TaxTMI 
TaxTMI 
2023 (12) TMI 854
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....nataka State Financial Corporation ('KSFC' for short), a State Government undertaking vide work order dated 14.11.2005. Petitioner firm appointed 45 persons for carrying out the audit work with KSFC and KSFC were required to pay salary for 45 persons engaged in the said activity of audit work. KSFC delayed making the payment. During the period under consideration, which is subject matter of the present case, petitioner firm was required to pay service tax, only on receipt of service tax from KSFC. 3. The petitioner, in view of delay in receipt of payments from KSFC, made delayed payment of service tax with interest. However, the Department issued a show cause notice which was received by the petitioner on 08.08.2007 without there being any details of specific work attracting the service tax. The show cause notice was duly replied by letter dated 01.10.2007 and despite said reply, petitioner was served with the summons dated 18.09.2007 and the same was replied. 4. The show cause notice covered the period from April 2005 to September 2007. The Department acknowledged the payment of service tax by the petitioner on 16.08.2007 and 17.08.2007 and also acknowledged ST-3 ret....
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....g the very fact from the Department. 11. Petitioner also contended that the said statement in the order in original is incorrect inasmuch as in the very show cause notice RP No.384/2022 itself there is a mention that ST-3 returns has been filed by the petitioner and payment of service tax with interest. Therefore, it was the case of the assessee that levy of penalty under Section 78 of the Act is contrary to the facts of the case. 12. The Order levying the penalty was challenged before the Commissioner of Central Excise Appeals, Hon'ble Customs, Excise and Service Tax Appellate Tribunal. But the Review Petitioner failed to get the order of imposition of penalty, set aside. Ultimately, Review Petitioner challenged the order of imposition of penalty before this Court in CEA No.21/2018. This Court taking note of the fact that there was a letter issued by the KSFC, though the service tax was paid before issuance of show cause notice, it is the duty of the petitioner to pay the service tax in time, passed an order on 11.02.2021 whereby CEA No.21/2018 came to be dismissed and substantial questions of law framed by the Court were answered in favour of the Department and against ....
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....tioner made willful mis-statement being one of the ingredients under section 73(4) of the Act is not in accordance with law. This Hon'ble Court ought to have appreciated that the petitioner has not suppressed the facts of providing the services under the classification of practicing chartered Accountant. The Petitioner was registered with the department. The Service tax department is having knowledge about the activity of the Petitioner. Once if it is held that the petitioner has not suppressed the facts then the provisions of section 73(3) of the Act is applicable and the show cause notice cannot be issued in respect of the payments already made. The registration obtained by the Petitioner and the entire payment of Service tax along with interest for the dispute period is paid before issue of show cause notice. Consequently, there is no suppression of facts and there is no intention by the Petitioner to evade payment of tax. Even on this count the extended period of limitation cannot be invoked on the facts of the case of the Petitioner. The Petitioner places reliance on CCE vs. Triveni sheet glass works (2005) 5 RC 612(SC) for the proposition that i....
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.... which only demonstrates the bona- fide conduct on the part of the Petitioner. iv. The entire payments were made along with interest 13 months prior to the issue of show cause notice. v. Without prejudice it is settled position of law that even in case where suppression is proved, the recourse to reasonable cause under section 80 is not prohibited. The authorities below failed to appreciate that issuing the show cause notice in respect of the service tax payments along with interest made by the petitioner before issue of show cause notice is not maintainable on the facts and circumstances of the case. a. The Petitioner has paid service tax and interest amount much before issue of show cause notice for the service rendered by the Petitioner and the details of payments are also intimated to the department. b. As per legislative provisions, show cause notice can be issued ONLY & ONLY wherever the taxes have not been levied or not been paid or has been short levied or short paid or erroneously refunded. In the instant case of the Petitioner: (i) The service tax has been paid much before the date of issue of notice; (ii) The....
