Assistant Commissioner Of Central Excise v. Krishna Poduval

The Judgment of the Court was delivered by

S. Siri Jagan, J.:— The issues involved in these two appeals are identical. Therefore the two appeals are disposed of by this common judgment.

2. The matter relates to payment of service tax, interest and penalty under the Finance Act, 1994, by the respondent in each of the two appeals. The Revenue is the appellant in both the appeals. Notices were issued to the respondents in these two appeals directing them to show cause why service tax amounting to Rs. 27,425/- and Rs. 33,450/-, respectively, along with interest as applicable under S. 75, as also penalty under Ss. 76 and 78 of the Finance Act, 1994, should not be recovered from them for failure to pay service tax and suppression of the value of taxable service with intent to evade payment of service tax. The show cause notices culminated in demand for service tax, interest and penalty under both Ss. 76 and 78 of the Finance Act, 1994. The respondents in these appeals challenged the same in appeals before the Commissioner of Central Excise (Appeals). However, the appeals were dismissed since the same were filed beyond the period proscribed under sub-s. 3 of S. 85 of the Finance Act, 1994 and the Commissioner (Appeals) did not have power to condone delay beyond the maximum period prescribed under the said Section. Although the respondents have a further right of appeal before the Appellate Tribunal, they chose to file the writ petitions, the judgments in which are under challenge in these Writ Appeals, probably realising that the Appellate Tribunal also cannot consider the appeal on merits, their first appeal having been dismissed as time barred with no provision to condone delay beyond the period prescribed under S. 85 of the Finance Act. The Writ Petitions were filed challenging sub-s. 3 of S. 85 of the Finance Act, 1994 which prescribes a maximum period of three months as the period during which the Commissioner (Appeals) could condone the delay in filing the appeals. They also challenge, inter alia, the imposition of penalty under S. 76 of the Act. On those grounds the respondents prayed for quashing of Exts. P8 and P9 orders in appeal passed by the Commissioner of Central Excise (Appeals). However, since the writ petitioners have not chosen to file any appeal against the judgment of the learned Single Judge in which this question was not considered, impliedly rejecting the prayer, we are not called upon to decide the same. Nor were any arguments advanced before us on that aspect probably because that question is no more res integra in view of die decisions interpreting identical provisions in other taxing statutes.

3. The learned Single Judge by the impugned judgments in each of the writ petitions, confirmed the demand for service tax and interest under S. 75, as also penalty under S. 78 of the Finance Act, 1994. However, the learned Single Judge directed the first appellant herein to modify the demand by withdrawing the penalty under S. 76. The Revenue is aggrieved by that part of the judgment of the learned Single Judge directing the 1st appellant to withdraw the penalty levied under S. 76.

4. According to the learned Assistant Solicitor General, who appeared and argued the appeals on behalf of the Revenue, the imposition of penalty under Ss. 76 and 78 of the Act is for non-payment of service tax and suppression of value of taxable service, respectively which are two distinct and separate offences attracting separate penalties and therefore both are imposable against the respondents in the two appeals. On the other hand, the learned counsel for the respondents submitted that the offences alleged against the respondents arose from the same transaction constituting only one offence and therefore imposition of penalty under both the sections are unwarranted and unsustainable.

5. We have considered the arguments of both sides in detail. However, we are unable to agree with the arguments advanced by the counsel for the respondents for reasons hereinafter appearing.

6. At the outset we may state that in so far as the respondents have not taken up the original orders imposing penalty in appeals before the appellate authority within the maximum period prescribed under S. 85(3) of the Finance Act, 1994, they cannot get the appeals revived and heard on merits by resorting to the discretionary remedy before this Court under Article 226 of the Constitution of India. Once the period of limitation has run itself out and the appellate authority does not have power to condone the delay in filing the appeals beyond the maximum period prescribed under the Act, the remedies of the appellants come to an end just like in the case of a time barred suit and the respondents cannot, by invoking the discretionary remedy under the extraordinary jurisdiction of this court under Article 226 of the Constitution of India, resurrect their unenforceable cause of action and require this court to consider their contentions against the original orders on merit. That would amount to defeating the very law of limitation which we are not expected to do under Art. 226. If we are to entertain the contentions of the respondents on merits, that would amount to negating the law of limitation which we have no jurisdiction to do under Article 226 and which may even lead no anomalous results. We are not satisfied that the jurisdiction of this Court under Art. 226 of the Constitution of India is so wide as to resurrect a cause of action which has become unenforceable on account of the law of limitation. Further, we are of the firm opinion that the jurisdiction under Art. 226 of the Constitution of India cannot be invoked against express statutory provisions, however harsh the effect of the provisions may be on an assessee or litigant.

7. ITie learned counsel for the respondents has cited before us a decision of the Madras High Court in Maheswary Fire Work Industries v. Commercial Tax Officer reported in 12 STC 272, which held that “although, as far as the appellate authority is concerned under the Tamilnadu General Sales Tax Act, 1959, its jurisdiction and power to condone delay is limited to a period of 30 days, that limitation cannot be made applicable to the High Court while exercising jurisdiction under Art. 226 of the Constitution of India.” With great respect, we are unable to persuade ourselves to agree with the said decision which does not also contain any reasoning for holding so. According to us, all the remedies of the respondents have come to an end when their appeals were dismissed by the Commissioner of Central Excise (Appeals) on the ground of limitation. Even the further appellate authority or this court does not have the jurisdiction to entertain the claim on merits disregarding the limitation or condoning the delay. In any event, the appellants have not pleaded any extraordinary circumstances warranting interference, even if we had the jurisdiction to do so.

