No Penalty for non payment of service Tax if no willful suppression of facts to evade tax

Court is of the considered opinion that there is no willful suppression of facts to evade tax on the part of the petitioner and it was bona fide on the part of the petitioner, it was not deliberate and in absence of finding relating to mensrea recorded by the Settlement Commission, the penalty imposed upon the petitioner under Section 78 of the Finance Act, 1994 deserves to be quashed.

FULL TEXT OF HIGH COURT JUDGMENT

1. Invoking jurisdiction of this Court under Article 226/227 of the Constitution of India, the petitioner herein, a partnership firm, calls in question legality, validity and correctness of the final order dated 3-3-2015 passed by the Customs & Central Excise Settlement Commission whereby a penalty of 4,50,000/- has ₹ been imposed upon the petitioner by the said Commission in exercise of power conferred under Section 78 of the Finance Act, 1994.

2. The essential facts requisite to adjudicate the lis between the parties are as under: –

2.1) The petitioner herein, M/s. Mahadev Logistics, is a partnership firm which is engaged in activities of supply of vehicles like Hyva, Dumpers, Pay Loader, Tipper etc. on hire basis and also in goods transportation by road but without  service tax registration. These activities are classified under supply of taxable goods service and goods transport services under sub- clause (zzzzj) of clause 105 and clause 50(f) of Section 65 of the Finance Act, 1994. Investigation was initiated against the petitioner on the basis of intelligence report that the petitioner is engaged in supply of tangible goods on hire basis without obtaining service tax registration and accordingly, summons were issued on 30-5-2014 requiring the petitioner to submit the details / documents related to its activities. Immediately thereafter, on 13-6-2014, the petitioner obtained service tax registration and submitted documents before the concerned competent authority. On 25-7-2014, on its own, the petitioner deposited service tax accepting its liability to the extent of ₹ 91,61,846/- and intimated to the Department. Similarly, on 26-8-2014, the petitioner also admitted and deposited interest liability to the extent of 32,62,861/- with intimation to the respondent ₹ Department. Thereafter, on scrutiny of records / documents submitted by the petitioner, it was revealed that the petitioner is engaged in the business of supply of vehicles, as mentioned herein, to M/s. Nalwa Steel and Power Limited, respondent No.3 herein, which are used for material handling in the plant for which the petitioner receives rent on yearly, monthly or trip basis for such supplies as per the agreement entered into with respondent No.3 herein and the petitioner was found involved to have been engaged in providing services of transportation of goods. Thereafter, on 21-10-2014, show cause notices were issued to the petitioner. Statement of authorised representative of the petitioner was recorded on 3-9-2014 in which it was stated by Mr. Jagdish Parulkar that they are engaged in supply of tangible goods service with M/s. Nalwa Steel and Power Limited and two other companies and they have obtained service tax registration on 13-6-2014 for supply of tangible goods and they did not obtain service tax registration in time because they understood that the work at M/s. Nalwa Steel and Power Limited is the transportation work. They have neither claimed service tax nor collected the same from M/s. Nalwa Steel and Power  Limited – respondent No.3. The service tax liability for the services provided to respondent No.3 against supply of tangible goods service has not been discharged on due dates but on being pointed out by the Department, they have discharged all the service tax liability for the period 2009-10 to 2013-14 amounting to 91,61,846/- including service tax and interest of ₹ ₹ 32,62,861/- have been paid.