(PER: THE HON'BLE MR. JUSTICE M.NAGAPRASANNA)
1. The petitioner - Proprietorship concern is
2. Heard the learned counsel Shri G.I.
3. Facts in brief germane are as follows:
4. A show cause notice comes to be issued on
entire Service Tax including penalty. This can be gathered
captures in his order, the case of the petitioner. Therefore,
(a) Whether the service of construction,
installation & maintenance of petrol bunks
owned by M/s. HPCL and M/s BPCL are
classifiable under the category of 'Works
Contract Service' under the provisions of
Section 65(105)(zzzza) of the Finance Act,
1994?
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(b) Whether the tax not paid/levied is
recoverable under Section 73 (1) of the
Finance Act, 1994?
(c) Whether the service provider is liable for
penalty under Sections 76, 77 and 78 of the
Finance Act, 19947
I find that Shri Chellappan Prashanthan, proprietor of
M/s Sigpac Associates, Keshwapur, Hubli is engaged in
the activity of Construction, Installation & Maintenance
of Petrol Bunks owned by M/s. Hindustan Petroleum
Corporation Ltd., Belgaum and M/s BPCL, Belgaum and
Bangalore and has been appropriately classified under
the category of 'Works Contract Service' as defined in
Section 65(105)(zzzza) of the Finance Act, 1994 and
chargeable to service tax under the provisions of
Section 66 read with Section 65 (105) (zzzza) of the
Finance Act, 1994. The service provider has also
accepted the classification of the services provided by
him under the Works Contract Service with effect from
01.4.2008 and after obtaining service tax registration
has paid appropriate service tax on the services
rendered by him.
7. The Superintendent HPU-II, Belgaum made a
reference to proprietor of the firm, Shri Chellappan
Prashanthan, vide letter dated 22.5.2009 seeking
details of service provided and payment of service tax.
Thereafter, the proprietor responded immediately to
the department's letter, discussed the issue with the
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preventive Superintendent and applied for service tax
registration on line. He has obtained Service Tax
Registration No. ABHPN1440NST001 on 19.06.2009
and paid service tax dues along with interest for the
financial year 2007-08 vide GAR.7 Challan dated
23.10.2009 and intimated to the preventive
Superintendent. Further, I also find from records that
the service provider vide his letter dated 26.09.2012
submitted copies of relevant balance sheets and profit
and loss accounts of his firm including copies of
Challans evidencing payment of service tax and
interest amounting to Rs 20,64,849/-. I also find from
the case proceedings drawn on 07 Oct 2013 that there
is a mention of the service provider having accepted
the liability of service tax with effect from 01.4.2008
under the Works Contract Service and after obtaining
service tax registration has paid total service tax
totalling to Rs.19,35,575/- for the period from
01.04.2008 to 31.03.2012 along with interest including
late fees of Rs 16,000/- for delay in filing of periodical
ST.3 returns totally amounting to Rs 4,06,129/- by
Challans. The Challan details are as per the data
available in ACES/NSDL challan database.
7. Having answered the issue of classification of the
services provided by the service provider and their
service tax liability, I now take up the issue whether
the service provider is liable for imposition of penalties
under Sections 76, 77 and 78 of the Finance Act, 1994?
1 find from records that the assessee had failed to
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register themselves within 30 days of the
commencement of service as required under Section 69
of the Finance Act, 1994, therefore, they are liable for
imposition for penalty under Section 77 of the Finance
Act, 1994. They have also failed to pay service tax
payable within due dates prescribed under Section 68
of Finance Act, 1994, accordingly, I hold that the
service tax not paid is liable to be recovered along with
interest at applicable rates in terms of provisions of
Section 73 and Section 75 of Finance Act, 1994. They
are also liable for imposition of penalty under Section
76 of the Finance Act, 1994. The late fee demanded
under the provisions of Section 70 of the Finance Act,
1994 read with Rule 7C of Service Tax Rules, 1994 and
the amount of Rs 16,000/- already paid for non-filing of
periodical returns is also liable for appropriation
towards the penalty imposable.