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....ut prejudice, the Petitioner submits that the entire payment of service tax and interest was paid before issue of show cause notice and consequently no demand exists and levy of penalty of Rs.10,12,433/- is not in accordance with law. c) The department is having knowledge about the activities of the Petitioner when the Petitioner got registered with the service tax department for the services under the classification of Practicing Chartered Accountant services. Consequently, the Petitioner has not suppressed the facts. d) In support of this submission the Petitioner places reliance on the decisions of the Hon'ble Supreme Court in the case of Kushal Fertilisers (P) Ltd Vs. Commissioner of Cus & C.Ex., Meerut 2009 (238) E.L.T. 21 (SC). e) The authorities below erred in imposing the penalty under section 78 of the Finance Act, 1994 and failed to consider that there is a reasonable cause for waiver of penalty as per provisions of section 80 of the Act. Consequently, the Petitioner is not liable for penalty under section 78 of the Finance Act, 1994. f) The Petitioner places reliance on the decision of this Hon'ble Court in the case of....
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.... the penalty under section 78 of the Act shall be levied only 25 percent of the service tax determined i.e., Rs.2,53,108/- (25 percent of Rs.10,12,433/-) as per first proviso to section 78 of the Act on the facts and circumstances of the case. i) As per proviso to section 78(1) of the Act where such service tax as determined under sub section (2) of section 73, and interest payable thereon under section 75 is paid within thirty days from the date of communication of order of the Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under this section shall be twenty five percent, of the service tax so determined. ii) In the present case the entire service tax and interest as determined under section 73(2) of the Act in the Order- In-Original is paid much before issue of show cause notice itself and consequently the above first proviso to section 78 of the Act is applicable on the facts and circumstances of the case. iii) The learned Additional Commissioner has not intimated the availability of the said benefit to the Petitioner in the order-in-Original passed vide dated 30.10.2009. The Petitioner respe....
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....an admitted fact in the case, penalty proceedings under Section 78 of the Act would be per se not maintainable and sought for allowing the Review Petition. 16. In support of his arguments, he has placed reliance on the following judgments: Power of review may be exercised on the discovery of new and important evidence which was not within the knowledge of the party seeking review. 1. State of West Bengal and others v. Kamlesh Sengupta and another, (2008) 8 SCC 612. 2. District Board, Muzaffarnagar v. The upper India Sugar Mills Limited, Khatauli, AIR 1957 AII 527. 3. Commissioner of C. Ex., Mangalore v. Shree Krishna Pipe Industries, (2004) 165 ELT 508." 17. The contentions urged on behalf of the petitioner was emphatically denied by the respondent and contended that the factual aspects cannot be gone into by this Court, that too, in the review jurisdiction and sought for dismissal of the Review Petition. 18. The Department maintained their stand that the Order came to be passed by the Additional Commissioner of Service Taxes on appreciating the material facts in a proper manner and the letter issued by the KSFC clearly mentions that ser....
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....Finance Act, as amended on 14.05.2015, I am agreeable to pay a sum of Rs.2,53,109/-, being 25% percent of the penalty of Rs.10,12,433/-. I pray that TARY this Hon'ble Court may kindly take into consideration the extenuating circumstances and the fact that tax and interest was paid even before the issuance of the show cause notice and accordingly modify the order levying penalty." 23. The said affidavit was opposed by the Department by filing counter, which reads as under: The Respondent submits as follows: 1. The Respondent submits that the affidavit filed by the petitioner is legally and factually untenable. The Final Order No.22268/2017 dated 25/09/2017 passed by the CESTAT and the Order-In-Appeal No.168/2012 and the Order-In-Original No.141/2009 have clearly brought out the circumstances for levy of penalty and confirmed by this Hon'ble Court in CEA No.21/2018. Neither there is a factual error nor has legal infirmity in passing the orders been demonstrated by the petitioner to entertain the present Review Petition. 2. The Respondent submit that the penalty was imposed under the provisions of Section 78 of the Finance Act, 1994 as existing in....
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....he undertaking of the petitioner in paragraph 3 of the affidavit that he is agreeable to pay 25% of the penalty in accordance with the amended provision contained in Section 76 of the Finance Act, 1994 is not legally permissible as the said amendment came into effect from 14/05/2015 which is prospective in nature. The said amendment is only in respect of penalty under Section 76 of the Finance Act and is not applicable to the provisions contained in Section 77 and 78 of the Finance Act, 1994. The penalty is levied by invoking Section 78 of the Finance Act, 1994. Therefore, the petitioner agreeing to pay penalty under amended provision of Section 76 of the Finance Act, 1994 cannot be legally acceptable. 6. The petitioner being a practicing Chartered Accountant has not demonstrated valid and cogent reason in his support during the proceedings before the Adjudicating Authority and Appellate Authorities. The CESTAT has observed that the petitioner has not contested the findings of the lower authorities and even before this Hon'ble Court during the pendency of the CEA No.21/2018. Therefore, there is no scope to raise new factual and legal contentions in the Review Petition.....
