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TMI Blog2018 (10) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... ecipient of taxable service to the government - the amounts collected as tax from the customer/ client are not the money in the hand of tax payer but only held in trust by the said taxable person for the period and to be deposited with revenue in manner as prescribed by the taxing statue. By not depositing the said amounts in the manner as have been provided by law, Appellants have misappropriate the funds held by them in trust for their personal gain and should not be allowed the plea of financial hardship. Financial hardship cannot be reason to justify such misappropriation of the money which was never held as the money by the appellant - demand upheld. Extended period of limitation - Penalty - Held that:- It is quite evident that appellants have been collecting the service tax from their customers/ clients but were not depositing the same with the exchequer. They were rotating the amounts collected as tax for their personal gains. They were also guilty of not filing the returns on due date to declare their tax liabilities and hence they have definitely suppressed the details of tax collected and payable to the exchequer. Thus demands made invoking extended period as provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were proposed on the concerned persons. 2.3 The show cause notices have been adjudicated by the concerned commissioners confirming the demand of taxes due and imposing the penalties. The details of the said order and appeals filed are indicated in table 1- Table 1- Details of Order in Original and Appeals Filed Appeal No ST/342344/10-MUM Order in Original No 07/2010/C dated 27.01.2010 Period 2004-05 to 2008-09 Branch Nagpur Demand of Service Tax ₹ 2,29,98,633/- Penalty Section 76 ₹ 2,29,98,633/- or ₹ 100/ Day or ₹ 200/ day or 2% Per month (whichever is higher) Penalty Section 77 ₹ 5000/- on Diwan Rahul Nanda and ₹ 5000/- on Joseph George Penalty Section 78 ₹ 2,29,98,633/- Appeal No ST/559561/10-MUM Order in Original No 2122/Service Tax/Com/2010 dated 27.01.2010 Period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice Tax ₹ 22,59,508/- Penalty Section 76 Penalty Section 77 ₹ 200/- per day or 2% (whichever is higher) Penalty Section 78 Appeal No ST/564/12-MUM Order in Original No 53/ST-II/WHL/2012 dated 10-May2012 Period 2010-11 Branch Kalamboli Demand of Service Tax ₹ 1,77,80,402/- Penalty Section 76 ₹ 200/- per day or 2% (whichever is higher) Penalty Section 77 ₹ 5,000 + ₹ 5000/- on Diwan Rahul Nanda Penalty Section 78 ₹ 1,77,80,402/- Appeal No ST/622/12-MUM Order in Original No 10-12/STC-I/SKS/12-13 dated 18-May-2012 Period 2004-05 to 2010-11 Branch Lower Parel Demand of Service Tax ₹ 11,74 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjourned to 4/11/2015 on request of Counsel 4/11/2015 Not reached, Adjourned to 19/1/2016 19/1/2016 No division bench, Matter adjourned to 3/3/2016. 3/3/2016 Adjourned to 12/4/2016 as a last chance. 12/4/2016 Time over matter adjourned to 26/5/2016. 26/5/2016 Adjourned to 02/6/2016 with all other appeals as per list submitted by both sides. 2/6/2016 Adjourned to 14/7/2016 on Revenues request. AR to submit the verification report of payment particulars. 14/7/2016 Adjourned on request of appellant due to ill health of Consultant, List on 2/9/2016 2/9/2016 Time over, matters adjourned to 20/10/2016 20/10/2016 Time over matter adjourned to 7/12/2016 7/12/2016 Adjourned to 15/2/2017 15/2/2017 Miscellaneous Application allowed only for raising the point of limitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly MA/927732 927733/17 are dismissed. 10/10/2017 Time over matter adjourned to 07/11/2017 07/11/2017 Adjourned to 20/11/2017 20/11/2017 Time over matter adjourned to 20/12/2017 20/12/2017 No Division Bench matter adjourned to 02/02/2018 02/02/2018 No Division Bench matter adjourned to 07/03/2018 7/3/2018 Matters are Adjourned to 12/04/2018 as per request of advocate 12/4/2018 Matters are Adjourned to 12/04/2018 as per request of advocate 28/6/2018 Adjourned to 12/7/2018 at the request of Learned Advocate, that Shri Bihari s wife is suffering from cancer. 12/7/2018 Judgment reserved. Written submissions be submitted in a weeks time. 4.1 When the matter was listed on 12/04/2018, 28/6/2018 and 12/07/2018, Ms Keyuri Desai Advocate had appeared on the behalf of Appellants. She has submitted during the arguments that they have d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them. 4.5 Adjudicating authorities have passed the said orders without taking into consideration the acute financial hardships being faced by them for which they were not in position to deposit the tax by appointed day. 4.6 Certain portions of the demands were time barred as they were clearly showing the details of payments received service tax due thereon and service tax deposited by them in their ST-3 returns filed by them from time to time. 4.7 Since they were operating from more than 35 branch offices. Each branch was raising bills and collecting the payments. Their client base is wide spread and there is also overlap of the jurisdictions of the branch office. A sometimes payment against some bill raised by a branch office is also received in some other branch office. All these factors have contributed to delay in payment of service tax. Also on account of delay in receipt of payments from their clients, and acute financial hardship on this account was responsible for delay in payments. 