2018 (12) TMI 262 – CESTAT MUMBAI – TMI – Extended period of limitation – Levy of penalty – Partial RCM – non-payment of service tax under partial reverse charge mechanism – there was a gap of six months between date of receipt of show-cause on 03.12.2015 and date of personal hearing given in May 2016 and appellant had not availed the gap period to obtain copy of audit report – principles of natural justice – Held that:- The appellant had failed to discharge the service tax liability. It is not understood as to why a person who failed to discharge the same cannot be equated with his ignorance to follow the new rule of partial reverse charge mechanism introduced by Notification no. 30/2012 w.e.f. 01.07.2012 and why the same shall be equated with suppression of fact and mis-declaration through ST-3. More importantly, neither the show-cause notice nor any documents relied in Order-in-Appeal and order-in-original, any reference is available as to whether the entire 100% tax component was
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vice tax partially on the service provider and partially on the service recipient.
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It cannot be said that only because audit party had found non-observance of partial reverse charge mechanism procedure in respect of certain services, without any reference to the categorising of service provider, appellant is to be tested for suppression etc. – there is no hesitation to say that respondent has not brought forth any cogent evidence on record to establish the charge of wilful suppression by the appellant company to invoke extended period of service so as to justify penalty.
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Appeal allowed – decided in favor of appellant. – Appeal No. ST/85936, 85940, 85961/2018 – A/88035-88037/2018 – Dated:- 30-11-2018 – Dr. Suvendu Kumar Pati, Member (Judicial) Shri Subash Chaudhary, Manager for the appellant Shri Vivek Diwedi, AC (AR) for the respondent ORDER Confirmation of penal liability under the Finance Act against non-payment of service tax under partial reverse charge mechanism has gi
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ter unsuccessful attempt before the Commissioner (Appeals Thane), GST & CE, Mumbai appellant has preferred this appeal against the common order passed in all three appeals. 3. In his memo of appeal and during course of hearing of appeal, ld. Representative for the appellant Shri S. Chaudhary submitted that much before show-cause was issued, upon being pointed out by the auditors who are equivalent to Central Excise officers, duty liability along with interest were discharged for which show-cause should not have been issued to the appellant. He further submitted that vide their letter dated 09.02.2016 (Exhibit D) appellant had intimated the respondent department in response to show-cause notice that they had not received audit report and they required a month s time after receipt of the said audit report to prepare and submit their reply to the show-cause and vide Exhibit-F i.e. letter dated 16.05.2016 appellant also had intimated the adjudicating authority that they had not receive
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nd rationality of the order passed by the Commissioner (Appeals) and in placing reliance on the judgment reported in 2017 (346) ELT 378 (Kar.). Ld. AR further submitted that in any case of default on payment of duty, penalty has to be paid as it is statutorily mandatory. In drawing attention of this Court to the Order-in-Appeal at para 6 that appellant had not disputed the service tax liability and accepted in principle that there was delayed payment of service tax for the relevant period for which being a long time registered manufacturer it is to be treated as well-versed with the Rules and Regulations pertaining to Central Excise and Service Tax laws and it has failed to disclose the correct value of tax in ST-3 returns for which wilful suppression can easily be attributed to it. He also pointed out that principle of natural justice was not violated since there was nearly six months gap between issue of show-cause and the date fixed for personal hearing during which period appellant
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s not understood as to why a person who failed to discharge the same cannot be equated with his ignorance to follow the new rule of partial reverse charge mechanism introduced by Notification no. 30/2012 w.e.f. 01.07.2012 and why the same shall be equated with suppression of fact and mis-declaration through ST-3. More importantly, neither the show-cause notice nor any documents relied in Order-in-Appeal and order-in-original, any reference is available as to whether the entire 100% tax component was realised by the service provider and deposited in the government to establish that there was occasion of revenue loss to the government. 6. Partial reverse charge mechanism has been introduced by way of Notification 30/2012 dated 20.06.2012. In the said Notification, w.e.f. 01.07.2012 in case of supply of manpower for any purpose or service in execution of work contract by an individual, HUF or partnership firm whether registered or not including association of persons are required to pay 2
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able thereon inclusive of service tax payable by service provider. Notification 33/12-ST dated 30.06.2012 indicates that if the turnover of the service provider is less than 10 lakhs, the service recipient shall be obliged to pay his share of service tax (of the service provider also) under the partial reverse charge mechanism. There is no denial of the fact that the idea behind introduction of this procedure was to bring unorganised sector on record so that the proper books of account are maintained by them, even though they are not aware about the various statutory liability cast on them and the same will remove the difficulty of the government in tracing out the service provider who are liable to pay service tax. But as commented by Ms. S. Sharma in her article on Reverse Charge Mechanism published in the Chamber Journal of December 2012 at page 95, this system would bring lot of confusion and uncertainty and among them the first would relate to identification of such vendors. In ot
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also referred in the said manual that after such submission of audit report, in cases where the disputed amount have not already been paid by the assessee at the spot, demand notices are issued by the department for their recoveries. EA 2000 audit was therefore held to be participative audit. Likewise CERA audit is conducted by the Comptroller and Auditor General of India in respect of receipt and expenditure of the Government of India. It also discharges revenue audit which covers central excise, service tax and customs laws during which time the assesses were examined by CERA audit party to point out the deficiencies, leakage of revenue and non recoveries of dues by the Central Excise Department. Therefore, it cannot be said that only because audit party had found non-observance of partial reverse charge mechanism procedure in respect of certain services, without any reference to the categorising of service provider, appellant is to be tested for suppression etc. 8. In the conclusio
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