RAMANASEKAR STEELS LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellants were working as consignment agents, a species of clearing and forwarding agents, during the material period. They had also paid service tax for the said period (April, 2002 -March, 2003) albeit belatedly. The lower authorities ordered levy of interest on the tax amount and have also imposed penalties of Rs. 200 per day under Section 76 of the Finance Act, 1994 and Rs. 1,000 under Section 77 of the Act. The party has since paid the interest also. In the present appeal, they concede tax and interest liabilities. Their only grievance is against the penalties.

(2.) AFTER hearing both sides and considering their submissions, I note that the company had instituted proceedings before the Board for Industrial and Financial Reconstruction ("BIFR", for short) under the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA", for short) in the year 2001 and that the Board declared them sick under Section 3(1)(o) of the said Act as on December 31, 2000 as per order dated September 19, 2002, a copy of which is available on record. Learned Counsel argues that the factum of the company having been declared sick as on a date prior to the period of dispute is a "reasonable cause" under Section 80 of the Finance Act, 1994 for any penalty not being imposed on the assessee under any of the penal provisions, viz., Sections 76, 77 and 78 of the said Finance Act. On the other hand, the case of learned JDR is that any person who is liable to pay service tax but defaults it is liable to pay penalty mandatorily under Section 76. Similarly, he is also liable to pay penalty under Section 77 upon his failure to file returns under the relevant provisions of the Finance Act and Rules framed thereunder. According to learned JDR, these liabilities would not be affected in any way by financial constraints. In other words, financial difficulties would not constitute "reasonable cause" under Section 80 of the Finance Act, 1994. The JDR has relied on the decision of this Bench in Sree Vadivambigai Textile Mills Ltd. v. Commissioner of Central Excise, Madurai [2006] 3 STR 426 (Tri. -Chennai), wherein it was held that the declaration by BIFR of a company "sick" under the SICA was no ground for leniency in demand of interest on service tax amount paid belatedly. The JDR has also relied on the decision in Inma International Security Academy P. Ltd. v. Commissioner of Central Excise, Chennai [2006] 3 STR 457 (Tri. -Chennai), wherein a penalty imposed under Section 76 of the Finance Act, 1994 was reduced in the facts and circumstances of the case and a penalty imposed under Section 77 was sustained.

(3.) AFTER giving careful consideration to the submissions, I note that the question whether the assessee having been declared a sick industry by BIFR should be exonerated from penal liability was not before the Tribunal in the case of Sree Vadivambigai Textile Mills [2006] 3 STR 426 (Tri. -Chennai). In that case, the question was whether the Revenue should be lenient towards such an industry in demanding interest on service tax under Section 75 of the Finance Act, 1994. Neither of these questions arose in the case of Inma International Security Academy [2006] 3 STR 457 (Tri. -Chennai), wherein Section 77 penalty was sustained and Section 76 penalty was reduced. The case law cited by learned JDR does not appear to advance the Revenue's case.