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V2(ST)103/A-IV/2012
ORDER – IN – APPEAL
M/s. Ames Impex Electrical Pvt. Ltd., C/1-B/1207, Phase-IV, GIDC, Naroda,,
Ahmedanbad (hereinafter referred to as “the appellant”) have filed an appeal along with
stay application 02.02.2012 against the OIO STC/50/N-Ram/AC/D-III/11-12 dated 30-122011 (hereinafter referred to as ‘the impugned order’) passed by the Assistant
Commissioner, Service Tax, Division-III, Ahmedabad (hereinafter referred to as ‘the
adjudicating authority’).
2.
The facts of the case, in brief, are that the appellants are engaged in providing taxable
services of “Business Auxiliary Services” registered with Service Tax department and having
Service Tax registration No. AAACA9825GST001 dated 25.02.2005. During the course of
Audit it was found that the appellant has raised bill for repairing charges for the period from
April-05 to Dec-2006 but failed to pay the Service Tax on the taxable value of Rs. 363016/- (
Rs. 185645/- + 177371/-) at applicable rate i.e 10.2% and 12.24% respectively. The appellant
has crossed the exemption limit i.e. 400000/- in the preceding year and hence in the next year
they are liable to discharge their Service Tax liability from the beginning of the financial year as
they are also availing the benefit of Cenvat Credit. Hence, the appellant has breached the
condition of the Notification No.6/2005-ST dated 1/3/2005. The appellant has failed to
discharge their liabilities on the repair charges received. Thus, they have evaded payment of
Service
Tax
of
Rs.
40646/-.
Hence,
a
Show
cause
Notice
bearing
No
STC/389/Ames/Demand/Dn.III/07.08 dated 03.08.2010 was issued for demand of Rs 40646/under Section 73(1) of the Finance Act, 1994 along with interest and penalty provisions. The
said demand was confirmed by the adjudicating authority vide the impugned order.
3.
Being aggrieved with the impugned order, the appellants preferred the present appeal.
In the appeal memorandum they submitted that the internal audit party prior to this audit party
also visited their factory premises and conducted the audit for the period from 1/4/2004 to
31/03/2005. At that time they have been directed by the audit party that the bill in relation to
repairing shown in the balance sheet for repairing of Transformer should be considered as
transaction value and to be included in the assessable value in the respective financial years
for the past five years prior to 31.3.2005. As directed by the audit party, they have paid Rs.
284905/- vide TR 6 Challan No. 0/2005-06 & 14/2005-06 dated 31.1.2006 & 21.02.2006. The
appellant submitted that the value of service provided by them to the buyer has already been
included in the assessable value and they have already discharged the Central Excise duty on
the said value, so again Service Tax on the value could nor be demanded and also not
justifiable. Hence, they have not paid any Service Tax on the service rendered to the buyers.
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4.
V2(ST)103/A-IV/2012
Personal hearing in the case was granted on 27.03.2012 wherein Shri Vipul
Khandhar, CA on behalf of the appellants appeared before me and reiterated the grounds of
appeal. He stated that the erection, testing and repairing during warranty period are all
included in the assessable value and paid Central Excise Duty. Hence, they are not liable to
pay Service tax again on the value for which Excise duty was paid.
DISCUSSION AND FINDINGS
5.
I have carefully gone through the facts of the case on record, grounds of appeal in the
respective Appeal Memorandums, as well as the oral submission made by the appellants at
the time of personal hearing.
6.
I find that the appellant has paid Central excise duty of Rs. 284905/- on the bills raised
including the charges collected towards of transformer repairing shown in the balance sheets
vide TR 6 Challan No. 0/2005-06 & 14/2005-06 dated 31.1.2006 & 21.02.2006 for the five
years period prior to 31.3.2005. Hence, they contended that they have not paid the Service
Tax. The department has stand that the appellant has failed to pay the Service Tax on the
taxable value of Rs. 363016/- (Rs.185645/- +177371/-) at applicable rate i.e 10.2% and
12.24% respectively. The appellant has crossed the exemption limit i.e. 400000/- in the
preceding year and hence in the next year they are liable to discharge their Service Tax
liability from the beginning of the financial year as they are also availing the benefit of Cenvat
Credit. Hence, the respondent contended that the appellant has breached the condition of the
Notification No.6/2005-ST dated 1/3/2005. The appellant has failed to discharge their Service
Tax liabilities on the repair charges received. Thus, it is alleged that they have evaded
payment of Service Tax of Rs. 40646/-.
6.1
I find that the appellant has been under falling repairing of transformers during the
warranty period. In the year 2004-05, they have shown an amount of Rs. 590891/- as repairing
charges in the Balance Sheet. The audit party which conducted the audit of the records for the
year 2004-05 advice them to include this repairing charges of Rs.590891/- in the assessable
value for the payment of Central Excise Duty and accordingly, the appellant has paid Central
Excise duty on the value. This fact has not been disputed by the adjudicating authority in the
OIO. Once this value is already included in the assessable value for Central Excise purpose at
the instance of Audit Party, it cannot be said that they have exceeded the exemption limit of
Rs. 400000/- in the previous year 2004-05 and hence liable for pay Service Tax from the
beginning for the year 2005-06. As 590891/- was taken as taxable value for the Service Tax
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V2(ST)103/A-IV/2012
purpose and included in the assessable value for Central Excise Duty purpose, appellant
would be eligible for the benefit of Notification 6/2005 in the year 2005-06.
7.
