TaxTMI 
TaxTMI 
2008 (5) TMI 99
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....im by Section 84 of the Finance Act, 1994. 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 ....
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....the issue of SCN - SDR states that suppression of facts is not countered. Counsel states that he is pleading the payment made before issue of SCN Sh.G. Natarajan, Adv. Sh. Hitesh Shah, SDR 16. ST/12/08 & ST/383/07 M/s. Adecco Flexione Workforce Solutions Ltd. & M/s. Adecco Flexione India Ltd. v. Commissioner, 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 f....
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....es v. CST 4. In this case, the short payment of Service tax is for the period from 1-10-2001 to 31-8-2004. The Show Cause Notice was issued on 18-4-2005. The short payment along with interest was paid before the issue of Show Cause Notice. The Original Authority imposed a nominal penalty of Rs. 2000/- under Section 78. However, he dropped the penalties, under Section 76 & 77. In 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 ....
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....4) S.T.R. 177 (P & H) = 2006 (202) E.L.T. 398 (P & H) (d) Sai Machine Tools Pvt. Ltd. v. CCE & C, Indore - 2006 (203) E.L.T. 15 (M. P.) (e) CCE & C, Aurangabad v. Padmashri V.V. Patil S.S.K. Ltd. - 2007 (215) E.L.T. 23 (Bom.) (f) CCE, Meerut v. Parmarth Steel & Alloys (P) Ltd. - 2007 (209) E.L.T. 200 (Tri. - Del.) (g) Krishnaram Dyeing & Finishing Works v. CCE & C, Surat - 2007 (209) E.L.T. 410 (Tri. - Mumbai) (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....
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.... dated 26-2-2008 in CEA No. 4/2000. (d) Commissioner of Central Excise and Customs v. Ashish Patil - 2008 (10) S.T.R. 5 (Bom.) wherein the Bombay High Court ruled that no question of law would arise once discretion is exercised and reasons are recorded for reducing penalty. (e) CST v. Lark Chemicals - 2008 (9) S.T.R. 230 (Bom.) wherein it was held that Section 76 is subject to Section 80 and there is discretion to reduce the penalty. - (f) Commissioner of 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 e....
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....rom financial institutions/bank in respect of certain services are taxable. The appellants paid the taxes much before the said circular and the circular itself has decided that there were certain doubts in respect of activities undertaken by authorized motor vehicle dealers and service stations. Since there were genuine doubts in the industry, no mala fides could be attributed to the appellants and hence, the enhancement of penalties in a haphazard and arbitrary manner s legally untenable. (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 Dep....
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....liable to service tax for the commission received by them. However, once they came to know that they had to pay service tax as advised by their auditors, they registered under the category of "Business Auxiliary Service" on 29-10-2004. Then, they obtained adequate confirmation from legal consultants and paid the tax along with interest on 10-2-2005 voluntarily. Therefore, the enhancement of penalty by the Revisionary Authority is not at all justified. (xiii) In respect of ST/169/2007 of M/s. 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. S....
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....of the Service Tax Law and had waived penalties under Sections 75A, 76, 77 etc. of the Finance Act, 1994 if the assessee had complied with the provisions of the said Act before the deadline. The appellant complied with the provisions of the said Act much before an introduction of the said amnesty scheme. The appellant also had doubts regarding the value to be taken for purpose of service tax. There was some doubt with regard to the salaries of the security personnel and their ESI and EPF in the computation 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 respec....
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.... Nos. 1 to 14, the Original Authority in exercise of the powers listed in hearing under Section 80 of the Finance Act, 1994 has set aside the penalties under Section 76 & 77 of the Finance Act and imposed a nominal penalty under Section 78. But, the Revisionary Authority felt that when the appellants had not proved sufficient cause for waiver of penalties, the Original Authority could not have set aside the penalties. Moreover, according to the Revisionary Authority, when the suppression of facts has been 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 suppr....
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.... (c) Willful mis-statement; or (d) Suppression of facts; (e) Contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year" the words "five years" had been substituted. Explanation. Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period 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 an....
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....nd also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Central Excise Officer, but for this sub-section. (4) Nothing contained in sub-section (3) shall apply to a case where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) Fraud; or (b) Collusion; or (c) Willful mis-statement; or (d) Suppression of fads; or (e) Contravention of any of the provisions of this Chapter or of the rules made thereunder with intent 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 whic....
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....s in respect of the service provider shall be deemed to be concluded. This indicates that wherever the service provider accepts his lapses and pays up the service tax, interest and 25% penalty, the proceedings shall not be reopened further. This is with a view to encourage voluntary compliance. For any person, payment of tax is not a very pleasant activity. The human psychology is such that there is a tendency to avoid payment of taxes. In any case, the Government has provided options to the service provider so that he can escape from harsh penalties. Section 73(3) also deserves a close 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 provisio....
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.... v. Commissioner of Central Excise, Bhopal - 2000 (117) E.L.T. 69 (Tri.). In the said case, the Commissioner imposed a penalty of Rs. 50 crore on an employee of BHEL. In fact he was a Deputy General Manager. Just because the Commissioner's power with regard to the imposition of penalty is unlimited, he cannot blindly impose savage penalty. The observations of the Tribunal in Para 3 reads as follows: 3. Paragraph 14 of the impugned order is worth reading for a proper under standing of the working of the mind of the Commissioner, the Adjudicating Authority. We read that paragraph :- "As 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....
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....fact that the tax amount along with the interest was paid before the issue of Show Cause Notice. The Revisionary Authority should keep in mind that the penalty imposed should be commensurate with the offence. Majority of the cases from Serial Nos. 1 to 14 relate to the commission received by the Automobile dealers from financial institutions. There was doubt in the trade circles whether the commission received should be taxable under the category of "Business Auxiliary Service." When there is genuine doubt and the Board issued a clarification, no mala fide can be attributed. In such cases, waiver 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. Thi....