INMA INTERNATIONAL SECURITY Vs. CCE

JUDGEMENT

(1.) Examined the records and heard both sides.

(2.) The appellants were engaged in the activity of training people for security services during the material period. Security service had become a service exigible to service tax in 1998. It appears that the appellants were not aware of this fact. The department found that, between 1999 and 2001, the appellants rendered security service for monetary consideration but did not pay tax thereon, nor had they got themselves registered as security service -provider or filed the requisite service tax returns. On the basis of this finding, a show -cause notice was issued on 4.4.2002 covering four spells of non -payment of service tax between October 1999 and September 2001. The notice proposed to recover service tax for the said periods under Section 68 with interest under Section 75 as also to impose penalties on the party under Section 76 and 77 of the Finance Act 1994. The noticee made part -payment of service tax within three months from the date of the show -cause notice. The balance amount of tax was paid later on, before the case was adjudicated by the original authority. The said authority in its order confirmed the demand of service tax amounting to Rs.1,75,443/ - for the entire period covered by the show -cause notice and appropriated the above payments towards such demand. It also charged interest at the rate of 1.5% per month upto 15.7.2001, 24% per annum from 16.7.2001 to 15.8.2002 and 15% per annum for the period from 16.8.2002, totalling to Rs.87,083/ -. The authority also imposed a penalty of Rs.1,75,443/ - on the assessee under Section 76 and another penalty of Rs.4,000/ - on them under Section 77, the former for the delay of payment of tax and the latter for the delay of filing of service tax returns. This decision of the original authority was upheld by the Commissioner (Appeals). Hence the present appeal.

(3.) Ld. Counsel for the appellants submits that, as the entire amount of service tax was paid before the order of adjudication was passed, it was not just on the part of the original authority to levy interest or impose penalty equal to the amount of tax. It is submitted that the delayed payment of tax was occasioned only by the fact that the assessee was not aware of "security service" having fallen in the net of service tax. There was no mens rea on their part. These facts and circumstances should have weighed with the authorities in determining the quantum of penalty under Section 76. Ld. Counsel, in this connection, relies on the Supreme Court's Judgement in State of Madhya pradesh v. Bharat Heavy Electricals, 1998 (99) ELT 33 (SC), wherein the expression "shall be liable to pay penalty equal to ten times the amount of entry tax" occurring in Section 7(5) of a Madhya Pradesh Act of 1976 was interpreted by their lordships and it was held that the assessing authority had the discretion to levy a lesser amount of penalty. After drawing a parallel between the above provision of the Madhya Pradesh Act and the Provisions of Section 76, Ld. Counsel argues that the lower authorities ought to have considered the facts and circumstances of the case and to have exercised discretion in determining the quantum of penalty to be imposed under Section 76. It is also pointed out by Counsel that no speaking order has been passed by the lower appellate authority. Ld. Counsel has also advanced arguments with regard to the penalty imposed under Section 77 and the interest charged under Section 75.