1. This appeal is filed by the appellant against Order-in-Appeal No. 28/2009(H-III)S. Tax, dated 29.05.2009.
2. Heard both sides and perused the records.
3. The appellants M/s. A.A.P. DETECTIVE & SECURITY SERVICE are the providers of security agency services which have been brought under the provisions of Service Tax net w.e.f. 16.10.1998. The appellant assessee were collecting service tax from their clients from September, 2002 but were not paying the service tax to the Government. The matter was investigated by the Officers of Anti Evasion Wing of the Commissionerate and a show cause notice was issued seeking to recover an amount of Rs. 6,92,729/- towards service tax + Rs. 11,063/- towards Education Cess not paid by them under the under the provisions of Section 73 of Finance Act, 1994. Interest was also demanded under section 75 and penalty was proposed to be imposed under section 76, 77 & 78 of the Finance Act, 1994. After following due process of law, the original adjudicating authority confirmed the demand of Rs. 6,78,212/- under section 73, interest on the amount under section 75. He also imposed fines under sections 76, 77(2) and 78 of the Finance Act, 1994.
4. Aggrieved, assessee appealed to the Commissioner (Appeals) who vide Order-in-Appeal No. 28/2009 (H-III) S.T., dated 29.05.2009, upheld the Order-in-Original No. 36/2008, dated 30.01.2009, with a modification that they will be eligible for CENVAT credit of the service tax paid in terms of CENVAT CREDIT rules which may be allowed while arriving at service tax liability. The assessee filed an appeal before CESTAT, Southern Zonal Bench, Bangalore who, vide Miscellaneous Order No. 52/2011, and Final Order o. 79/2011, dated 24.01.2011 dismissed the appeal for non-compliance of the order passed in the stay order. The appellants paid entire amount of duty alongwith interest and filed for Restoration of Appeal dated 28.02.2015 before CESTAT, Hyderabad, which was dismissed vide Miscellaneous Order No. M/30142/2016, dated 02.08.2016. Assessee filed Writ Petition No. 35899 of 2016, datd 27.10.2016 before Hon'ble High Court of Andhra Pradesh at Hyderabad. The Hon'ble High Court disposed the petition with the direction to the appellant to deposit 1/3rd of the penalty amount imposed by original adjudicating authority within eight weeks and ordered CESTAT to restore the appeal upon compliance by the appellant and dispose it of in accordance with the law. The appellants complied with the directions of Hon'ble High Court and this Bench has restored the appeal vide Interim Order No. 03/2017, dated 20.02.2017 and appeal No. ST/659/2009 and the matter is listed for hearing today. In appeal, the appellants prayed (i) to set aside the Order-in-Appeal No. 28/2009 (H-III) S.T., dated 29.05.2009 and (ii) to waive the pre-deposit of the dues and (iii) to stay the operation of the order.
5. Ld. Consultant of the appellants submits that the demand for service tax was made in the show cause notice from Annexures I, II & III. There was an overlap between the entries in Annexure-III and Annexure-II. The appellants paid an amount of Rs. 19,754/- towards Education Cess against confirmation of demand of Rs. 12,670/- in the Order-in-Original, thereby paying an excess of Rs. 7,084/- as Cess. The appellants request for adjustment of refund of this amount. The adjudicating authority imposed penalties under both Sections 76 and 78 of the Finance Act, 1994 simultaneously for the disputed period. The second proviso to sub-section (2) of Section 78 of Finance Act was introduced w.e.f. 10.05.2008 stating that when penalties payable under section 78, no penalty should be simultaneously payable under section 76. Although this proviso was introduced w.e.f. 10.05.2008, in the following judgments this was held to be applicable for cases to the period prior to this date also.
i) Industrial Security Protection Services [2016 (1) (TMI) (209)
ii) RAVAL TRADING COMPANY : 2016 (42) S.T.R. 210 (Guj.)]
iii) CCE vs. FIRST FLIGHT COURIER Ltd : 2011 (22) STR 722 (P & H)]
6. The prayer by the appellant is that in view of the above, the penalty imposed under section 76 of Finance Act, 1994 may kindly be set aside as the penalty has already been imposed under section 78 of the Act.
7. Ld. DR reiterated the findings in the Order-in-Original and Order-in-Appeal and pleaded that the appeal may be dismissed.
