By TIOL News Service

MUMBAI, FEB 22, 2019: APPELLANT is a nationalized bank having branches across the country.

They were also holding Service Tax registration branch-wise and were discharging the service tax liability branch-wise. Returns were also filed branch-wise.

During the course of Audit of branches at Hyderabad, it was observed that service tax payable was being wrongly computed and thereby short-paymentarose. Similar discrepancies were also observed during audit conducted by Bhubaneswar-I Commissionerate.

Accordingly, SCNs were issued to each branch demanding the service tax short paid and also seeking imposition of penalty and interest. The period covered is from 1st April 2004 to 31 st March 2010.

Subsequently, Appellants obtained centralized registration in Mumbai and accordingly 171 such SCNs were taken up for adjudication by the jurisdictional authorities.

The demands (totaling Rs.91,38,569/-) were confirmed by the Deputy Commissioner, Division II, Service Tax–I Mumbai along with penalties and interest. The option for paying up the demand and interest for reducing the penalty u/ 78 of FA, 1994 to 25% was also extended to the appellant.

Except for setting aside one of the demands, since already covered against another notice, and the penalty in respect of another SCN, the order as passed by the original authority was upheld by the Commissioner(A).

The appellant is before the CESTAT and essentially argues that since there was no malafide intention to evade tax and the short payment had occurred due to erroneous practices followed at branch level, which short-payment has been paid along with interest, imposition of penalty is not justifiable.

The AR submitted that penalty is inescapable in view of the decisions in Prudential Spinners Ltd. - 2011-TIOL-45-SC-CX and Shiva Alloys Pvt. Ltd. - 2018-TIOL-988-HC-DEL-CX. Furthermore, the adjudicating authority had in paragraph 16 of his order spelt out the reasons for invocation of the extended period of limitation.

The Bench considered the submissions and after reproducing paragraph 16 of the o-in-o, paragraphs 10 to 12 of the o-in-a and liberal extraction from the apex court decision in Prudential Spinners Ltd. (supra) and the Bombay High Court decision in Shri Ram Aluminium P Ltd. - 2009-TIOL-358-HC-MUM-CX observed thus -

++ There appears to be no dispute that Appellants have not paid the duty demanded at the relevant time and hence short paid the duty to that extent. In case of non/short payment of duty, Section 73(1) of the Finance Act, 1994 automatically comes into picture and demand is made in terms of that section, to recover the duty so short paid. In case the duty is paid after the relevant date the same gets adjusted by application of the section.

Concluding that there is no merit in the submissions made by the appellant, the appeal was dismissed.

(See 2019-TIOL-567-CESTAT-MUM)