The order of Tribunal
was erroneous in deleting/quashing penalty under Section 78 of the Finance Act
1994 on the ground that the show cause notice did not grant any opportunity of
rebuttal to the respondent-assessee to defend the penalty under the said
Section, though the two corrigendums show cause notices were issued calling
upon and asking the assessee to give its explanation as to why the penalty
under Section 78 of the Finance Act should not be imposed. It will be open
to the assessee to dispute that the corrigendum was issued or was issued after
the limitation period or was not served.
Commissioner of Service Tax Vs. BAS
Engineering Private Limited
Delhi High Court
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR.
JUSTICE R.V. EASWAR
SANJIV KHANNA,J:
(ORAL)
1.
The
present appeal filed by the Revenue under Section 35G of the Central Excise
Act, 1944 read with Section 83 of the Finance Act, 1994 (for short ‘Act’)
impugns the order No.ST/71/2011-CU(DB) dated 08.03.2011 passed by the Customs,
Excise and Service Tax Appellate Tribunal (for short, ‘Tribunal’) in appeal
No.ST/656/2007 in the case of Bas Engineering Pvt. Ltd.
2.
Having
heard the counsel for the parties, the following two substantial
questions of law
are framed:-
“(i) Whether the Tribunal was right in
deleting/quashing penalty under Section 78 of the Finance Act 1994 on the
ground that the show cause notice did not grant any opportunity of rebuttal to
the respondent-assessee to defend the penalty under the said Section?
(ii) Whether the Tribunal was in right
in deleting the penalty imposed under Section 76 and 78 of the Finance Act
1994?”
3.
The
respondent –assessee was/is an authorized dealer of passenger cars. The cars
were sold to customer from their show room. Some of the cars were sold under
finance schemes offered by various banks/financial institutions. The
respondent-assessee received payments/commission from banks/financial
institutions. Initially question was raised whether the respondent–assessee was
liable to pay service tax on the payout/commission received from the said
banks/financial institutions for providing the service under the Business
Auxiliary Service. It is now an admitted position that the said tax is payable.
The same was paid with interest but belatedly.
4.
By
order-in-original No.20/VKG/2007 dated 31.07.2007, the Commissioner, Service
Tax Commissionerate, New Delhi imposed penalty of Rs.79,67,977/- under Section
78 of the Act. Further, penalty of Rs.1,000/- was imposed under Section 77 of
the Act for each periodical return and penalty of Rs.100/- per day was imposed
for failure to pay the tax amount of Rs.79,67,977/- under Section 76 of the
Act.
5.
The
respondent-assessee preferred an appeal before the Tribunal.
6.
The
Tribunal deleted the penalty imposed under Section 76 of the Act relying upon
the decision of Allahabad High Court in CCE v. Auto World, 2010 (18) STR 5
(All). With regard to the penalty under Section 78, the Tribunal recorded as
under:-
“8. We are not in disagreement with the
learned AR in so far as the levy of penalty under Section 78 of the Finance
Act, 1994 is concerned. We do appreciate that the show cause notice gives rise
to civil and penal consequences. There was no opportunity of rebuttal granted
to the appellant to defend the penalty imposed which is apparent from the show
cause notice available at page 18 of the appeal folder. We are satisfied that
there was no proposition in the show cause notice for penalty under Section 78.
Therefore, the appellant succeeds on the count of levy of penalty under Section
78 of the Finance Act, 1994 and such penalty is hereby set aside.”
7.
The
contention of the learned counsel for the appellant is that the two corrigendums
dated 12.12.2006 and 16.05.2007 were issued calling upon and asking the
respondent-assessee to give its explanation as to why the penalty under Section
78 of the Finance Act should not be imposed. This factual aspect has been
overlooked and ignored by the Tribunal.
8.
Learned
counsel for the assessee submits that the corrigendums were not received and he
relies upon a judgment of the High Court of Punjab and Haryana in Commissioner
of Central Excise vs. Ashwani Nut Bolts Industries, 2010 (256) ELT 72 (P &
H).
9.
The
two corrigendums mentioned above were filed and are on record of the Tribunal.
In the order dated 29.01.2008 passed by the Tribunal, while disposing of the
application of the respondent-assessee for waiver of the service tax liability,
these two corrigendums were referred to. We have examined the said order
wherein it has been specifically stated that the corrigendums were issued
invoking Section 78 of the Act.
10.
In
these circumstances we feel that there is an error and mistake in the impugned
order and the reasons given for deleting penalty under Section 78 of the Act
cannot be sustained.
11.
The
decision of the High Court of Punjab and Haryana in case of Commissioner of
Central Excise Vs. Ashwani Nut Bolts Industries (supra) is distinguishable
because in the said case there was a dispute whether or not correigendum was
issued or was served. In the present case, this is not an issue or the ground
on which the Tribunal has deleted the penalty under Section 78 of the Act. Of
course, it will be open to the respondent- assessee to dispute that the
corrigendum was issued or was issued after the limitation period or was not
served. If any such contention is raised, the same will be considered and
decided by the Tribunal in accordance with law. First question of law mentioned
above is, accordingly answered in favour of the Revenue and against the
assessee and on the said aspect the matter is remitted to the Tribunal for a
fresh decision.
12.
With
regard to the second question, we are inclined to restore the matter back to
the Tribunal. It is apparent that the respondent-assessee has invoked Section
80 of the Act and submitted that there was a reasonable cause and, therefore,
penalty should not have been imposed. The factual aspects, explanation offered
etc. have not been dealt with and adverted to. Reference has been made to the
decision in Auto World (supra) but the factual matrix, the period of default,
conduct etc. have not been examined. The Tribunal while deleting the penalty
has not discussed and stated the stand of the respondent-assessee and recorded
any finding on the said respect. It merely relied on the judgment in Auto World
(supra). Accordingly, we answer the second question in favour of the Revenue
and against the respondent-assessee and an order of remit is passed. However,
it is clarified that whether or not there was any reasonable cause will be examined
by the Tribunal. No opinion has been expressed by us.
13.
The
appeal is disposed of.
The parties will appear before the Joint
Registrar of the Tribunal on 24th February, 2012, when a date of
hearing will be fixed.
Date
of Pronouncement of Order January 04, 2012.
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