1. The respondent is engaged in supplying aircraft/helicopter to various entities for their use. While providing the said aircraft/helicopter on chartered hire, the respondent supplied its own crew i.e. pilot and other flying staff along with the said aircraft keeping effective control and possession of the same.
2. In addition, they have also provided various services like Y/A clearance, ATC clearance, DGCA clearance, Handling, Technical support etc. to other operators for a consideration. The department, on conclusion of investigation issued show cause notice dated 23.10.2013 demanding Service Tax amount of Rs. 2,57,46,894/-. The show cause notice also proposed to deny cenvat credit amounting to Rs. 1,14,08,852/- as well as for imposition of penalties under various sections under the Finance Act, 1994. The case stand adjudicated by the Commissioner by passing the impugned order dated 3.12.13 in which the following order was passed:-
"(i) The supply of aircraft on hire basis to various entities will be classifiable under taxable service of "supply of tangible goods for use" as defined under section 65 (105)(zzzj). Further, services such as ATC clearance, DGCA clearance, technical support etc. provided by the respondent would be classifiable under the taxable service of "Business Support Service" as defined under section 65(105)(zzzq) of the Finance Act, 1994.
(ii) Demand of Service Tax was confirmed amounting to Rs. 2,04,20,088/- along with interest.
(iii) Cenvat credit amounting to Rs. 1,14,08,852/- is allowed under the Cenvat Credit Rules 2004,
(iv) No penalty imposed under various sections of the Finance Act, 1994."
3. Aggrieved by the impugned order, Revenue has filed the present appeal mainly on the following grounds:-
"(1) The adjudicating authority has confirmed the service tax demand against the respondent by invoking the extended period of limitation under section 73(1) of the Finance Act, 1994. However, he refrained from imposing any penalty on the respondent by taking a view that the extended benefit of limitation is not applicable.
(2) Revenue has contended that since the demand has been confirmed by invoking the suppression clause of Section 73, in terms of provisions of section 73(1A) ibid, the proceedings cannot be concluded unless the duty demand, the interest as well as 25% penalty under section 78 is paid within a period of one month from the date of issue of show cause notice. In the present case, only a part of the service tax demand has been paid by the respondent within a period of one month. Consequently, the penalty equal to the service tax demand will be liable to be imposed on the respondents."
4. With the above background, we have heard Shri Sanjay Jain, learned DR for the Revenue as well as Shri A.S. Hasija, learned Counsel for the respondent. Learned DR reiterated the points urged by the Revenue in the appeal. He argued that even though the entire service tax demand stands paid along with interest, since the same has not been paid within one month from the date of issue of show cause notice, the Commissioner ought to have imposed penalties under various sections of Finance Act, 1994.
5. The learned Counsel for the respondent supported the impugned order. His submission is that the adjudicating authority has held in para 52 of the impugned order that the respondent, during the course of investigation has admitted their liability and has paid the whole outstanding service tax along with interest. This shows their bonafide nature and accordingly, Commissioner has held that there was no ingredient in the case to invoke the proviso to section 73(1) of the Finance Act, 1994. He has also emphasized the following case laws relied upon by the adjudicating authority
"(i) CST, Bangalore v. C Head Info Technologies India P. Ltd. [2017 (47) STR 125 (Kar)];
(ii) Tidewater Shipping Pvt. Ltd. v. CST, Bangalore : 2008 (11) STR 475 (Tri-Bang)];
(iii) Commissioner v. Macro Service [2015 (37) STR J 130 (Kar)]; and
(iv) Amarvati Peoples Co-Op Bank Ltd. v. CCE Nagpur [2014 (36) STR 456 (Tri-Mum)]."
6. Heard both sides and perused the records.
7. The adjudicating authority has held that the activities undertaken by the respondents would be rightly classifiable under 'Supply of Tangible Goods for Use' Service as well as 'Business Support Service'. He has also confirmed the demand of service tax under the above two services. It is also pertinent to record that the entire service tax demand has also been paid by the respondent along with interest partially through cash and partially by availing cenvat credit which has been regularized by the Commissioner in the impugned order. The Only point on which the Revenue is aggrieved is that the adjudicating authority has refrained from imposing any penalty under various sections of Finance Act, 1994, even though the demand itself has been confirmed on the basis of show cause notice issued invoking the proviso to section 73(1). The adjudicating authority has given detailed reasons for not imposing the penalty and the same are reproduced below:-
"52. Whether the assessee is liable for penalty under section 76, 77 and 78 of the Act.
52.1 In this regard, I find that the present SCN has also proposed penal action under section 76, 77 and 78 of the Act, as they failed to assess the tax, file the return and deposit the tax within the prescribed period as discussed in the preceding paragraphs. However, I find that during the course of investigation, the assessee admitting their liabilities has paid whole the outstanding service tax amounting to Rs. 2,12,85,111/- (including CEss and SHEC) through Cash and cenvat credit voluntarily along with interest of Rs. 1,10,676/- which shows their bonafide that they had no intention to evade the tax liabilities. I find that there remains no outstanding service tax liability against them. I further find that section 73(3) of the Act provides that an assessee may pay such amount of service tax not paid or short paid along with interest payable under Section 75 of the Act before service of notice on the basis of -(i) own ascertainment of such tax; or (ii) tax ascertained by the Central Excise officer. Further, after payment of tax, the assessee should inform the Central Excise officer in writing about such payment, and then the Central Excise officer shall not issue any SCN under section 73(1) in respect of service tax so paid. Explanation -2 to Section 73(3) also provides that no penalty under any provisions of the Finance Act or the rules made there under shall be imposed in respect of such payment of service tax along with interest.
52.2 In the instant case, the short payment/non-payment of service tax has been ascertained by the Central Excise Officer in course of investigation conducted against the assessee. The assessee has also paid whole the amount of Service Tax along with interest. I further find that the CBEC vide letter No. 137/167/2007-CX.4 dated 3.10.2007 had also clarified that if tax and interest is paid before SCN, all proceedings are concluded. In the case of M/s. Auto Transport Services v. CCE - [2006 (5) STT 396 (CESTAT SMB) the Hon'ble Tribunal held that if tax with interest is paid, no SCN could have been serviced upon the assessee. Further, in case of CCE, Kolkatta I v. Hazi Abdul Razzaque [2006-TIOL-1237-CESTAT-KOL], the Tribunal held that under section 73, if the amount is paid by Noticee before issuance of SCN, there is no need to issue any SCN, hence upheld the waiver of penalty. Thus, in view of principles of natural justice, the assessee is entitled for the benefits of waiver of penal action as was available under Section 73(3) of the Act, during the period under dispute. Therefore, I do not propose any penal action against the assessee under section 76, 77 and 78 of the Act, and I hold it accordingly. "
8. After going into the detailed reasons given by the adjudicating authority and the case law relied by him, we are of the view that this is not a fit case for imposition of penalty. The supply of tangible goods service was introduced
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with effect from 16.5.2008 and the Business Support Service was introduced with effect from 1.5.2006. We note that the demand for service tax in this case has arisen for the periods immediately after the introduction of these two services when the activities covered under these services were being debated and settled by various judicial forum. We also note from the records of the case that the respondent has disputed the classification of their activity under the supply of tangible goods service. However, during the course of investigation they were convinced and they have discharged the entire service tax liability along with interest. Keeping these circumstances in view, we are convinced that this is a fit case to waive all the penalties under the provisions of section 80. 9. In view of the above discussions, the impugned order is upheld and the appeal filed by the Revenue is rejected.