Gb Engineering Enterprises (P) Vs. Commissioner of Central Excise - Court Judgment

Excerpt:
1. this application has been filed by m/s. g.b. engineering enterprises (p) limited (gbe) long with their appeal against the impugned order passed by the commissioner of customs and central excise (appeals), trichy. in the impugned order, the commissioner (appeals) has upheld the order passed by the joint commissioner confirming a demand of service tax of rs. 5,01,770/-, interest due thereon, imposing a penalty equal to the service tax demanded and a penalty at the rate of rs. 100/- per day from the date the arrears of tax were due to be paid till the date of payment subject to a maximum of the service tax demanded.2. the facts of the case are that gbe manufactures boilers and boiler components. they also provide, inter alia, consulting engineer service.in terms of contracts the assessee had entered into with m/s. ispat energy limited (iel) gbe, provided materials and service to iel. on verification of the assessee's records it was found that the assessee had received a total amount of rs. 67,73,900/- as per invoices dated 16.1.2004 as advance separately towards supply of material and service from iel. during investigation, manager (excise) of gbe had submitted that of out of rs. 67,73,900/-, rs. 45,48,000/- was received towards advance for supply of materials and rs. 22,35,900/-as advance towards service. he also admitted that till then no material had been supplied to iel. it was found in the adjudication proceedings before the original authority that out of the advance amount of rs. 67,73,900/- a sum of rs. 38,85,840/- was adjusted on 7.2.2004 towards service already rendered by gbe. the balance amount was also adjusted towards payment of service rendered to iel and not towards supply of materials. the original authority concluded that the assessee had raised invoices in terms of the contract for the services rendered and not towards the material supplied and raised demand of service tax, interest and imposed penalty as detailed above.3. ld. consultant appearing for the appellants argued that the provisions defining taxable services to be service provided or to be provided were introduced in the statute only with effect from 16.6.2005 by amended clause 105 of section 65 of finance act, 1994. prior to the amendment service tax was required to be paid only after the related service was provided in terms of notification no. 5/04-st dated 9.7.2004. ld. sdr reiterated the reasoning contained in the impugned order. he invited my attention to the finding of the lower authorities that gbe had charged service tax at the rate of 8% in the invoices raised for the service portion. he also submitted that the appellants suppressed the fact of rendering service, collecting service charges and tax from their clients from the department.4. on a careful consideration of the records and the submissions, i find that the appellants have not made a prima facie case for waiver of predeposit and stay of recovery of the dues as per the impugned order.the appellants had received amounts towards service already rendered and collected tax from their clients but not credited to the exchequer.the appellants have already paid the service tax found due from them as also the interest after detection of the offence. however, a penalty of rs. 5,01,770/- and penalty at the rate of rs. 100/- per day for the delay in payment of the service tax remains to be paid. in a lenient approach, i order that the appellants shall deposit an amount of rupees one lakh within four weeks from today, whereupon the requirement of predeposit of balance dues will be waived and recovery of the same stayed till the final disposal of the appeal. appellants to report compliance on 3.8.2007.

Judgment:
1. This application has been filed by M/s. G.B. Engineering Enterprises (P) Limited (GBE) long with their appeal against the impugned order passed by the Commissioner of Customs and Central Excise (Appeals), Trichy. In the impugned order, the Commissioner (Appeals) has upheld the order passed by the Joint Commissioner confirming a demand of service tax of Rs. 5,01,770/-, interest due thereon, imposing a penalty equal to the service tax demanded and a penalty at the rate of Rs. 100/- per day from the date the arrears of tax were due to be paid till the date of payment subject to a maximum of the service tax demanded.

2. The facts of the case are that GBE manufactures boilers and boiler components. They also provide, inter alia, Consulting Engineer Service.

In terms of contracts the assessee had entered into with M/s. Ispat Energy Limited (IEL) GBE, provided materials and service to IEL. On verification of the assessee's records it was found that the assessee had received a total amount of Rs. 67,73,900/- as per invoices dated 16.1.2004 as advance separately towards supply of material and service from IEL. During investigation, Manager (Excise) of GBE had submitted that of out of Rs. 67,73,900/-, Rs. 45,48,000/- was received towards advance for supply of materials and Rs. 22,35,900/-as advance towards service. He also admitted that till then no material had been supplied to IEL. It was found in the adjudication proceedings before the original authority that out of the advance amount of Rs. 67,73,900/- a sum of Rs. 38,85,840/- was adjusted on 7.2.2004 towards service already rendered by GBE. The balance amount was also adjusted towards payment of service rendered to IEL and not towards supply of materials. The original authority concluded that the assessee had raised invoices in terms of the contract for the services rendered and not towards the material supplied and raised demand of service tax, interest and imposed penalty as detailed above.

3. Ld. Consultant appearing for the appellants argued that the provisions defining taxable services to be service provided or to be provided were introduced in the statute only with effect from 16.6.2005 by amended Clause 105 of Section 65 of Finance Act, 1994. Prior to the amendment service tax was required to be paid only after the related service was provided in terms of Notification No. 5/04-ST dated 9.7.2004. Ld. SDR reiterated the reasoning contained in the impugned order. He invited my attention to the finding of the lower authorities that GBE had charged service tax at the rate of 8% in the invoices raised for the service portion. He also submitted that the appellants suppressed the fact of rendering service, collecting service charges and tax from their clients from the Department.

4. On a careful consideration of the records and the submissions, I find that the appellants have not made a prima facie case for waiver of predeposit and stay of recovery of the dues as per the impugned order.

The appellants had received amounts towards service already rendered and collected tax from their clients but not credited to the exchequer.

The appellants have already paid the service tax found due from them as also the interest after detection of the offence. However, a penalty of Rs. 5,01,770/- and penalty at the rate of Rs. 100/- per day for the delay in payment of the service tax remains to be paid. In a lenient approach, I order that the appellants shall deposit an amount of rupees one lakh within four weeks from today, whereupon the requirement of predeposit of balance dues will be waived and recovery of the same stayed till the final disposal of the appeal. Appellants to report compliance on 3.8.2007.