CESTAT, NEW DELHI BENCH
Hindustan Aeronautics Ltd.
Commissioner of Central Excise, Lucknow
FINAL ORDER NO. ST/A/351/2012-CUS.
APPEAL NO. ST/641 OF 2008
APRIL 9, 2012
Archana Wadhwa, Judicial Member
Applicant is a Govt. of India undertaking engaged in the manufacture, repair and overhaul of aircrafts of India Air Force, Army, Coast Guard and navy under the Ministry of Defence, Govt. of India. Service Tax of Rs. 3,77,09,729/- stands confirmed against them along with imposition of penalty of identical amount and penalties of Various amounts under various sections of Finance Act, 1994 for the period July 2003 to September, 2005 on the ground that they have provided services to the Ministry of Defence falling under the category of ‘maintenance or repair services’. The said demand stands confirmed against them by invoking longer period of limitation.
2. During the course of adjudication, the appellants contested the demand on limitation by submitting that they were into correspondence with the Ministry of Defence for exempting the said services being provided by them. For the same reason, they also contested that the penalties would not be imposable upon them.
3. The Commissioner, however, by noticing that noticees were well aware of their liabilities to pay service tax as they entered into a dialogue with the Ministry of Finance for exemption of the same and that non-registration and non-payment of service tax was with an intention to evade payment of service tax, accordingly confirmed the demand and imposed the penalties, hence the present appeal.
4. Ld. Advocate appearing for the appellants though contends that the demand in question is barred by limitation but submits that the appellants are not contesting the same in as much as the same is deposited by them. However, he submits that the only dispute in the present appeal is exemption of penalties imposed upon the appellants. By drawing our attention to the various correspondences exchanged by the appellants with the Ministry of Finance praying for exemption of above services in question, he submits that in as much as the services were from one Govt. to another Govt., they were trying to procure the exemption for the same. However, the Ministry of Finance vide their letter dtd. 26.7.2005 rejected the appellants’ request.
5. Thereafter the appellants’ voluntarily obtained the registration and also paid service tax. He also placed on records various decisions of the Tribunal.
6. After carefully considering the submissions made by both the sides, the demand is confirmed as we find that the appellants have not contested the same. As regards penalty we find that it is not disputed by the adjudicating authority that the appellants were in correspondence with the Ministry of Finance seeking exemption on the maintenance and repair services of aircrafts pertaining to Ministry of Defence. Such correspondence resulted in denial of said request for exemption by Ministry of Finance on 26.7.2005. In as much as the appellants were bonafidely contesting the issue before the appropriate authority and the appellants being a Govt. of India unit, no malafide with intent to evade the payment of duty can be attributed to them so as to invoke penalties. We are of the view that provisions of section 80 of Finance Act, 1994 are required to be applied holding that there was a justifiable reason entertained by the appellants for non-payment of duty. As such while confirming the demand of duty, we set aside the penalties imposed upon the appellants.