BY
BIHARI B. SHAH
Chartered Accountant

(1) INDIAN TRANSPORT SERVICES VS. COMMISSIONER OF CENTRAL EXCISE., JAMSHEDPUR (2003) 156 ELT 994 (TRI-KOLKATA)

Section 117 of Finance Act, 2000 validated the collection of service tax under Rule 2(I)(d)(xii) and (xvii) of Service Tax Rules, 1994, from the user of services and has also provided that any service tax refunded is recoverable within the period of 30 days from the date on which the Finance Act, 2000 receives the assent of the President – Further, provided in the event of non-payment of such service tax refunded within this period is addition to the amount of service tax recoverable, interest @ 24% shall also be payable – These provisions are mandatory and interest is payable even in case of Financial constraints of the assessee.

ORDER:

The impugned Order has been passed by the Commissioner reviewing the Order-in-Original of the lower authorities under the Finance Act, 1994 read with Service Tax Rules vide which he has directed the appellants to pay the service tax of Rs.1,49,512.00 (Rupees One Lakh Forty Nine Thousand Five Hundred Twelve only) which was earlier refunded to them along with the interest.

The above service tax amount was refunded to the appellants after the provisions for payment of service tax by the users of services of goods transport operators and the clearing and forwarding agents, were struck down by the Hon´ble High Court as ultra vires in the case of Laghu Udyog Bharati & Others Vs. Union of India reported in 1999 (112) E.L.T. 365 (S.C). Thereafter, Section 117 of the Finance Act, 2000 validated collection of service tax under sub-rule (xii) and (xvii) of Rule 2(I)(d) of the Service Tax Rules, 1994, from the user of services of the goods transport operators and has provided that any service tax refunded in pursuance of any judgment, decree or order of any court, is recoverable within a period of thirty days from the date on which the Finance Act, 2000 receives the assent of the President and in the event of non-payment of such service tax refunded within the period in addition to the amount of service tax, recoverable interest of 24% per annum shall also be payable from the date immediately after the expiry of the said period of thirty days till the date of payment.

The appellants are not aggrieved with the demand of service tax already refunded to them. Further, it is their contention that because of their financial constraints, they are not in a position to pay interest ordered to be paid by the Commissioner at the rate of 24% per annum. Hon´ble Tribunal do not find any justification in the above contention of the appellants. As per the provisions of Section 117 of the Finance Act, 2000, interest is leviable. The Tribunal in the case of Rewa Gases Pvt. Ltd. Vs. C. C. Ex. Raipur reported in [2002 (143) E.L.T. 375 (T) = 2002 (51) RLT 28 (CEGAT – Del.)], while considering the provisions of section 117 of the Finance Act, 2000, has observed that tax, penalty and interest are leviable under the said section, inasmuch as the same saves the assessee only from the prosecution. Inasmuch as the issue is decided by the Division Bench of the Tribunal.

(2) PRABHAT ZARDA FACTORY (INDIA) LTD. VS. COMM. OF C. EX. PATNA (2002) 145 ELT 222 (TRIBUNAL – KOLKATA)

The appellant entered into an agreement with M/s. Ratna Zarda Company as its agent – Appellants were issued SCN alleging that company is availing services of C & F Agents, hence liable for payment of service tax from the period 16.7.1997 to 31.10.1998 and also for November, 1998 onwards along with interest u/s. 75 – Notice also proposed imposition of personal penalty on the second appellant, who is the director of the company – Services of the agent held to be covered in the definition of clearing and forwarding agents as in the charging section the expression, ‘ any service directly or indirectly´ indicated that scope of services is quite wide and include services rendered indirectly but connected with clearing and forwarding operators in any manner, Section 65(23) of Finance Act, 1994 – Regarding validity of SCN it is held that the provisions of Rule 2(1)(d)(xii) & (xvii) were revalidated by the section 116 & 117 of Finance Act, 2000 hence notice issued on 9.2.1999 is a valid SCN – Regarding imposition of personal penalty on director of the company, held as the company has already been penalized there is no justification for imposition of separate penalty on the director – Appeal filed by the company is rejected and appeal filed by the director is allowed.

(3) ANIL CHEMICAL AND INDUSTRIES LTD. VS. COMM. OF C. EX. RAIPUR (2002) 146 ELT 147 (TRIBUNAL – DELHI)

SCN was dropped by the adjudicating authority in the light of the judgment of the Hon´ble Supreme Court in the case of Laghu Udyog Bharti & Others Vs. Union of India – Later on these provisions were revalidated retrospectively by section 116 & 117 of the Finance Act, 2000 – Commissioner sought to set aside the order passed by D. C. and also directed the dealer to pay the penalty of Rs.10,000/- u/s. 77 along with the amount of tax and interest – Demand of tax with interest was upheld and penalty was set aside looking to the facts that the provisions were revalidated retrospectively.

ORDER:

When this application for waiver of pre-deposit of penalty came up for hearing, it was agreed by both sides that the appeal itself can be disposed of. Initially, the show cause notice dated 7.2.1998 was dropped by the adjudicating authority under his order dated 14.12.1999 in the light of the judgment of the Supreme Court in the case of Laghu Udyog Bharti – 1999 (112) E.L.T. 365. Later Finance Act, 2000 validated sub-sections (xii) and (xvii) of clause (d) of sub-rule (1) of Rule 2 of the Service Tax Rules, 1994 which were declared ultra vires by the Apex Court. The amendment was made retrospectively and deemed to be in force at all material times. The Commissioner of Central Excise sought to review the order passed by the Dy. Commissioner and issued show cause notice dated 31.5.2001. By order in review dated 10.12.2001 Commissioner set aside the adjudication order. The appellant was directed to pay the amount due, as service tax for the relevant period. Apart from the above, an amount of Rs.10,000/- towards penalty was also imposed under section 77 for contravention of Section 70. The above order is under challenge in this appeal.

