1. This appeal is filed by Revenue against Order-in-Appeal No. 174/2012 (H-II) S. Tax, dated 23.11.2012.
2. Heard both sides and perused the records.
3. The relevant facts, after filtering out unnecessary details are, during the period 01.10.2005 to 31.07.2008, the Respondents herein had not discharged the service tax liability on an amount received as commission. When investigation was taken up, respondent during the period February 2008 to October 2008, paid the service tax liability plus interest thereof, of an amount of Rs. 11,88,789/-. Show cause notice was issued on 17.02.2011 demanding an amount of Rs. 13,00,006/- from the Respondent. The said demand was contested by respondent before the adjudicating authority as being wrongly calculated and that the said amount needs to be reduced by various amounts which have been paid earlier during the period in question as reimbursable expenses. Adjudicating authority did not agree with the contentions raised and confirmed the demands. Aggrieved by such an order, an appeal was preferred before the first appellate authority. First appellate authority upheld the Order-in-Original but directed the lower authorities to requantify the amount of service tax liability after considering opening balance and service tax paid. The said findings are in para No. 11, which I reproduce:
11. However, I direct the lower authority to re quantify the demand of service tax as the appellant contended that the department had taken for the purpose of demand of service tax for the period from April 2008 to July 2008, also had taken taxable value, inclusive of an amount of Rs. 2,19,930/- which was opening balance of the April 2008 and also include 1,06,004/- which was paid towards service tax. After verification if the appellant contentions is correct, penalty should be re determined to impose under the proviso.
4. Revenue is not aggrieved by the above reproduced findings and the Bench was informed by both sides that the adjudicating authority has still not requantified the demand of service tax.
5. Ld. DR submits that they are aggrieved only by the findings recorded by the first appellate authority to extend the benefit of 25% of the total amount of tax payable after paying the part of the tax during investigation. He submits that there is no provision like that.
6. Ld. Counsel submits that they have paid substantial amount during investigation itself and some balance amount is still to be paid and on such an amount of tax liability, the demand of 25% should be made as penalty as per section 78 of Finance Act, 1994.
7. The only para which Revenue is aggrieved against the impugned order is para 12, which I reproduce:
12. By taking note of the facts of the circumstances of the case as the service tax part amount has been paid before issue of show cause notice, I take a lenient view and I am inclined to reduce the penalty imposed under section 78 of the Finance Act, 1994 to 25% of the total service tax amount under proviso to Section 78 of the Finance Act, 1994, provided the appellant pays the remaining payable service tax along with the applicable interest and penalty within 30 days of receipt of the order as the lower authority has failed to give the option to the appellant as per the statutory provision. On failure on the part of the appellant to pay within 30 days the benefit of reduced penalty will not be available. In this regard, I rely and draw support from the following case laws:
(i) K.P. Puches (P) Ltd. vs. Union of India: 2008 (228) ELT 31 (Del.)
Penalty Quantum of Section 11AC of Central Excise Act, 1944 Assessee deposited entire duty amount well before issuance of show cause notice, hence liable to pay only 25% of duty amount as penalty Fact that Assistant Commissioner levied an incorrect penalty left assessee with no option ut to challenge it otherwise he would have had to pay full penalty amount, which is statutorily not leviable Since statutory authorities have themselves acted illegally and contrary to first proviso to Section 11AC ibid assessee cannot be faulted for challenging the order Failure of assessee to pay penalty amount within 30 days of adjudication order cannot be held against assessee Section 11AC ibid (paras 21, 22, 23, 24)
Adjudication Penalty in its adjudication order the adjudicating authority under the Act should explicitly state options available to assessee under Section 11AC of Central Excise Act, 1944 Once choices are made known to assessee and it still does not take advantage of first proviso to Section 11AC ibid, it will be entirely at its own peril. (para 27).
(ii) HIND TELE LINKS Vs. CCE, JALANDHAR : 2012 (25) STR (Tri.-Del.)
Penalty Quantum Service tax paid prior to the issuance of show cause notice except for an amount of Rs. 10,086 Separate penalties under Sections 76 and 78 of Finance Act, 1994 not justified Penalty under Section 76 set aside and penalty under Section 78 upheld with modifications Option to the appellant to deposit 25% of the penalties within a period of 30 days, as not provided to the appellant in earlier proceedings, granted and meanwhile also penalty reduced to 25% - Penalty under section 77 for non-filing of return, etc. not interfered with Sections 76, 77 and 78 of Finance Act, 1994 (paras 4, 5).
8. It can be seen from the above reproduced para, the first appellate authority has misdirected himself on the law. In my considered view, once the demand of service tax liability for the period 01.10.2005 to 31.07.2008 is demanded under the show cause notice dated 17.02.2011, it is obviously done by invoking the extended period. If there is a demand by invoking extended period for the payment of service tax, in my view, the provisions of Section 78 will have to be followed, giving relief of payment of reduced penalty
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. In my view, the directions given by the first appellate authority in para No. 12 that the respondent has to pay 25% of the amount of the penalty after reducing the amount paid before issuance of show cause notice, seems to be in consonance of law. Adjudicating authority will have to requantify the amount of service tax liability and appropriate the amount by the appellant towards tax liability and interest and extend benefit pay of pending 25% of the amount of such requantified amount of tax liability, and also appropriate the amount which has been paid by the respondent towards penalty. 9. Appeal stands disposed of as indicated hereinabove.