The Present Appeal, Along with a Stay Application Has Been Filed by M/S Gujarat Ambuja

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V2(GTA)22/STC-III/2012

The present appeal, along with a Stay application has been filed by M/s Gujarat Ambuja Exports Ltd. (Bio-Chem Division), Vrindavan Road, Village: Dalpur, Taluka: Prantij, District: Sabarkantha (hereinafter referred to as ‘the appellants’ for the sake of brevity) being aggrieved by Order-in-original No.20/ST/AC/AS/2011 dated 15.11.2011 (hereinafter referred to as ‘the appellants’ for the sake of brevity). The facts of the case, stated briefly are that during audit by CERA it was revealed that the appellants had paid commission of `2,43,727/- in foreign exchange to foreign parties for services availed under the category of Business Auxiliary services during 2009-10 but failed to pay Service Tax amounting to `16,590/- as recipient of the services in accordance with sub-section (1) of Section 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of the Service Tax Rules and Notification No.11/2006-ST dated 19.4.2006 as the foreign service providers did not have an establishment or a permanent address in India. Therefore, a Show Cause Notice F.No. IV/16-14/SCN/GAEL/LAR133(3)/GNR/2011 dated 24.01.2011 was issued to the appellants proposing to recover Service Tax amounting to `16,590/- under first proviso to Section 73 (1) of the Finance Act, 1994 along with interest under Section 75 ibid and proposing penalties on the appellants under Section 76, Section 77 and Section 78 of the Act ibid.

2.The Show Cause Notice was adjudicated by the Assistant Commissioner, Central Excise Division, Gandhinagar (hereinafter referred to as ‘the adjudicating authority’ for the sake of brevity) who has confirmed the demand of Service Tax and appropriated an amount of `16,590/- paid by the appellants towards the confirmed demand. He has confirmed levy of interest and appropriated an amount of `1,224/- paid by the appellants towards interest confirmed. He has imposed penalty of `200/- per day or @2% of the Service Tax amount per monthrestricted to the total Service Tax liability under Section 76 of the Finance Act, 1994. He has imposed penalty of `5000/- on the appellants under Section 77 ibid and a penalty of `16,590/- under Section 78 of the Act ibid.

3.The grounds of appeal filed by the appellants against the impugned order, inter alia, are that in the present case demand of the period 2009-2010 was raised by issuing Show Cause Notice in January, 2011; that however they had already paid the Service Tax amount along with interest before issuance of the Show Cause Notice; that this fact of payment of Service Tax was brought to the knowledge of the department officer and audit officers; that by doing so the appellants expected that no demand on the amount so paid will be raised by the department in terms of Section 73(3) of the Finance Act, 1994; that for the same reason, in terms of section 73(3) ibid, no penalty should have been imposed on the appellants under Section 76, Section 77 or Section 78 of the Finance Act, 1994. In support of these contentions the appellants have relied on the decision of CESTAT, Delhi in the case of Commissioner of Service Tax, New Delhi Vs Independent News Services P. Ltd. reported in 2011 (23) STR 23 (Tri.Del.) where the Revenue appeal against dropping of penalties under Section 76 and Section 77 of the Finance Act, 1994was rejected by Tribunal as Service Tax and interest had been paid up before issuance of Show Cause Notice. The appellants have also relied on the case laws in the matters of Krishna Security & Detective Services reported in2011 (24) STR 575 (Tri.-Ahmd. ); Nischint Engineering Consultants Pvt. Ltd. Vs CCE, Ahmedabadreported in2010 (19) STR 276 (Tri.- Ahmd.)and Hajarilal Jangid Vs. CCE, Nagpurreported in2011 (24) STR 510 (Tri.-Mumbai)in support of their contention that as Service Tax and interest had been paid before issuance of Show Cause Notice, the issuance of Show Cause Notice was dispensable and penalties under Section 76 and Section 77 of the Finance Act, 1994 were not sustainable as per the provisions of Section 73(3) of the Finance Act, 1994.

4.Personal hearing was held on 22.3.2012. Shri Rakesh Jain appeared for personal hearing. He stated that they have paid the entire Service Tax along with interest before issue of SCN. Hence penalty under Section 76 and Section 78 are not imposable. He cited the following decisions.

(i)CCE Vs Pannu Property Dealers, Ludhiana– 2011(24)STR173(P&H)

(ii)CCE Rajkot Vs Jay Shipping - 2010 (20) STR 774 (Tri.Ahmd.)

(iii)CCE Rajkot Vs Inland Mines and Minerals–2011 (21) STR 630 (Tri.Ahmd.)

