Judgment:
1. The appellant was engaged in providing outdoor catering service in and around Chennai, during the period April, 2006 to September, 2007. The applicant was not discharging the service tax liability promptly but they were paying service tax along with interest as applicable with delays ranging from 1 day to 293 days in different months. The books of accounts of the appellant were audited on 12.09.07 and 5.10.07. The department pointed out that the appellant was not paying tax promptly and was also not paying interest on such delayed payment of service tax. The appellants paid the outstanding amounts and discharged the entire liability of Rs. 1,57,18,055/- of service tax for the period 01.04.06 to 30.09.07 and also paid interest of Rs. 8,41,810/- before issue of show cause notice in the matter. Later, show cause notice was issued on 05.02.2008 for demanding the service tax not paid in time and for appropriating the service tax already paid by them towards such liability along with interest as applicable and also proposing imposition of penalty Section 76 of the Finance Act, 1994. On adjudication, tax amount of Rs.1,57,21,912/- was confirmed and Rs.1,57,17,055/- paid by them was appropriated towards the demand. Further Rs. 8,41,856/- was demanded towards interest and an amount of Rs. 8,41,810/- paid by them was appropriated against this demand. Further, a penalty of Rs. 15,54,195/- was imposed on them under Section 76 of the Finance Act, 1994. Aggrieved by the penalty imposed, the appellant has filed this appeal before the Tribunal.
2. Arguing for the appellant, the Ld. Counsel for the appellant submits that as per the provisions of Section 73 (3) of Finance Act, 1994, where an assessee pays tax short levied or short paid before issue of show cause notice under Section 73(1) and informs the Central Excise officer of such payment made, the officer shall not issue notice under sub-section 73 (1) in respect of such amount paid. His argument is that the service tax amount and interest were paid before the issue of show cause notice and such payment was known to the department as evident from the Show Cause Notice itself. In the show cause notice, the department alleged that the assessee is liable to pay interest on the amount of tax already paid. During the present hearing when it was pointed out that during there is a shortfall in the payment of service tax to the extent of Rs. 3,857/- and shortfall in payment of interest to the extent of Rs. 46/-, as is evident from the order, the Ld. Advocate for the appellants submits that he does not know whether the short paid amount was paid later. But he submits that the appellant will pay the short paid amount if it has not yet been paid. The proviso to Section 73(3), states that when short paid tax is paid under provision of the 73(3) and if the payment made is found short, the Central Excise Officer may determine the short payment of service tax which has not been paid under 73(3) and he can proceed to recover only the short paid amount after considering the payment made under 73(3). Therefore, he submits that the show cause notice issued by the department for recovery of the entire amount including the amount already paid is not maintainable in terms of express provisions of 73(3). He relies on the decision of the Karnataka High Court in CCE, ST, (LTU), Bangalore Vs. ADECCO FLEXIONE Workforce Solutions Ltd 2012 (26) STR 3 (Kar.), where the Court passed strictures against the departmental authorities for wasting time in proceeding to impose penalty under section 76 against persons who paid service tax with interest promptly before issue show cause notice. He submits that the said decision of the Honble High Court may be taken into account and relief may be granted to the appellant from the penalty imposed under Section 76 in the impugned order.
3. Opposing the prayer, Ld. AR for the Revenue submits that the appellant was a habitual defaulter for almost 18 months, as may be seen from para 5.2 of the impugned order showing dates of payment of tax from April, 2006 to September, 2007. There was delay in payment of service tax for varying periods for different months. But delay was there in every month. He further points out that even after the auditors pointed out the default in September, 2007, the payment for outstanding amounts was completed only on November, 2007 and thus there was a delay of almost nearly two months after the date of audit. He further submits even after the issue of show cause notice, passing of the Order-in-Original and filing appeal before the Honble Tribunal, the appellant has not paid the balance amount of service tax and balance amount of interest and it appears that they have not paid such balance amounts and when the entire amount is not paid, the provisions of Section 73(3) cannot be extended. He, further submits that the appellant had collected service tax amount but not deposited and hence there is a clear suppression on the part of the appellant in disclosing the value of taxable service rendered and hence no leniency should be shown to the appellant. He further relied on the following case laws:-
