Rmc Readymix (India) Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai - Court Judgment

1. The appellant is a manufacturer of ready mixed concrete.Appellant supplied such item by taking it in vehicles specially designed for transportation of this item and supplied it at the site where construction took place. The vehicles used for this purpose had facility for pumping ready mixed concrete from the container on the vehicle to the work site and the material was so supplied by pumping. Revenue was of the view that this activity of pumping ready mixed concrete from vehicle to work site was taxable under entry for Transportation of goods through pipeline or conduit made taxable under section 65 (105) (zzz). Since the appellant did not pay service tax on this activity, a show cause notice was issued for the period 16-06-05 to 31-12-06. The matter was adjudicated by the Additional Commissioner of Central Excise, confirming the tax demand but he did not impose any penalty. The adjudicating authority considered that the disputed service was newly brought into tax net and there was confusion about the scope of the relevant entry and hence waiving of penalty was justified.

2. Against the adjudication order, the appellant filed appeal with Commissioner (Appeals). The Commissioner (Appeals) vide OIA No.32/09 (MST) dt. 27.7.2009 set aside the demand for tax itself since he found that the activity was not covered by the said entry. The department has not filed any appeal against this order of the Commissioner (Appeals).

3. In the meanwhile, the Commissioner of Central Excise exercised powers of revision conferred on him under section

84 of the Finance Act, 1994 and the reviewed the order of adjudicating authority for imposing penalty. A show cause notice was issued and on adjudication a penalty of Rs.25 lakhs has been imposed which is more than the tax liability originally confirmed which was to the tune of Rs.22,81,673/-. Aggrieved by the order of Commissioner passed in exercise of powers under section 84, as it existed at the relevant time, the appellant has filed this appeal.

4. Arguing for the appellant, Ld. Counsel submits that when the demand for tax itself is held to be not sustainable, there cannot be any question of imposing any penalty and therefore penalty imposed is not sustainable and it should be set aside.

5. Ld. AR for Revenue submits that the reason why Commissioner exercised power was that the adjudicating authority gave a finding that there was suppression but still he did not impose penalty.

6. Considered submissions on both sides. I find merit in the argument of the appellant that when the demand for tax itself is not sustainable, there cannot be a penalty imposed on the same matter. Therefore, the appeal is allowed by setting aside the impugned order.