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ST – Transaction of non-payment of service tax (on reverse charge basis) was duly reflected in books of account – no suppression of fact can be alleged: CESTAT

2019-TIOL-2035-CESTAT-KOL

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH, KOLKATA

Appeal Nos. ST/ 61/2008 & ST/ 176/2009

Arising out of Order-in-Appeal No. 15/ST/B-II/2009, Dated: 25.3.2009 & CCE/BBSR-II/S. Tax/ 18-Commr-2007, Dated: 30.12.2007
Passed by the Central Excise, Customs and Service Tax, Bhubaneswar-7

Date of Hearing: 20.09.2018
Date of Decision: 20.09.2018

REXON STRIPS LTD

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
BBSR-II

Appellant Rep by: Shri K Kumay, & Shri S B Sharma, Advs.
Respondent Rep by: Shri S S Chatopadhyaya, Suptd. AR

CORAM: P K Choudhary, Member (J)
Bijay Kumar, Member (T)

ST – The assessee is engaged in manufacture of sponge iron and mild steel ingots at their factory for which they are registered under FA, 1994 – They are receiving services from GTA and also from the Goods Transport Owners – The assessee in the capacity of service receivers use to pay service tax in terms of Rule 2(1) (d) (v) of STR, 1994, however no service tax is being paid by them on services received from Goods Transport Owners – The service tax is payable on such service which were not paid by assessee initially, however, the same was paid before adjudication proceedings subsequent to issue of SCNs – The issue is, therefore, as to whether the adjudication authority was correct in imposition of penalty and interest under the provision of FA, 1994 – It is the argument of revenue that but for Audit Objection the issue would not have come to light and the assessee would have continue to make non payment of service tax – And, therefore, imposition of penalty and interest is justifiable – It is the contention of assessee that the situation of revenue neutrality is there as assessee was entitled to take Cenvat Credit of duty paid on reversed charge basis for the payment of service tax – Since the imposition of service tax on goods transport Agency was subject matter of dispute and the same was settled only after issuance of clarification by CBEC by issuance of Circular – Assessee has made his point that there was no deliberate suppression of fact by assessee in this case – In fact, the Audit detected the case is non payment of service tax on the basis of records maintained by the assessee – This transaction of non payment of service tax was duly reflected in their books of account – In such a situation it has been held by Tribunal that no suppression of fact can be alleged – The assessee has also made the plea regarding the waver of interest – There is no justification of imposition of any penalty or interest in these cases as has been held in the impugned order relying on the case laws mentioned – The whole exercise is revenue neutral and accordingly there is no scope of levy of any penalty – As the payment of Service Tax is not contested the same is upheld: CESTAT

Appeals partly allowed

Case laws cited:

Nandganj Sihori Sugar Company Ltd. vs. CCE, 2014 (34) STR 850 (Tri-Del)… Para 4

Birla Ready Mix vs. CCE – 2012-TIOL-2200-CESTAT-DEL… Para 5

Bellary Iron & Ores Pvt Ltd. vs. CCE – 2010-TIOL-704-CESTAT-BANG… Para 5

Shree Balaji Transport Vs. CCE 2015 (38) STR (Tri-Bang)… Para 6

Mentha and Allied Products vs. CCE – 2004-TIOL-59-SC-CX… Para 6

Jet Airways India Ltd. Vs. CGT – 2016-TIOL-2072-CESTAT-MUM… Para 6

Hindustan National Glass & Industries Ltd. vs. CCT – 2018-TIOL-2672-CESTAT-HYD… Para 6

Anglo French Textile vs. CCE reported in(2018) 95 Taxmann. Com 329… Para 6

CCE vs. Siddheswar Textile Mills Pvt. Ltd – 2014-TIOL-1995-HC-MUM-CX… Para 7

CC vs. Textile Corp. Marathwada Ltd – 2008-TIOL-242-SC-CX… Para 7

Nirlon Ltd. vs. CCE – 2015-TIOL-96-SC-CX… Para 8

CCE Salem vs. Suibramania Siva Co-Op. Sugar Mills Ltd. 2014 (35) STR 500 (Mad.)… Para 10

FINAL ORDER NOS. A/77156-157/2018

Per: Bijay Kumar:

1. These two appeals have been filed by the appellant on the common issue and is being disposed of by this order.

2. The appellants have filed these two appeals, being aggrieved with the Order-in-Appeal No. 15/ST/B-II/2009 dated 25/03/2009, and Order-in- Original No. CCE/BBSR-II/S. Tax/ 18-Commr-2007 dated 30/12/2007. The period involved in these two appeals are from 1/1/2006 to 30/09/2006 and 1/1/2005 to 31/12/2005, involving the service tax amount to Rs. 27,46,516/- and 70, 38,200/- respectively.

