By TIOL News Service

MUMBAI, JUNE 03, 2016: BOTH, assessee and Revenue are in appeal against the order passed by the Commissioner (A).

The Commissioner (Appeals) has passed the following order -

"Order-in-Original No. STC/ADC/02/2014-15 dt. 07.11.2014 passed by the Additional Commissioner, Service Tax, Pune Commissionerate is modified as under:

(i) Confirmation of demand of Service Tax of Rs.29,09,226/-, alongwith interest of Rs. 9,84,787/- payable thereon, is upheld.

(ii) Penalty imposed under Section 77 of the Act is reduced to Rs.10,000/- only.

(iii) Penalty imposed under Section 78 of the Act is reduced to Rs.14,54,613/- only."

The facts are that the appellant is engaged in the activity of providing taxable services, viz. Manpower Recruitment or Supply Agency Services, Erection, Commissioning or Installation service and Maintenance or Repair Service.

After enquiry, it came to notice that during 2008-09 to 2011-12 the appellant had charged and collected service tax from their customers but not paid to the exchequer and the service income was accounted under the head 'job work' in their financial Accounts.On pointing out the same, the appellant paid the entire service tax and also interest.

SCN was issued. The adjudicating authority confirmed the demand of Rs.29,09,226/- along with interest and imposed equivalent penalty under Section 78 of FA, 1994.

The Commissioner (Appeals) reduced the penalty imposed u/s 78 to 50% of the service tax invoking the amended Section78 which is effective from 8.4.2011 on the ground that as per Section38A the provisions of erstwhile Section 78 of the Act, wherein 100% penalty imposable was not saved. Therefore at the time of adjudication, the new Section78 effective from 8.4.2011 is applicable and accordingly the penalty was imposed to the extent of 50% as per the new Section 78 instead of 100% imposed by the adjudicating authority applying the erstwhile Section 78 of the Act.

Aggrieved by this order, the assessee has filed appeal for waiver of 50% penalty imposed u/s 78 by invoking Section 80 of FA, 1994 and Revenue also filed appeal against the reduction of penalty from 100% to 50%.

Appeals were filed in the year 2015. None appeared on behalf of the appellant during the hearing fixed on various dates and no adjournment was also sought.

The AR submitted that new Section 78 is not applicable in respect of cases which were booked before enactment and at the time of cause of action the old Section 78 was enforceable. Therefore penalty equal to service tax demand is liable to be imposed. Moreover, although Section 38A does not save the provision of old Section 78, as per 6 of the General Clauses Act, 1897 the proceedings initiated under old Section 78 shall continue.

Following case laws were cited in support viz. L & T Ltd. - 2010-TIOL-646-CESTAT-DEL-LB,

Lakshmi Packagings Ltd. - 2008-TIOL-1033-CESTAT-MAD, Rajasthan Spinning and Weaving Mills - 2009-TIOL-63-SC-CX, S.A. Enterprises - 2015-TIOL-1682-CESTAT-MUM, Dharmendra Textile Mills - 2008-TIOL-192-SC-CX-LB.

In the matter of waiver of penalty sought by appellant in terms of s.80 of FA, 1994, it is submitted by the AR that since appellant had collected the service tax from their service recipient and not deposited to the Government exchequer, there was no reasonable cause for waiver of penalty and the appellant does not deserve any leniency. [Master Marine Services Pvt. Ltd. - 2014-TIOL-612-CESTAT-MUM refers.]

The Single Member Bench observed that on an identical issue in the case of Commissioner of Central Excise Pune -I vs. Shrikrishna Associates - 2016-TIOL-607-CESTAT-MUM the Tribunal had concluded thus -

ST - Neither there was any intention to save the tougher provisions of Section 78 of the FA, 1994 after 8/4/2011 nor is Section 38A of the CEA, 1944 legally capable of saving the provisions of erstwhile Section 78 of the Act, as the same is not a piece of delegated legislation - Amended s.78 applies at the time of adjudication of cases booked prior to 08/04/2011 - Penalty of 50% rightly imposed - Revenue appeal dismissed: CESTAT [para 5]

After extracting the said order, the Bench held thus -

"…In the above order, this Tribunal dealing with identical issue held that in the absence of saving clause in respect of erstwhile Section 78, the new Section 78 shall apply and accordingly the penalty of 50% is imposable. As regard judgments relied upon by the Ld. AR, I find that in the case of L & T Ltd. (supra) the issue relates to amendment of Modvat Rule 57 C. As per Section 38A the amendment of any Rule or notification is saved. However in the present case, the issue relates to the repeal of Act, i.e Section 78 therefore this judgment shall not apply. Similarly, the Tribunal's order in the case of Lakshmi packaging Ltd. (supra), the issue relates to the amendment of Notification. The Hon'ble Supreme Court judgment in the case of Rajasthan Spinning and Weaving Mills (supra and Dharmendra Textile Processors (supra). The issue involved is whether the mandatory penalty under Section 11AC can be reduced or otherwise, that is not the issue involved in the present case. On going through the Tribunal's order in S.A. Enterprises cases, I find that that order does not deal with application of Section 38A. Therefore all the judgments relied upon by the Ld. AR are not on the identical facts and circumstances, therefore the ratio of the same is not applicable in the present case. The Revenue's appeal is not maintainable. As regard asseessee's appeal for waiver of 50% penalty imposed under Section 78, I find that admittedly the assessee have collected the service tax and not deposited to the Government exchequer. They have also not filed return in respect of the transaction for which service tax was collected and not deposited. In this fact, it is a clear case of suppression of fact with intent to evade payment service tax, therefore, no reasonable cause has been shown by the assessee in order to invoke the Section 80. The penalty was rightly imposed under Section 78 by the lower authority which is upheld."

Conclusion:

Revenue appeal dismissed. Assessee appeal also dismissed.

In passing: The order in the referred case 2016-TIOL-607-CESTAT-MUM was also passed by the same Member.

(See 2016-TIOL-1327-CESTAT-MUM)