2016 (6) TMI 359 - HC - Central Excise

Imposition of penalty by the Settlement Commission - Job work activity undertaken by the Petitioner - Paying service tax for the said period - department took the stand that the job work activity undertaken by the Petitioner amounts to manufacture and not service and that the Petitioner was required to pay excise duty - Held that - there was no justification for the Settlement Commission to have imposed a penalty of ₹ 30,000 on the Petitioneras per advice of Service Tax Department. The Petitioner acted bona fide on the advice of the Service Tax Department and initially got itself registered with the said Department. Later, again on the insistence of the Excise Department, the Petitioner got registered under the CE Act. There was no attempt by the Petitioner to deliberately evade payment of tax. Accordingly, the penalty imposed by Settlement Commission is set aside. The said penalty amount, which has been adjusted against the penalty already paid by the Petitioner, shall be refunded to the Petitioner within one month from today. - Petition disposed of

Summary

Issues: Impugned penalty imposed by the Settlement Commission

Analysis:
The Petitioner, engaged in manufacturing ready mixed concrete on a job work basis, faced a penalty of ?30,000 by the Settlement Commission due to a dispute regarding the classification of their activity as manufacture or service. The Petitioner initially registered with the Service Tax Department based on their advice but later registered under the Central Excise Act following the demand by the Excise Department. The Settlement Commission determined the central excise duty payable by the Petitioner at ?9,43,5790, with an excess payment of ?2,94,215 to be refunded and adjustments to be made for penalty and interest paid. The Court found no deliberate tax evasion by the Petitioner, considering their bona fide actions based on departmental advice.

The Court held that the imposition of the ?30,000 penalty was unjustified, given the Petitioner's genuine compliance efforts and lack of intent to evade taxes. Consequently, the penalty was set aside, and the amount adjusted against the already paid penalty was ordered to be refunded to the Petitioner within one month. The judgment disposed of the petition in favor of the Petitioner, emphasizing the absence of any fraudulent intent in their tax dealings.