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TMI Blog2010 (7) TMI 774X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai ("Tribunal" for short) and, by Writ Petition No. 4975/2010, also invoked writ jurisdiction of this Court under Article 226 of the Constitution of India to challenge the order dated 16th November, 2009 passed by the Tribunal [2010 (18) S.T.R. 444 (Tribunal)], whereby and whereunder the prayer for rectification of mistake in the final order dated 17th April, 2009 was rejected by the Tribunal. 4. The facts and the issues involved in the appeal as well as writ petition being common and identical, they were heard together and are being disposed of by this common order on the factual backdrop sketched hereinbelow : Factual Backdrop : 5. M/s. Riya Travels & Tours (I) Private Limited (hereinafter referred to as "appellant-assessee"/ "petitioner-assessee" for short) is an air travel agent. They issue air tickets for domestic as well as international flights to the passengers. The petitioner-assessee is registered with the Service Tax Department under taxable head of 'Air Travel Agent' service. The petitioner-assessee are paying service tax. 6. A show cause notice dated 21st September, 2005 was issued to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed on the petitioner-assessee under Section 78 of the Act to Rs. 50,00,000/-. On the other hand, the Member (Technical) agreed with the finding recorded by the Member (Judicial) in respect of the confirmation of demand of service tax, interest and imposition of penalty under Section 76. However, in so far as reduction of the penalty imposed under Section 78 is concerned, there was a difference of opinion. The Member (Technical) held that the penalty imposed by the respondent on the petitioner-assessee under Section 78 amounting to Rs. 10 crore is correct and there was no reason to reduce the same. 10. The above difference of opinion was referred to the third member. The third Member (Judicial) agreed with the Member (Technical) and upheld the imposition of penalty of Rs. 10 crore on the petitioner-assessee under Section 78. In view of the majority order, final Order was passed on 17th April, 2009. 11. The petitioner-assessee, however, chose to file application No. 3T/ROM-335/2009 for clarification/modification of the aforesaid final order passed by the Tribunal on the ground that in terms of first proviso to Section 78, the petitioner-assessee is liable to pay pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en paying service tax to the tune of Rs. 20 crore annually. The appellant-assessee has paid the entire amount of service tax along with interest even before issuance of the show cause notice voluntarily, which proves the bona fides of the appellant-assessee. In this factual scenario, the provisions of Section 80 should have been invoked and no penalty should have been imposed on the appellant-assessee. Mr. Sridharan, in support of his submission relied upon the opening phrase appearing in Section 80 of the Act reading as "Notwithstanding anything contained in the provisions of Sections 76, 77 and 78....." He also relied upon the judgment of this Court in the case of SK Babbu v. Sayeda Masarat Begum - (1999) 3 Mh LJ 465, wherein it is held that the term "notwithstanding" means "irrespective of" and should be interpreted accordingly. 17. Mr. Sridharan submits that a non obstante clause confers benefits to the exclusion of contents of the other provisions of the act/rules/sub-rules, which were specifically over ridden by the said clause. In the instant case also, Section 80 allows benefit of no penalty, to the exclusion of power to impose penalty under Sections 76, 77 and 78. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon the decisions in Hindustan Steel Ltd. v. The State of Orissa, 1969 (2) SCC 627 = 1978 (2) E.L.T. (J159) (S.C.) and State of MP v. Bharat Heavy Electricals, 1998 (99) E.L.T. 33 (S.C.). 21. In the alternative and without prejudice to the above submissions, Mr. Sridharan submits that in terms of the first proviso to Section 78, where the service tax as determined under Section 73(2) and the interest payable under Section 75 is paid within 30 days of communication of the order, the amount of penalty liable to be paid by such person shall be 25% of the service tax so determined. Thus, the penalty amount is reduced to 25% of the service tax amount upon satisfaction of the said conditions. In other words, the Tribunal has upheld the penalty imposed on the appellant-assessee and held that the appellant-assessee is liable to pay the same. The only clarification, if any, not provided by the Tribunal in this regard in the order is that penalty shall be payable as per law. However, this is inherent. The operation of law as declared by the Parliament will have force over any order passed by the Appellate Tribunal. Hence, the appellant-assessee is entitled to benefit of proviso ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid conditions. 