karkhana Ltd. - 2008 (222) E.L.T. 204 (Bom.) (q) Larsen & Toubro v. CCE, Mumbai-II - 2003 (161) E.L.T. 827 (Tri. - Mumbai) (r) CCE, Delhi v. Toshi Auto Industries Pvt. Ltd. - 2005 (183) E.L.T. 48 (Tri - Del.) (s) CCE & C, Daman v. Goldstar Metal Ltd. - 2007 (219) E.L.T. 476 (Tri. - Ahmd.) (t) CCE, Jalandhar v. Jai Udyog Trading Corporation - 2007 (219) E.L.T. 1003 (Tri. - Del.) 7.1 On t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Central Excise And Customs v. Security Services - 2008 (9) S.T.R. 529 (Bom.) wherein it was held considering Section 76 read with Section 80, once the discretion had been exercised by the officer and no arbitrariness is pointed out the Court will not interfere. (g) There was reasonable cause for waiver of penalties in view of a specific finding of fact recorded by the Adjudicators. (h) Section 80 of the Finance Act is pari materia with the provisions of Section 273B of the Income Tax Act, 1961/which confers powers to the Assessing Officer to reduce or waive penalties when there is reasonable cause for failure. The appellants have cited case law and enclose the same along with the text of the provisions wherein the expression reasonable cause has been interpreted by the course which ratio is equally applicable in the context of Service Tax Law. (i) The decision of the Karnataka High Court in Sunita Shetty's case has attained finality as the Department did not challenge the same be fore a higher forum. Hence the Department cannot take a different view and revise the penalty imposed by the Adjudicator by employing Section 84 in other cases or take decisions contrary to the sai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nable. (viii)Section 80 has a non obstante clause and commences with the word notwithstanding and therefore gives wide discretion in the matter relating to non-imposition of penalty. In the present cases, penalties were actually imposed and the Original Authority need not actually have imposed them at all. This factor has been ignored by the respondent who has enhanced the penalties by outrageous multipliers. (ix) Our attention was also invited to Section 73(3) of the Finance Act, and also a Board's Circular based on the above provisions. The Circular and Section 73(3) provides that if the assessee cleared the service tax due along with interest on his own and even on the insistence of the Departmental Authority, then no penalty proceedings can be taken against him. (x) In the case of Appeal No. ST/05/2007 of M/s. Engineering Resources Group, there was only delay in remitting the service tax. However, before the issue of Show Cause Notice, the appellant remitted the service tax along with interest. The lower authority waived the penalties under Section 76 & 77. But the Revisionary Authority imposed penalties under the above Sections. The learned Advocate Sri Ramesh Ananthan ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....NCS Storage. System Pvt. Ltd., there was failure to pay the service tax and also to file the half yearly return. The Service Tax of Rs. 1,51,011/- was paid after the issue of show cause notice but before the adjudication. The Adjudicating Authority imposed penalty of Rs. 1000/- under Section 77 for non-filing of returns and dropped proceedings with regard to penalties under Section 76 & 78. The Revisionary Authority has held that the Adjudicating Authority's decision not to impose penalties under Section 76 & 78 is without any basis. Therefore, in the Order-in-Revision, he imposed penalty of Rs. 100/- under Section 76 & Rs. 1,51,011/- under Section 78. (xiv) In respect of Appeal No. ST/130/2007 of M/s. RNS Motors, the learned Advocate argued on merits as against time bar. The appellants received a communication from Maruti Udyog Ltd. that they will be paying service tax in respect of amounts received and hence the appellant entertained a bona fide belief that they are not liable for service tax in respect of commission received by them. When the appellant came to know that no service tax was paid under the category of Business Auxiliary Services, they immediately paid the amou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....utation of service tax. In fact there was a clarification from the Board that service tax was payable on the gross amount billed, as communicated in Madurai Commissionerate Trade Notice dated 13-10-2002. Therefore, the appellant had proved there was reasonable cause for failure to pay the service tax in time. This has not been appreciated by the Revisionary Authority. 8. The bunch of appeals mentioned in the tabular column in Serial Nos. 15 & 17 have been passed by the Commissioner (Appeals). In these cases, the contention of the appellant is that they had paid the duty before the issue of Show Cause Notice. Therefore, they had prayed for setting aside the penalties imposed. In respect of the appeals in Serial No. 16, the impugned orders have been passed by the Commissioner as Original Authority. According to the Commissioner, there is no suppression of facts to evade payment of duty. In view of the above finding there is request for setting aside the penalties imposed. We shall consider the points raised in the course of our findings. 9. The learned Joint CDR stated that the appellants had stated various case laws from the Central Excise. According to him, the ratio of the case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... established, the penalty under Section 78 could go to a maximum of twice the service tax sought to be evaded. Taking this view, in all the cases, he had imposed penalties under Section 78 to amounts more than the service tax. All these orders are under serious challenge. Several case laws have been cited both by the appellants and the Revenue. The facts of each case have to be examined before deciding on the correctness and legality of the impugned orders. 