GSKCH Employees Co-Operative Canteen Ltd Vs Commissioner of Central Excise (CESTAT Chandigarh)
CESTAT Chandigarh held that imposition of penalty unjustified as tax paid along with interest before issuance of show cause notice.
Facts- The appellant is a co-operative society registered under the Punjab Co-operative Societies Act, 1961. The Appellant is engaged in providing the canteen services to M/S GlaxoSmithKline Consumer Healthcare Pvt. Ltd. The employees of GSKCH Ltd. formed the present co-operative society i.e., the Appellant for supply of meals and light refreshments to the employees of GSKCH Ltd. All the employees of GSKCH Ltd. are members of the Appellant society. The Appellant is registered as a ‘service provider’ under ‘outdoor catering services’ and also under VAT. For the purposes of operation of the Appellant’s canteen, GSKCH Ltd. provided space within the factory premises for running the canteen and also some materials and fixed assets to the Appellant. Also, in cases of loses in any particular financial year, the Appellant often receives subsidy from GSKCH Ltd. The Appellant serves the food items to the employees of GSKCH Ltd. in consideration of some money on which VAT was duly been discharged by the Appellant during the Relevant Period. Also, on the amount received as subsidy, no service tax was deposited by the Appellant in light of the settled law in sales tax regarding non leviability of VAT on amounts received as subsidy.
On these allegations, a show cause notice was issued to the appellant proposing to recover service tax of Rs. 57,66,971/- for the applicable services of outdoor catering services along with applicable interest and penalty by invoking the extended period of limitation.
Commissioner of Central Excise and Service Tax confirmed the demand by the impugned order. Hence, this appeal. Importantly, the appellant has already paid service tax with interest much before the issuance of show cause notice.
Conclusion- On perusal of Section 73(3) shows that if a tax is paid along with interest before the issuance of show cause notice then in that case show cause notice shall not be issued and in the present case also, we find that the contention of the appellant that they had bona-fide belief that they are not liable to pay service tax but when they realised on their own, they immediately paid the service tax along with interest which is admitted in the impugned order itself.
Held that the appellants are not liable to pay penalty under Section 77 & 78 hence we allow the appeal of the appellant by setting aside the penalties on the appellant.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The present appeal is directed against the impugned order dated 26.07.2011 passed by the Ld. Commissioner of Central Excise and Service Tax, Chandigarh whereby he confirmed the demand of service tax amount to Rs. 55,66,971/- by invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994 and appropriated the whole amount paid by the appellant. The Ld. Commissioner also imposed equal penalty under Section 78 of the Act along with penalty under Section 77. The demand of interest also confirmed under Section 75 of the Act.
2. Briefly the facts of the present case are that the appellant is a co-operative society registered under the Punjab Co-operative Societies Act, 1961. The Appellant is engaged in providing the canteen services to M/S GlaxoSmithKline Consumer Healthcare Pvt. Ltd. („GSKCH Ltd.’) pre19.09.2002. The employees of GSKCH Ltd. formed the present co-operative society i.e., the Appellant for supply of meals and light refreshments to the employees of GSKCH Ltd. All the employees of GSKCH Ltd. are members of the Appellant society. The Appellant is registered as a „service provider’ under „outdoor catering services’ and also under VAT. For the purposes of operation of the Appellant’s canteen, GSKCH Ltd. provided space within the factory premises for running the canteen and also some materials and fixed assets to the Appellant. Also, in cases of loses in any particular financial year, the Appellant often receives subsidy from GSKCH Ltd. The Appellant serves the food items to the employees of GSKCH Ltd. in consideration of some money on which VAT was duly been discharged by the Appellant during the Relevant Period. Also, on the amount received as subsidy, no service tax was deposited by the Appellant in light of the settled law in sales tax regarding non leviability of VAT on amounts received as subsidy.
3. On these allegations, a show cause notice was issued to the appellant proposing to recover service tax of Rs. 57,66,971/- for the applicable services of outdoor catering services along with applicable interest and penalty by invoking the extended period of limitation.
4. After following the due process, the Commissioner of Central Excise and Service Tax confirmed the demand by the impugned order. Hence, this appeal.
5. Heard both the parties and perused the record.
6. Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. She further submitted that in the present appeal the appellant is not contesting the demand of service tax which they have already paid along with applicable interest. She further submitted that the appellant is only contesting the imposition of penalty under Section 77 and 78. She further submitted that the appellant has already paid service tax demand along with interest suo-moto prior to the issuance of the show cause notice and without any insistence from the department and therefore the extended period of limitation invoked by the department under Section 73(3) of the Act is not applicable as the appellant has not suppressed the facts with the intention to evade the payment of service tax. She further submitted that the appellant being a Cooperative society was providing services to its members only and was under bona-fide belief that subsidy received by them is not subject to service tax as the same is a source of finance. She further submitted that the decision of the Apex Court in the case of Tisco General Office Recreation Club Vs. State of Bihar 2002 (126) STC 547 wherein it was held that subsidy given for running a canteen is not subject to sales tax as it is not a consideration for sale. Accordingly, the appellant had a bona-fide belief that no service tax would be levied on the subsidy received from GSKCH. She further submitted that upon gaining knowledge of potential liability of such amount received as subsidy, the appellant got itself registered under „Outdoor Catering Services‟ on 25.06.2009 and deposited the appropriate amount of service tax along with the appropriate interest on the subsidy received from 16.06.2005 to 30.09.2009 and the said amount was deposited suo-moto without any insistence by the department and the same was also disclosed in its return filed on 24.10.2009 and also intimated the same to the department vide letter dated 09.11.2009. She further submitted that the Tribunal in catena of this decision has held that when there is no suppression or intention to evade payment of tax, no penalty can be imposed. For this, she relied upon the following decisions:
