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TMI Blog2008 (5) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocates/CA/Consultants, for the Appellant. Ms. Sudha Koka, Hitesh Shah, R.P. Raheja, SDRs/JCDR, for the Respondent. [Order per: T.K. Jayaraman, Member (T)]. - The following cases involving common questions of law and facts were taken up together for decision. The cases appearing from Serial Nos. 1 to 14 involve enhancement of penalty by the Commissioner in terms of the revisionary powers conferred on him by Section 84 of the Finance Act, 1994. The appellants challenged the enhancement of penalty on various grounds. As regards the cases appearing in Serial Nos. 15, 16 17 the penalties imposed are under challenge on the ground that the duty has been paid before the issue of Show Cause Notice. The details of the cases are given in the tabular column below. Sl. No. Appeal No. Name of the Party Impugned Order No. Date Remarks Advocate/ DR 1. ST/85/07 M/s. Majestic Mobikes Pvt. Ltd. v. CST RA No. 29/2007 Dt: 5-3-2007 It is a case of enhancement of penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Sudha Koka, SDR 10. ST/282/07 M/s. Infra Violet v. CST RA No. 43/2007 Dt: 27-3-2007 It is a case of enhancement of penalty Sh. Rajesh Kumar T.R, CA Hitesh Shah, SDR 11. ST/126/07 M/s. TAPE Access Ltd. V. CST RA No. 13/2007 Dt: 7-2-2007 It is a case of enhancement of penalty Sh. Vijayan, Adv., Smt. Sudha Koka, SDR 12. ST/169/07 M/s. N.C.S Storage Systems Pvt. Ltd. v. CC CE, Vizag-II RO No. 1/2007 Dt: 29-3-2007 It is a case of enhancement of penalty Sh. S.V Ratnam, Adv. Smt. Sudha Koka, SDR 13. ST/130/07 M/s. RNS Motors v. CST RA No. 7/2007 Dt: 22-1-2007 It is a case of enhancement of penalty. Argued on merits and on time bar. Sh. S. Raghu, Adv. Sh. R.P. Raheja JCDR 14. ST/168/07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cers pointed out the lapse. Invoking the powers under Section 80 of the Finance Act, the Original Authority did not impose any penalty under Section 76 and 77 of the Finance Act. However, under Section 78 he imposed a penalty of Rs. 10,000/- only. The order of the Original Authority is dated 30-3-2005. The date of Show Cause Notice is also 30-3-2005. The service tax payment had been made on 19-3-2005. Thus, it is seen that the service tax has been paid before the issue of Show Cause Notice. In terms of the powers conferred under Section 84 of the Finance Act, the Commissioner Service Tax initiated revisionary proceeding on the ground that the Original Authority arbitrarily invoked Section 80 to drop penalties under Sections 76 77 despite the fact that the assessee did not show any reasonable cause for their failure to comply with the provisions. The Commissioner has given a finding that the assessee admittedly paid the amount after almost two years. He is of the view that penalties ought to have been imposed under Sections 76, 77 78 of the Finance Act. He also held that the amount of Rs. 10,000/- as penalty imposed under Section 78 is not in accordance with the law, because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhanced to Rs. 4,65,000/- (d) Penalty of Rs. 8000/- enhanced to Rs. 6,83,800/- 5.1 All the four revision orders are under challenge on various grounds. Motor World Ltd. v. CST, Bangalore 6. This is similar to the earlier cases. In this case also, the service tax was paid before the issue of Show Cause Notice along with the interest in the Order-in-Revision apart from imposition of penalties under Section 76 77. The penalty under Section 76 was enhanced from Rs. 20,000/- to Rs. 4,35,000/-. The impugned order-in-Revision is under serious challenge. Further, all the appeals from Serial Nos. 5 to 14 are similar to the above-mentioned cases. The Submission of the Counsels 7. The learned Advocates made their submissions. They relied on various case laws. They brought to our notice several decisions of the judicial for a wherein it has been held that when the duty is paid before the issue of Show Cause Notice, penalty cannot be levied. The learned Departmental Representative countered this point by inviting our attention to several contra-decisions. Reference was invited to the decision of the Rashtriya Ispat Nigam Ltd. v. Commissioner of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tri. - Del.) 7.1 On the other hand, it was submitted by the learned Counsels that in all the above-mentioned cases the Adjudicating Authority in exercises of the owers conferred on him under Section 80 of the Finance Act, waived the penalties under Section 76 77. However, he reduced the penalty under Section 78 considering the fact that in all the above-mentioned cases, the service tax along with interest has been paid much before the issue of Show Cause Notice. It was strongly urged that the Adjudicating Authorities who had passed the order in original exercise their discretion under Section 80 and the Commissioner had no jurisdiction to question the manner of exercise of discretion and interfere in such exercise of discretion more so when the Orders-in-Original cite the provisions of Section 80 stating that there was reasonable cause not to impose high penalty. The following cases were relied on: (a) Commissioner of Central Excise v. Sunitha Shetty - 2006 (3) S.T.R. 404 (Karnataka) = 2004 (174) E.L.T. 313 wherein it was held that the Commissioner was not justified in reviewing the order passed by the Deputy Commission as he had exercised his discretion under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying Section 84 in other cases or take decisions contrary to the said judgment. Reliance was placed on the following Apex