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TMI Blog2009 (6) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... MBER K.K. Anand for the Appellant. L.B. Yadav for the Respondent. ORDER D.N. Panda, Judicial Member.- These two appeals arise out of common cause and facts relating to same appellant, in terms of two adjudications made by two different Jurisdictional Commissioners consequent upon discovery of certain materials in the course of search made on 5-9-2005 to its head office in Chandigarh and branch office in Delhi. Hence both the appeals were heard together and disposed by this common order. Although appellant had made prayer in both the Appeal Memos for setting aside of order in original and grant of consequential relief if any, the appellant in the course of hearing before us confined its claim against penalty imposed without disputing tax liability arose under adjudication. Accordingly limited issue of penalty was pressed praying that penalties imposed under sections 76, 77 and 78 may be waived or in the alternative, penalty under section 76 may be waived in toto and penalty under section 78 may be reduced to a marginal amount in the interest of justice. Also, subsequent to hearing of the matter, learned counsel for the appellant filed written submissions on 24-2-2009, reiteratin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice was directed to be appropriated against interest demanded as above. (4) Penalty of Rs. 86,66,878 was demanded under section 78 of the Finance Act, 1994. (5) Penalty of Rs. 100 for every day of default to discharge tax liability under section 76 of the Finance Act, 1994 and penalty of Rs. 1,000 was imposed under section 77 of the Act. Basic facts 4. The appellant is an Air Travel Agent, having its head office in Chandigarh and branch office in Delhi. It is an approved agent of International Air Ticketing Association (IATA). A Company called "Amadeus" had provided Central Reservation System (CRS) to the appellant to book air ticket of various Air Lines with which the former had business tie up. The appellant was booking ticket for its clients as well as agents who were not members of IATA, under Billing Settlement Plan (BSP) of IATA. Under this plan, the appellant was getting tickets on line from various tied up Air Lines. Fortnightly statement was received by the appellant under above. Plan showing various details like basic fare, transaction value, tax values and commission on tickets. Due to stiff competition in the market, the appellant was merely able to retai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigation, service tax on Air Travel Agent service was imposed with effect from 1-7-1997. In terms of rule 6(7) of Service Tax Rules, 1994 air travel agents were given option to discharge tax liability by an alternate method of calculating the tax on "basic fare" at the rate provided in that rule instead of paying service tax at the general rate of service tax on commission, prescribed by section 66 of the Act. Following rule 6(7) of the Rules and applying the following rates of tax prescribed under that rule by Notification from time to time, Investigation worked out the value of taxable service and tax evaded as under: Period Rate of tax International Bookings Domestic Bookings Prior to 14-5-2003 0.5% 0.25% 15-5-2003 to 13-9-2004 0.8% 0.4% 13-9-2004 to 31-3-2005 1% 0.5% In addition to the service tax payable, Education Cess was payable at the rate of 2 per cent on the service tax with effect from 10-9-2004. Suppressed value of "basic fare" for the impugned period 1-4-2000 to 31-3-2005 relating Chandigarh jurisdiction was worked out as follows, which is subject-matter of Appeal Case No. 444/06: Domestic Tickets International Tickets Actual Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating Authorities that the appellant had mala fide in calculation of its tax liability to make undue gain by short payment of tax. Further, it was held by them that invoking of extended period was justified in view of suppression of facts and intentional violation of the provisions of law when tax was actually collected by the appellant on the basis of basic fare, but manipulating the basic fare, that was not deposited fully. It was also held that while tax actually collected was reflected in records, deposit thereof not being made to the treasury, that has resulted in violation of provisions of section 11D of Central Excise Act, 1944 read with provisions of section 83 of the Act. Above finding against the appellant made it liable to penal consequence of law as well recovery of tax evaded. 11. The Authorities found the appellant not innocent. Deliberate manipulation of record and suppression of taxable service having been found and finding the appellant had realised service tax due from its customers, but not deliberately deposited the same under law, it was held by both the authorities that penalty under sections 76 and 78 of the Act was leviable. An additional liability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oximately only 1 per cent of the commission. He further stated that as was understood by them that service tax is payable at the rate of 10 per cent of commission, they have been depositing approximately 10 per cent of the commission retained (after deducting the commission/discount passed on to the customers). Any other detail or method of calculation was not known or explained to them. Their returns for the period October 2004 to March 2005 shows payment of service tax at the rate of 1.02 per cent on the basic price of the tickets, but in reality their calculation of service