Tribunal find no merit in the challenge against the demand of service tax in view of the amendment brought under Finance Act, 2000. But as far as penalty is concerned, the appellant is entitled to relief. It is to be noted that during the relevant period the decision of the Apex Court regarding service tax was in force. A subsequent amendment in the statute with retrospective effect cannot bring about penal consequence on the assessee. The demand of penalty cannot be sustained. In the light of the above, we set aside that part of the order impugned and the appeal is allowed to the extent.

Interest on late payment by Government department – Department argued that during the relevant period the appellant was part of Central Government – The accounting rule relating to telecom charges and service tax remains stipulated by the Government itself – Appellant could not effect collection of amounts or disbursement from the same in any manner other than in the manner stipulated – Stand of the appellant was accepted and the appeal was allowed.

ORDER:

This is an appeal at the instance of the General Manager Telecom BSNL, Amritsar challenging the order passed by the Commissioner (Appeals) Chandigarh dated 26.11.2001. Under the above order, the Commissioner confirmed the order passed by Additional Commissioner (Preventive) demanding an amount of Rs.15,69,132/- as interest on delayed payment of service tax for the period August, 1994 to March, 1999. Commissioner (Appeals) rejected the contention filed by the appellant that service tax along with the amount due under the bill of each subscriber was being paid to the account of the Central Government on day-to-day basis at the close of each working day and merely because there is a delay in crediting the service tax by way of a book transfer to the book account of the Central Government under Head 0044 will not make the appellant liable for interest. Aggrieved by the above, the General Manager, Telecom has come up in appeal.

It is contended by the learned counsel for the appellant that they were following the procedure prescribed in the matter of payment of the bill amount along with service tax prescribed by the Department of Telecom Headquarter in consultation with the Principal Chief Controller of Accounts, Central Board of Excise & Customs, New Delhi. Such procedure was being followed throughout the country. Telephone charges along with service tax is being received by the village Post Office from the subscriber. It is then sent to the Head Post Office. By 1oth of next month, a statement is prepared by the Head Post Office and sent to General Manager Telecom, Amritsar. From there the statements are reconciled and segregation between telephone charges and service tax is also made by 25th of next month and the statement is sent to DOT, New Delhi. Till a circular was issued in October, 1998, the General Manager – Telephones had no authority to straightaway pay the service tax to the Excise Department. Once the statement is obtained by DOT they await for the payment from all districts of Punjab. DOT thereafter make a statement State-wise and Book Entry is made in favour of the Government of India. This procedure certainly involved delay. Pursuant to a circular issued in 1998, General Manager got authority to pay service tax directly. The circular was brought to the notice of all concerned and thereafter, payment is being made without delay. It is the submission of the appellant that from March, 1999 onwards the new procedure is followed and there is no delay in making the book entry. Under these peculiar circumstances, the appellant would submit that he should not have been directed to pay interest for the delayed payment during the relevant period.

The learned Counsel for the appellant brought to our notice an order a similar demand for interest for delayed payment of service charges by Tirunelveli Telecom District Manager, was dropped by the Assistant Commissioner, Tirunelveli Division accepting the explanation offered as in the present case.

He has also pointed out that the very same Commissioner (Appeals) who had passed the order impugned has accepted identical contentions raised by General Manager Telecommunication Limited, Ludhiana in his order dated 5.9.2000 and set aside the order passed by the original authority directing payment of interest. The learned Counsel, therefore, submits that there is no justification whatsoever to take a different view in the present proceedings against the appellant especially when the Revenue has not challenged the earlier orders, as mentioned above.

The learned DR would submit that even if the officers had taken a wrong view in the earlier proceedings, it should not stand in the way of the Commissioner (Appeals) passing an order in accordance with law. He contended that the liability to pay interest under section 75 of the Finance Act, 1994 is mandatory and that the adjudicating authority has no discretion to exempt from payment of interest when there is a delay in payment of service tax. He also contended that unless the amount is credited to the book account of Central Government under the head 0044 prescribed for payment of service tax, it cannot be taken that payment has been made by the appellant. Therefore, the Commissioner (Appeals) was fully justified in sustaining the demand of interest.

The appellant is a Department of Central Government. It is bound to make payment including crediting of the amount received from the subscribers towards the telephone charges and service tax in accordance with the directives given by the Chief Controller of Accounts. It is the case of the appellant that they were strictly following the procedure prescribed by DOT Headquarters in connection with the Principal Chief Controller of Accounts and the Central Board of Excise & Customs. This procedure was toward till March 1999. Thereafter the General Manager is directly crediting the service tax to the book account of the Central Government under the head 0044 in view of a circular issued in the year 1998. Thus the delay caused by the statement being sent to DOT Headquarters is avoided. In the peculiar facts and circumstances of this case, where the appellant is a Central Government Department and that it had been strictly following the procedure approved by Principal Chief Controller of Accounts and which procedure approved by Principal Chief Controller of Accounts and which procedure has resulted in the delay and the fact that the amount received from the subscribers were deposited on a day to-day basis in the Post Office to the account of Central Government, Tribunal find that the appellant cannot be burdened with the liability to pay interest. Tribunal therefore set aside the order impugned and allow the appeal

(SOURCES: CASE LAWS ON SERVICE TAX – BY ASHOK BATRA)

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• For the month of September 2004
• For the month of October 2004