Court's decision. (i) UOI v. Sathish A. Shah - 2001 (249) ITR 221 (SC) wherein it was held that it was not open to the Revenue to accept the earlier judgment in the case of one assessee and challenge its correctness without just cause in the case of other assessee. (ii) Commissioner of Central excise v. Shivasagar - 2002 (257 ITR 59 (SC) wherein it was held that Departmental appeals against High Court decision for subsequent year was dismissed on the ground that no appeals were filed by the department before the Supreme Court for earlier hearing. (iii) Jayaswal Neco Ltd. v Commissioner of Central Excise - 2007 (8) S.T.R. 305 (S.C.) = 2006 (195) E.L.T. 142 (S.C.) = 2006 (73) RLT 230 (S.C.) wherein it was held that department having accepted the principle laid down in the earlier case cannot be permitted to take a different stand. (iv) The penalty imposed should be commensurate with the gravity of the offence. The Revisionary Authority has imposed penalties disproportionate to the tax amounts involved. (v) The Revisionary Authority h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority imposed penalties under the above Sections. The learned Advocate Sri Ramesh Ananthan invited our attention to the observations of the Tribunal in the case of Commissioner of Central Excise, Bhopal v. Bhojpur Club - 2006 (3) S.T.R. 512 (Tri. - Del.), wherein the Tribunal has upheld the Commissioner Appeals' Order to the effect, 'When the assessee who did no at all comply with the Service Tax Law can be given immunity provided they pay the Service Tax along with appropriate rate of interest, there is no tangible and logical reason as to why the law abiding assessee who had got himself registered more or less in time and had also started paying the Service Tax along with interest, much before the new scheme became operational, should be denied the benefit of waiver of the penal provisions referred to above for late registration, delay in filing of relevant returns etc, all of which are procedural in nature'. (xi) In respect of Appeal No. ST/282/2007 of M/s. Infra Violet, it was stated that the appellant was engaged in conducting various programs for clients in arranging conferences, day outs, annual days, parties, competitions, launches and promotions of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no service tax was paid under the category of Business Auxiliary Services, they immediately paid the amount from 1-7-2003 to 10-3-2005. The appellants received the show, cause notice on 16-3-2005. The Original Authority in exercise of the powers under Section 80, dropped the penalties under Section 76, 77 78. The Revisionary Authority imposed penalty of Rs. 200/- per every day under Section 76, Rs. 1000/- under Section 77 and Rs. 9,00,000/- under 78. The decision of the Tribunal in the case of Silicon Honda - 2007 (7) S.T.R. 475 (Tri.-Bang.) was relied on. In that case, it was held that mere providing of space by the appellant for monetary consideration cannot be brought under the definition of Business Auxiliary Service. Therefore, even on merits, the demand is not sustainable and levy of penalty is not justified. Moreover, when the service tax amount with interest is paid before the issue of show cause notice, Section 73(3) of Finance Act, 1994 itself provides for non-issue of Show Cause Notice and, therefore, the question of imposition of penalty does not arise. The period of demand is from 1-7-2003 to 31-3-2005. The date of Show Cause Notice under Section 84 is 19-7-2006. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the appellants had stated various case laws from the Central Excise. According to him, the ratio of the case laws relating to Central Excise does not apply for Service Tax matters. It was also argued that Section 84 enables Revisionary Authority for making good the lacunas in the order passed by the lower authority. It was urged that the case law cited by the appellant in the Sai Motor's case at serial no. 1 namely Smt. Kuntesh Gupta v. Management of Hindu Kanya Mahavidyalaya - 1987 (32) E.L.T. 8 (S.C.) is not applicable because the Revisionary Authority has the power to pass appropriate order under Section 84. Reliance was placed on the decision of the High Court of Karnataka in the case of M/s. First Flight Couriers Pvt. Ltd. in CEA No. 19/2005 with respect to Departmental appeal against CESTAT's Final Order No. 1859/2004 dated 19-11-2004 - 2006 (3) S.T.R. 460 (T) = 2005 (183) E.L.T. 51 (T) wherein it had been held that reduction of penalty cannot be arbitrarily ordered. The case law CIT v. Dr. Suresh G. Shah - 2007 (289) ITR 110 (Guj) was relied on. Wherein it was held that where assessing officer failed to initiate penalty proceedings, such omission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable cause for the said failure. Section 84 of the Finance Act reads as follows: 84. Revision of orders by the Commissioner of Central Excise. - (1) The Commissioner of Central Excise may call for the record of a proceeding under this Chapter in which an adjudicating authority subordinate to him has passed any decision or order and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Chapter, pass such order thereon as he thinks fit. (2) No order, which is prejudicial to the assessee shall be passed under this section unless the assessee has been given an opportunity of being heard. - (3) The Commissioner of Central Excise shall communicate the order passed by him under sub-section (1) to the assessee, such adjudicating authority and the Board. (4) No order under this section shall be passed by the Commissioner of Central Excise in respect of any issue if an appeal against such is pending before the Commissioner of Central Excise (Appeals). (5) No order under this section shall be passed after the expiry of two years from the date on which the order sought to be revised has been passed. 