M/s. J.D.Marketing vs Commissioner Of CGST & CX, Kolkata North Commissionerate

K. Anpazhakan, Member(T)

The appellant was engaged in providing ‘business auxiliary service’ to AIRCEL, by way of distributing SIM cards. The appellant buys SIM cards at a discounted price and then sell the SIM cards to a lesser discounted price in the retail market thereby earning a profit through difference of discounts. The department alleged that the appellant was selling the SIM cards without any further processing and therefore as per Rule 3(5) of the Cenvat Credit Rules, 2004, they were liable to reverse the equal amount of credit availed on the inputs. Accordingly, irregular Cenvat Credit amounting to Rs.5,11,591/-, was proposed to be recovered from the appellant along with interest and penalty. They have also short paid Service Tax amounting to Rs.3,42,795/.

The irregular availment of credit and the short payment were detected by the audit party during the course of audit of the accounts of the appellant. The appellant agreed with the audit objection and paid the irregular availment of credit amounting to Rs.5,11,591/- by debiting their Cenvat credit account along with interest. They have also paid Service Tax amounting to Rs.3,42,795/., which was short paid.

We observe that the appellant has paid both Rs.5,11,591/- towards irregular availment of Cenvat credit and Rs.3,42,795/- on account of non-payment of Service Tax before issuance of the show cause notice.The interest was also paid immediately aftedr issue of the Notice. It is the claim of the appellant that as per section 73(3) of the Finance Act, 1994, no show cause notice need to be issued when duty was paid before issuance of the show cause notice. Further, the appellant stated that they have not suppressed any information from the department. The irregular availment of credit and the short payment of service tax were noticed by the Audit party, during the audit and they have accepted the audit objection and paid the entire duty immediately. Hence, they submitted that the provisions of section 78 of the Finance Act, 1994 is not applicable in this case and accordingly they requested for waiver of the penalty. In support of their claim, the appellant cited the order passed by this Tribunal in the case of Bimal Auto Agency v. Commissioner of CGST & CX, Dibrugarh Commissionerate in Final Order No.75815/2023 dated 23.06.2023, wherein under similar circumstances penalty under section 78 of the Finance Act, 1994 was waived.

The Ld.Authorized Representative for the department reiterated the points stated in the impugned order.

I observe that the appellant has been filing Service Tax returns regularly and paying service tax. The details of credit availed and utilized by them have been disclosed in the ST-3 returns filed by them. The value of taxable services rendered by them have been disclosed in their Balance Sheets. The two issues have been raised by the department during the course of audit, from the data disclosed by the Appellant. Thus, I observe that the appellant has not suppressed any information from the department. All the details have been taken from their audited balance sheet. In such cases suppression of fact with an intention to evade payment of duty cannot be alleged. I find that that this view has been taken by this Tribunal in the case of Bimal Auto Agency (supra), wherein this Tribunal has observed as under:-

“6. As regards the demand of service tax on he basis of difference in ledgers of income and value shown in ST 3 for such services rendered, we find that the Appellant has produced a CA certificate being the statutory auditor of the Appellant and the main reason for such difference was because the department has only taken the credit side of income by ignoring the debit entries for reversal etc. and hence the value as per ledger is inflated.

It is also submitted by the Appellant that the service tax audit was conducted for the period from April, 2014 to September, 2016 by the Assistant Commissioner (Audit), Guwahati Audit Circle – 2 in January 2017 and such income reconciliation was satisfactorily explained to the department and thus again issuing a show cause notice for such difference by invoking extended period of limitation cannot be maintained.

We agree with the submissions of the Ld. Advocate for the Appellant as since there had been service tax audit conducted prior to the DGGI investigation covering the period under dispute, we are of the considered view that suppression cannot be alleged by the department for income reconciliation of books and ST 3 returns as no such allegation was raised during department audit. Hence we find that extended period of limitation also cannot be invoked to raise any demand.

Thus, we are of the view that the entire demand of service tax has to go and the order of the Ld. Adjudicating authority is set aside. The appeal filed by the Appellant is allowed with consequential relief to the appellant, if any.”

I find that in the present case also, the details have been taken by the Audit party from the audited balance sheet. The department has not established any suppression on the part of the Appellant. The impugned order is also silent on this. In view of the discussion and by following the decision of this Tribunal mentioned above, I hold that the provisions of section 78 are not applicable in this case. Accordingly, penalty imposed under 78 is liable to be set aside.

In view of the above, I allow the appeal filed by the appellant.