Brief Facts of the Case

38.2. Suppression of facts:
I find that the charge of suppression of material facts with intention to evade service tax had been conclusively established herein above. Had the department not investigated/audited their record, the said taxable value would have been escaped assessment and might have resulted in non payment of service tax. They were aware of the facts regarding payment of service tax on the above services rendered by them but have not paid/short paid or have not disclosed with regard to service rendered by them and its receipt towards the same to the department. Such information is statutorily prescribed to be furnished by the registered service provider in the form ST-3 returns form time to time. The suppression with an intent to evade payment, on part of the assessee, is proved beyond doubt and proviso to Section 73(1) of the Finance Act, 1994 has rightly been applied in the instant case and therefore, by their such act of omission and commission, the assessee has rendered themselves liable for penalty. Further, how the extended period is to be computed has been clarified by various judgments. In this regard, I rely on the decision delivered by Hon’ble Supreme Court of India in the case of appeal filed by the department in the case of M/s Mehta & Co. cited as 2011(264) ELT 481 (SC) wherein identical issue was decided reversing the decision of CESTAT. Relevant para is reproduced below:-

“24. The cause of action, i.e., date of knowledge could be attributed to the appellant in the year 1997 when in compliance of the memo issued by the appellant and also the summons issued, the hotel furnished its reply setting out the details of the work done by the appellant amounting to Rs. 991.66 lakhs and at that stage only the department came to know that the work order was to carry out the job for furniture also. A bare perusal of the records shows that the aforesaid reply was sent by the respondent on receipt of a letter issued by the Commissioner of Central Excise on 27-2-1997. If the period of limitation of five years is computed from the aforesaid date, the show cause notice having been issued on 15-5-2000, the demand made was clearly within the period of limitation as prescribed, which is five years.”

38.3. Further, I also rely on the following judgments of Hon’ble Supreme Court & Tribunals;

• 
  Mathania Fabrics Vs CCE, Jaipur reported in 2008 (221) ELT 481 (SC)
  
• 
  CCE, Ahmedabad I Vs M Square Chemicals reported in 2008 (231) ELT 194 (SC)
  
• 
  Salasar Dyg & Ptg. Mills (P) Ltd., Vs CCE, Surat reported in 2009 (235) ELT 93 (Tri-Ahmd.)
  
• 
  Associated Cement Companies Ltd., Vs CC reported in 2001 (128) ELT 21 (SC)
  

Hon’ble High Court of Gujarat in the case of CCE, Surat – I Vs Neminath Fabrics Pvt. Ltd., reported at 2010 (256) ELT 369 (Guj), while deciding the similar issue in Central Excise, has held that proviso can not be read to mean that because there is knowledge, suppression which stands established disappears – concept of knowledge, by no stretch of imagination, can be read into provisions – suppression not obliterated, merely because department acquired knowledge of irregularities. The relevant para is reproduced below ;

“20. Thus, what has been prescribed under the statute is that upon the reasons stipulated under the proviso being satisfied, the period of limitation for service of show cause notice under sub-section (1) of Section 11A, stands extended to five years from the relevant date. The period cannot by reason of any decision of a Court or even by subordinate legislation be either curtailed or enhanced. In the present case as well as in the decisions on which reliance has been placed by the learned advocate for the respondent, the Tribunal has introduced a novel concept of date of knowledge and has imported into the proviso a new period of limitation of six months from the date of knowledge. The reasoning appears to be that once knowledge has been acquired by the department there is no suppression and as such the ordinary statutory period of limitation prescribed under sub-section (1) of Section 11A would be applicable. However such reasoning appears to be fallacious inasmuch as once the suppression is admitted, merely because the department acquires knowledge of the irregularities the suppression would not be obliterated.”

