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Judgment
The present appeal is directed against the impugned order dated 30.10.2020 passed by the Principal Commissioner, Cochin on the direction of the Tribunal dated 25.02.2019.
Briefly the facts of the present case are that the appellants are engaged in civil construction work in respect of commercial or industrial buildings, site formation and clearance and they were registered under the category of 'Works Contract Service' with effect from 28.03.2008. During the period from 2004-05, the appellants had undertaken Commercial or Industrial Construction Service for Mr. G. Yohannan and Mr. P.K. Thomas, and Works Contract Service for M/s Ambuja Cements Limited, M/s Degremont Lmited and M/s Hydrotech Limited. They were paying service tax only in the case of construction work undertaken for M/s Ambuja Cements Limited as they were under the firm belief that the other works were not liable for service tax. The appellants were issued a Show Cause Notice No.52/2010-ST dated 08.04.2010 demanding Service Tax amounting to Rs.1,46,82,438/- on the work they had executed for their clients for the period from 2004-05 to 2008-09 along with applicable interest and proposing to impose penalties under various sections of the Act. After following the due process, the Principal Commissioner, Cochin confirmed the demand for service tax along with applicable interest and also imposed penalties amounting to Rs.1,46,82,438/- under Section 78, Rs.100/Rs.200 per day under Section 76 and Rs.5,000/- under Section 77. Out of the total amount of Rs.1,46,82,438/- demanded, the appellants had paid Rs.45,22,733/- as service tax and Rs.1,85,526/- as interest against the service tax payable in respect of the work rendered for M/s Gujarat Ambuja Cements Limited. The appellants had pre-deposited the balance amount of service tax amounting to Rs.1,01,59,705/-, interest amounting to Rs.54,64,010/- and 25 per cent penalty under Section 78 amounting to Rs.36,70,860/-. This Tribunal vide its Final Order No. 20198/2019 dated 25.02.2019 dropped the service tax demand in respect of all matters except in respect of M/s Gujarat Ambuja Cements Limited. The Tribunal also dropped the penalties under Sections 76 and 78 except in case of the service tax demanded against M/s Ambuja Cements Limited and also extended the benefit of 25 per cent penalty under Section 78. Though the appellants had paid the entire service tax in respect of the service tax in respect of work undertaken for M/s Ambuja Cements Limited, but since the exact amount of service tax payable in this respect was not forthcoming neither in the order-in-original nor in the SCN hence the Tribunal remanded the case back to the Commissioner for the limited purpose of quantifying the amount of service tax payable/paid by the appellants and quantify the penalty amounts under Sections 76 and 78. While remanding the matter to the Commissioner, the Tribunal directed that the above quantification should be done within three months from the date of receipt of the final order. Consequent to the final order of the Tribunal, the Deputy Commissioner of Central Tax vide order No.17/2019 dated 20.06.2019 refunded the pre-deposit amount of Rs.1,92,94,575/- along with interest amounting to Rs.51,85,747/-. Thereafter, the Principal Commissioner in pursuance to the final order of the Tribunal, vide his order 30.10.2020 adjudicated the matter de novo and passed the following order:
I) I appropriate Rs.42,93,273/- (Rupees Forty Two Lakh Ninety Three Thousand Two Hundred and Seventy Three only) from the amount already paid by them as directed by the Hon'ble Supreme Court as detailed in Para 27 above;
II) I hold the assessee liable for payment of interest of Rs.8,94,092/- (Rupees Eight Lakh Ninety Four Thousand and Ninety Two Only) under Section 75 of Finance Act, 1994 read with Section 174 of Central Goods and Services Tax Act, 2017;
III) I appropriate the interest of Rs.8,94,092/- (Rupees Eight Lakh Ninety Four Thousand and Ninety Two Only) from the amount already paid by them as directed by the Hon'ble Supreme Court as detailed in Para 27 above and from the amount of Rs.1,85,525/- already paid by them vide Challan No.9795 dated 29.03.2010 ;
IV) I desist from imposing penalty on the assessee under Section 76 of the Finance Act, 1994;
V) I impose penalty of Rs.10,73,318/- (Rupees Ten Lakh Seventy Three Thousand Three Hundred and Eighteen Only) under Section 78 of the Finance Act, 1994 read with Section 174 of Central Goods and Services Tax Act, 2017 for suppression of facts and contravention of the provisions of the said Act and Service Tax Rules, 1994 with intent to evade payment of tax.
VI) I appropriate the penalty of Rs.10,73,318/- (Rupees Ten Lakh Seventy Three Thousand Three Hundred and Eighteen Only) from the amount already paid by them as directed by the Hon'ble Supreme Court as detailed in Para 27 above.
Heard both the parties and perused the records.