11. Section 76 of the Finance Act provides for penalty for failure to collect or pay service tax. Section 77 provides for penalty for failure to furnish prescribed return. Section 78 is for the imposition of penalty for suppressing value of taxable services. Section 80 of the Finance Act reads as follows : "Penalty not to be imposed in certain cases. - Notwithstanding anything contained in the provisions of section 76, section 77, section 78 or section 79, no penalty shall be imposable on the I assessee for any failure referred to in said provisions if the assessee proves that there was reasonable cause for the said failure." Section 84 of the Finance Act reads as follows: 84. Revision of orders by the Commissioner of Centra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....od of one year or five years, as the case may be. (1A) Where any service tax has not been levied or paid or has been short- levied or short paid or erroneously refunded, by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Chapter or the rules made thereunder, with in tent to evade payment of service tax, by such person or his agent, to whom a notice is served under the proviso to sub-section (1) by the Central Excise Officer, such person or agent may pay service tax in full or in part as may be accepted by him, and the interest payable thereon under section 75 and penalty equal to twenty-five per cent., of the service tax specified in the riotice or the service tax so accepted by such person within thirty days of the receipt of the notice." (2) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. "Prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntent to evade payment of service tax. (5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May 2003. (6) For the purposes of this section, "relevant date" means, - (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short paid - (a) Where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) Where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) In any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ose look. Sometimes short payment of tax may not be on account of, fraud or suppression of facts. In such cases, there is a provision for payment of short levies by the service provider on his own or even after pointing out by the Central Excise officer. If such payment along with interest is made, even there is no need for serving any Show Cause Notice. This provision was introduced w.e.f 14-5-2003. This is also a clear indication of Government to inculcate the habit of voluntary compliance in the assessee. While imposing penalties, the Central Excise Officer should not close his eyes to these provisions. 13. Even though the penal provisions have been incorporated under sections 76, 77 & 78, Section 80 provides for waiver of penalties proposed under the above Sections provided the assessee proves reasonable cause. The non obstante clause 'Notwithstanding' deserves a close look. The Revisionary Authority of the view that in the present cases; there is no reasonable cause for waiver or reduction of penalties. 14. In the Majestic Motor case, the appellants did not pay the service tax under the category of "Business Auxiliary Service." However, when the lapse was pointed out....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s per Rule 209A of the Rules, the maximum penalty permissible is three times the value of such goods or five thousand rupees, whichever is greater. In the instant case the value of goods involved in the ten show cause notices referred to above is Rs. 22.67 Crores and so the maximum penalty that could be imposed on Shri Alvi in this case is .Rs. 68 Crores. I know that a person working in a Public Sector Undertaking cannot afford to pay a huge amount of penalty, even then I am compelled to impose here a greater amount of penalty so that the law of the land may not be faulted by anybody in such a blatant manner as has been done by Shri Z.U. Alvi and be it known to the concerned authorities that it is their duty to follow the law of the land sincerely and need not follow the duty evasion/avoidance/deferrement modus operandies of this type." This is a classic instance to show how an Officer entrusted with a quasi-judicial function can become crazy and cause untold miseries in blatant violation of law with no regards for the rule of law. According to us if such an Officer is entrusted with quasi-judicial duties, he will resort to arbitrary exercise of power, which will compel the victim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of penalty under Section 80 is justified. 17. It is worth mentioning that the Government of India, in its Circular 18/2004-ST dated 23-9-2004 (Chennai III Trade Notice), announced an Extraordinary Tax Payer Friendly Scheme for instant registration of service tax providers. For a limited period, assessees were allowed to register themselves for payment of service tax even if they had failed to register on account of ignorance or any other reasons with full waiver of penalty. It is very clear that the Government is making all efforts for a taxpayer friendly service tax administration. This should be kept in mind while imposing penalties. In the case of Commissioner of Central Excise, Bhopal v. Bhojpur Club the Tribunal quoted with approval the following observations of the Commissioner (Appeals). "When the assessee who did not at all comply with the service tax law can be given immunity provided they pay the service tax along with the appropriate rate of interest there is no tangible and logical reason as to why the law abiding assessee who had got himself registered more or less in time and also started paying the service tax much before the new scheme became operational should be ....