CESTAT, AHMEDABAD BENCH
Shree Perfect Security Services (India) (P.) Ltd.
Commissioner of Service Tax, Ahmedabad
ORDER NO. A/1073/WZB/AHD of 2012
APPEAL NO. ST/396 of 2010
JANUARY 16, 2012
1. The issue involved in the present appeal is whether the appellant is eligible for the refund of the penalty paid by them after penalties were set aside in the appeal proceedings. Refund claim of Rs.81,799/- and interest of Rs.6,000/- has been credited to Consumer Welfare Fund on the ground that the appellants have not been able to show that the liability has not been passed on.
2. Heard both the sides.
3. It was submitted on behalf of the appellants that even though the entire amount of penalty was shown as an expenditure, when the return was assessed, it was disallowed and appellants themselves had shown it as disallowable expenditure. It was submitted that when Income Tax Authorities disallow an expenditure, it means that it is not added as an income and therefore the question of passing on the liability does not, arise. I find that this submission was made before the appellate authority, taken note of, but there is no discussion on this aspect. Further, the appellants had relied upon the decision of the Tribunal in the case of GIS Cotton Mill Ltd. v. CCE 2009 (237) ELT 200 (Tri. – Kolkata) to submit that the principles of unjust enrichment is not applicable for penalty. This has been distinguished by placing reliance upon the decision of the Tribunal in the case of Keihin Fie (P.) Ltd. v. CCE 2009 (16) STR 71 (Tri. – Mumbai). Unfortunately both the original adjudicating authority and the appellate authority have nowhere indicated whether the decision of the Tribunal in the case of Keihin Fie Pvt. Ltd. was relating to penalty or duty and the paragraph 6 & 7 of the decision quoted verbatim by the adjudicating authority also does not indicate whether the issue therein was duty or penalty. Both the adjudicating authority and the appellate authority have failed to follow the judicial discipline which requires them to clearly indicate why they are ignoring the ratio laid down by one decision and if two decisions are quoted, it is necessary to show why the concerned authority is agreeing with one and not with the other. In any case during the hearing the learned counsel submitted that in the case of United Spirits Ltd. v. CC (Import) 2009 (240) ELT 513 (Bom.), Hon’ble High Court of Bombay has made an observation in paragraph 28 “no authority has been brought to our attention by either side where the principles of ‘unjust enrichment’ have been applied insofar as the fine or penalty is concerned”: This shows that the decision of the Hon’ble High Court of Bombay supports the claim of the appellant that in respect of the penalty unjust enrichment principle cannot be applied. Similar was the view taken in GIS Cotton Mill Ltd. which relied upon the decision of the Tribunal in the case of Industrial Cables (I) Ltd. v. CCE 2002 (140) ELT 543 (Tri. – Delhi). The reliance of the learned A.R. on the decision of Offshore Hook-up & Cons. Services (I) (P.) Ltd. CC (Import) 2009 (244) ELT 135 (Tri. -Mumbai) also is misplaced in my view in view of the fact that the Tribunal observed in paragraph 8 in that case that neither Customs Act, 1962 nor Central Excise Act, 1944 provide for recovery of fine or penalty from any other person. The Tribunal also observed that the law does not permit transfer of penal liability by a person who has been found to have committed an offence to another person who has not. From these main observations, the Tribunal reached the conclusion that in the case of penalties the burden to show that the penalty has been passed on to another person is on the department and not on the assessee as in the case of duty. The learned A.R. on this basis submitted that once the penalty amount is shown as an expenditure, it has to be presumed that the burden has been passed on since the same principle has been applied in the case of duty and interest in several decisions of the Tribunal. I am not able to find myself in agreement with this view. If this view is accepted, it would mean that whether it is duty, interest or penalty, the burden is always on the assessee to show that there is no unjust enrichment if he has shown it as an expenditure in the income and expenditure account or balance sheet. In view of the presumption in the law that an penal liability can never be passed on to another person who has not committed the offence, the view taken by the Tribunal in the case of Offshore Hook-up that department has to prove that unjust enrichment would mean that some extra effort is required in addition to merely looking at the balance sheet or profit & loss account on the part of the department. In view of the decisions of the Hon’ble High Court of Bombay and the Tribunal in the case of GIS Cotton Mill Ltd., which cover the present issue, I find that appellant has been able to work out a case in their favour for allowing the appeal. Accordingly, appeal is allowed with consequential relief to the appellant.