11.1 We wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. Provided that where such person has paid the service tax in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notices are served under sub section (1) shall be deemed to be concluded : Provided further that where such person has paid service tax in part along with interest and penalty under sub-section (1A), the Central Excise Officer shall determine the amount of service tax or interest not being in excess of the amount partly due from such person. (3) Where any service tax has not been levied or paid or has been short levie or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund. 12. For the first time, Service Tax was introduced in India in the year 1994. Initially, only three services were liable to service tax. Later, gradually more and more services were brought under the tax net, with the result that at present, there are more than 100 taxable services. The point to be appreciated is that the service tax Law in our country is evolving. In every budget, new categories of services are introduced. Many a time, the service providers are not clear as to whether the service provided by them is taxable or not. The CBEC also issues circulars clarifying the law. Even at the time of introduction of the service tax, the Government of India emphasized the culture of voluntary compliance. In other words, the Government was against draconian provisions in practice. Even though some harsh provisions are in the statute book, a close reading of the various provisions indicate that the intention of the Government, is not to impose heavy penalties in respect of service providers for various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or reduction of penalties. 14. In the Majestic Motor case, the appellants did not pay the service tax under the category of Business Auxiliary Service. However, when the lapse was pointed out, they paid the service tax even before the issue of Show Cause Notice. The Original Authority has made an observation however because of their action of making good, the payment immediately after pointing out by the departmental officers has diluted the offence committed by them . Here is a case where the reason given for non-payment is ignorance. When it was told that they are liable for tax, the tax along with interest was paid. The very action of the appellant has shown that he is ready to comply with the law. Under such circumstances, the Original Authority is of the view that waiver of penalties under 76 77 can be given in terms of Section 80 and also imposition of a nominal penalty under Section 78. In our view, the order of the Original Authority is well reasoned and is not at all arbitrary. The tax paid is to the tune of Rs. 6,68,945/-, whereas the penalty imposed by the Revisionary Authority is Rs. 10,00,000/-. It is very clear that imposition of such a huge penalty on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in blatant violation of law with no regards for the rule of law. According to us if such an Officer is entrusted with quasi-judicial duties, he will resort to arbitrary exercise of power, which will compel the victims to approach higher tribunals for extricating them from the illegal orders. The predicament of such an Officer is quite evident from the fate of the appellant before us. This case on hand is a classic example of the vagaries of a Government servant who can misuse his powers. The Officer acted in an arbitrary and illegal manner in exercise of his so-called judicial powers. 16. The appellant did not pay the service tax on account of ignorance of law. There is no intention to evade payment of duty. When such facts are on record, no further action on the part of the appellant to prove reasonable cause is warranted. What is reasonable cause? The Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v State of Uttar Pradesh - 1978 (118) ITR 326 (SC) held that it is well settled law that 'reasonable cause' can be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence acting under normal circumstances without negli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest there is no tangible and logical reason as to why the law abiding assessee who had got himself registered more or less in time and also started paying the service tax much before the new scheme became operational should be denied the benefit of waiver penal provisions. It is also of interest to note that there is no provision of prosecution in respect of offences relating to service tax. In respect of all the cases excepting one under Serial No. 12, there was sufficient cause for non-payment of, service tax in time. They are namely ignorance and bona fide belief. The moment the lapse was pointed out in all the cases except that in Serial No 12, the tax and the interest was paid well before the issue of Show Cause Notice. Hence, in all the cases, in Serial Nos. 1 to 14 excepting Serial No. 12, we set aside the impugned Order-in-Revision and restore the Order-in-Original. 18. As regards Serial No. 12, with regard to N.C.S. Storage System, it is seen that the service tax was paid only after the issue of show cause notice. In these circumstances, non-imposition of penalties under Section 76 78 is not justified. However, keeping in view the fact that the service ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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