8. As regards imposition of penalty under Section
78 of the Finance Act, 1994, I find from the case
records that the service provider have responded
immediately to the departments letter dated 22.5.2009
seeking details of service provided and payment of
service tax. Thereafter, the proprietor responded to the
department's letter, discussed the issue with the
preventive Superintendent and applied for service tax
registration on line. He has not contended for payment
of service tax. Instead, expressed that they were
unaware of the fact that their services providing to
their clients were chargeable to service tax. He has
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obtained Service Tax Registration No.
ABHPN1440NST001 on 19.06.2009 and paid service tax
dues along with interest and late fees for late filing of
ST.3 returns. Hence, I do not find any suppression of
facts. The service provider has discharged all the
service tax and interest liabilities which act of them
clearly shows that there was no maläfide intention to
evade duty or an intention whatsoever to wilfully evade
the provisions of ervice tax laws and that and I accept
that there was reasonable cause for non payment of
service tax. The Hon'ble High Court of Punjab &
Haryana in the case of CCE Jalandhar vs Dharmania
Telecon reported in 2009 (14) STR 145 have held that
if reasonable cause is shown for failure to pay tax and
file returns, penalty not imposable despite the
provisions under Section 78 of the Finance Act, 1994. A
similar view has also been taken by the Hon'ble High
Court of Allahabad in the case of CCE vs Auto World
reported in 2010 (18) STR.5. Taking into consideration
the case laws quoted by them and since I have already
imposed penalty under Section 76 of the Finance Act,
1994 and penalty cannot be imposed under both the
sections ie. Section 76 and 78, I refrain from imposing
penalty under Section 78 of the Finance Act, 1994.
9. In view of the foregoing facts, I pass the
following order.
ORDER
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a) I order classification of the service provided
by them for the period from 01.04.2008 to
31.03.2012, in Construction, Installation &
Maintenance of petro! bunks owned by M/s. HPCL
and M/s BPCL under the category of 'Works
Contract Service' under the provisions of Section
65(105) (zzzza) of the Finance Act, 1994.
b) I confirm the demand of service tax
including EC and S&H EC amounting to Rs.
19,35,575/- (Rupees Nineteen Lakhs thirty five
thousand five hundred and seventy five only), for
the services rendered for the period from
01.04.2008 to 31.03.2012 under the category of
'Works Contract Service
c) I order appropriation of service tax of Rs.
19,35,575/- (Rupees Nineteen Lakhs thirty five
thousand five hundred and seventy five only)
Service Tax including EC and S&H EC already
paid by them towards the demand above.
d) I confirm the demand of interest to be
recovered from them under Section/s of the
Finance Act, 1994 on the above amount.
e) I order appropriation of interest of Rs.
3,90,129/- (Rupees Three Lakhs ninety thousand
one hundred and twenty nine only) paid during
investigation towards the demand at (d) above.
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f) I impose Penalty on them under the
provisions of Section 76 of the Finance Act, 1994
for failure to pay service tax by due dates.
g) I impose Penalty of Rs 10,000/- under the
provisions of Section 77 of the Finance Act,
1994, for failure to obtain registration within the
stipulated time
h) I demand Late Fees under the provisions of
Section 70 of the Finance Act, 1994 read with
Rule 7C of Service Tax Rules 1994, and
appropriate an amount of Rs.16000/- already
paid during investigation against the demand."
5. A perusal at the order is indicative of an
unequivocal fact that after issuance of the show cause
notice, the petitioner has paid the entire amount of Service
Tax including the penalty, long before the issuance of show
cause notice in the year 2009 itself. The show cause notice
as observed hereinabove comes to be issued in the year
2013. The proceedings are instituted after the receipt of the
entire amount of arrears and default Service Tax and
penalty on the score that the entire penalty or interest is
not paid by the petitioner. The order quoted captures the
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fact that the amount of Rs.3,19,129/- is also appropriated
by the authority during the investigation towards the
demand. Therefore, there is nothing today to be paid by the
petitioner as long before the show cause notice, an amount
of Rs.20,64,849/- had been paid which is recorded by the
authority at paragraph No.7 supra. The order also records
that it was the payment of service tax and interest that was
paid by the petitioner and later on account of the
proceedings, an amount of Rs.3,19,129/- is also
appropriated.
