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If the intention of the legislature was to align the exemption with section 26 of the SEZ Act or Rule 31 of the SEZ Rules, then notification No. 4/2004-ST would have been amended to reflect the same. No such amendment has been carried out in the said notification. In these circumstances, we are of the view that if the services are not consumed within the Special Economic zone, then the benefit of notification No. 4/2004-ST will not be available.
As regards the penalty set aside by first appellate authority under section 76 of Finance Act, 1994, for the quarter ending 30.09.2006, I find from the Form ST-3 return produced by ld. Counsel for the assessee, that the said form specifically indicate the taxable service rendered from April 2006 to September 2006 is Nil. Such return has been filed with the lower authorities on 25.09.2006.
Any order for imposing penalty specially the heavy once qas provided under Section 76 and 77, of the Act should show the reason justifying the imposition of penalty and thus following the principles of justice done. It is a fact on record that the Appellants had asked for clarification regarding availability of benefit of exemption Notification No. 12/2003 dated 20.6.03 from the department time and time again but as no response was made to their request under a bona fide belief of availability of said exemption notification had availed the benefit of said exemption notification.
It is undisputed that the appellant is a State Government entity and has been providing services of testing and certifying the quality of the seeds in the State. We find that the appellant was informed on 01.08.2006 by the office of the Commissioner of Service Tax that their activities would not fall under the category of services rendered and they would not be covered under the Service Tax.
The impugned order was passed by the Commissioner under section 84 as this section stood prior to 19-8-2009. It was passed on 24-3-2011. With effect from 19-8-2009, the date on which a new appellate remedy was granted in the place of the erstwhile revisionary remedy against orders passed by Central Excise officers subordinate to Commissioner of Central Excise, section 84 offers appellate remedy against an order passed by an Assistant Commissioner of Central Excise. The provision for revision of such an order by the Commissioner ceased to be in force on 19-8-2009.
The appellant has placed on record the authorization letter dated 15.3.2005 addressed by PBPL to Assistant /Deputy Commissioner, Central Excise, Varanasi authorising the appellant to manufacture biscuit on their behalf. Further perusal of the terms and conditions mutually agreed upon between PBPL and the appellant would show that as per the job work contract the appellant were required to process and manufacture biscuit, carry out inspection, packing and delivery to various depot of PBPL located all over the country as directed by PBPL.
Provisions of the section 73(1A) of the Finance Act, 1994 will apply in full force in this case, as there is payment of entire amount of service tax liability and interest thereof before the issuance of show cause notice (SCN). In my view, it is a fit case wherein the proceedings initiated against the assessee for the imposition of penalties, under various sections needs to be set aside and I do so.
The ld. A.R. submits that penalties have been imposed because they did not pay in time the tax due. We find that there is no case for imposing penalty for an amount more than net tax liability. So the penalty under Section 78 is reduced to Rs. 18,889/-. Further, penalty under Section 76 is waived and also the appellant is given an opportunity to pay 25% of the penalty under Section 78 in 30 days of receipt of the order. If such payment is not made in such timeframe full penalty will be payable.
Issue involved in this case is regarding the bona fide belief of the assessee during the relevant period. During the relevant period, the activity of receiving commission from the bankers for providing the help of identifying the purchasers of the vehicles and completing all the formalities was in dispute before the Tribunal. The said dispute got settled against the assessee. In my considered view, the appellant M/s. Rajesh Auto Finance/Shri Rajesh Biharilal Gandhi would have entertained a bona fide belief that the services rendered by them are not liable to service tax under the category of business auxiliary services.
Learned Advocate submits that lower authorities have also taken into account the Service Tax availed on the capital goods whereas the restriction of 20% utilisation is only in respect of the input service credit. He draws my attention to two precedent decision of the Tribunal in the same appellants case being BSNL v. CCE&C [2009] 21 STT 127 (Bang.-Cestat) and BSNL v. CCE [Final Order No. A/265/2011, dated 28-3-2011]. It stands held in the said decision that the restriction to use 20% of the credit in case of non-maintenance of separate Cenvat accounts for taxable and exempted services is only in respect of inputs service credit. Matter stands remanded to the lower authorities for segregating said credit falling on the input services as also on capital goods and to decide the matter afresh.