4.8 Demands have been worked out erroneously and cannot be justified. Till 01.04.2011, the service tax was payable on the amounts received and not on the amounts billed. The show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and same investigation CESTAT Delhi bench has already upheld the demands and penalties imposed as per the decision reported in 2016 (41) S.T.R. 634 (Tri. - Del.). He also relied upon the Decision of Delhi High Court, wherein the High Court has not only upheld the imposition of mandatory penalty upon the Appellant, but has held that tribunal could not have allowed the option of payment of 25% of the mandatory penalty, as has been allowed by tribunal in the above referred decision [2016 (41) S.T.R. 612 (Del.)]. He argued for dismissal of all the appeals 5.2 In their submissions made revenue has contended as follows- i. Sum of the demand confirmed involves about ₹ 31.8 Crores in all the appeals under consideration. The appellants have defrauded the government of its legitimate revenues. ii. The case is not the case of late filing of returns as has been made out by the appellants, but a deliberate attempt to defraud the government of its legitimate due. In the scheme of indirect taxation, the person depositing the tax is collecting the tax from the customers/ recipients of service and depositing the same with government in manner as provided in law. Appellants ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017. Tribunal has recorded Appellant is not at all co-operative to examine its averment in miscellaneous applications. Accordingly MA/92732 92733/15 are dismissed. ix. Thus the submission of the appellants that certain more documents are to be examined is without any merits. x. With respect to the challans submitted by the Appellants along with the written submissions made on 23/07/2018, the verification was again caused. On sample verification of the list submitted it was found that these documents were the same documents in respect of which the verification was earlier caused and the payments made in these documents could not have been justified against the payment of service tax demanded. 6.0 We have considered the submissions made by both the Appellants and revenue. Undisputed fact is that Appellants are registered providers of taxable service under the category of Security Agency Services. During the period under dispute, appellant were raising the invoices on their customers/ clients for the services rendered along with the applicable taxes. They were receiving the payments inclusive of the service tax amount but were not depositing the same. They were als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Ld. Consultant has argued that, as in the case of penalties under the Central Excise Act, there should be no penalty on the ground of delay of payment of service tax prior to issuance of a show cause notice. I am unable to accept this proposition inasmuch as the penal provisions relating to service tax are couched in a language different from those relating to Central Excise Duty. The penalties have been correctly quantified by the original authority. 7.0 Similar View was expressed in case of Shayna Construction [2010 (262) E.L.T. 1006 (Tri.-Ahmd.)], and United Udyog [2015 (39) STR 148 (T-Kol)]. The observations of tribunal in case United Udyog are reproduced below: 5. Heard both the sides and perused the records. Issue involved is whether financial hardship is a reasonable cause for exercising the powers by the adjudicating authority under Section 80 of the Act. The ld. Advocate has cited the case of Sunitha Shetty and Motor World (supra) in support of their claims that the discretion conferred on the adjudicating authority under Section 80 of the Act cannot be reviewed by the Commissioner (Appeals). I however find that the facts involved in the present appeal is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is office letter of even no dated, please find enclosed herewith the reconciliation of service tax along with cesses, wherever applicable, payable and paid in respect of M/s Tops Security Limited, prepared as per the direction contained in your above referred letter. The reconciliation is done on the basis of the following document received in the office of Hon ble CESTAT, Mumbai on 04.08.2017 and further additional submissions dated 05.10.2017, 06.10.2017 09.10.2017, received in this office:- a. Copies of the SCN s b. Copies of ST-3 return c. Copies of Taxpaying challans (TR-6/ GAR-7) d. Tax liability and payment worksheets prepared by and submitted by M/s Top Security Ltd. Factors applied and documents considered in reconciliation:- (1) Where the CIN of the Challans are not matching with their amounts, the same have not been considered as valid challans. (2) (Where the assessee has clearly marked, whether hand written or otherwise the challans for payment of the particular month/ period, the same has been considered provided the said payments are not declared/ adjusted/ claimed/ made against any other liabilities/ dues. (3) In respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73 3 3,16,37,53 2 9 ST/128/10-MUM 3,75,69,008 67,31,285 4,17,58,70 8 4,84,89,99 3 10 ST/564/10-MUM 1,45,65,041 0 3,07,67,32 5 3,07,67,32 5 Total 31,79,67,99 2 6,99,84,973 47,95,21,265 54,95,06,238 8.3 Appellants have vide their letter dated 14.11.2017, again submitted documents which in their view should be taken up for reconciliation, though these