ST - Amounts paid in cash take shape of tax only when same are adjusted by filing return against tax liability - facility of filing late returns is not meant to be a mechanism to avoid payment of taxes: CESTAT
By TIOL News Service
MUMBAI, MAY 17, 2018: THE appellant is involved in mining activity and although they had collected service tax from clients, they had not filed ST-3 returns during the period 1.6.2007 to 31.3.2010.
It is informed that though they had not filed ST-3 Returns, they were maintaining records by which they were entitled to the credit of cenvat and the said cenvat credit was used to discharge the tax liability for the period June 2007 to March 2010; that after adjusting the credit available for discharge of duty, the balance amount was being paid by them in cash from time to time during the said period.
Pursuant to investigation by DGCEI, they filed the Service Tax Returnsalong with late fee for the period June 2007 to March 2010 on 26.5.2010 and 22.6.2010.
Nonetheless, SCN was issued and the demand along with interest was confirmed by the CCE, Goa but the proposal for imposition of penalties u/ss 76 and 78 were dropped.
The appellant is before the CESTAT and so is the Revenue.
It is the submission of the appellant that the above was a case of delayed filing of returns as they had discharged cash liability at the correct time. Moreover, the notice and the order-in-original both recognized the admissibility of credit which they have utilized in the returns filed by them. Inasmuch as on account of the above, there cannot be any liability to pay any interest as they had discharged the entire liability timely and before filing the revised return. It is also argued that the credit was available to them at the material time and the only default on their part was not filing of ST-3 returns and for which default they had paid the late fee at the time of filing revised returns. The appellant also supported the order of the Commissioner in not imposing any penalties.
The AR submits tht the demand of interest is justified in view of the decision of Tribunal in the case of Toyo Engineering Corporation Ltd. - 2014-TIOL-2020-CESTAT-MUM. So also, for the default of the appellant, penalty is imposable u/s 76, 78 of the FA, 1994, the AR pleaded.
The Bench extracted paragraph 5 of the cited Tribunal decision in Toyo Engineering Ltd. (supra)and observed –
“It is seen that the appellants have not cited any decision in their favour. In the appeal memorandum also they have merely asserted that they were discharging the cash element of the duty liability after adjusting the cenvat credit. We find that duty paid by assesse for input/services becomes cenvat credit only when the same is claimed by the appellant by filing a return in this regard. Duty paid by the appellant for input/input services does not automatically become cenvat credit at the hands of the appellant. In this regard the decision of Tribunal in the case of Toyo Engineering Corporation Ltd. (supra) becomes applicable to this situation. In view of above the appeal of M/s. Venkateshwara Earthmovers is dismissed.”
Insofar as the appeal of revenue is concerned, the Bench observedthus –
"…M/s. Venkateshwara Earthmovers have failed to file return for a period of almost three years. The facility of filing late returns is only a facility to be used in exigencies. It is not meant to be a mechanism to avoid payment of taxes. If the appellant had not paid the tax for another two years, the liability to pay tax would have gone beyond the period of limitation. The continuous default for almost three years cannot be considered as a simple failure as by doing so M/s. Venkateshwara were putting entire revenue to the risk. The impugned order holds that penalty under Section 78 is not leviable on the ground that the appellant had paid after adjustment discharging the cenvat amount the balance of duty in cash. This is an erroneous assertion in so far as a duty paid on inputs/services by M/s. Venkateshwara Earthmovers can become credit only when the same is claimed by filling a return under the cenvat credit rules. Thus it is apparent that M/s. Venkateshwara Earthmovers failed to pay the duty in the entire period of three years. They had also not filled any ST-3 returns however they had already taken registration. The amounts paid by the appellants in cash also take the shape of duty only when the same are adjusted by filling the return against the duty liability. In absence of such adjustment of amounts paid against an existing duty liability the said payments do not take the shape of payment of service tax. Thus it is apparent that M/s. Venkateshwara Earthmovers by not filling return for a period of over three years and not by paying tax despite collecting the same from the service recipients even though they had taken the registration have made themselves liable to penalty under Section 78 also."
The appeal of the Revenue was allowed to the extent of imposition of equivalent penalty u/s 78 of the FA, 1994, however, an option was given to pay only 25% of the penalty amount subject to the condition that the entire service tax and interest along 25% penalty under Section 78 are paid within 30 days of communication of the order.
Penalty imposition sought u/s 76 of the FA, 1994 was not allowed in view of the decision of the High Court of Punjab and Haryana in the case of First Flight Courier Ltd. [2011-TIOL-67-HC-P&H-ST].
The appeals were disposed of accordingly.
(See 2018-TIOL-1563-CESTAT-MUM)