8. We find that in the appeal, the prayer was to set aside the Order-in-Appeal in toto. We have examined the Order-in-Original and Order-in-Appeal and find that the appellant assessee had rendered taxable services and also collected service tax on them from their customers but failed to deposit the same with the Government. Hence, the appellant cannot claim ignorance that they are liable to pay service tax on the services rendered by them. They have collected service tax willfully and not paid the same to the Government, hence the demand of service tax as confirmed in the Order-in-Original and modified in the Order-in-Appeal is sustainable. This point was not even pressed by the Ld. Consultant during the personal hearing today. Since they did not deposit the service tax in time, they are liable to pay interest under section 75 of Finance Act, 1944. They are also liable for penalties.
9. As far as Ld. Consultant's contention that there was an overlap between Annexure-III and Annexure-II of the show cause notice, thereby resulting in excess payment of confirmed is concerned, it is not supported by facts. During the hearing when he was asked to show how there was an overlap, Ld. Consultant could not do so. As far as the submission that they had paid Cess in excess of the amount confirmed in the Order-in-Original is concerned, it is beyond the scope of this appeal.
10. We also find that the penalty under section 77(2) of Finance Act 1944 is imposable on the appellant due to failure to submit ST-3 returns.
11. Regarding the simultaneous imposition of penalties under section 76 & 78 of the Finance Act, 1944 (for the period September 2002 to July 2006), we find that the proviso of sub-section 2 of Section 78 was introduced on 10.05.2008 stating that no penalty is imposable under section 76, when a penalty is imposed under section 78. The question whether this also applies to the period prior to this amendment, is no longer res integra, it was decided by Hon'ble High Court of Gujarat in the case of Raval Trading Company vs. CST : 2016 (42) S.T.R. 210 (Guj.)] and paras No. 10, 11 & 12 of the judgment are reproduced below:
"(10). The tenor, background and the purpose for which the penalty could be imposed under Section 78 of the Finance Act, 1994, is entirely different than in case of Section 76 of the Finance Act, 1994. However, the language of Section 76 did not specifically exclude the situation; otherwise covered under Section 78 namely nonpayment of tax on account of willful misstatement, fraud or collusion, etc. One plausible argument therefore could be that Section 76 would also cover such situations and permit the department to levy a further penalty for default as envisaged under Section 76 of the Act over and above the penalty imposed under Section 78 of the Finance Act, 1994. In order to clarify this position, a further proviso was introduced in Section 78 making it clear that, if the penalty is payable under Section 78, the provisions of Section 76 shall not apply. In other words, with the introduction of further proviso to Section 78 whenever penalty was imposed under Section 78, no further penalty could be levied under Section 76 of the Finance Act, 1994.
(11). In view of the nature of this further proviso and the relevant position of the two statutory provisions both pertaining to penalty, we are convinced that the proviso was in the nature of clarificatory amendment and not creating a liability for the first time. Even without the aid to this further proviso to Section 78, one entire plausible view was that the situation envisaged under Section 76 of the Finance Act, 1994, would exclude those cases covered under Section 78 of the Finance Act, 1994. In other words, Section 76 of the Finance Act, 1994, would cover only the cases of non-payment of service tax which are not related to fraud, collusion, willful misstatement, suppression of facts or contravention of any of the provisions of the said Chapter or the rules made thereunder with the intent to evade payment of service tax since legislature had already provided for penalty in Section 78 in such situations. Thus further proviso to Section 78 made it explicit which was till then implicit.
(12). Section 76 of the Finance Act, 1994, as is now amended with effect from 14-5-2015 gives further credence to this argument. Section 76(1) as it stands after the said amendment provides that where service tax was not levied or not paid or having been short-levied or short-paid, or erroneously refunded for any reason, other than the reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 or the rules made thereunder with an intent to evade the payment of service tax, th
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e person liable shall in addition to service tax and interest also be liable to pay penalty not exceeding ten per cent of the amount of such service tax. Thus, by way of this amendment, the statute has ensured that Sections 76 and 78 of the Finance Act, 1994, apply in mutually exclusive areas. In other words, the cases of non-payment of tax by reason of fraud or collusion or willful misstatement or suppression of facts, etc., would be covered under Section 78 of the Finance Act, 1994, and all cases other than those envisaged under Section 78 would be covered under Section 76 of the Finance Act, 1994. 12. As it is now settled law, penalty cannot be imposed under section 76 of Finance Act, 1944 if it is imposed under section 78. 13. In conclusion, the Order-in-Appeal is upheld with the modification that the service tax liability with interest and penalty under sections 77 & 78 is also upheld while the penalty under section 76 is set aside. 14. Appeal is disposed of as indicated herein above.