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2015 Supreme(Del) 3527
IN THE HIGH COURT OF DELHI AT NEW DELHI
S.MURALIDHAR, VIBHU BAKHRU, JJ.
PRINCIPAL COMMISSIONER OF SERVICE TAX DELHI –II - Petitioner
Versus
TOPS SECURITY LTD - Respondent
CEAC 42/2015
Decided On : 05.12.2015
Ms Sonia Sharma, Senior Standing Counsel.
Ms Kavita Jha, Mr Shammi Kapoor, Mr Vaibhav Kulkarni and Ms Purva Juneja, Advocates.
An appellate authority cannot extend the time for an Assessee to pay the reduced penalty beyond the stipulated period, as provided in the relevant statutory provisions.
Headnote:
CESTAT - Service Tax - Central Excise Act, 1944 (CE Act) - Finance Act 1994 - Section 35G, Section 83 - Section 78 (1) of the Finance Act 1994
Fact of the Case:
The Respondent, Tops Security Limited, was found to be charging and collecting service tax from its clients but the service tax paid was not commensurate with the amount received for the services rendered. Show Cause Notices were issued demanding service tax and proposing penalties under the Finance Act, 1994.
Finding of the Court:
The Court found that the CESTAT was not justified in extending the time for the Respondent to pay the reduced penalty within 30 days from the date of the order of the CESTAT, as it was contrary to the third proviso to Section 78 (1) of the Finance Act, 1994.
Issues: The main issue was whether the CESTAT was justified in granting the Respondent the benefit of payment of reduced penalty to the extent of 25% within 30 days from the date of the order of the CESTAT.
Ratio Decidendi: The Court held that the option to pay the reduced penalty comes to an end on the expiry of thirty days from the date of communication of the adjudication order, and an appellate authority cannot give the option to an Assessee to pay the reduced penalty beyond the stipulated time.
Final Decision: The appeal was allowed in favor of the Department, and against the Assessee, as the CESTAT's extension of time for the Respondent to pay the reduced penalty was legally unsustainable.
Dr. S. Muralidhar, J.:
1. This appeal by the Principal Commissioner of Service Tax, Delhi under Section 35G of the Central Excise Act, 1944 (CE Act) read with Section 83 of the Finance Act 1994, is directed against an order dated 18th November 2014 passed by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in Appeal Nos.54595-54597 of 2014.
2. Admit.
3. The following question of law is framed:
“Was the CESTAT justified in granting to the Respondent the benefit of payment of reduced penalty to the extent of 25% in terms of the 3rd proviso to Section 78 (1) of the Finance Act 1994 (as it stood prior to its substitution by the Finance Act 2015) within 30 days from the date of the order of the CESTAT?
4. This Court has heard the submissions of Ms Sonia Sharma, learned counsel for the Appellant and Ms Kavita Jha, learned counsel for the Respondent.
5. The facts leading to the filing of the present appeal are that the Respondent, Tops Security Limited, is engaged in the business of providing security services. An investigation carried out by the Directorate General of Central Excise Intelligence revealed that the Respondent was charging and collecting service tax from its clients but the service tax that was paid was not commensurate with the amount received for the services rendered. Accordingly, a Show Cause Notice (SCN) dated 20th October, 2009 was issued to the Respondent by the Commissioner of Service Tax demanding service tax amounting to Rs.8,15,44,386/-for the period 2004-05 to 2008-09 by invoking the extended period and proposing penalty under Section 78 of the Finance Act, 1994. Subsequently, SCN dated 10th April, 2011 demanding differential service tax of Rs.89,76,597/-for the period 2009-10 and another SCN dated 20th October, 2011 demanding differential service tax of Rs.81,07,919/-to the period 2010-11 were also issued. In these SCNs penalty under Section 76 of the Finance Act, 1994 was proposed.
6. Consequent upon the above SCNs, an Order-in-Original was passed by the Adjudicating Authority, i.e. the Commissioner (Adjudication), on 6th November, 2012 confirming the above demand of service tax with interest. As regards the first SCN the said Order-in-Original levied penalty equivalent to the service tax amount in terms of Section 78 of the Finance Act, 1994. As regards the other two SCNs, the service tax demand along with interest was confirmed and penalty under Sections 76 and 77 of the Finance Act, 1994 was levied.
7. Aggrieved by the above Order-in-Original, the Respondent filed appeal Nos.54595-54597/2014 before the CESTAT. The said appeals along with applications for stay were listed before the CESTAT on 18th November, 2014 i.e. over two years after the passing the Order-in-Original by the Adjudicating Authority. In the impugned order passed on that date, the CESTAT recorded the statement on behalf of the Respondents that they were not disputing their liability to pay service tax and interest but only were seeking to avail the benefit of the reduced penalty in terms of the 3rd proviso to Section 78 of the Finance Act, 1994. After noticing the judgment of the Gujarat High Court in the case of CCE, Ahmedabad v. Ratnamani Metals and Tubes Ltd. 2013 (296) ELT 327 (Guj. HC), the CESTAT ordered as under:
“In the light of the foregoing, we do not find any merit in the appeals except to the extent that the benefit of 25% of mandatory equal penalty under Section 78 (ibid) is required to be extended to the appellants. Accordingly the appeals Nos. ST/55809/2013 and ST/55810/2013 relating to Show Cause Notices dated 10.4.2011 and 20.10.2011 are dismissed and appeal No. 55715/2013 relating to the Show Cause Notice dated 20.10.2009 is partially allowed only to the extent that the penalty of Rs. 8,15,44,386/-imposed under Section 78 of Finance Act, 1994 will be reduced to 25% of the said amount provided the service tax and interest are paid within 30 days from the date of communication of this order and the said reduce
