Penalty
CESTAT, Chennai Bench
Sekhar Enterprises
v.
Commissioner of Central Excise, Salem
P. KARTHIKEYAN, TECHNICAL MEMBER
Final Order No. 1326 of 2007
Stay Order No. 1073 of 2007
S/PD/ Application No. 103 OF 2007 and S/Appeal No. 147 OF
2007
November 02, 2007
Section 80 read with
sections 76, 77 and 78 of the Finance Act, 1994 - Penalty - Not to be imposed
in certain cases - Assessee was engaged in grinding Dead Burnt Magne site lumps
(DBM) into powder for its customers and collected charges for that service -
Though it took registration in March, 2005 it did not paid service tax arrears
till 8-7-2005 - It had sought clarification from department as regards its
liability to pay service tax - Clarification in that regard was received by
assessee during July 2005 and assessee paid Service tax before issuance of
show-cause notice - Original authority confirmed demand of service tax on
assessee along with penalties under sections 76, 77 and 78 - On appeal,
Commissioner (Appeals) on finding that no suppression of facts by assessee,
vacated, penalty imposed on assessee under section 76 and reduced penalty
imposed under section 76 and sustained remaining order of original authority -
Whether since non payment of service tax due by assessee had occurred due to its
ignorance of scope of new levy ‘Business Auxiliary Service’ under which
grinding of DBM for a fee was classified by department there existed sufficient
cause, which prevented assessee from paying tax due and that assessee deserved
benefit of provisions contained in section 80 - Held, yes - Whether therefore
penalty imposed on assessee under section 76 was to be set aside - Held, yes
[Para 3]
The original authority had confirmed demand of service tax on assessee under category of business auxiliary service. He had also charged interest and imposed penalties under sections 76, 77 and 78 on assessee. On appeal, the Commissioner appeals vacated the equal amount of penalty imposed under section 78 and reduced the penalty imposed under section 76, but upheld rest of the order of the original authority.
On appeal
The assessee was engaged in grinding Dead Burnt Magnesite lumps (DBM)
into powder for its customers and collected charges for the above service. The assessee had not followed the statutory formalities
including registering itself as a service provider with the department nor paid
the service tax due. Though it took
registration in March 2005, they did not pay the service tax arrears till
08-07-2005. It had sought clarification
from the department as regards its liability to pay the service tax which it
received only during July 2005. On
receipt of clarification, it paid the tax on 11-7-2005 before the issue of show
cause notice. Considering the facts that
there was no suppression of facts involved, the assessee had promptly furnished
necessary details called for by the department, obtained the registration
certificate on its own during March 2005 and had paid the arrears of service
tax before issue of show cause notice, the Commissioner (Appeals) vacated the
penalty under section 78 and reduced the penalty imposed under section 76. [
On a careful consideration of the facts of the case, it was found that the non payment of service tax due by assessee had occurred due to its ignorance of scope of new levy ‘Business Auxiliary Service’ under which grinding of DBM for a fee was classified by department. The Commissioner had found that there was no suppression of facts by the assessee, it had promptly furnished the information called for by the department and paid the service tax when it became certain about its liability to pay the service tax involved. In the circumstances it was that there existed sufficient cause, which prevented assessee from paying tax due and that assessee deserved benefit of provisions contained in Section 80, which empowers the proper officer not to impose penalty in such circumstances. Accordingly, the penalty imposed under section 76 was to be set aside and the impugned order otherwise to be sustained.