tax is based on the net commission retained by them, because of the reason that they were not aware of the method of calculation of the service tax. (9) There was no intention to evade tax. But shortfall of tax paid is under bona fide mistake of law for which the interpretational error of law gives shelter to the appellant under section 80 of the Act and such reasonable cause absolves the appellant from rigours of penalty under sections 76, 77 and 78 of the Act. (10) Alternatively, in any event, penalty shall not exceed 25 per cent of the tax liability and the appellant finds support from the decision of Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were seized which gave rise to the order of adjudication. (2) The assessee was collecting service tax from Airlines on the basis of basic fare as per sample Invoice No.450, dated Nil, Invoice Nos. 4502 and 4503, dated 16-4-2002 and Invoice Nos. 569 and 570 both dated 2-4-2002. But it was paying service tax on the basis of net commission retained by it and this amount of service tax was shown in their service tax returns, while a different value of the service was shown in the service tax returns. (3) That, Director of the appellant Sri Mohinder Singh Bajaj in his recorded statement on 5-9-2005 stated that the company is depositing service tax on calculation of net commission retained by it but this figure on service tax return (ST-3) is different because of mistake in their calculation and misunderstanding of the calculation method. (4) That, Sri Kulwant Singh, Accountant in his statement recorded on 5-9-2005 stated that he is preparing accounts since last 13 years and prepares service tax return for the appellant which is calculated at the rate of 10 per cent of the commission / profit retained by the appellant company. (5) That, the appellant was paying service tax on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the airlines. However, sub-rule (7) of rule 6 of the Service Tax Rules, 1994 provided an option to the Air Travel Agents to pay Service Tax on the 'basic fare" as defined in this sub-rule, at the rate specified under that sub-rule. The term 'basic fare' was defined for the purpose of this rule - as that part of the air fare on which commission was payable to the agent by the airline. The option under rule 6(7), once exercised was to apply uniformly in respect of the bookings of air travel by the air travel agent and could not be changed during the financial year under any circumstances. 15.1 What has happened in this case is that throughout during the period of dispute, the appellant was actually paying the service tax at the prevailing rate under section 66 on the net commission instead of on the gross commission and that has resulted in short payment of tax. While doing so, in the ST-3 returns, instead of showing the gross and net commission and calculation of service tax on that basis, the tax payment shown was as if it was on the 'basic fare' basis at the rate appearing under rule 6(7) of the Rules. 'Basic fare' shown in the ST-3 returns was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made thereunder, fails to pay such tax. Since in this case the appellant, during each month of the period of dispute have failed to discharge full service tax liability by due date resulting in huge short payment, the provisions of section 76 would be attracted. It has been pleaded by the appellant that penalty under section 76 as well as under section 78 cannot be imposed when the offence is same. Such plea is untenable in view of Hon'ble Kerala High Court's judgment in case of Asstt. CCE v. Krishna Poduval [2006] 3 STT 96. It was held in that case that incidents of imposition of penalty under sections 76 and 78 are distinct and separate under two provisions and even if the offences are committed in the course of the same transaction or arise out of the same act, penalty would be imposable both under section 76 as well as section 78. In view of this, the penalty under section 76 is upheld. However, the same is reduced to Rs. 100 per day in Appeal No. ST/440/06. 17.1 As regards penalty under section 78, the same is attracted wherever any service tax has not been levied or paid or has been short levied or short paid or erroneously refunded by the reasons of fraud, suppress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stated that an Explanation added under section 78 of the Act by Finance Act, 2003 expressly made clear that provisions of section 78 with above concessional approach shall even be applied to cases in which notices were issued prior to the day on which the Finance Bill, 2003 received assent of the President. Therefore this appellant cannot be denied such concessional approach of law. We find that in both the cases, entire amount of service tax along with interest had been paid prior to the issue of adjudication order. In view of these circumstances, we hold that the ratio of Hon'ble Delhi High Court's judgment in the case of K.P. Pouches (P.) Ltd. (supra) is applicable to both the appeals of the appellant and accordingly penalty in both the cases is reduced to 25 per cent of the service tax. 18. On the basis of our above observations and findings, we, therefore, hold as under:- (i) The service tax demand along with interest in both the cases is upheld. (ii) While the penalty under section 77 of the Act is set aside, imposition of penalty under section 76 of the Act is upheld. (iii) In appeal case No. ST/440/06, the penalty under section 76 of the Act is reduced from Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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