ST : Where short-payment of service tax was due to non-understanding of law
while entire value of taxable service had been correctly shown in balance sheet, penalty under section 78 would not be imposed
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[2012] 23 taxmann.com 150 (Kolkata - CESTAT)
CESTAT, KOLKATA BENCH
Gemini Veterans Security & Vigilance
v.
Commissioner of Service Tax, Kolkata *
DR. D.M. MISRA, JUDICIAL MEMBER
ORDER NO. A-83(KOL.) of 2012
Appeal No. ST/273 of 2010
FEBRUARY 10, 2012
Section 78, read with section 76, of the Finance Act,
1994 - Penalty - For suppressing value of taxable service - Period from
August, 2005 to October, 2006 - Due to non-understanding of relevant
provisions of law, there was some short-payment of service tax during
relevant period -
When short-payment was brought to its notice, same was paid - Whether
since entire value of taxable services for relevant period had been
correctly shown in
balance sheet, delay in payment of service tax would not be attributed
to suppression, or mis-declaration and therefore, penalty under section
78 was not imposable - Held, yes - Whether however, since there was
delay in payment of service tax and short-payment was made good on being
pointed out by department, penalty under section 76 was imposable -
Held, yes [Para 5] [Partly in favour of assessee]
FACTS
The assessee had taken a service tax registration and had
been paying the service tax and also filing returns with the Department
from time to time. On a visit of the Officer to its premises, it was
noticed that certain amount of service tax though payable, was not paid
by it during the
relenant period. On being pointed out, the assessee had discharged the
entire service tax. Later, a show-cause notice was issued proposing
penalties under sections 76, 77 and 78. On adjudication, the
adjudicating authority imposed above penalties.
HELD
The assessee was registered with the Central Excise
Department on its own on 16-6-2005. It was a proprietorship concern and
it was required to file the service tax returns quarterly, which
it had been filing meticulously with the Department. However, due to
non-understanding of the relevant provisions of law, there was some
short-payment of service tax during the period from August 2005 to
October, 2006. However, when the said short payment was brought to the
assessee's notice in November, 2006 by the Visiting Departmental
Officers, the entire amount of service tax was paid. However, it had not
paid the interest for the period in question. It
was the submission of the assessee that as the interest amount had not
been directed to be paid, the same was not paid by it. It
was difficult to accept such a proposition, as the calculation of
interest is a simple process and ought to have been paid by it. However,
the assessee fairly conceded that the interest liability was required
to be discharged and it agreed to pay the said interest as due. From the
conduct of the assessee, it was found that though there was a delay in
making the payment of the service tax, but the same was not by way of
suppression, misdeclaration etc., as the entire value of taxable
services for the relevant period had been correctly shown in the balance
sheet. Hence, it was difficult to accept that penalty would be
imposable under section 78. However, there was a delay in payment of
service tax, though not for a considerable period, but around a year and
the short payment of
service tax was made good on being pointed out by the Department. In the
said circumstances, the penalty was imposable under section 76.
Accordingly, it was held that the assessee was liable to penalty under
section 76 only.
[Para 5]
CASES REFERRED TO
Dixit Security & Investigation (P.) Ltd. v. CST [2011] 32 STT 121/12
taxmann.com 15 (Ahd.-Cestat) (para 3) and Asstt. CCE v. Krishna Poduval [2006] 3 STT 96 (Ker.) (para 4).
N. K. Chowdhury for the Appellant. S. Chakraborty for the Respondent.
ORDER
1. This is an Appeal filed by the Appellant against
the Order-in-Appeal No. 70/ST/2010 dated 31.03.2010. Briefly stated the
facts of the case are that the Appellant had taken a Service Tax
Registration on 16.06.2005. They have been paying the Service Tax and
also filing ST-3 returns with the Department from time to time. On a
visit of the Officers to their premises on 03.11.2006, it was noticed
that certain amount of Service Tax though payable, was not paid by them
during the aforesaid period. On being pointed out, the Appellant had
discharged the entire Service Tax by the end of November 2006, as
pointed out by the Officers. Later, a show cause notice dated 10.05.2007
was issued proposing penalty under Sections 76, 77 and 78 of the
Finance Act. On adjudication, the Adjudicating Authority has imposed a
penalty of Rs.4,97,999.00 under Section 78 of the said Act and also
penalty @Rs.200.00 per day of delay under Section 76 of the said Act.
The Appellant had disputed the imposition of penalties and accepted the
Service Tax liability for the said period.