documents have earlier been submitted also. Jurisdictional officers again considered these documents and have vide letter dated 20.11.2017 given report indicating why each document could not have considered for reconciliation. The document wise reasons submitted are mentioned in table below: Table 4 Reasons for not accepting certain documents towards payments made Sl No Amount Document Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20-Dec-07 2007-08 3 43 1,17,018 Bank Statement 28-Dec-07 2007-08 10 44 9,38,168 Liability Reversed 31-Mar-07 2007-08 6 Appeal No ST/128/12-MUM 10 3,19,013 Bank Statement 7-May-05 2005-06 7 11 3,47,347 Bank Statement 7-June-05 2005-06 7 12 3,92,519 Bank Statement 7-Jul-05 2005-06 7 13 3,07,912 Bank Statement 28-Aug-05 2005-06 7 14 3,29,568 Bank Statement 20-Oct-05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Challan has been prepared but never submitted to bank since there is no receiving stamp of the bank on challan. 6 The assessee ha himself reversed the liability in his accounts without showing any concrete reason thereof 7 The party has claimed the payment of Service tax on the basis of a bank statement but this is not a prescribed document evidencing payment of service tax and other dues. Moreover the it can be confirmed whether it is service tax, interest, penalty or any other dues and the period is also not mentioned. 8 The assessee has not mentioned the month for which the payment is being made, therefore payment for the month of April 2004 cannot be considered as claimed. 9 No explanation was tendered by the party why this amount be adjusted against the payment of ₹ 1,66,765/- 10 This entry in Bank statement is on account of payment of Salary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey also pleaded for the benefit of reduced 25% of the mandatory equal penalty in terms of proviso to Section 78 of Finance Act. 5. The ld. AR stated that the appellants deliberately did not pay the service tax due in spite of having collected it and their appeals need to be dismissed. 6. We have considered the submissions. It is seen that the appellants have not denied that the impugned service tax was leviable and therefore with the consent of AR we take up the appeals waiving requirement of pre-deposit. They have been collecting service tax as part of gross amount charged and therefore non-deposit thereof on the ground of financial crunch is totally unacceptable. Financial crunch in no circumstance can justify non deposit of service tax collected. Obviously thus there is not a great deal of discussion required to conclude that the appellants deliberately short paid the service tax due and the impugned order does not suffer from any appealable infirmity on merit. The appellants during the hearing have pleaded that for penalty under Section 78 the benefit of payment of 25% of the mandatory equal penalty as per proviso to Section 78 of the Finance Act should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority to indicate in the adjudication order the option available to an assessee of paying reduced penalty, that option cannot be made available at the appellate stage by permitting the assessee to pay the reduced penalty within 30 days of the order of the appellate authority. 22. As far as Section 78(1) read with Section 83 of the Finance Act, 1994 is concerned, apart from the fact that Section 11AC of the CE Act is not ipso facto applicable, the circular of the C.B.E. C. issued in the context of that provision requiring the adjudicating authority to mandatorily state in the adjudication order the availability of the option of payment of reduced penalty, is also not applicable. In other words, an adjudication order levying penalty under Section 78(1) of the Finance Act, 1994 does not have to mandatorily spell out the option available to an assessee of payment of reduced penalty under the second proviso thereto. The failure to make such mention neither renders the adjudication order bad in law nor permits an appellate authority to give such an option at the appellate stage. 23. It appears to the Court that the very object of extending to an assessee the option of ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statutory provision under which he can file an appeal. 26. The upshot of this discussion is that an appellate authority cannot at the appellate stage give the option to an assessee to pay the reduced penalty within a time that is beyond what is stipulated in the third proviso to Section 78(1) of the Finance Act, 1994. The statute is explicit. The second proviso states that the payment of the service tax and interest has to be paid within paid within thirty days from the date of communication of order of the Central Excise Officer determining such service tax and the third proviso states that the reduced penalty that has been determined also has to be paid within the period of thirty days referred to in the second proviso. The option to pay the reduced penalty comes to an end on the expiry of thirty days from the date of communication of the adjudication order. It is only where the service tax is enhanced by an appellate authority that, in terms of the proviso to Section 78(2) of the Finance Act, 1994, the time period for paying the reduced penalty at 25% of such enhanced service tax is computed from the date of communication of the appellate order. 27. In that vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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