38.4 In view of the above, I find that extended period for demand of service tax under the proviso to section 73(1) of the Finance Act, 1994 was rightly invoked and the SCN is sustainable on limitation. Therefore demand of Service tax of Rs.7,04,338/- for the period from 2006-07 to 2008-09 is recoverable from the said service provider along with Interest as provided in proviso to Section 73(1) of the Finance Act, 1994 read with Section 75 of the Act ibid.
39. Since the said service provider had not discharged service tax liability on the amount of taxable value received as income/commission demanded under the show cause notice and therefore, they have contravened the provisions of Section 67, 68, of the Finance Act, 1994 and thereby rendered themselves liable to penal action under Sections 76, 77 & 78 of Finance Act 1994 as discussed below.
40. Penalty under Section 76:
40.1. I further observe that during the relevant period M/s Dishman Pharmaceutical & Chemical Ltd. have defaulted in payment of service tax which has been established as not paid, in accordance with the provisions of section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, and thereby rendered liable to pay mandatory penalty under the provisions of Section 76 of the Finance Act, 1994 for default in payment of service tax on time till the final payment. It has come to my notice that till date M/s Dishman Pharmaceutical & Chemical Ltd. have not paid the service tax, hence imposition of mandatory penalty under Section 76 is once again justified.
40.2. Accordingly, I hold that M/s Dishman Pharmaceutical & Chemical Ltd. is liable to imposition of penalty under Section 76 of the Finance Act, 1944. My conclusion is also based on various decisions of Hon’ble High Courts & Tribunals as mentioned below ;

• 
  CCE & ST Vs First Flight Couriers Ltd reported at 2007(8) STR 225 (Kar.)
  
• 
  UOI Vs Aakar Advertising, reported at 2008 (11) STR.5 (Raj.)
  
• 
  UOI Vs Shiv Ratan Advertisers reported at 2008 (12) STR 690 (Raj.)
  
• 
  Shiv Network Vs CCE, Daman reported at 2009 (14) STR 680 (Tri-Ahmd)
  
• 
  CCE, Vapi Vs Ajay Sales Agencies reported at 2009 (13) STR 40 (Tri–Ahmd)
  
• 
  Siddhi Motors Vs CCE, Rajkot reported at 2009 (15) STR 422 (Tri-Ahmd)
  

40.3. I further observe that the Hon’ble CESTAT in the case of M/s Gujarat Industrial Security Force Society Vs CST, Ahmedabad, vide order No.A/1110/WZB/AHD/2010 dated 05.08.2010, has held that no lenient view can be taken under section 76 of the Finance Act, 1994. The relevant paras are reproduced below;
“2. After hearing both the sides, I find that in this case, the assessee was registered more than 6 years back and no explanation has been given by them for delayed filing of return and delayed payment of service tax. Under these circumstances, I am not finding fault in stand taken by the lower authority that penalty is imposable under section 76 and once it is held that penalty is imposable under section 76, the amount fixed as per the provision of section 76 is required to be imposed. Under these circumstances, even though the Ld. Advocate submitted that the appellant is a non profit organization, no lenient view can be taken in view of the provisions of law.

3. Accordingly, the appeal is rejected.”
40.4. Hon’ble High Court of Gujarat in the case of CCE & Cus. Vs Port Officer, reported at 2010 (19) STR 641 (Guj) has now settled the issue of penalty under Section 76. The relevant para is reproduced below ;
“10. A plain reading of Section 76 of the Act indicates that a person who is liable to pay service tax and who has failed to pay such tax is under an obligation to pay, in addition to the tax so payable and interest on such tax, a penalty for such failure. The quantum of penalty has been specified in the provision by laying down the minimum and the maximum limits with a further cap in so far as the maximum limit is concerned. The provision stipulates that the person, who has failed to pay service tax, shall pay, in addition to the tax and interest, a penalty which shall not be less than one hundred rupees per day but which may extend to two hundred rupees for everyday during which the failure continues, subject to the maximum penalty not exceeding the amount of service tax which was not paid. So far as Section 76 of the Act is concerned, it is not possible to read any further discretion, further than the discretion provided by the legislature when legislature has prescribed the minimum and the maximum limits. The discretion vested in the authority is to levy minimum penalty commencing from one hundred rupees per day on default, which is extendable to two hundred rupees per day, subject to a cap of not exceeding the amount of service tax payable. From this discretion it is not possible to read a further discretion being vested in the authority so as to entitle the authority to levy a penalty below the stipulated limit of one hundred rupees per day. The moment one reads such further discretion in the provision it would amount to re-writing the provision which, as per settled canon of interpretation, is not permissible. It is not as if the provision is couched in a manner so as to lead to absurdity if it is read in a plain manner. Nor is it possible to state that the provision does not further the object of the Statute or violates the legislative intent when read as it stands. Hence, Section 76 of the Act as it stands does not give any discretion to the authority to reduce the penalty below the minimum prescribed.”
40.5. The Hon’ble High Court of Gujarat has further confirmed the above view in the case of CCE Vs S J Mehta & Co., reported at 2011 (21) STR 105 (Guj.) and CCE Vs Bhavani Enterprises reported at 2011 (21) STR 107 (Guj.).
41. Penalty under Section 77
I further find that the assessee have failed to file their ST-3 returns correctly for the period covered under the impugned show cause notice & hence they are liable for penalty under Section 77 for non filing of ST-3 returns correctly for the period in dispute.
42. Penalty under Section 78
42.1. I further observe that the show cause notice also proposes imposition of penalty under Section 78 of the Finance Act, 1994. I find that fraud, suppression of facts and wilful mis-statement on the part of M/s Dishman Pharmaceutical & Chemical Ltd., has been established beyond doubt as discussed and concluded in the earlier part of this order. Accordingly, I hold that M/s Dishman Pharmaceutical & Chemical Ltd. is also liable to penalty under the provisions of Section 78 of the Finance Act, 1994.
42.2. As it is already proved that the service provider had suppressed the facts, the consequences shall automatically follow. Hon’ble Supreme Court has settled this issue in the case of U.O.I Vs Dharmendra Textile Processors reported in 2008 (231) ELT 3 (S.C) and further clarified in the case of U.O.I Vs R S W M reported in 2009 (238) ELT 3 (S.C). Hon’ble Supreme Court has said that the presence of malafide intention is not relevant for imposing penalty and mens rea is not an essential ingredient for penalty for tax delinquency which is a civil obligation.
42.3. I, therefore, hold that they have rendered themselves liable to penalty under Section 78 of the Finance Act, 1994. My above view gets support from below mentioned case laws ;