2. The learned Commissioner (Appeals) has recorded
the finding that the Appellant had paid the entire amount of Service Tax
and did not contest the Service Tax liability. However, on the aspect
of imposition of penalty, he was not convinced with the arguments of the
Appellant that the Service Tax could not be paid in time due to
non-realization from their debtors and also due to paucity of fund.
Consequently, he has upheld the Order passed by the lower Adjudicating
Authority on imposition of penalty. Hence, this Appeal.
3. The learned Advocate appearing for the Appellant
has categorically submitted that at no stage, they had disputed the
quantum of the entire amount of Service Tax paid by them voluntarily
after visit of the Officers to their premises. He also submitted that
they had discharged the entire amount of Service Tax within a period of
30 days of the visit of Officers. There was no concealment whatsoever,
on their part relating to the gross amount of taxable value; the same
are correctly reflected in their Balance Sheet as charged to customers.
He has submitted that the entire demand was within the normal period of
limitation, even though the extended period of limitation had been
invoked in the show cause notice. It is his submission that no facts
relating to realization of the value of services provided had been
concealed and suppressed from the knowledge of the Department, as the
same were duly reflected in the Balance Sheet prepared by their
Chartered Accountant. He has submitted that once they were registered
with the Central Excise Department, the Department can direct them to
produce any of the documents relating to the services rendered at any
time. It is their bonafideness in reflecting the correct value of
services received, in the Balance Sheet submitted to the Department.
Hence there was no concealment on their part and accordingly, the
ingredients of Section 78 are not satisfied in the case and accordingly,
the same is not attracted. Further, he has submitted that in view of
the specific provisions contained in Section 73 (3) of the Finance Act
1994, since the entire amount of Service Tax had been paid before
issuance of the show cause notice, no show cause notice ought to have
been issued to them. On a query from the Bench, he has fairly conceded
that no interest was paid by them till date. He has placed reliance on
the judgement in the case of Dixit Security & Investigation(P.) Ltd. v. CST [2011] 32 STT 121/12
taxmann.com 151 (Ahd.-Cestat).
He has specifically referred to para 5 of the said judgement which,
according to him, is comparable to the facts of the present case and
consequently, no penalty is imposable on them, as theirs is a fit case
to invoke Section 80 of the Finance Act, 1994.
4. Per contra, learned A.R. for the Revenue
reiterates the findings of the learned Commissioner (Appeals). He has
submitted that the Appellant, though had taken the Registration on
16.06.2005, but failed to discharge the Service Tax liability correctly,
till it was pointed out to them by the Department. Further, he has
submitted that they were operating their services from some unregistered
premises, which were not disclosed to the Department. However, he
fairly concedes that the gross taxable value received from the business
of the said services, had been duly reflected in their Balance Sheet,
irrespective of non-disclosure of the premises of rendering the
services. He has referred to the decision of the Hon'ble Kerala High
Court in the case of Asstt. CIT v. Krishna Poduval [2006] 3 STT 96 (Ker.).
5. Heard both sides and perused the records. The
Appellant were registered with the Central Excise Department on their
own on 16.06.2005. Theirs is a proprietorship concern and they are
required to file the Service Tax Returns quarterly, which they have been
filing meticulously with the Department. However, due to
non-understanding of the relevant provisions of law, there was some
short payment of Service Tax during the period from August, 2005 to
October, 2006. However, when the said short payment was brought to their
notice in November, 2006 by the Visiting Departmental Officers, the
entire amount of Service Tax was paid. I find, however, they had not
paid the interest for the period in question. It is the submission of
the learned Advocate appearing for the Appellant that as the interest
amount had not been directed to be paid, the same was not paid by them.
It is difficult to accept such a proposition, as the calculation of
interest is a simple process and ought to have been paid by them.
However, the learned Advocate fairly concedes that the interest
liability was required to be discharged and they agreed to pay the said
interest as due. From the conduct of the Assessee, I find that though
there was a delay in making the payment of the Service Tax, but the same
was not by way of suppression, misdeclaration etc., as the entire value
of taxable services for the relevant period has been correctly shown in
the Balance Sheet. Hence, it is difficult to accept that penalty would
be imposable under Section 78 of the Finance Act. However, I find that
there was a delay in payment of Service Tax, though not for a
considerable period, but around a year and the short payment of Service
Tax was made good on being pointed out by the Department. In the said
circumstances, I find that the penalty is imposable under Section 76 of
the Finance Act. Accordingly, I hold that the Appellant are liable to
penalty under Section 76 of the Finance Act, 1994 only. The Appeal is
allowed in the above terms.
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