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H.M. Singh & Co. Vs. Commissioner of Central Excise, Customs & Service Tax [2014 (49) 417(Allahabad)] 

H.M. Singh & Co. (“the Appellant”) was served a Show Cause Notice dated September 29, 2010 by the Department  demanding Service tax on the ground that  during the period from April 2005 to March 2010, the Appellant had received Provident Funds payments relating to manpower supplied by it to the Hindalco Industries Limited, Renukoot (“service recipient”) and had not included the same  in the assessable value for the purpose of calculation of Service tax.

The Appellant made payment of Service tax along with interest during June 2011 to October 2011. Thereafter, the Department passed an adjudicating order dated November 24, 2011 and levied penalty under Sections 77 and 78 of the Finance Act, 1994 [“the Finance Act”] (with option to pay 25% penalty within 30  days) which was further upheld by the Ld. Commissioner (Appeals) and the Hon’ble  Tribunal.

Being aggrieved, the Appellant preferred  an appeal before the Hon’ble High Court of Allahabad contesting the amount of  penalty on the following ground:

· There was no case of fraud, collusion, wilful misstatement or suppression of  facts within the meaning of Section 78 of the Finance Act or of a contravention with intent to evade payment of Service tax.

· The Appellant’s bona fide intentions  are well established from the fact that the alleged amount of Service tax with interest was deposited without waiting for an order of adjudication.

· Nearly two-hundred notices had been  issued by the division and  Commissionerates at Allahabad on same issue which indicates that there was mass unawareness among the service providers in the stated area  which was also noted in an order of  the Joint Commissioner  (Adjudication), Central Excise,  Allahabad dated June 16, 2011.

It was held by the Hon’ble High Court of  Allahabad that the Appellant’s conduct in  paying Service tax even prior to  adjudication was relevant factor depicting  bona fide intentions of the Appellant. 

Further, since there was mass  unawareness on the issue involved, as  even noted by Department itself, there  was no case of fraud, collusion, willful  misstatement or suppression of facts  within the meaning of Section 78 of the Finance Act or of a contravention with intent to evade payment of Service tax. 

Hence, penalty could not be levied.

Small Service Provider benefit cannot be  denied on the ground that the Assessee  has not opted for the same

Subin Telecom Vs. Commissioner of C.  EX., Rajkot [2014 (10) TMI 133 - CESTAT AHMEDABAD]

Subin Telecom (“the Assessee”) is  engaged in providing services as  authorized distributor of products of Vodafone Essar Gujarat Ltd. (“Vodafone”)  on commission basis since April 2007. 

Even though the Assessee took  registration under Service tax for  ‘Business Auxiliary Service’ on April 26, 2007, they neither paid Service tax nor did  they file any return. As soon as the  Assessee came to know that the  Department has collected the details of  distributors from Vodafone, they made  payment of Service tax with interest on February 8, 2008. On February 11, 2008, a letter from jurisdictional Central Excise authority was received by the Assessee requiring him to file return and produce records of books of accounts etc., for verification.

Thereafter, proceedings were initiated  against the Assessee which culminated into impugned Order-in-Appeals, wherein the demand of Service tax was reduced from Rs. 2,24,106/- to Rs. 1,23,236/- by  extending the benefit of erstwhile Small Service Provider Exemption Notification No. 6/2005-ST dated March 1, 2005 (“the SSI Exemption Notification”). Further, penalty imposed under Section 78 of  Finance Act, 1994 (“the Finance Act”)  were upheld, while the penalties under  Section 76 and 77 of the Finance Act were  set aside. Against the said order, the  Assessee filed an appeal before the Hon’ble CESTAT, Ahmedabad against  imposition of penalty under Section 78 of Finance Act and at the same time, the  Revenue preferred an appeal against  extension of benefit of the SSI Exemption  Notification. The Revenue relied upon the  decision in the case of L.G. Marwadi Vs.  CCE, Pune-III [2010 (19) S.T.R. 279 (Tri.- Mumbai)] (“L.G. Marwadi case”) to  submit that SSI benefit cannot be  extended when the Assessee has not  opted for the same.

The Hon’ble CESTAT, Ahmedabad held  that when the Service tax was paid along  with interest even before formal letter of  the Department, penalty under Section 78  of the Finance Act is not sustainable.

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Bimal Jain
Category Service Tax   Report

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