Balwinder Singh vs Customs, Excise and Service Tax and others

Ajay Kumar Mittal, J.—This appeal has been filed by the appellant against the orders dated December 8, 2008, December 22, 2009 and September 30, 2010, annexure P-1, P-2 and P-3, respectively, whereby he has been ordered to pay service tax as well as education cess along with penalties, claiming following substantial questions of law : (i) Whether the penalty under sections 76 and 78 of the Act can be imposed simultaneously particularly in view of the fact that there was no evidence/proof to prove the allegations of suppression of fact?

(ii) Whether the appellant is entitled for the protection of section 80 of the Act in view of the fact that as soon as he came to know about his liabilities to pay service tax immediately cleared the whole liability ?

(iii) Whether the show-cause notice (P-1) is bad in the eyes of law, particularly in view of the provisions of section 73(3) of the Finance Act, 1994 ?

Brief facts as narrated in the appeal may be noticed. The appellant is an illiterate farmer and is running a small concern in the name and style of M/s. Quality Welding Works, Jalandhar where he undertakes the jobs of welding and erection, commissioning or installation service. He executed similar kind of work in the premises of M/s. Jagarjit Industries Ltd., Hamira for the period from July 1, 2003 to March 31, 2006 and received a total amount of Rs. 50,39,721 for the job. He also incurred certain amount on the material used in the said job. It was only after checking by the Central excise staff that the appellant came to know that his job is covered by the provisions of the service tax and he immediately thereafter cleared all the dues of the service tax for the work done by him during the said period. Inspite of that, he was issued a show-cause notice dated October 10, 2007 whereby a demand of Rs. 4,80,957 under the provisions of sections 73 and 75 of the Finance Act, 1994 (in short, "the Act") was made. Even penalty under the provisions of sections 76, 77 and 78 of the Act along with rule 6 of the Service Tax Rules, 1994 was also imposed. The appellant appeared before respondent No. 3 and presented his case. Respondent No. 2 confirmed the demand made by respondent No. 3 vide order dated December 8, 2008, annexure P-1. The appellant challenged the said order before the Commissioner (Appeals), Customs and Central Excise, Chandigarh. The appeal was partly allowed vide order dated February 22, 2009, annexure P-2 to the extent that the amount of the material supplied by the appellant for the job done by him was to be deducted but the penalties under sections 76 and 78 of the Act were upheld. It was held that the appellant had concealed and suppressed material facts from the Department. Aggrieved by the order, the appellant filed an appeal before the Tribunal which was dismissed vide order dated September 30, 2010, annexure P-3. Hence the present appeal.

Learned Counsel for the appellant submitted that the Tribunal was in error in sustaining the penalty under sections 76 and 78 of the Act. According to the Learned Counsel, as regards question (i), the penalty could not be imposed simultaneously under both sections. Reliance was placed on the decision of this Court in Service Tax Appeal No. 13 of 2010 Commissioner of Central Excise Vs. Pannu Property Dealers, Adverting to question (ii), it was submitted that the appellant was entitled to protection of section 80 of the Act as the liability to pay service tax was cleared immediately. It was urged that the show-cause notice (annexure P-1) was bad in view of section 73(3) of the Act and, therefore, question (iii) was to be answered in favour of the appellant.

Learned Counsel for the Revenue, however, could not successfully controvert that so far as question (i) is concerned, the same stands answered in favour of the assessee in the aforesaid case. As regards question (ii), it was submitted that the Tribunal recorded that the assessee was required to establish by producing sufficient material that ingredients of section 80 stood fulfilled whereas the assessee had not even filed reply to the show-cause notice. Further, it was submitted that question (iii) does not arise as no such plea was taken before the Tribunal.

After hearing Learned Counsel for the parties, we find that question (i) alone arises for consideration. In respect of question (ii), the absence of any evidence produced by the appellant to prove that essential requirements of section 80 of the Act were complied with, no substantial question of law as claimed arises. Question (iii) does not arise for consideration on the ground that no such plea was taken before the Tribunal, which fact has candidly been admitted by the Learned Counsel for the appellant. Accordingly, the same is declined.

Adverting to question (i), it may be noticed that the Tribunal had levied penalty under sections 76 and 78 of the Act. this Court in an identical issue in CCE v. Pannu Property Dealers [2010] 34 VST 478 (P&H); [2010] 4 GSTR 362 (P&H), recorded as under (page 480 in 34 VST) : We are of the view that the even if technically, scope of sections 76 and 78 of the Act may be different, as submitted on behalf of the Revenue, the fact that penalty has been levied u/s 78 could be taken into account for levying or not levying penalty u/s 76 of the Act. In such situation, even if reasoning given by the appellate authority that if penalty u/s 78 of the Act was imposed; penalty u/s 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty u/s 76 of the Act having regard, to the fact that penalty equal to service tax had already been imposed u/s 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time. Moreover, the amount involved is Rs. 51,026 only.

In view of the above, question (i) is decided in favour of the appellant. Accordingly, the appeal is partly allowed in the manner indicated above.