3. The brief facts of the case are that the appellants are engaged in the manufacture of sponge iron and mild steel ingots falling under chapter 72 of the Central Excise Tariff Act, 1985 at their factory located at Kumakela, Lathikata, District-Sundergrah, Orissa for which they are registered under the Finance Act, 1994 (for short ‘Act’) vide the registration No. 1/LR/S. Tax/2005. The appellant is receiving services from Goods Transport Agency and also from the Goods Transport Owners. The appellant in the capacity of service receivers use to pay service tax in terms of Rule 2(1) (d) (v) of service tax Rules, 1994( for short ‘Rules’), however no service tax is being paid by them on the services received from the Goods Transport Owners. During the Audit Objection it was pointed out by the Revenue that they have not properly discharged the service tax on receipt of services from the Goods Transport Owners, taxable under the category of Goods Transport Agency Services as defined under Section 65 (50b) of the Act. Accepting the Audit Objection the appellant paid the amount of service tax including cess in both the cases. Subsequently, after the payment of service tax, Department issued two show Cause Notices, one answerable to Joint Commissioner of Customs and other to the Commissioner of Customs, who adjudicated the cases imposing equal penalty under Section 76 and 78 of the Act and also interest under section 75 of the Act. Being aggrieved by the order passed by the ld. Joint Commissioner the appellant preferred appeal before the Commissioner (Appeal) who upheld the order passed by the Ld. Adjudicating Authority rejecting the appeal filed by the appellant. Similarly, in other case of the Commissioner confirmed the demand, penalty and interest against the appellant vide the impugned order. Being aggrieved with the two impugned orders, one passed by the Commissioner (Appeal) while other passed by the Commissioner, the appellant is before us in the present proceedings. The appellant is aggrieved by imposition of penalty and levy of interest on the appellants for the amount of service tax having already paid before the adjudication.

4. Ld. Advocate submits that the appellants have already paid the service tax before the issue of Show Cause Notices in the two cases and not contesting the demand on merits. Appellant is only challenging the levy of interest and penalty. Under reversed charge mechanism, the appellants bonafidly paid the service tax on the services received from the Goods Transport Agency / Operator under bonafide belief that levy is limited to service tax on services received from transport booking agents for which the reliance was placed in case of Nandganj Sihori Sugar Company Ltd. vs. CCE, 2014 (34) STR 850 (Tri-Del) wherein it is held that all the transport activities are not taxable under the Act but only those were transportation services are being provided by the Goods Transport Agency and who issues the consignment note. If there is no requirement of issuance of consignment note it would be out of levy, it was the view of appellant.

5. Ld. Advocate further relied upon following the judgments

(i) Birla Ready Mix vs. CCE [2013 (30) STR 99(Tri-Del.)] = 2012-TIOL-2200-CESTAT-DEL

(ii) Bellary Iron & Ores Pvt Ltd. vs. CCE[2010 (18) STR 406 (Tri.-Bang.)] = 2010-TIOL-704-CESTAT-BANG

6. Ld. Advocate further submits that the Tribunal in case of Shree Balaji Transport Vs. CCE 2015 (38) STR (Tri-Bang) took a contrary stand in such a case also the assessee is required to pay the service tax but not interest and penalty. It was thus prayed that during the relevant time there existed a bonafide issue within the Tribunal regarding the imposition of service tax on the goods transport activities without issuance of the consignment not provided by the transport owners/operators. Ld. Advocate also referred and relied upon the case of Mentha and Allied Products vs. CCE [2004 (167) ELT 494 (SC)] = 2004-TIOL-59-SC-CX , wherein it is held that in view of divergent opinion about the taxability by Hon’ble Tribunal, penalty is not imposable. There is no mensrea involved in this case, and therefore, intention to evade the payment of service tax is not there. In addition, it was prayed that the case is falling under the revenue neutral situation and hence the interest and penalty is not leviable as has been held in the impugned order. Reliance for which was placed on the following decisions;

(i) Jet Airways India Ltd. Vs. CGT reported in – 2016-TIOL-2072-CESTAT-MUM

(ii) Hindustan National Glass & Industries Ltd. vs. CCT reported in – 2018-TIOL-2672-CESTAT-HYD

(iii) Anglo French Textile vs. CCE reported in(2018) 95 Taxmann. Com 329 (SC0 upheld by Supreme Court in (2018) 95 Taxmann. Com 329(SC)

7. In case of revenue neutral, it was impressed upon by the appellant, that no interest can be levied, placing reliance on the following judgments;

(i) CCE vs. Siddheswar Textile Mills Pvt. Ltd. [2015 (320) ELT 524 (Bom)] = 2014-TIOL-1995-HC-MUM-CX;

(ii) CC vs. Textile Corp. Marathwada Ltd. [2008 (231) ELT 195 (SC)] = 2008-TIOL-242-SC-CX

8. Ld. Advocate also relied upon on the case of Nirlon Ltd. vs. CCE reported in 2015 (320) ELT 22 (SC) = 2015-TIOL-96-SC-CX regarding the non imposition of penalty in a situation of revenue neutral. It was also impressed upon by the ld. Advocate that CBEC Circular letter No. 341 dated 18/2004 TRU(Pt.) dated 17/2/2004 has clarified that during the period 1/1/2005 to 31/1/2005, no penalty may be levied on any of the provision of the Act for procedural infractions unless and until the default is on the account of deliberate, fraud, collusion etc., which condition does not arise in the instant case.

