Commissioner of C. Ex. vs B.S.G.K. Shastry

K.A. Puj, J.—The Appellant-revenue has filed this tax appeal u/s 35G of the Central Excise Act, 1944, proposing to formulate the following substantial question of law for determination and consideration by this Court:

Whether the penalty u/s 76 of the Finance Act, 1994 can be reduced below the limit prescribed by the section?

Heard Mr. Darshan Parikh, learned Senior Standing Counsel appearing for the Appellant-revenue. Despite service of notice nobody appears on behalf of the Respondent.

The brief facts of case are that M/s. B.S.G.K. Shastry, 17-A-NS, Reliance Greens, Motikhavadi, Dist-Jamnagar (hereinafter referred to as the "Respondent") has been holding Service Tax Registration bearing Regn. No. JMN/MRA-04/S. TAX/2006-2007 u/s 69 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as "the said Act") under the category of "Man power Recruitment & Supply Agency" and has undertaken to comply with the conditions prescribed in the Service Tax Rules, 1994 (hereinafter referred to as "the said Rules").

The Respondent had filed Service Tax returns for the period from April-2005 to September-2005 on 26-10-2006, i.e., late by 366 days in contravention of Section 70 of the said Act read with Rule 7 of the said Rules.

It was also noticed that the Respondent had paid service tax for the month of July-2005, August-2005 and September-2005 on 9-6-2006, 26-7-2006 and 25-10-2006 i.e. late by 308, 324 and 385 days respectively.

the Respondent had filed the Service Tax return for the period from October-2005 to March-2006 and for the period from April-2006 to September-2006, on 26-10-2006 i.e. late by 183 and 1 day, respectively, in contravention of Section 70 of the said Act read with Rule 7 of the said Rules. It was also noticed that the Respondent had paid the Service Tax for the period October 2005 to December 2005 and January 2006 to March 2006 on 26-7-2006, i.e., late by 202 days and 117 days, respectively. The Respondent had paid the Service Tax for the period April 2006 to June 2006 and July 2006 to September 2006 on 9-10-2006 and 25-10-2006 i.e. late by 96 days, 112 days and 4 respectively.

Thus the Respondent has contravened the provisions of the Section 68 of the said Act read with Rule 6 of the said Rules as they failed to make the payment of Service Tax to the Central Government within the prescribed time limit. Therefore, Show Cause Notices were issued asking them to explain why penalty should not be imposed upon them u/s 76 of the said Act for failure to make the payment of Service Tax within prescribed time limit u/s 77 of the said Act for failure to file the Service Tax Return in form ST-3 within prescribed time-limit.

The Adjudicating Authority vide Order-in-Original No. 038/Service Tax/2008 dated 28-1-2008 and 992 to 993/Service Tax/2007 dated 3-10-2007 imposed penalty of Rs. 74,049/- and 86,738/- u/s 76 of the said Act and Rs. 1000/- u/s 77 of the said Act respectively.

Being aggrieved by the said O-I-O, the Respondent preferred appeal before the Commissioner (Appeals), Central Excise, Rajkot. The Commissioner (Appeals), Central Excise, Rajkot vide Order-in-Appeal No. 105 to 106 /2008/COMMR(A)/RAJ dated 29-4-2008 reduced the penalty imposed u/s 76 of the said Act from Rs. 74,049/- to Rs. 15,000/- in respect of Order-in-Original No. 038/Service Tax/2008 dated 28-1-2008 and from Rs. 74,049/- to Rs. 10,000/- in respect of Order-in-Original No. 992 to 993/Service Tax/2007, dated 3-10-2007. The Appellate Authority also waived the penalty imposed u/s 77 of the said Act.

Being aggrieved, the Appellant filed appeal before the Tribunal against the above Order-in-Appeal passed by the Commissioner (Appeals), Central Excise, Rajkot to the extent of reducing the penalty u/s 76 of the said Act.

The Tribunal vide the impugned Order No. A/2845-2846/WZB/08 dated 26-12-2008 has rejected the appeal filed by the Appellant.

The issue involved in the present tax appeal is similar to one which is involved in Tax Appeal No. 1367 of 2009 [2010 (19) S.T.R. 641 (Guj.) : 2010 (257) E.L.T. 37 (Guj.) While deciding the said tax appeal on 8-7-2010, this Court has quashed and set aside the order passed by the Tribunal and restored the matter to the file of the Tribunal to decide the same afresh in accordance with law.

This Court in the Tax Appeal No. 1367 of 2009 2010 (19) STR 641 (Guj.) : 2010 (257) E.L.T. 37 Guj ] has taken the view that on a conjoint reading of Sections 76 and 80 of the Act, it is not possible to envisage a discretion as being vested in the authority to levy a penalty below the minimum prescribed limit. If the authority imposing the penalty is not entitled to levy below the minimum prescribed, the appellate authority and the Tribunal cannot read the provision so as being vested with such powers, namely, to reduce the penalty below the minimum prescribed. This Court has, therefore, answered the question accordingly in the negative and the said tax appeal was disposed of.

Following the aforesaid decision of this Court, we hereby quash and set aside the impugned order of the Tribunal and restore the matter to the file of the Tribunal to decide the issue afresh in light of the observations made by this Court in the order dated 8-7-2010 in Tax Appeal No. 1367 of 2009 [2010 (19) S.T.R. 641 (Guj.) : 2010 (257) E.L.T. 37 (Guj.)], as indicated hereinabove in the present order.

This tax appeal is, accordingly, disposed of.

The office is directed to keep papers of this tax appeal with Tax Appeal No. 2220 of 2010.