• 
  Shiv Network Vs CCE, Daman reported in 2009 (14) STR 680 (Tri.Ahmd.)
  
• 
  CCE, Vapi Vs Ajay Sales Agencies reported in 2009 (13) STR 40 (Tri. Ahmd.)
  
• 
  Order No. A/754/WZB/AHD/2010 dt. 09.06.2010 / 23.06.2010 in the case of M/s Bajrang Security Services Vs CST, Ahmedabad.
  
• 
  Order No. A/1937/WZB/AHD/2010 dated 08.10.2010 / 20.12.2010 in the case of M/s Dhaval Corporation Vs CST, Ahmedabad.
  

42.4. I further observe that recently hon’ble High Court of Punjab & Haryana, in the case of CCE Vs Haryana Industrial Security Services reported at 2011 (21) STR 210 (P&H), has also upheld the penalty equal to service tax imposed under Section 78 of the Finance Act, 1994. Hon’ble Karnataka High Court has also taken similar view in the case of CCE, Mangalore Vs K Vijaya C Rai reported at 2011 (21) STR 224 (Kar.)
43. Both Penalty under Section 76 & 78 justified.
43.1. I also find that penalty under Section 76 ibid is provided for failure to pay service tax whereas penalty under Section 78 ibid is for suppressing value of taxable service. In the instant case, service tax liable to be paid in terms of Section 68 read with Rule 6 of the Service tax Rules, 1994, have not been found paid as well as service tax has not been paid / short paid by suppressing value of taxable service by reason of wilful mis-statement and suppression of facts. Of course these two offences may arise in the course of same transaction, or from the same action of the person concerned. But the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act the penalty is imposable for ingredients of both offences, this aspect was also considered by the Hon’ble High Court of Kerala in the case of Assistant Commissioner, C.Ex. Vs Krishna Poduval – 2006 (1) STR 185 (Ker). I also find that the Hon’ble Mumbai Tribunal in the case of Golden Horn Container Services Pvt. Ltd. v/s Commr. of C. Ex., Raipur reported at 2009 (16) S.T.R. 422 (Tri.-Mumbai), has held that Section 76 provides for a penalty who commits default simpliciter in payment of the tax whereas section 78 is a more stringent penal provision, which provides harsher penalty who commits default with mens rea. Since in this case also, M/s Dishman Pharmaceutical & Chemical Ltd. has committed default with mens rea, the decision of the tribunal is squarely applicable.
43.2. Therefore, I am of the view that in the facts and circumstances of the case, it is justifiable, if the penalty is imposed under the provisions of Section 76 and 78 of the Finance Act, 1994, separately, following the decisions of Hon’ble Kerala High Court and Mumbai tribunal (supra). My views are also further supported by various decisions of tribunals in the

cases of ;