9. Against above background, it was prayed that the appeal filed by the appellant be allowed with consequential relief and impugned order be set aside/quashed.

10. Ld. AR on the other hand referred and relied on the order of the Hon’ble this Tribunal in case of M/s SL Mining Industries Ltd. vs. Commissioner of Central Excise, Bhubaneshwar in ST Appeal no. ST/14/2009 dated 29/6/2018 , the final order No. being FO/76385/2018, wherein relying on the decision of Hon’ble Madras High Court in case of CCE Salem vs. Suibramania Siva Co-Op. Sugar Mills Ltd. reported in 2014 (35) STR 500 (Mad.) has held that in such situation the service tax is leviable and appellants are required to pay the same. The relevant part of the said order is reproduced as under ;

“5. We have also head Ld. DR for the Revenue who has vehemently opposed the arguments advanced by the Ld. Advocate and has advanced the judgment of the Hon’ble Madras High Court in the case of Commissioner of Central Excise, Salem vs. Suibramania Siva Co-op Sugar Mills Ltd. reported in 2014 (35) STR 500 ( Mad.). The relevant extract of the above judgment are reproduced here below for the sake of convenience:-

18. The expression “any person” is not defined under the Act. Section 3(42) of the General Clauses Act defines “person”, as including any company or association or body of individual whether incorporated or not. The thrust of the definition is that it includes every person engaged in an activity providing service of transport of goods by road. Thus, any commercial or a proprietary concern carrying on the business of Goods Transport would fall under the definition of “Goods Transport, Agency” in Section 65(50b) of the Finance Act. In the absence of any words of restriction, the definition ‘any person’ thus would have application to any concern providing the service.

22. The Explanation given in the Notification gives the guidance as to the scope of clause (1) and clause (2) of the Notification. As is evident from the reading of the Explanation, “individual consignment” means all goods transported by “a goods transport agency” by road “in a goods carriage” “for a consignee”. In contra distinction to this, the first clause, fixing the exemption limit to Rs. 1,500/- is not limited to the consignment to an individual but it refers to consignment relatable to more than one consignee. In other words, while clause (1) is with reference to consignments transported in a goods carriage to different consignees, Clause (2) as seen from the Explanation refers to transport of goods by a goods transport agency by road in a goods carriage for “a consignee”. Thus, by making two classifications, exemption Notification limits its operation based on the consignee, the charges and the consignment. For the purpose of claiming exemption, in the first case the gross amount charged on consignments is limited upto a sum of Rs. 1,500/-. In the second case, the charges not exceeding Rs. 750/- is referable to goods transported in a goods carriage for a consignee. On the admitted case, the goods carried was for a single consignee, viz., the assessee alone, transported by the Goods Transport Agency, the assessee’s case would fall under sub-clause (2); in which event, when the gross amount charged exceeded Rs. 750/-, as rightly advised by the assessee’s internal audit, they remitted the liability. In the circumstances, we agree with the Revenue that the question of limitation, does not arise to hold that the demand herein is time barred as per Section 69 of the Finance Act, 1994. As far as the levy of interest is concerned, Section 75 of the Finance Act, 1994 is the relevant provision, which reads as under :”

11. Thus we are of the opinion that the service tax is payble on such service which were not paid by the appellant initially, however, the same was paid before the adjudication proceedings subsequent to issue of Show Cause Notices. The issue is, therefore, as to whether the adjudication authority was correct in imposition of penalty and interest under the provision of Finance Act, 1994. It is the argument of Ld. AR that but for Audit Objection the issue would not have come to light and the appellant would have continue to make non payment of service tax. And, therefore, imposition of penalty and interest is justifiable. It is the contention of the assessee that the situation of revenue neutrality is there as the appellant was entitled to take Cenvat Credit of the duty paid on the reversed charge basis for the payment of service tax. Since the imposition of service tax on the goods transport Agency was subject matter of dispute and the same was settled only after issuance of clarification by the CBEC by issuance of the Circular (supra). Ld. Advocate has impressed upon the fact that there were different view among the various coordinated branches of Tribunal itself regarding the liveability of service tax on the services being received by the new truck owner and also the amount of Rs. 7,015 as per the Notification No. 34/2004/ST dated 3/12/2004. We find that the ld. Advocate has made his point that there was no deliberate suppression of fact by the appellant in this case. In fact, the Audit detected the case is non payment of service tax on the basis of records maintained by the appellant. This transaction of non payment of service tax was duly reflected in their books of account. In such a situation it has been held by the Hon’ble Tribunal that no suppression of fact can be alleged. The appellant has also made the plea regarding the waver of interest. High Court has also affirmed the same in case of (supra). We, accordingly, held that there is no justification of imposition of any penalty or interest in these cases as has been held in the impugned order relying on the case laws mentioned in para (5) and (6) above. The whole exercise is revenue neutral and accordingly there is no scope of levy of any penalty.

12.Accordingly, we set aside the impugned regarding penalty and interest and order and allow the appeal. As the payment of Service Tax is not contested the same is upheld. Order accordingly. Appeals are thus partly allowed.

(Operative part of the order pronounced in open court)

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