1. This is an appeal filed by the assessee being aggrieved by the order of Commissioner of Central Excise (Appeals), Coimbatore. Reliefs sought in this appeal are (i) deletion of penalty under Section 78 to the extent sustained by the Commissioner (Appeals) and (ii) deletion of penalty imposed under Section 77(2) of the Act.
2. Brief facts leading to the present appeal are as under:
(i) The appellant is the holder of service tax registration for providing short term accommodation service. A Show Cause Notice dated 23.02.2016 was issued by the respondent on the ground that the appellant having collected service tax from its customers from 01.05.2011 onwards, was liable to obtain service tax registration w.e.f. that date and that the service tax collection from its customers ought to have been deposited into Government account; that the appellant having failed on both the above counts, the SCN was required. Thus, in terms of the above SCN, the following propositions were made as to why:
'(i) the proviso to Section 73(1) of the Finance Act, 1994, should not be invoked to demand service tax beyond the normal period of eighteen months;
(ii) service tax amount of Rs. 7,86,009/- (Rupees seven lakhs eighty six thousand and nine only) (Service Tax Rs. 7,63,115/-; Education Cess: Rs. 15,262/- and Secondary & Higher Education Cess: Rs. 7,632/-) payable on the services provided by them by way of short term accommodation during the period from 01/05/2011 to 31/07/2012 as shown in Table III above, should not be demanded from them under proviso to Section 73(1) of the Finance Act, 1994;
(iii) the amount of Rs. 64,189/- collected as Service Tax in excess on Room Rent as shown in Table I should not be demanded from them under Section 73A(3) of the Finance Act, 1994;
(iv) the amount of Rs. 22,419/- collected as Service Tax on Food Bills from 01/07/2011 to 31/03/2012 as shown in Table II above, should not be demanded from them under Section 73A(3) of the Finance Act, 1994;
(v) Service tax amount of Rs. 8,60,864/- paid on 31/08/2012 by them as shown in Table IV above should not be appropriated against the amounts demanded at (ii), (ii) & (iv) above
(vi) appropriate interest on the amount demanded at Sl. No. (ii) above, should not be demanded from them under Section 75 of the Finance Act, 1994;
(vii) appropriate interest on the amount demanded at Sl. No (iii) and (iv) above, should not be demanded from them under Section 73B of the Finance Act, 1994;
(viii) the amount of Rs. 90,641/- paid as interest on 31/08/2012 under various Challans dated 31/8/2012 as shown in Table IV above should not be appropriated against the demand of interest at Sl. No (vi) and (vii) above;
(ix) penalty should not be imposed on them under Section 77 of the Finance Act, 1994 for their failure to obtain service tax registration on time and for their failure to file the stipulated ST3 returns;
(x) penalty should not be imposed on them under Section 78 of the Finance Act, 1994 for non-payment of Service Tax by suppressing facts from the knowledge of the Department with intent to evade payment of Service Tax.'
(ii) The appellant filed its reply to the above Show Cause Notice, inter alia, contending that the appellant was under a bona fide belief that the Service Tax was being paid by its Head Office at Chennai; that there was a mistake in depositing the Service Tax collected at the Head Office with the bank account on a daily basis; that the appellant took registration on 07.05.2012; that the entire Service Tax of Rs. 8,60,686/- was paid on 31.08.2012 along with interest of Rs. 90,641/- , etc. The adjudicating authority (AA), vide order dated 18.01.2017 confirmed the demand of Service Tax, appropriated the amount paid towards duty and interest, imposed penalty of Rs. 10,000/- under Section 77(2) of the Finance Act, 1994 and a penalty of Rs. 1,29,103/- under Section 78 proviso (i) of the Finance Act, 1994, on the appellant. The appellant preferred an appeal against the levy on the ground that the imposition of penalty at 15% under 2nd proviso to Section 78, on the ground that the appellant had paid tax and interest much before the issuance of Show Cause Notice (SCN) with a further contention that the larger period was not invocable, since there was no suppression on the part of appellant. The Ld. Commissioner (Appeals), however, vide order dated 14.09.2017 upheld the penalty imposed under 2nd proviso to Section 78, but set aside the penalty imposed under Section 78 on the excess amount collected. Aggrieved by this part of the order of the Ld. Commissioner (Appeals), the appellant is in appeal.