8. In this connection, we feel it apposite to quote a passage from the decision of the Supreme Court in Commissioner of Sales Tax, Uttar Pradesh v. Parson Tools and Plants, Kanpur, reported in (1975) 35 STC 413 cited by the learned Assistant Solicitor General which reads thus:

“Thus the principle that emerges is that if the legislature in a special statue prescribes a certain period of limitation for filing a particular application there under and provides in clear terms that such period on sufficient cause being shown, may be extended, in the maximum, only up to a specified time-limit and no further, then the tribunal concerned has no jurisdiction to treat within limitation, an application filed before it beyond such maximum time-limit specified in the statute, by excluding the time spent in prosecuting in good faith and due diligence any prior proceeding on the analogy of S. 14(2) of the Limitation Act.

We have said enough and we may say it again that where the legislature clearly declares its intent in the scheme and language of a statute, it is the duty of the court to give full effect to the same without scanning its wisdom or policy, and without engrafting, adding or implying anything which is not congenial to or consistent with such expressed intent of the law-giver; more so if the statute is a taxing statute. We will close the discussion by recalling what Lord Hailsham has said recently, in regard to importation of the principles of natural justice into a statute, which is a clear and complete code by itself:

“It is true of course that the courts will lean heavily against any construction of a statute which would be manifestly fair. But they have no power to amend or supplement the language of a statute merely because in one view of the matter a subject feels himself entitled to a larger degree of say in the making of a decision than a statute accords him. Still less is it the functioning of the courts to form first a judgement on the fairness of an Act of Parliament and then to amend or supplement it with new provisions so as to make it conform to that judgment.:

9. We do not think that it is necessary to elaborate on the aspect any further since the law as laid down by the Supreme Court as above is eloquent enough to obviate any such necessity. Therefore, we are of opinion that the respondents could not have raised their contentions regarding the imposition of penalty on merits notwithstanding the limitation prescribed under S. 85(3) of the Finance Act, 1994 and dismissal of their appeals on the ground of limitation even in the writ petitions filed under Art. 226 of the Constitution. Although the writ petition is liable to be dismissed on that ground alone, since the learned Single Judge had decided the sustainability of imposition of penalty under S. 76 on merits and the parties have also advanced arguments in detail before us regarding the same, we shall consider the validity of the same also. Ss. 76 and 78 of the Finance Act, 1994 are reproduced below for the easy reference:—

“76. Penalty for failure to pay service tax.—

Any person, liable to pay service tax in accordance with the provisions of S. 68 or the rules made thereunder, who fails to pay such tax shall pay in addition to paying such tax, and interest on that tax in accordance with the provisions of S. 75, a penalty which shall not be less than one hundred rupees [for every day during which such failure continues] but which may extend to two hundred rupees for every day during which such failure continues, so, however, that the penalty under this clause shall not exceed the amount of service tax that he failed to pay.”

“78. Penalty for suppressing value of taxable service:—

If the [Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise] in the course of any proceedings under this Chapter is satisfied that any person has, with intent to evade payment of service tax, suppressed or concealed the value of taxable service or has furnished inaccurate value of such taxable service, he may direct that such person shall pay by way of penalty, in addition to service tax and interest, if any, payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of service tax sought to be evaded by reason of suppression or concealment of the value of taxable service or the furnishing of inaccurate value of such taxable service:

10. (Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of—

(a) fraud; or

(b) collusion: or

(c) wilful mis-statement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax,

the person, liable to pay such service tax or erroneous refund, as determined under Subsection (2) of S. 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall not be less than, but which shall not exceed twice, the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded:)

(Provided that where such service tax as determined under Sub-s. (2) of S. 73, and the interest payable thereon under S. 75, is paid within thirty days from the date of communication of order of the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise determining such service tax, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the service tax so determined;

Provided further that the benefit of reduced penalty under the first proviso shall be available only if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso:

Provided also that where the service tax determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purpose of this section, the service tax as reduced or increased, as the case may be, shall be taken in account;

Provided also that in case where the service tax determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of service tax so increased, the interest payable thereon and twenty five per cent of the consequential increase of penalty have also been paid within thirty days of communication of the order by which such increase in service tax takes effect.

Explanation— For the removal of doubts, it is hereby declared that—

(1) the provision of this section shall also apply to cases in which the order determining the service tax under sub-section (2) of S. 73 relates to notices issued prior to the day on which the Finance Bill, 2003 receives the assent of the President;

(2) any amount paid to the credit of Central Govemment prior to the date of communication of the order referred to in the fust proviso or the fourth proviso shall be adjusted against the total amount due from such person.)

11. The penalty imposable under S. 76 is for failure to pay service tax by the person liable to pay the same in accordance with the provisions of S. 68 and the Rules made there under, whereas S. 78 relates to penalty for suppression of the value of taxable service. Of course these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But we are of opinion that the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences. There can be a situation where even without suppressing value of taxable service, the person liable to pay service tax fails to pay. Therefore, penalty can certainly be imposed on erring persons under both the above Sections, especially since the ingredients of the two offences are distinct and separate. Perhaps invoking powers under S. 80 of the Finance Act, the appropriate authority could have decided not to impose penalty on the assessee if the assessee proved that there was reasonable cause for the said failure in respect of one or both of the offences. However, no circumstances are either pleaded or proved for invocation of the said Section also. In any event we are not satisfied that an assessee who is guilty of suppression deserves such sympathy. As such, we are of opinion that the learned Single Judge was not correct in directing the 1st appellant to modify the demand withdrawing penalty under S. 76. Therefore, the judgment of the learned Single Judge, to the extent it directs the first appellant to modify Ext. P1 by withdrawing penalty levied under S. 76, is liable to be set aside and we do so. The cumulative result of the above findings would be that the Writ Petitions are liable to be dismissed and we do so. However, we do not make any order as to costs.