The appellant contended that department raised the demand and confirmed the
Service Tax of Rs. 40646/- on taxable value of Rs 185645/ and Rs. 177371/- for the period
from April-2005 to Dec.2006 respectively. Whereas they have not crossed the exemption limit
during the financial 2005-06.Hence, they are also liable to avail the benefit of the said
notification for year 2006-07. I find that Balance sheet for the period 2005-06 and 2006-07
showing repairing amount of Rs 252179/- and 933961/- respectively, which are not matching
with taxable value on which demand was raised by the department. The appellant submitted
that apart from taxable value shown in OIO, (252179- Rs 185645/- and 933961-177371/-) they
have taken the Cenvat Credit on input and paid Excise duty on their clearance accordingly.
Hence the said value was not shown in OIO and Service Tax was not demanded. The
appellant said that they have not availed the Cenvat credit on input used in repairing
charges/work mentioned in the OIO.
8.
I find that the appellant has been collecting repairing charges from their customers.
They have been utilizing replacement parts for repairing works. They have been availing
CENVAT Credit on these parts. During the years 2005-06 and 2006-07, in the most of cases,
the appellant has paid Central Excise Duty by including the repairing charges in the
assessable value. They have used CANVAT Credit on the component used in the repairing. In
some cases they have considered it as Service and not paid Service Tax as the value of
taxable Service was within the exemption limit. In these repairs also they used the component
on which CENVAT credit has been availed. In their defence, the appellant stated that they
have not availed CENVAT Credit on the component used in the repairing work. But the
appellant has not submitted any evidence to substantiate their claim. They are not maintaining
any separate account of the components used in repairing on which CENVAT credit was not
availed. In the absence of such evidence, it is to be concluded that they have utilised the
component on which CENVAT credit has been availed in the repairing work also. Availment of
CENVAT credit was also one of the ground on which the appellant was denied the benefit of
exemption provided under Notification 6/2005, in the impugned order. Hence, I hold that the
appellant are not eligible for the benefit of Notification 6/2005, as they have availed CENVAT
Credit on the component used for repairing.
9.
With regard to the Appellants' request for wavier of penalty under section 76, I find that
the audit party has raised the para/issue, that the appellant is rendering taxable service to their
clients and not discharging their Service Tax liability. The appellant has been availing CANVAT
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V2(ST)103/A-IV/2012
Credit on the component used for repairing work. The appellant was well aware of the facts
that exemption under Notification 6/2005 is not available, when CENVAT Credit is availed on
the component used in repairing. Inputs of that they have availed both the benefits. Thus, it
was established that the tax liability was not discharged by appellant. Penalty under section 76
is imposed for delay in payment of Service Tax. In this case the appellant still has not
discharged their tax liabilities. The said penalty is imposable whether there is any intention to
evade payment of Service Tax or not. Thus, I find no reason to interfere with the impugned
order with regard to penalty imposed under Section 76 of the Finance Act1994. Hence the
Appellants' request for relief from penalty under section 76 ibid can not be considered.
10.
The Appellant has requested for waiver of penalty under section 78 of the Finance
Act1994 I find that appellant has not paid appropriate Service Tax (till now) on their own.
They have simultaneously availed CENVAT Credit on the component used for repairing and
full exemption under Notification6/2005. Thus, the intention to evade payment of duty has
been clearly established. Also, the appellant had been registered with the department,
however they have failed to file the ST-3 returns and provide the correct taxable value,
resulting in suppression of necessary information to the department. They have not
disclosed the facts of Availment of credit on the component used in repairing. This is a case
of deliberate non-declaration and suppression of vital information with willful
evade
payment
intention
to
of Service Tax. The penalty is imposed U/s 78 of the Finance Act1994
when suppression is established. Hence, I uphold the imposition of penalty U/s 78 in the
impugned order.
11.
The appellant claimed that penalty cannot be imposed under both the sections 76 &
78. I find that the penalties under 76 & 78 are for difference purposes. Penalty under
section 76 is imposed for failure to pay service Tax in time. In this case appellant still has
not paid Service Tax even though they are agreeing to pay the same. Penalty Under
section78 is imposed for suppressing the taxable value with intention to evade payment of
service Tax. As the both the condition are proved in this case, I hold that separate
penalties under Section 76 & 78 of said Act can be imposed. I rely upon the judgment of
Hon'ble Kerala High Court in the case of Krishna Poduval 2006 (1) STR 185 (Ker) and the
Tribunal- Delhi decision in the case of Bajaj Travels Ltd 2009 (16) STR 183 ( Tri- DEL) in
support of my view stated above.
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V2(ST)103/A-IV/2012
In view of above discussion I pass the following order :
ORDER
12.
In view of the above discussion, I uphold the impugned order passed by the
adjudicating authority and reject the appeal filed by the appellants.
Sd/- (11.04.2012)
(K. ANPAZHAKAN)
COMMISSIONER (APPEAL-IV)
CENTRAL EXCISE, AHMEDABAD.
(ATTESTED)
Dated .11.04.2012
(P C RATHI)
SUPERINTENDENT (APPEAL-IV)
SERVICE TAX, AHMEDABAD.
BY R.P.A.D.
To,
M/s. Ames Impex Electrical Pvt. Ltd., C/1-B/1207, Phase-IV, GIDC, Naroda,, Ahmedanbad
COPY TO:1. The Chief Commissioner, Central Excise, Ahmedabad.
2. The Commissioner, Service Tax, Ahmedabad.
3. The Joint Commissioner, Service Tax, Ahmedabad.
4. Assistant Commissioner, Systems, Service Tax, Ahmedabad.
5. Guard file.
6. P.A. file.