6. In that light, the proceedings have gone on only
to the satisfaction of the respondents - Department as
there was nothing to be paid or recovered from the hands
of the petitioner. The proceedings itself were redundant
insofar as the principal amount was concerned and the
interest is also paid by the petitioner or appropriated by the
department from the petitioner. Reference being made to
the judgment rendered by the Division Bench of this Court
in the case of C.C.E. & S.T., LTU, BANGALORE VS.
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ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD.,1 in
the circumstance becomes opposite and the Division Bench
interpreting Sections 73 and 76 of the Finance Act, 1994
has held as follows:
"[Judgment per: N. Kumar, J.] Both these
appeals are preferred by the assessee challenging the
order passed by the Tribunal as well as the Appellate
Commissioner who have held that the assessee is not
liable to pay any penalty under Section 76 of the
Finance Act, 1994 and therefore, set aside the order
passed by the lower authorities imposing penalty.
2. Facts are not in dispute. The assessee has
paid both the service tax and interest for delayed
payments before issue of show cause notice under the
Act. Sub-sec. (3) of Section 73 of the Finance Act,
1994 categorically states, after the payment of service
tax and interest is made and the said information is
furnished to the authorities, then the authorities shall
not serve any notice under sub-sec. (1) in respect of
the amount so paid. Therefore, authorities have no
authority to initiate proceedings for recovery of penalty
under Sec. 76 of the Act.
3. Unfortunately the assessing authority
as well as the appellate authority seem to think.
If an assessee does not pay the tax within the
2012 (26) S.T.R. 3 (Kar.)
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stipulated time and regularly pays tax after the
due date with interest. It is something which is
not pardonable in law. Though the law does not
say so, authorities working under the law seem
to think otherwise and thus they are wasting that
valuable time in proceeding against persons who
are paying service tax with interest promptly.
They are paid salary to act in accordance with law
and to initiate proceedings against defaulters
who have not paid service tax and interest in
spite of service of notice calling upon them to
make payment and certainly not to harass and
initiate proceedings against persons who are
paying tax with interest for delayed payment. It
is high time, the authorities will change their
attitude towards these tax payers, understanding
the object with which this enactment is passed
and also keep in mind the express provision as
contained in sub-sec. (3) of Sec. 73. The
Parliament has expressly stated that against
persons who have paid tax with interest, no
notice shall be served. If notices are issued
contrary to the said Section, the person to be
punished is the person who has issued notice and
not the person to whom it is issued. We take that,
in ignorance of law, the authorities are indulging
in the extravaganza and wasting their precious
time and also the time of the Tribunal and this
Court. It is high time that the authorities shall
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issue appropriate directions to see that such tax
payers are not harassed. If such instances are
noticed by this Court hereafter, certainly it will be
a case for taking proper action against those law
breakers."
7. Learned counsel for the respondents - Revenue
would submit that the issue in the lis stands answered by
the judgment of the Apex Court in the case of NATIONAL
SPOT EXCHANGE LIMITED VS. ANIL KOHLI2. The said
judgment is distinguishable on the facts, noticed
hereinabove, as there was nothing to be paid by the
petitioner. Therefore, the petition deserves to be succeed.
8. For the aforesaid reasons, the following:
ORDER
(i) The writ petition is allowed.
(ii) The impugned order dated 07.01.2014 vide
Annexure-C passed by respondent No.2;
impugned corrigendum dated 25.02.2014
vide Annexure-D issued by respondent
AIR 2021 SC 4339
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No.2; impugned order dated 28.02.2015
vide Annexure-E passed by respondent
No.3 & the impugned notice dated
30.12.2015 vide Annexure-F issued by
respondent No.4 stand quashed.
Sd/-
(M.NAGAPRASANNA)
JUDGE
VNP/CT-ASC