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....application issued to M/s LSG Sky Chefs India Pvt Ltd was not received by the Adjudication Section, as seen from the SCN register maintained in the Section, for Commissioner/ADC/JC level Show Cause Notices. 03. If you are not satisfied with the above reply, you may prefer an appeal before the first Appellate Authority, Shri H. Soikhanthang, Additional Commissioner, HMT Bhavan, Bellary Road, Bengaluru-560032, within a period of 30 days from the date of receipt of this letter." 27. As could be seen from the reply, the letter said to have been issued by KSFC is made as basis for the Department to commence the penalty proceedings against the review petitioner. It is pertinent to note that KSFC has now not been able to furnish copy of the said letter. 28. The scope of Review Petition is no longer res integra. The Hon'ble Apex Court, in the case of the S. Madhusudhan Reddy Vs. V. Narayana Reddy and Others reported in 2022 SCC Online SC 1034, after taking into consideration catena of judgments of the Apex Court on the point, has held as under: "31. As can be seen from the above exposition of law, it has been consistently held by this Court in several judi....
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.... by filing an application under Right to Information Act. 31. Whether at all the KSFC has issued such a letter or not, therefore, assumes significance in adjudicating the grounds urged in the Review Petition. Time was granted by this Court to both the parties to place the said letter before the Court. Sri Jeevan J. Neeralgi, learned counsel for the Department has stated that due to lapse of time, such a letter could not be produced before this Court. The Review Petitioner has placed the reply received by KSFC. Irrespective of the letter that has been issued by KSFC, since KSFC is a State Government undertaking, accounts of KSFC would be available to establish that all payments have been made by the KSFC for 45 persons who had been deputed for carrying out the internal audit work. According the Review Petitioner, he came to know about the fact that no such letter has been addressed by KSFC only recently and said letter is the basis on which the entire proceedings against Review Petitioner has been commenced and therefore, he can maintain the Review Petition. 32. In the light of the above factual aspects, this Court bestowed its attention to Section 78 of the Finance Act, wh....
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....ed records." "(2) Where the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be, modifies the amount of service tax determined under sub-section (2) to section 73, then the amount of penalty payable under sub-section (1) and the interest payable thereon under section 75 shall stand modified accordingly, and after taking into account the amount of service tax so modified, the person who is liable to pay such amount of service tax, shall also be liable to pay the amount of penalty and interest so modified. (3) Where the amount of service tax or penalty is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be, over and above the amount as determined under sub- section (2) of section 73, the time within which the interest and the reduced penalty is payable under clause (ii) of the second proviso to sub-section (1) in relation to such increased amount of service tax shall be counted from the date of the order of the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be.] 33. On careful perusal of the above provisions, it is crystal clear that as per second proviso, if th....
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....ld also disclose that the service tax has been paid subsequently with accrued interest even before the show cause notice has reached the review petitioner. Surprisingly, the Additional Commissioner has observed in his order that the service tax has not been paid. The show cause notice itself shows that there was a payment of service tax along with interest by the review petitioner. Therefore, the order of the Additional Commissioner is factually incorrect. 39. Further, order imposing Rs.10,12,433/- as penalty under Section 78 of the Act, itself needs to be set-aside, if there is factual error especially in the absence of department making available copy of the letter issued by the KSFC. The affidavit filed by the Review Petitioner clearly mentions that he is intending to put quietus by paying 25% of the penalty. 40. In the absence of the parties placing the letter said to have been issued by KSFC which is the sole basis for passing the order imposing 100% penalty on the review petitioner, the order passed by the respective authorities which came to be confirmed in CEA No.21/2018 needs a relook. 41. Taking note of these peculiar facts and circumstances of the case, this ....