INDUSTRIAL SECURITY AGENCY Vs. CCE

JUDGEMENT

(1.) THIS appeal by the assessee is directed against the order of the Commissioner (Appeals) dated 06.12.2006 by which, modifying the order -in -original of the Assistant Commissioner of Central Excise dated 17.02.1006, he imposed penalty of Rs. 6,54,489/ - (Rs. 2,31,300 + 4,23,189) under Section 76 and Rs. 4,23,189/ - under Section 78 of the Finance Act, 1994. However, penalty of Rs. 1,000/ - under Section 77 was upheld. The Commissioner also directed that interest at the applicable rate may be recovered under Section 75 of the Act, after deducting the interest already paid.

(2.) THE appellant is engaged in the business of providing 'Security Agency' service - a taxable service within the meaning of Section 65(105)(w) of the Finance Act, 1994. In course of scrutiny of records of M/s B.S.N.L., Gorakhpur, it transpired that the appellant was providing the Security Agency Service to them from April 2000 to December 2003, and received a sum of Rs. 1,30,75,260/ - for the period April 2000 to April 2003, and Rs. 36,00,455/ - for the period May 2003 to December 2003 as the value of the service, but failed to pay Service Tax amounting to Rs. 9,41,799/ -. The appellant, it was found, had suppressed the fact that it was providing Security Agency Service to M/s B.S.N.L. at the time of submitting application for registration and they did not file ST -3 return for the relevant period making them liable for penalties under Sections 76, 77 & 78 of the Act, apart from interest under Section 75 on the amount of tax. Show cause notice was issued to the appellant on 23.12.2005. At the conclusion of the adjudication proceedings, the appellant was held liable to pay Service Tax of Rs. 9,41,799/ - along with interest on the said amount; the appellant was also held liable to penalties of Rs. 9,41,799/ - under Sections 76 and 78 each, besides penalty of Rs. 1,000/ - under Section 77. The Commissioner (Appeals) took notice of the fact that the entire amount of tax stood paid and there was no tax liability; he however, confirmed the penalties to the extent indicated above.

(3.) AS mentioned above, penalties have been imposed separately under Sections 76, 77 and 78 of the Finance Act. Section 76 provides for penalty where a person liable to pay Service Tax fails to pay the tax. Section 77 provides for penalty for violation of any of the provisions of Chapter V of the Finance Act, 1994 or any Rule made thereunder for which no penalty is separately provided in the Chapter. Section 78 provides for penalty in cases of non -levy/non -payment or short levy/short payment or erroneous refund by reason of fraud or collusion or wilful mis -statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules with intent to evade payment of Service Tax. Section 80 lays down that notwithstanding anything contained in Section 76, 77 or 78, penalty shall not be imposable for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for such failure. In view of non -obstante clause of Section 80, notwithstanding the default(s) committed by the person liable to pay Service Tax, penalty may not be imposed for such default. However, the person is required to prove that there was reasonable cause for the failure/default. The submission of the learned consultant for the appellant in this regard was that M/s B.S.N.L. had failed to make the payment and as the amount was very high, it was not possible for the appellant to discharge the Service Tax liability. The submission, in my opinion, would not justify complete waiver of penalty in view of the provisions of Section 67(I) of the Finance Act which lays down the value of taxable service (in case service is for monetary consideration) as "gross amount charged by the service provider". There is no dispute that in terms of under Section 68(I), the appellant being service provider was liable to pay Service Tax. In this view of the matter, the fact that M/s B.S.N.L. did not pay the amount and the appellant had to file Writ Petition in the Allahabad High Court and pursuant to the order of the High Court payment was made by M/s B.S.N.L. direct to the Assistant Commissioner, is not enough to justify waiver of penalty.