2005 (98) ECC 129 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Chennai

Shri P.G. Chacko, Member (J)

Commissioner of Central Excise, Trichy

Versus

Vishnuram Textiles Pvt. Ltd.

S/COD/523/2004 and S/70/2004

[Arising out of Order-in-Appeal No. 110/2004 (SCN) TRY-II, dated 20.4.2004 passed by Commissioner of Central Excise (Appeals-II), Trichirapalli]

Misc. Order No. 697/04
Final Order No. 1027/2004, dt. 22.11.2004, Certified on 10.12.2004

Service Tax

Demand -- Interest on Tax amount u/s 75 of the Finance Act, 1994 -- Penalties under Sections 76 & 77 (ibid) -- Held, any demand of service tax on the respondents for the period 16.11.1997 to 1.6.1998 in show-cause notice issued on 27.6.2002 is not sustainable in law and hence there is no question of levy of interest on tax or of imposition of penalty on the assessee.

[Para 6]

Appeal rejected

PRESENT :

Shri C. Mani, JDR for the appellant.

Shri V. Bethanasamy, Cons. for the respondent.

Cases Cited :

1. EID Parry Confectionary Ltd. [Final Orders No. 930-931/2004 dated 20.10.2004] (Relied on) [Para 2]

2. Laghu Udyog Bharati v. Union of India, 1999 (65) ECC 687 (SC)............. [Paras 4, 5 & 6]

Per : P.G. Chacko (Oral)

There is a delay of 17 days in the filing of the captioned appeal of the Revenue. After considering the appellants' explanation and noting that the respondents have no serious objection, I condone this delay and, with the consent of both sides, take up the appeal for hearing and disposal.

2. Ld. DR has given an account of the facts of the case and has reiterated the grounds of the appeal. Ld. Consultant for the respondents has argued in defence of the impugned order of the Commissioner (Appeal), banking on Final Order No. 930-931/2004 dated 20.10.2004 passed by this Bench in the cases of M/s. EID Parry Confectionary Ltd. and EID Parry (India) Ltd. [Appeal Nos. S/22 & 39/2004].

3. The Revenue's appeal is against the order of the Commissioner (Appeals) vacating interest on service tax as well as penalty on the assessee. The assessee (respondents) had received goods transport service during the period 16.11.1997 to 1.6.1998 but did not pay tax in respect thereof. However, the tax was paid later on 22.2.2003, prior to issuance of the relevant show-cause notice. This payment was not under protest. The show-cause notice, which also proposed to levy interest on tax and to impose penalty on the assessee, came to be adjudicated upon by the original authority which, apart from confirming the demand of service tax, charged interest on the tax amount under Section 75 of the Finance Act, 1994 and imposed penalties on the assessee under Sections 76 and 77 of the said Act. The first appellate authority upheld the demand of tax but set aside the lower authority's order with regard to interest and penalties. In the present appeal, the Revenue has challenged the dropping of the penalties and the interest on tax. The assessee has not come in appeal against the demand of service tax.

4. After giving careful consideration to the submissions of both sides, I find that as the demand notice in this case for the period 16.11.1997 to 1.6.1998 was issued as late as on 27.6.2002. The demand does not stand the test of the Apex Court's ruling in Laghu Udyog Bharati v. Union of India, 1999 (65) ECC 687 (SC) : 1998 (112) ELT 365 (SC). However, in the absence of challenge to the demand, the benefit of the Apex Court's ruling is not available to the assessee. But, as regards penalties and interest on tax, the assessee will get the benefit. Rule 7A of the Service Tax Rules, 1994 has been relied on by Ld. DR to argue that the interest and penal consequences of default of payment of service tax would still follow. Rule 7A, referred to by the DR reads as under:

--"7A. Returns in case of taxable service provided by goods transport operators and clearing and forwarding agents: Notwithstanding anything contained in Rule 7, an assessee, in case of service provided by --

--(a)

--goods transport operator for the period commencing on and from the 16th day of November, 1997 to 2nd day of June, 1998; and

--(b)

--clearing and forwarding agents for the period commencing on and from the 16th day of July, 1997 to 16th day of October, 1998,

--shall furnish a return within a period of six months from the 13th day of May, 2003, in Form `ST-3B' alongwith copy of Form TR-6 in triplicate, failing which the interest and penal consequences as provided in the Act shall follow.";

--The DR has relied on the underlined portion of the rule. The Rule allowed a grace period of six months from 13.5.2003 for filing service tax return, to those assessees who had not so far filed return in terms of the amended provisions of the Finance Act, 1994. Admittedly, in the instant case, the assessee had filed their return prior to 13.5.2003. There being no default by the assessee in this respect, the above rule cannot be invoked to levy interest on tax or to impose any penalty on the assessee. The Revenue's appeal is devoid of merit.

5. A similar appeal of the Revenue has been rejected as per Final Order No. 930-931/04 and dated 20.10.2004 reading as under:

--"5. I have carefully considered the submissions. The assessees in both the appeals are recipients of taxable services, namely `Clearing and Forwarding' service, `Goods Transport' service. In respect of both these services, rules had been framed by Central Government to recover Service Tax from the recipients of service. But these rules were held to be ultra vires Sections 65 and 66 of the Finance Act, 1994 by the Hon'ble Supreme Court in the case of Laghu Udyog Bharati (supra). In order to get over the Supreme Court's ruling, Parliament amended Section 65 ibid in relation to the limited period, 16.7.1997 to 16.10.1998 under Section 116 of the Finance Act, 2000, whereby recipients of `Goods Transport' service and `Clearing and Forwarding' service were defined as "assessees". Further, for the aforesaid limited period, Parliament declared that "any action taken or anything done or purported to have been (i) taken or done at any time during the period commencing on and from the 16th day of July, 1997 and ending with the day, the Finance Act, 2000 receives the assent of the President shall be deemed to be valid and always to have been valid for all purposes, as validly and effectively taken or done" vide Section 117 of the Finance Act, 2000. Later on, the Finance Act, 2003, made certain amendments to the Service Tax provisions of the Finance Act, 1994, whereby the aforesaid assessees were required to present Tax Returns to the proper officer within six months from 14.5.2003 (date on which the Finance Act, 2003 received Presidential assent). Ld. Counsel has also invited my attention to the legal opinion given by the Additional Legal Advisor to Government of India. This opinion is to the effect that Service Tax could not be recovered from the aforementioned assessees for the period covered by the amendment where no action was initiated against them for such recovery during such period.

--6. In the instant case, the demands of Service Tax were raised beyond 12.5.2000 in show-cause notices dated 13.5.2002 and 14.2.2003. Such demands are not effected by the amendments made to Section 65 by Parliament under Section 116 of the Finance Act, 2000 and consequently they are hit by the Apex Court's ruling in Laghu Udyog Bharati (supra). Furthermore, undisputedly, the demands raised by the Department, in these cases, are far beyond the period of limitation prescribed under Section 73 of the Finance, 1994."

6. Following the precedent, it is held that any demand of service tax on the respondents for the period 16.11.1997 to 1.6.1998 in show-cause notice issued on 27.6.2002 is not sustainable in law and hence there is no question of levy of interest on tax or of imposition of penalty on the assessee. The decision of the Commissioner (Appeals) is affirmed and this appeal is rejected.

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