By TIOL News Service

AHMEDABAD, JAN 22, 2015: DURING the course of audit of M/s. Gujarat Borosil Limited , Bharuch , it was noticed that appellant has provided Rent-a-Cab service to M/s. Gujarat Borosil Limited during the period 01.4.2000 to 31.1.2004.

Based on the said information a SCN came to be issued demanding service tax of Rs.1,17,045/- and which was confirmed by the adjudicating authority with interest and penalties. In appeal the matter was remanded and the adjudicating authority reduced the demand to Rs.67,996/- along with interest and an equivalent amount of penalty u/s 78 of the FA, 1994 was also imposed.

In appeal, the Commissioner(A) set aside the penalties u/s 80 of FA, 1994 but upheld the order of the Adjudicating authority with respect to tax demand and interest.

The appellant is before the CESTAT and submits that the demand is time barred in view of the fact that the benefit of section 80 was extended to them inasmuch as there was a reasonable cause for their failure to not pay the tax. Reliance is also placed inter alia on the decisions in Ashok Kumar Sharma vs. State of Rajasthan - 2013-TIOL-02-SC-NDPS, Ankleshwar Taluka ONGC Land Loosers Travellers Co.Op vs. CCE, Surat - 2012-TIOL-253-HC-AHM-ST, Indian Institute of Chemical Technology - 2011-TIOL-973-HC-AP-ST.

The AR submitted that Section 80 of the FA, 1994 talks of waiving the penalty imposable under Section 78, where elements of fraud, willful misstatements and suppression etc. with intention to evade tax also exist. It was his case that even after allowing the benefit of Section 80, it can not be said that in all such cases extended period will not be applicable; that appellant never approached the department that there is any confusion in the tax relating to Rent-a-Cab service; that only through the audit of M/s. Gujarat Borosil Limited it was realised that the appellant is providing taxable service. The AR sought to derive support from the Allahabad High Court decision in Daurala Organics - 2014-TIOL-2447-HC-ALL-ST

After extracting paragraphs 15 to 18 of the Allahabad High Court decision in Daurala Organics vs. CCE (supra), the Bench observed -

5.2 In view of the above judgment even in the case of where Section 78 is invokable and established the penalty imposed upon an assessee can be set-aside under Section 80 of the Finance Act, 1994 in case it can be proved by an assessee that there was a reasonable cause for failure. Therefore, it can be independently examined whether extended period can be invoked, where waiver of Section 78 penalty upon the appellant is allowed as per the provisions of Section 80 of Finance Act, 1994. The case of Gujarat High Court in the case of Ankleshwar Taluka ONGC Land Loosers Travellers Co.Op vs. CCE, Surat (supra) relied upon by appellant was different on facts. There was a written contract between M/s. ONGC and that appellant having no service tax clause. M/s. ONGC refused to pay tax to the appellant in that case. It was specifically brought to the notice of High Court that in those circumstances the service tax could not be deposited in time. In the present case before this bench, no written contract is produced to indicate that service tax clause was not there. There is also no indication that M/s. Gujarat Borosil Limited refused to pay service tax to the appellant. There is also no evidence that appellant had any confusion that service tax payment on Rent-a-Cab services was disputable. Appellant preferred to sit quiet with his eyes closed. In the present case the entire demand is not time barred and appellant has not shown his bonafides by paying the service tax along with interest for the period within limitation period. Appellant is not able to convince the Bench, with any documentary evidence that there was any confusion in his mind regarding non payment of service tax.”

Holding that the extended period is applicable even if waiver from Section 78 penalty has been extended to the appellant under Section 80 of the Finance Act, 1994, the appeal filed was rejected.

(See 2015-TIOL-166-CESTAT-AHM)