3. Shri Ayyamperumal P, Advocate appeared for the appellant and Smt. P. Hemavathi, Commissioner (DR), appeared for the Revenue. The sole ground of agitation is whether 2nd proviso to Section 78 of the Act was not applicable since the provisions of Section 73(1) were not satisfied in the case on hand. It is the contention of the appellant that the 2nd proviso to Section 78 could be invoked only when the Service Tax, interest and reduced penalty of 15% are paid within 30 days of the notice under Section 73(1) of the Act. In support, the learned Counsel relies on the following decisions: (i) Sri Velmurugan Sago Factory Vs. Commissioner of C. Ex., Salem 2017 (347) E.L.T. 185 (Tri.-Chennai) (ii) Santhi Casting Works Vs. C.C.E. Coimbatore 2009 (15) S.T.R. 219 (Tri.-Chennai.) (iii) C.C.E. Salem Vs. Best Cheran Spintex India Ltd. 2014 (33) S.T.R. 432 (Tri.- Chennai), Mount Housing & Infrastructure Ltd. vs C.C.E & S.T. Coimbatore 2014 (35) S.T.R. 389 (Tri. Chennai) & (iv) Shriram Epc Ltd. Vs. Commissioner of Service Tax, Chennai 2014 (35) S.T.R. 564 (Tri.- Chennai)
4. Per contra, the learned Department Representative (DR) supports the findings of the lower authorities.
5. I have considered the rival contentions and perused the materials on record and the case law relied on during the hearing. In the case of Sri Velmurugan Sago Factory Vs. Commissioner of C. Ex., Salem reported in 2017 (347) E.L.T. 185 (Tri.-Chennai), this very Bench of the Tribunal was considering an identical issue, but with regard to the demand of penalty under Section 11AC of the Central Excise Act, 6 1944, and after a careful analysis of Section 112B, has concluded as under:
'6. This being the case, it would have been most appropriate if the SCNs had not been issued in these cases. Instead, these appellants perforce have been required to come before this forum for relief. In the circumstances, while there is no two opinion that the differential duty has been discharged by the appellant on being pointed out, along with interest amounts thereon, issue of SCNs for imposition of penalties under Section 11AC is an overkill. Penalty has also been imposed under Rule 27 of the Central Excise Rules, 2002 for not taking registration. When in the first place there was no requirement of issue of SCN itself, penalties will not survive particularly as there was some confusion on the duty rates and the continued eligibility of SSI concessions for these appellants.
7. In the result, all the three appeals are allowed with consequential relief, if any, as per law.'
6. In the case of Shriram Epc Ltd. Vs. Commissioner of Service Tax, Chennai reported in 2014 (35) S.T.R. 564 (Tri.-Chennai), this Bench, after considering an identical issue, concluded as under:
'7. I have considered submissions on both sides. It is obvious that the appellant paid entire tax liability and interest. This inference is drawn because the impugned order does not involve demands for these but just imposes penalty for delay in payment. When provisions similar to Section 73(3) was introduced in Central Excise Act, 1944 as Section 11A(2B) in the year 2001, it was clarified that these provisions are meant for encouraging immediate realization of short payments detected by audit teams so that whoever discharges the short paid tax immediately need not get entangled in protracted litigations. Therefore, unless there is a case of active suppression, provisions of Section 73(3) should be extended. This is view of the Karnataka High Court also in the case of CCE & ST., LTU, Bangalore v. ADECCO Flexione Work Force Solutions Ltd. – 2012 (26) S.T.R. 3 (Kar.). The decision in the case of First Flight Couriers was on a different footing because the appellant therein did not pay Service Tax and also did not file return on the ground that there was a strike by the employees of that appellant. It was not a case of bona fide error or doubt regarding legal provisions and prompt payment when short payment was p
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ointed out by audit as is the case in this appeal. 8. The facts of the present case are more similar to that in the case of ADECCO Flexione Work Force Solutions Ltd. (supra). So considering this decision of Hon. Karnataka High Court, I set aside the penalty imposed on the appellant. Thus the appeal is allowed.' 7. Considering the above decisions/judgments/orders, I find that there is no dispute with regard to the fact that the appellant has paid the duty along with interest at least three years before the issuance of Show Cause Notice and, therefore, going by the above decisions, I have to conclude that the demand of penalty equal to 15% imposed under 2nd proviso to Section 78 of the Act is bad and unsustainable. So also the fact that the appellant had obtained registration prior to the Show Cause Notice, I find that the same is sufficient reason to hold there was no violation or contravention of Section 77(2). Hence, the appeal is allowed.