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TMI Blog2019 (7) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... be the reason for holding on the money collected from the customer/ client be valid reason for nonpayment of tax due to the government. In the scheme of indirect taxation the tax depositor is only a conduit for depositing the tax collected from the recipient of taxable service to the government. Financial hardship cannot be reason to justify such misappropriation of the money which was never held as the money by the appellant. Penalty u/s 78 of FA - HELD THAT:- In the case of Jamshedpur Branch, the penalty imposed under Section 78 is higher than the demand of tax. Such an approach is contrary to the provisions of Section itself. However since the matter in respect of Jamshedpur Branch is remitted back to the original authority for re-computation of tax payable, the authority shall reconsider the quantum of penalty and make it equal to the tax demand - In respect of Jamshedpur Branch is on all grounds except for grounds re-computation of tax payable and quantum of penalty under Section 78 is rejected. Original Authority to recompute the demand and penalties under Section 78 of Finance Act, 1994 after affording them a chance of hearing. Appeal dismissed. - ST/716,717/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T-3 Returns whichever is later is imposed under section 77 ibid. 1.3 By his order Commissioner Bhubaneswar held as follows: In view of my findings, I order as under- 5.1 I confirm Service Tax of ₹ 58,03,816/- (Rupees Fifty Lakhs Three Thousand Eight Hundred and Sixteen only) on M/ Tops Security Limited Plot No 20, Acharya Vihar Bhubaneswar, Dist Khurda 751022 under Section 73(2) of the Act along with interest under Section 75 of the Act. Since Service Tax of ₹ 37,47,040/- and interest of ₹ 5,74,285/- has already been paid, I order for its appropriation. I also order for recovery of the balance Service Tax alone with interest. 5.2 I impose a penalty of ₹ 58,03,816/- (Rupees Fifty Lakhs Three Thousand Eight Hundred and Sixteen only) on noticee under Section 78 of the Act. However in case the noticee pays Service Tax along with interest within 30 (thirty) days of communication of this order, the above penalty amount would stand reduced to 25% i.e. ₹ 14,50,954/- (Rupees Fourteen Lakhs Fifty Thousand Nine Hundred and Fifty Four only), provided further that the reduce penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jamshedpur Branch 04-05 5032343 0 714905 714905 217753 497152 05-06 4071646 497152 437601 934753 0 934753 06-07 12291566 934753 1504488 2439241 0 2439241 07-08 23871947 2439241 2949558 5388799 752609 4636190 08-09 36162759 4636190 4399634 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not able to substantiate their claim for having paid the service tax of ₹ 19,26,084/- before the investigating authority. They admitted that the tax short paid by them during the period in dispute and deposited the amount of ₹ 37,47,040/- along with interest of ₹ 5,74,285/- as per the table below: S No Challan Date Amount Remark Service Tax + Edu Cess + SHE 1 14.10.2008 573400 Paid during the course of Investigation 2 05.11.2008 421313 3 08.12.2008 520141 4 11.12.2008 486417 5 06.01.2009 374013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e As per SCN/OIO As per Actual and Rate prescribed Taxable Value Amount Rate (%) Taxable Value Rate (%) Amount 04- 05 5032343 714905 14.2 1 5032343 10.2 465789 05- 06 4071646 437601 10.7 5 4071646 10.2 376867 06- 07 1229156 6 1504488 12.2 4 1229156 6 12.2 4 134042 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.03.10 220119 805656 2007-08 17.03.10 265764 17.03.10 491361 17.03.10 1719228 2478353 2008-09 30.05.09 365748 365748 Total 41,71,543 Paid through CENVAT 82326 Total 42,53,869 Payment after filing the appeal 27.12.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 680438 7 04.03.2009 602194 8 11.03.2009 89079 9 30.10.2009 51052 10 30.03.2010 68775 Total 3866822 They had paid a sum of ₹ 19,26,084/- on 20th October 2009 on the Challans bearing registration No of Kolkata Branch (AAACT0160FST014) inadvertently by mistake, for the invoices issued for the Bhubaneswar Customers. Apart from the above payments made they had also paid interest amounting to ₹ 7,90,940/- If all the above payments made by them as detailed above is taken into account then they have discharged the entire service tax liability along with the interest before the adjudication of the matter. Out of the above amounts paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices of the Appellant across the country. In the Appellants own case, on the basis of same 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. 