1. 
   Shiv Network v/s Commissioner of Central Excise & Customs, Daman reported at 2009 (14) S.T.R. 680 (Tri.-Ahmd.)
   

2. 
   Commissioner of Central Excise, Vapi v/s Ajay Sales Agencies reported at 2009 (13) S.T.R. 40 (Tri.-Ahmd.), and
   

3. 
   Mett Macdonald Ltd. v/s Commissioner of Central Excise, Jaipur reported at 2001 (134) E.L.T. 799 (Tri.-Del.).
   

4. 
   M S Shah & Co., Vs CST, Ahmedabad – Order No. A/1328/ WZB/ Ahd/ 2010 dated 30.06.2010 / 26.08.2010.
   

5. 
   Bajarang Security Services Vs CST, Ahmedabad – Order No. A/745/ WZB/Ahd/2010 dated 09.06.2010 / 23.06.2010.
   

6. 
   CESTAT, Principal Bench, New Delhi in the case of Bajaj Travels Ltd., Vs CCE, Chandigarh – 2009 (16) STR 183 (Tri.Del.)
   

44. In light of the aforesaid discussions and findings, I hold that the service tax amount of Rs.7,04,338/- for the period from 2006-07 to 2008-09 alongwith interest is liable to be confirmed under section 73(2) of the Finance Act,1994 read with Section 75 of the Act ibid and they are also liable to penalty under the provisions of section 76, 77 and 78 of the Finance Act, 1994.
45. In light of the aforesaid findings, I pass following order.
O R D E R

1. 
   I hereby confirm the Service Tax of Rs.7,04,338/- (Rupees Seven Lakh four thousand three hundred thirty eight only) (including, Education cess and Higher Edu.Cess ) under Sub-Section (2) of Section 73 of the Finance Act, 1994, on the services provided outside India but received in India out of total amount of Rs.9,36,431/- (Rs. Nine Lakh Thirty Six Thousand Four Hundred Thirty One only) for the period from 2006-07 to 2008-09 and drop the demand of Service tax of Rs.2,32,093/- (Rupees Two lakh Thirty two thousand Ninety three only) involved for the year 2004-05 to 2005-06;
   

2. 
   I order that interest at the appropriate rate is required to be recovered from them on the total amount of Service Tax as mentioned at ( i ) above under the provision of Section 75 of the Finance Act, 1994, from the due date of payment up to the actual date of payment;
   

3. 
   I impose a penalty of Rs.200/- (Rupees Two Hundreds Only) upon them per day or at the rate of 2% of the service tax amount per month, whichever is higher, under the provisions of Section 76 of the Finance Act, 1994, as amended, for failure to pay Service Tax and Education Cess within the stipulated period as required under the provisions of Section 68 (1) of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1944, as amended however this penalty may be calculated upto 09.05.2008 only;
   

4. 
   I impose a penalty of Rs.7,04,338/- (Rupees Seven Lakh four thousand three hundred thirty eight only) under section 78 of Finance Act, 1994 with condition that if service tax and interest as determine at Sr.No.(ii) are paid within thirty days of communication of this order the amount of penalty liable to be paid by the party under section 78 shall be 25% of service tax. Also the benefit of reduction of penalty shall be paid within thirty days of communication of this order the amount of penalty liable to be paid by the party under section 78 shall be 25% of service tax. Further, the benefit of reduction of penalty shall be available only if the amount of penalty so determined has also been paid within thirty days of communication of this order; and
   

5. 
   I impose penalty of Rs.5,000/- (Rupees Five thousand only) upon them under Section 77 of the Finance Act, 1994 in as much as they failed to file the prescribed Service Tax Returns within the stipulated period as required under the provisions of aforesaid Section 70 read with Rule 7 as amended.
   

Accordingly, the Show Cause Notice bearing F.No:STC-54/O&A/SCN/DP/ADC/R-9/Dn-II/09 dated 22.09.2009 is disposed of forthwith.

(Dr Manoj Kumar Rajak)

Additional Commissioner

Service Tax, Ahmedabad.
F.No.STC-54/O&A/SCN/DP/ADC/R-9/Dn-II/09 Date:- 16/05/2012.
By REGD. POST A.D.
To

M/s Dishman Pharmaceutical & Chemical Ltd. (100% EOU),

Survey No.47, Village: Lodariyal,

Tal. Sanand, Dist. Ahmedabad

Copy to:-

1. The Commissioner, Service Tax, (attention to RRA section) Hdqrs., Ahmedabad

2. The Assistant Commissioner, Service Tax (Audit), Ahmedabad.

3. The Assistant Commissioner, Service Tax, Division-II, Ahmedabad.

4. The Superintendent, Service Tax, AR-IX, Div-II, Ahmedabad. Along with an extra copy of OIO to be delivered to the assessee and submit the acknowledgement to this office.

5. Guard File.

1