2014 CESTAT NEW DELHI

COMMISSIONER OF CENTRAL EXCISE Versus M/s CHAMAN COLOR LAB & STUDIO

Revenue.

No. - Service Tax Appeal No.204 of 2009
Order No. - Final Order No. 51462/2014
Dated - March 27, 2014

G Raghuram And Rakesh Kumar, JJ.

For the Appellant : Shri Yashpal Sharma, Authorized Representative (DR)

For the Respondent : None

PER : Rakesh Kumar

The respondent are providers of photography service. The period of dispute in this case is from September 2003 to March 2005. The point of dispute is as to whether the service tax is to be charged on the gross amount charged by the respondent from their customers or on the net amount charged after excluding the cost of paper and chemicals used in the photography service. The department being of the view that the service tax is to be charged on the gross amount and abatement of the value of paper and chemicals used in providing the photography service is not to be allowed, issued a show cause notice dated 23/03/07 to the respondent for demand of allegedly short paid service tax amounting to ₹ 8,83,785/- alongwith interest and also for imposition of penalty. The show cause notice had been issued by invoking extended period under proviso to Section 73 (1) of the Finance Act, 1994. The show cause notice was adjudicated by the Joint Commissioner vide order-in-original dated 30th April, 2008 by which the above-mentioned service tax demand plus education cess was confirmed alongwith interest thereon under Section 75 of the Finance Act, 1994 and beside this, penalty of equal amount was imposed on them under Section 78 ibid. However, on appeal to Commissioner (Appeals), the above order of the Joint Commissioner was set aside and the appeal was allowed by the Commissioner (Appeals) vide order-in-appeal dated 29/12/2008 against which this appeal has been filed by the Revenue.

2. None appeared for the respondent, though a notice for hearing had been sent to them well in time. In view of this, so far as the respondent are concerned, the matter is being decided ex-parte.

3. Heard Shri Yashpal Sharma, the learned DR who pleaded that the issue involved in this case stand decided in favour of the department by Larger Bench of the Tribunal in the case of Agarwal Colour Advance Photo System vs. CCE, Bhopal reported in 2011 (23) S.T.R. 608 (Tri.-LB). He, therefore, pleaded that the impugned order is not correct. He also emphasized that longer limitation period under proviso to Section 73 (1) of the Finance Act, 1994 has been correctly invoked and penalty under Section 78 has been correctly imposed, as the respondent had suppressed the fact of excluding the value of paper and other chemicals from the department.

4. We have considered the submissions of the learned DR and have gone through the records of this case.

5. So far as the case on merits, the issue stands decided in favour of the department by Larger Bench of the Tribunal in the case of Agarwal Colour Advance Photo System vs. CCE, Bhopal (supra) and therefore we hold that the respondent were liable to pay service tax on the gross amount charged and the exclusion from the assessable value of the value of paper and other consumables and chemicals used for providing photography service was not permissible. However, we find that in this case, the period of demand is from September 2003 to March 2005 and the show cause notice invoking extended period under proviso to Section 73 (1) of the Finance Act, 1994 has been issued only on 23/03/07 and the same would survive only if the conditions for imposing proviso to Section 73 (1) exists. We find that during the period of dispute, there were conflicting judgments of the Tribunal on the issue involved in this case as a result of which, this matter had been referred to a Larger Bench in the case of Agarwal Colour Advance Photo System vs. CCE, Bhopal (supra). Apex Court in the case of Continental Foundation Jt. Venture vs. CCE, Chandigarh-I reported in 2007 (216) E.L.T. 177 (S.C.) and also in the case of Jaiprakash Industries Ltd. vs. CCE, Chandigarh reported in 2002 (146) E.L.T. 481 (S.C.) has held that when on a particular issue during a particular period there was divergence of views on account of conflicting judgments of the Tribunal or High Courts and the assessee had paid tax in accordance with one group of judgments in his favour, he would have to be treated on having acted in bonafide belief and longer limitation period for recovery of short paid tax cannot be invoked. We find, these circumstances exist in this case and hence longer limitation period under proviso to Section 73 (1) would not be invokable and, as such, the demand is time barred. For the same reason, penalty under Section 78 also would not be imposable. In view of this, the Revenue's appeal is dismissed.

(Operative part of the order pronounced in the open court)