4.1 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 also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andatory equal penalty as per proviso to Section 78 of the Finance Act should be given to them as the same had not been done in the impugned order. In this regard, we find that the Gujarat High Court in the case of CCE, Ahmedabad v. Ratnamani Metals Ltd. - 2013-TIOL-1124-HC-Ahd-CX = 2013 (296) E.L.T. 327 (Guj.) has held as under : At no stage, either in the Order-in-Original or in the order of Commissioner (Appeals), the assessee respondent has been given the benefit of payment of reduced penalty - Court has followed a consistent view that the assessee is required to be given the option by the adjudicating authority where he is asked to pay a duty demand with interest and 25% of penalty within 30 days from the date of adjudication of the order and in such case, he would be liable to pay only 25% of the penalty - whenever such option had not been given, the remand had been made to the concerned authorities and the period of 30 days is being considered, if in case option is not given earlier, from the date of availing such option - since no option was given, the Tribunal can award such an option to the assessee. 7 . In the light of the foregoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rose before the Gujarat High Court in CCE, Ahmedabad-III v. Ratnamani Metals and Tubes Ltd. (supra) that High Court took the view that where the Order-in-Original of the adjudicating authority did not specifically draw the attention of the assessee to the benefit of the proviso to Section 11AC concerning payment of the reduced penalty, there was nothing erroneous in an order of the CESTAT extending such benefit at the appellate stage to the assessee and permitting the assessee to pay the reduced within 30 days of the order of the CESTAT. 20 . The Gujarat High Court at this stage took note only of, and chose to follow, its earlier decisions in CCE v. Akash Fashion Prints Pvt. Ltd. - 2009 (239) E.L.T. 439 (Guj.) and CCE v. M/s. Krishnaram Dyeing Finishing Works - 2013 (298) E.L.T. 376 (Guj.). Soon thereafter it again dealt with the issue in Commissioner of Central Excise v. Rajeshree Dyeing Printing Mills (P) Ltd. - 2014 (305) E.L.T. 442 (Guj.). This time the Gujarat High Court took note also of the decisions of this Court and of the Bombay High Court noted hereinbefore and of the Allahabad High Court in Commissioner of Customs and Central Excise v. Majes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late stage. 23. It appears to the Court that the very object of extending to an assessee the option of availing the benefit of payment of reduced penalty in terms of the second proviso to Section 78(1) of the Finance Act, 1994 was to provide an incentive for prompt payment of the service tax and interest that is due. When an assessee does not wish to contest the service tax liability or even when it wishes to contest such liability, but is prepared to pay upfront the service tax and interest without prejudice to its rights and contentions, the statute provides an option of payment of reduced penalty to the extent of 25% of the service tax. This is, of course, subject to payment of not only the service tax and interest but also the reduced penalty within 30 days of the communication of the order of the adjudicating authority. 24. The SCN issued to an assessee invariably mentions the statutory provisions under which the demand for service tax, interest and penalty is proposed to be raised. There can be no question, therefore, of the assessee being unaware of the provisions of the statute. It is also very likely that in the adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 view of the matter, in the instant case, the CESTAT could not have permitted the respondent to pay the reduced penalty amount in terms of the second proviso to Section 78(1) of the Finance Act, 1994 within thirty days from the date of the impugned order of the CESTAT. Such a direction was contrary to the third proviso to Section 78(1) of the Finance Act, 1994 and therefore legally unsustainable. Following the above decisions we have ourselves in case of Appellant various Branches decided the matter against the appellant upholding the demand of service tax and interest along with penalties as reported at [2018-TIOL-3253-CESTAT-Mum] 4.3 In view on the merits of case demanding the Service tax with interest and penalties imposed we do not find any merits in the appeals filed by the appellant. While appellants do not dispute the computation of tax demand in case of Bhubaneswar Branch, they have pointed out to certain computational errors as indicated in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation (1) : Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short levied or was short paid or was erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty. 8. The ratio laid down in the matter of Rashtriya Ispat Nigam Ltd. v. Commissioner of Central Excise, Visakhapatnam - 2003 (161) E.L.T. 285 (Tri.-Bang.), relied upon by learned Counsel for assessee, which view was confirmed by the Hon ble the Apex Court while dismissing the appeal of the department, that in case the duty is paid before issuance of show cause notice, no penalty u/s. 11AC is imposable, was a decision of the Tribunal at Bangalore dated 13-11-2002. Taking into consideration the hierarchy of authorities under the Central Excise Act, 1944 i.e. Assessment Officer conducting enquiry and determining the duty evaded or short paid, Commissioner (Appeals) and thereafter CESTAT, it can safely be said that this was a decision regarding the non-payment of duty of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o far as penalty imposable u/s. 11AC is concerned. 