1. CCE, Rajkot Vs. Ashish Anand and Co. 2013 (31) STR 26 (Tri.-Ahmd.)
2. CST. Bangalore Vs. Gowri Computers (P) Ltd. 2012 (25) STR 380 (Tri. Bang.)
3. Special Fx Vs. CST, Mumbai 2011 (22) STR 336 (Tri. Mum.)
4. World View Vision Vs. CCE, Mangalore 2012 (26) STR 304 (Kar.)
5. Asst. Commr. Of CE vs. Krishna Poduval 2006 (1) STR 185 (Ker.)
4. Ld. Counsel submits that it was submitted before the Commissioner that the appellant was facing acute financial hardship because the customers were not paying the value of the service rendered by them and payments were received in piece meal.
5. I have considered the submissions on both sides. I notice that allegations regarding suppression or other ingredients in terms of Section 78 were not raised in the show cause notice. This confirms the position that this is only a case of delay in payment of service tax and not a case of suppression of information. Section 73(3) does not make any distinction between habitual offenders and one time offenders and the argument raised by Ld. A. R. is not relevant in determining the dispute. What is required is whether the provisions of section 73(3) was complied with or not.
6. On the issue whether the penalty can be imposed under Section 76 where service tax and interest are paid under Section 73(3), there are a few decisions of the Tribunal to the effect that such notices are maintainable. For example, in the case of CST. Bangalore Vs. Gowri Computers (P) Ltd (supra) and Special (Fx) (supra). This is a doubtful issue because if this interpretation is adopted, in many cases, an assessee paying service tax along with interest before the issue of show cause notice will be at a disadvantage as compared to an assessee who does not furnish any information at all because against such assesse the provisions under Section 73(1A) or penal provisions under Section 78 will be applicable and such assesse need pay penalty of 25% of the tax amount if such payment is made within 30 days of receipt of the order. So such an interpretation does not appear to be a harmonious one. Further, the Board had clarified vide Circular C.B.E. and C. Circular No. 137/167/2006-CX-4, dated 3-10-2007 that the provisions under Section 73(3) is to the effect that no proceedings shall be initiated for recovery of penalty under Section 76 either. This position has been incorporated in section 73(3) by adding Explanation 2 in the said sub-section with effect from 08-05-2010 by amendment carried out through Finance Act 2010.
7. The Honble Karnataka High Court in the case of ADECCO Flexione Workforce Solutions Ltd. (supra) has very categorically ruled that were payments are made under Section 73(3) of Finance Act, 1994, penalty under Section 76 cannot be imposed. I would like to go by the decision of the Honble Karnataka High Court in this regard.
8. Further, I note that if the proviso to Section 73(3) has to be interpreted to mean that the proviso deals with short payment remaining after the payment made under section 73(3) and not the short payment under the main provisions of Section 73(1). Section 73(3) and proviso thereto are reproduced below:
(3). Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid :
Provided that the Central Excise Officer may determine the amount of short-payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the [Central Excise Officer] shall proceed to recover such amount in the manner specified in this section, and the period of one year referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.
9. In view of the clear provisions in the proviso, in this case SCN for recovery could have been issued for the amounts short paid ie. Rs. 3,857/- of service tax and interest of Rs. 46/- only. I find that the decision of the Tribunal in the case of Ashish Anand and Co. does not examine the effect of the proviso in subsection 73(3) and is passed sub-silentio on this provision. Since after consider the proviso I come to a different conclusion I am not following the said order. I also not that the decision of the Honble Karnataka High Court in the case of World View Vision Vs. CCE, Mangalore (supra) dealt with the situation involving suppression of facts in as much as penalties under Section 78 was imposed in the impugned order. So that order cannot be made applicable, where provisions of Section 78 has not been invoked at all. The argument of the Ld. AR for the Revenue that this is a case of suppression cannot be sustained because no such allegation is seen in the show cause notice. I also note that the decision of Hon. Kerala High Court in the case of Krisha Poduval (supra) and a few other decisions cited by the Ld. A. R. but not recorded do not deal with a situation where payments were made under section 73(3) and hence I find that those decisions are not applicable to the facts of the case
10. In view of the analysis as above, the impugned order is set aside and the matter is remanded to the adjudicating authority for determining the amount which are still remaining short paid and to deal with that matter as per the provisions under Section 73(3). The appeal is thus disposed of on the above terms.