S.S. Garg ORDER
S.S. Garg, Member (J)
1. The present appeal is directed against the impugned order dated 26.3.2018 passed by the Commissioner (A) whereby the Commissioner (A) has rejected the appeal of the appellant and upheld the penalty imposed under Section 78 of the Finance Act, 1994.
2. Briefly the facts of the case are that the appellants are engaged in providing services under the category of "mining of mineral service". The Joint Commissioner of Service Tax issued a show-cause notice dated 20.11.2015 alleging that during the audit of the assessee's record on reconciling the income shown in ST-3 returns and tax paid thereof with service tax liability as per the income shown in Trial Balance for the year 2014-15, it was found that service tax paid was lower than the service tax liability on the income reflected in the Trial Balance, resulting in short-payment of service tax. Further, it was noticed that the assessee had failed to file ST-3 returns for the period October 2014 to March 2015. The details of which are given herein below:
After following the due process, the original authority confirmed the demand of Rs. 24,71,701/- under proviso to Section 73(1) of the Finance Act and also appropriated the said amount paid by the assessee along with interest of Rs. 98,733/- and imposed equal penalty under Section 78 (1) of the Finance Act, 1994. Aggrieved by the said order, appellant filed appeal before the Commissioner (A), who rejected the appeal. Hence, the present appeal.
3. Heard both sides and perused the records.
4. The learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submitted that the impugned order is contrary to the binding judicial precedents on the same issue. The learned counsel further submitted that the entire service tax along with interest was paid before the issuance of show-cause notice and all the transactions have been recorded by the appellant in their books of accounts. He further submitted that the alleged short-payment of service tax of Rs. 24,71,701/- had already been quantified, accounted and included in the Trial Balance as on 31.3.2015 as service tax liability. He further submitted that it is well settled law that there cannot be any suppression if the transactions are recorded in the books of accounts. For this submission, he relied upon the following decisions.
• Garodia Special Steels Ltd. vs. CCE, Raigad: MANU/CM/0618/2014 : 2015 (38) STR 527 (Tri.-Mum.)
• Calderys India Refractories Ltd. vs. CCE, Aurangabad: MANU/CM/0356/2013 : 2014 (36) STR 102 (Tri.-Mumbai)
• Midnapore Tyre Retreading Factory vs. CCE, Haldia: MANU/CK/0163/2012 : 2013 (30) STR 569 (Tri.-Kol.)
• Moving Pixels Co. vs. CST, Ahmedabad: MANU/CS/0387/2013 : 2014 (34) STR 286 (Tri.-Ahmd.)
4.1 He further submitted that the issuance of show-cause notice dated 20.11.2015 is contrary to the provisions of Section 73(3) of the Finance Act, 1994. He referred to the provisions of Section 73(3) of which is reproduced herein below:
"Section 73:
(3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid".
4.2 He further submitted that it is a settled law that when service tax is paid with interest before issuance of show-cause notice and the fact of payment is intimated to the Central Excise Officers, the proceedings should be deemed to have been concluded and the Revenue was not required to issue any show-cause notice and Section 73(3) of the Finance Act, 1994 acts as a bar against issuance of show-cause notice in terms of Section 73(1) of the Finance Act. It is his further submission that the appellate authority has not recorded in his finding as to why the appellant is not eligible for the benefit under Section 73(3) of the Finance, 1994. He further relied upon the Circular issued by CBEC vide Circular No. 137/46/2015/CE dated 18.8.2015. He further relied upon the decision of the Karnataka High Court in the case of CCE vs. Adecco Flexione Workforce Solutions Ltd. reported in MANU/KA/2372/2011 : 2012 (26) STR 3 (Kar.) wherein it has been held that if the assessee pays the tax with interest, no notice shall be served. Further, in the case of CST, Bangalore vs. Master Kleen: MANU/KA/2620/2011 : 2012 (25) STR 439 (Kar.) wherein it has been held by the Hon'ble High Court of Karnataka that when the service tax and interest are paid, show-cause notice shall not be issued in terms of Section 73(3) of the Finance Act, 1994.
5. On the other hand, the learned AR defended the impugned order and submitted that there was suppression of facts on the part of the appellant. He further submitted that the learned Commissioner (A) has given reasons for imposing penalty under Section 78 and has relied upon the decision rendered in the case of Commissioner of Customs vs. Jindal Vijayanagar Steel Ltd. reported in 2017 (346) STR 378 (Kar.) and also on United Communication, Udupi vs. CCE reported in MANU/KA/2355/2011 : 2012 (281) ELT 168 (Kar.).
6. After considering the submissions of both the parties and perusal of record, I find that the service tax liability was shown in the books of accounts but it was not paid on account of the fact that they could not get the service tax collected from their clients. Further, I find that there is no suppression of facts because all the transactions are reflected in the books of accounts and the audit party detected these transactions from their records only. Further, in view of the decision rendered in the case of Garodia Special Steels Ltd. and Midnapore Tyre Retreading Factory cited supra, I am of the view that there is no suppression on the part of the appellant to evade payment of service tax. Further, I find that when the service tax is paid along with interest before issuance of show-cause notice, then the Revenue should not have issued the show-cause notice as per Section 73(3) of the Finance Act. Further, this Tribunal in the case of Bhoruka Aluminium Ltd. vs. CCE as reported in MANU/CB/0234/2016 : 2017 (51) STR 418 (Tri.-Bang.) after considering the submissions of parties and the various decisions has held in para 7 as under:
"7. After considering the submissions by both the parties and perusal of the provisions of Sections 73, 76 and 78 of the Finance Act, 1994 and the judgments relied upon by the appellant cited supra, I find that Section 73(3) is very clear as it says that if tax is paid along with interest before issuance of the show cause notice, then in that case, show cause notice shall not be issued. In this case, I find that the contention of the appellant that he bona fidely believed that he is not liable to pay service tax but during the audit, the audit party informed him that he is liable to pay service tax, then he immediately paid the entire service tax along with interest. Except mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression and concealment of facts to evade payment of tax. Consequently, in my opinion, the imposition of penalty under Section 78 of the Act is not justified and bad in law. Moreover, in the impugned order, the learned Commissioner (Appeals) has not recorded any finding on suppression of facts by the appellant with an intention to evade tax. In view of the above discussion, I set aside the impugned order by allowing the appeal of the appellant."
6.1 Further, I find that the decision relied upon by the Revenue are not applicable in the facts and circumstances of this case. The appellant's case is squarely covered by the decision of the Hon'ble Karnataka High Court in the case of Adecco Flexicone Workforce Solutions Ltd. and Master Kleen as cited supra. Therefore, by following the ratio of the above said decisions, I hold that the impugned order is not sustainable in law and the same is set aside by allowing the appeal of the appellant.
(Order was pronounced in Open Court on 20/09/2018)
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