Discussion and Findings:

5.I have gone through the impugned order, the grounds of appeal and the Stay application filed by the appellants. The entire amount of Service Tax amounting to `16,590/- stands paid in this appeal. This payment has been appropriated towards the confirmed demand in the impugned order. Similarly, an amount of `1,224/- paid by the appellants stands appropriated in the impugned order towards levy of interest. Accordingly, I find that the pre-deposit is sufficient for the compliance of Section 35F of the Central Excise Act, 1944 read with Section 85(5) of Finance Act, 1994 and take up the appeal for decision on merits.

6.The appellants have not disputed their liability for payment of `16,590/- as Service Tax under Business Auxiliary category towards services received from foreign service providers having no establishment or permanent address in India. Their only contention is that as they had paid up the Service Tax and interest before the issuance of the Show Cause Notice, they were not liable to penalties under Section 76, Section 77 and Section 78 of the Finance Act, 1994. I find that penalty under Section 78 ibid has been imposed on the appellants for suppressing and not disclosing the value of taxable services with an intent to evade duty. The Show Cause Notice invokes proviso to Section 73(1) of the Finance Act, 1994 pertaining to extended period even though Show Cause Notice has been issued within normal period of demand as pointed out by the appellants in their grounds of appeal. However, the appellants have not put forth any defence contention regarding the invoking of the proviso relating to extended period in the Show Cause Notice. The adjudicating authority, on the other hand, has clearly explained in paragraph 11 of the impugned order that the elements of wilful mis-statement and suppression of facts are present in the case of the appellants with clear intention to evade payment of Service Tax. I find that there is merit in this finding of the adjudicating authority as the incidence of non-payment of Service Tax was revealed only consequent upon audit of the records of the appellants by CERA. The facts would have remained suppressed had the lapse not come to the notice of CERA. Therefore, I hold that the contention of the appellants that the SCN was to be dispensed with and penalties were to be waived as per the provisions of sub-section (3) of Section 73 as they had paid up Service Tax and interest before issuance of the Show Cause, is not tenable once the charges of suppression of facts and mis-statement upheld in the impugned order remains unchallenged in the grounds of appeal. The decisions cited by the appellants in the grounds of appeal as well as during personal hearing pertain to cases where the charges of suppression of facts etc have not been upheld and are thus not relevant to the facts of this appeal. Accordingly, I uphold the imposition of penalty under Section 78 of the Finance Act, 1994 on the appellants as imposed in the impugned order.

7.As regards the imposition of penalty under Section 77 of the Finance Act, 1994, the same has been imposed for failure to file complete ST-3 returns for the year. I find that this ground is justifiable and sustainable because the appellants had failed to reflect the value of the impugned services in their returns rendering the same as incorrect and incomplete. I, therefore uphold the penalty imposed on the appellants under Section 77 of the Finance Act, 1994.

8.I find that the adjudicating authority has imposed penalty on the appellants under Section 76 of the Finance Act, 1994 for failure to pay Service Tax within the stipulated time. Prior to 10.5.2008, the settled position was that penalties could be imposed under both Section 76 ibid as well as Section 78 ibid provided that ingredients of both the Sections are present in a case. However, with effect from 10.5.2008, a proviso has been inserted in Section 78 of the Finance Act, 1994 stipulating that if penalty is payable under Section 78 ibid, the provisions of Section 76 shall not apply. The impugned period in the Show Cause Notice is 2009-10 which is subsequent to rendering Section 78 ibid and Section 76 ibid as mutually exclusive. Accordingly, I hold that as penalty in this case is payable by the appellants under Section 78 ibid, the provisions of Section 76 ibid are not applicable.

ORDER

9.I uphold the confirmation of demand of Service Taxalong with the confirmation of the levy of interest in the impugned order.

10.I uphold the imposition of penalties in the impugned order under Section 77 and Section 78 of the Finance Act, 1994.

11.I set aside the imposition of penalty on the appellants in the impugned order under Section 76 of the Finance Act, 1994.

12.The Stay application filed by the appellants also stands disposed off in terms of paragraph 5 above.

Sd/-

10.04.2012

(K. ANPAZHAKAN)

COMMISSIONER (APPEAL-III)

CENTRAL EXCISE, AHMEDABAD.

Attested

(K. P. Jacob)

Superintendent (Appeal)

Central Excise

Ahmedabad-III.

(By R.P.A.D.)

M/s Gujarat Ambuja Exports Ltd.(Bio Chemical Division)

Vrindavan Road, Village: Dalpur,

Taluka: Prantij,

District: Sabarkantha

COPY TO:

1. The Chief Commissioner of Central Excise, Ahmedabad.

2. The Commissioner of Central Excise, Ahmedabad-III.

3. The Assistant Commissioner, Central Excise Division, Gandhinagar.

4. The Deputy Commissioner, Central Excise (Systems), Ahmedabad-III for uploading the order on the website.

5. Guard file.

6. P.A. file.