ABC ENGINEERING WORKS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS appeal is filed by M/s. ABC Engineering Works, Vijayawada, seeking to vacate penalty imposed on them under Section 76 of the Finance Act, 1994 (the Act). The appellants had entered into a contract with M/s. Singareni Collieries Company Ltd. (SCCL), a Central Public Sector Undertaking, and provided the services, of blast hole drilling, blasting, excavation, loading, transportation dumping, etc. of overburden in open cast coal mines, to SCCL during the period from 16 -6 -2005 to 31 -3 -2006, without following statutory formalities including payment of service tax. After due process of law, the Commissioner found that though the appellants had been engaged by SCCL under work orders dated 6 -10 -2003 and 16 -10 -2004 prior to introduction of service tax on the services of "site formation and clearance, excavation and earthmoving and demolition" on 16 -6 -2005, the work orders had provided for the appellants paying the duties and taxes payable to various Governments. The appellants had paid an amount of Rs. 6,85,87,026/ - out of the total tax due of Rs. 7,50,76,429/ - before issue of the show cause notice and balance amount of Rs. 64,89,403/ - after issue of show cause notice but before adjudication. At the time of adjudication on 27 -5 -2008, the interest due for the delay in payment of service tax was outstanding. She confirmed the demand of service tax and appropriated the amount already paid and imposed penalty at the rate of Rs. 200/ - per day or at the rate of 2% per month till the date of payment of arrears of tax whichever is greater under Section 76 of the Act.

(2.) IN the appeal filed before us, the delay for registering themselves with the department and for payment of service tax due are attributed to prolonged negotiations they had undertaken with SCCL for reimbursement of the tax liability, even though such provision was not made in the tender, as the amount involved was huge. There was no willful intention on the part of the assessee to evade payment of service tax and education cess or to suppress any facts or to make willful mis -statement, since their client was a Central Government Company. They had paid Rs. 6,85,87,026/ - before issue of show cause notice and the balance tax of Rs. 64,89,403/ - before adjudication. Interest liability of Rs. 13,19,582/ - was paid on 7 -1 -2008 before adjudication. It is argued that since the total amount of service tax and education cess was paid well before the adjudication, imposition of penalty under Section 76 of the Act for delay involved in obtaining registration, payment of service tax and filing returns could not be imposed ordinarily, "unless the party obliged either acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest or acted in conscious disregard of its obligation", as decided by the Hon'ble Supreme Court in the case of M/s. Hindustan Steel v. State of Orissa : [1978 (2) E.L.T. J159 (S.C.) : (1972) 83 ITR 26]. The delay involved in the instant case was due to the circumstances beyond the assessee's control on account of huge financial involvement and as a matter of policy to be settle at higher level for the client company, SCCL. They relied on the following case laws in support of the claim that penalty imposed under Section 76 was not sustainable:

(3.) THE undisputed facts are that the appellants had rendered taxable services classifiable under clause 97(a) of Section 65 of the Act namely, "site formation and clearance and excavation and earthmoving and demolition" during the material period without following statutory formalities such as taking registration with the department, making payment of service tax and filing ST -3 returns as prescribed. Though the appellants had entered into contract for rendering service prior to 16 -6 -2005, when the impugned activity became taxable, the appellants had failed to register itself with the department or to pay the service tax due. The appellants took registration on 3 -3 -2006 following a communication from the department on 25 -1 -2006 and paid the tax of Rs. 6,85,87,206/ - before issue of show cause notice on 30 -8 -2006 and the balance tax of Rs. 64,89,403/ - subsequently before adjudication. The appellants paid the interest due on 7 -1 -2008.