26. He submits that in the instant case, the service tax amount determined by the Respondent is Rs. 7,67,05,449/- and the appellant-assessee have already paid service tax, interest and penalty of Rs. 1,91,76,362/- (i.e. 25% of Rs. 7,67,05,449/-) within 30 days from the date of passing of the order. Hence, under no circumstances, the penalty imposed on the appellant-assessee can be Rs. 10 crore. Even in the worst case scenario, the penalty imposed on the appellant-assessee can be Rs. 1,91,76,362/- only and not beyond that. He, thus, submits that this is a protective action. The appellant-assessee need net 'even challenge the impugned order passed by the Tribunal. However, the Revenue should not raise an argument tomorrow that the appellant-assessee are liable to pay penalty of Rs. 10 crore. Per Contra : 27. Per contra, Mr. Jetly, learned counsel for the Revenue canvassed his submission in consonance with the allegations made in the show-cause-notice and the findings recorded by the adjudicating authority, the Commissioner of Service Tax. He took us through the entire order of the adjudicating authority together with the order of the Tribunal to urge that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Jetly in support of his submissions. The aforesaid findings confirmed in appeal by no means can be said to be perverse or 'without application of mind, if one goes through the facts and circumstances leading to issuance of show cause notice and investigation thereof which, ultimately, culminated in the impugned order. The relevant findings read as under : "4.12. The Noticees have not disputed their liability to pay taxes. However, they not only failed to declare correct value of their services in the ST-3 Returns and discharge their legitimate service tax liability from time to time but they fraudulently misdeclared the value of the service and their liability at the time of enquiry which resulted in issue of 'Notice 5'. It is, therefore, conclusively proved that the Noticees had fraudulently short paid the tax with intent to evade the payment of tax. Their pleading about certain aspect of service tax not being clear, in the initial period or that they could not pay the tax due to tight financial position or intense competition in the market are of no avail. They did not come clean even when an enquiry was initiated against them. Even at that time they supplied wrong infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cees have opted to pay tax on the basic fare hence there was no question of having any contrary bona fide belief. After citing decision of M/s. Hindustan Steel v. State of Orissa, 1978 (2) E.L.T. J159 (S.C.) they have pleaded that there was no deliberate defiance of law or dishonest conduct on their part hence penalty cannot be imposed on them. The conduct of the Noticees has been reprehensible right from the beginning. They had software which was capable, of calculating the tax payable by them but still they chose to declare less value by them than the correct value of their services and paid less tax on such services. They did not come clear in the previous enquiry. It is not open to them to say that they are not quilty of dishonest intention or there was no deliberate defiance of law. The facts of case go against them even with respect to rulings in other two cases, M/s. Godrej Soaps Limited v. Commissioner Central Excise, Mumbai, 2004 (170) E.L.T. 201 and M/s. ETA Engineering Limited v. Commissioner of Central Excise, Chennai, 2004 (174) E.L.T. 19, pleaded by them. (Emphasis supplied) 33.& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be paid by such person under this section shall be twenty-five per cent of the service tax so determined. 35. If one goes through the provision of Section 78, one would find that where service tax is determined under sub-section (2) of Section 73 and the interest payable thereon under Section 75 is paid within thirty days from the date of communication of order of Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under this section shall be 25% of the service tax so determined. 36. In the instant case, the petitioner-assessee claims to have paid service tax much prior to the determination of its tax liability under sub-section (2) of Section 73. At this stage, it is not necessary for us to go into the detailed factual matrix and record positive finding since the matter is remanded by the Tribunal to the Adjudicating Authority for recalculation of correct service tax liability. Unless correct quantification of tax liability with interest payable thereon by the appellant is done, it is not possible to record positive finding on the issue raised. However, prima facie; petitioner-assessee seems to be entitled to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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