10 . So far as interest u/s. 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations between 10% to 36% is as determined by the Central Government by notification in the Official Gazette from time to time. There would be discretion, if at all the same is incorporated in such notification in the gazette by which rates of interest chargeable u/s. 11AB are declared. The second aspect would be whether there is any discretion not to charge the interest u/s. 11AB at all and we are afraid, language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied/short paid/non-levied/unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time. This is evident from the opening part of sub-section (1) of Section 11, which runs thus : Where any duty of exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The first one is civil liability whereas second is penal, if not criminal, liability. This is because u/s. 11AC, existence of mens rea is a must, whereas u/s. 11AB, it may be innocent evasion or omission to pay the duty. The judgment of the Supreme Court is brief and it is not possible to judge whether issue regarding interest was also agitated by the department before the Hon ble Apex Court. Otherwise also, we have already pointed out that this is a judgment, which can safely be presumed to be regarding the duty payable for a period prior to insertion of amendments by Act No. 14/2001 with effect from 11-52001, which have clarified the distinction between Sections 11AB and 11AC by virtue of sub-section (2B) and Explanations below the same. Second explanation below sub-section (2B) reads thus : Explanation (2) : For the removal of doubts, it is hereby declared that the interest u/s. 11AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of duty if any as may be determined by the Central Excise Officer, but for this sub-section. It is evident that explanation has taken care to charge t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee to show cause as to why interest may not be charged or penalty may not be imposed. The department would be justified in issuing show cause notice pertaining to duty as well if the duty as ascertained by the assessee himself and paid is less than duty as prima facie ascertained by the officer of Central Excise. In any case, we are unable to agree with the submission by learned Counsel Shri Kolte that on payment of short duty as under sub-section (2B), before issuance of show cause notice, no interest u/s. 11AB can be charged, by virtue of portion of Section 11AB (2B) reproduced hereinabove. 12. Learned Counsel Shri Kolte has also placed reliance upon the tail piece of Explanation (2) to sub-section (2B) reading but for this sub-section . According to him, but is a conjunction used to indicate the intention of those who use it to limit or restrain the sense or effect of something, which had before been said. He has obtained this meaning from Law Lexicon by P. Ramnatha Aiyar. In order to examine the submission by learned Counsel as to whether this terminal part of Explanation (2) gives the explanation so much strength as to mean that the party, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) of Section 11A, till the date of payment of such duty. Thus, why the clause but for is used, is evident from the tail piece of Section 11AB(1). Ordinarily, the interest is payable till payment of short duty as adjudicated, but in view of sub-section (2B), which gives liberty to the party to pay the short duty even before determination or without determination by the officer of Central Excise, the interest would stop to run to the extent of amount deposited by self ascertainment and on the date such amount is so deposited. If the tail piece of Explanation (2) was to be so strong as to nullify the effect of sub-section (2B), Section 11AB would not have incorporated within it the clause or has paid the duty under sub-section (2B) . Reading Section 11AB together with Section 11A (2B) and Explanation (2), we are unable to accede to the interpretation tried to be attributed by Advocate Shri A.P. Kolte to Explanation in question. 13 . For all these reasons discussed, we are unable to agree with the proposition that interest u/s. 11AB is also not chargeable in case the short duty or unpaid duty is deposited with the Government b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2 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 same as in case of the judgments cited by the appellant. On the other hand ld. Commissioner (Appeals) has placed reliance on the case of Shayna Construction (supra), wherein the Tribunal held that delay of 187 days in filing the return and delayed payment of Service Tax ranging from 194 to 286 days was explained by the appellant due to his frequent visits on account of his mother s illness and that after return the tax could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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