Learned Counsel for the appellants submitted that the impugned order is ultra vires to the directions given by the Appellate Tribunal in its Final Order and secondly the computation of interest and penalty is factually incorrect. He further submitted that as per the Order of Tribunal dated 25.02.2019, the Commissioner should re-quantify the quantum of service tax payable along with the interest and penalties within three months of receipt of the order but the learned Principal Commissioner re-quantified the service tax, interest and penalty on 30.10.2020 causing more than one year's delay and therefore the learned Counsel has prayed that the Order passed by the Commissioner should not be upheld. Secondly, the learned Counsel submitted that the impugned order is factually incorrect because the Commissioner has re-quantified the amount of service tax payable in respect of Works Contract Service provided to M/s Ambuja Cement Limited at Rs.42,93,273/- and appropriated the same from the total pre-deposit of Rs. s.1,46,82,438/- (Rs.45,22,733/- already paid before filing the order-in-original and Rs.1,01,59,735/- by E-payment on 20.12.2014) of which the appellants had already received Rs.,1,01,59,735/- along with interest as refund. He further submitted that the service tax payable has correctly been appropriated from the service tax already paid before the Order-in-Original which fact has also been confirmed in the refund order dated 20.06.2019. He further submitted that as far as quantification of interest is concerned, the learned Commissioner has demanded an amount of Rs.8,94,092/- and sought to appropriate the same from the amount of Rs.1,85,525/- paid by challan dated 29.03.2010 and the pre-deposit of interest made as per the order of the Appellate Tribunal as modified by the Honourable Supreme Court of India. He further submitted that the Commissioner has not disclosed as to how this amount has been arrived at, according to the appellants, there are two factual and calculation mistakes which are reproduced herein below:
i) The appellants had already paid the re-quantified amount of service tax of Rs.42,93,273/- before the order-in-original on various dates as disclosed in the ST3 Returns. Accordingly, the appellants are liable to pay an interest of Rs.4,36,709/- of which they have already paid Rs.1,85,525/- as confirmed in the impugned order, against Rs.8,94,092/- confirmed by the Commissioner. Thus, the net interest liability works out to Rs.2,51,184/- as detailed in the Annexure.
ii) The entire pre-deposit of interest of Rs.54,54,010/- has already been refunded to the appellants as per Deputy Commissioner's order dated 20.06.2019.
iii) As such, the Commissioner's order appropriating the amount of interest from the refunded pre-deposit is patently illegal and incorrect.
4.1. As far as penalty is concerned, learned Counsel has also prayed that the imposition of penalty of Rs.10,73,318/- is also not sustainable because the entire confirmed service tax amounting to Rs.42,93,273/- had been paid before the issue of the Order-in-Original and reported in the ST3 Returns from time to time which fact is also confirmed in the Final Order as well as in the Refund Order.
On the other hand, learned AR defended the impugned order. At the direction of the Bench, as to why the learned Commissioner has not adhered to the time limit given by the Tribunal vide its Order dated 25.02.2019, the learned AR has tried to justify by saying that during the period 2019 because of COVID, the whole system was out of order and hence the delay was caused in finalization of the case. Though, the reasons given for the delay by the Deputy Commissioner in their letter dated 19.04.2021 does not hold good as the COVID has started only in March 2020 and not in 2019. As far as the calculation of interest is concerned, the Assistant Commissioner has re-calculated the interest and found that there were same error and now as per the Department, the interest payable by the appellant for the entire period amounts to Rs.7,22,623/- and the net interest payable after deducting the interest of Rs.1,85,525/- paid by the assessee, amounts to Rs.5,37,098/-. The Assistant Commissioner has also given a table showing the quantification of the interest. In response to the Department's quantification, the learned Counsel submitted that still the Department is incorrect in the quantification of the interest on the ground that in Order-in-Original dated 22.11.2011, the amount of tax involved in respect of Works Contract Service undertaken for M/s Ambuja Cement Limited during the period 2007-08 to 2009-10 was Rs.42,93,273/- which is the amount confirmed in the de novo order dated 30.10.2020 but however in the calculation sheet submitted by the Department along with letter dated 19.04.2021, the interest is calculated at an amount of Rs.51,56,865/- as can be noticed from the statement annexed thereto. Thus, the interest amount of Rs.7,22,523/- arrived therein is incorrect. Further, as per the learned Counsel, the actual amount of interest payable as per calculation above is Rs.6,39,133/- after reducing the interest amount of Rs.1,85,525/- paid from time to time, the net amount payable out of total amount of Rs.4,53,608/-. He also submitted that as per the Department and as well as according to the appellant, they have paid an amount of Rs.2,29,644/- as excess tax and this amount is liable to be adjusted against net amount of interest payable and thus the net amount works out to Rs.2,24,144/-.
After considering the submissions of both the parties and perusal of the material on record as well as the re-quantification done by the Department as well as by the appellant, I find that in the impugned order, the learned Commissioner has confirmed the demand of interest of Rs.8,94,092/- under Section 75 of the Finance Act and on re-quantification, the Department itself has come to the amount of Rs.7,22,523/- which is also incorrect as per the appellant because the interest has been calculated on a wrong amount as stated by the appellant. Hence, there is a divergence of opinion between the appellant and the Department regarding the quantification of the interest. Therefore, in view of this situation, I am of the opinion that the interest needs to be re-quantified again by the Department as per the statements made by the learned Counsel for the appellant noted herein above. For this purpose, the matter is remanded back again to the Assistant Commissioner for re-quantification of the interest payable under Section 75. The appellant is also directed to assist the Assistant Commissioner in re-quantifying the demand of interest. As far as penalty amount under Section 78 is concerned, I do not find any justification to interfere because the same has been calculated on the basis of the directions issued by the Tribunal Order dated 25.02.2019.
In view of my discussion above, the impugned order is set aside and I remand the matter back to the Assistant Commissioner for the purpose of quantification of interest in view of various discrepancies pointed out by the appellant in their submission noted above. The said quantification shall be done within a period of two months from the date of receipt of the certified copy of this order and before quantifying the interest, the Assistant Commissioner will afford an opportunity of hearing to the appellant and also give opportunity of producing documents, if any. In the result, appeal is disposed of by way of remand on above terms.
(Order pronounced in the open court on 16/08/2021)