Saturday, December 8, 2012

Reimbursement of Expenses not subject to Service Tax

Reimbursement of Expenses not subject to Service Tax

We are sharing with you an important  analysis of judgment  of  Hon’ble  Delhi High Court in the W.P. (C) 6370/2008 of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India & ANR (2012-TIOL-966-HC-DEL-ST) on the following issue:-
Issue:
♣  Whether reimbursement of expenses includible in gross consideration for the chargeability of Service Tax?
♣  Whether Rule 5(1) of Service Tax (Determination of Value) Rules is ultra vires Sections 66 and 67 of Finance Act, 1994?
Facts:
The Petitioner Company is engaged in providing consulting engineer services and receives payments not only for its service but also for reimbursed expenses incurred by it such as air travel, hotel stay, etc. It was paying service tax in respect of amounts received by it for services rendered to its clients. It was not paying any service tax in respect of the expenses incurred by it, which was reimbursed by the clients. Department issued Show Cause Notice demanding service tax on the expenses reimbursed by invoking the provisions of Rule 5(1) of the Service Tax (Determination of value) Rules 2006. The Petitioner Company has challenged Rule 5(1) in a Writ Petition.
The Service Tax (Determination of Value) Rules, 2006, (hereinafter referred to as “Rules”), was brought into effect from 01.06.2007. Rule 5 provided for “inclusion in or exclusion from value of certain expenditure or costs”. Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, reads as:-
“(1) Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service.”
Illustration 3 to this Rule reads as: -
“Illustration 3: A contracts with B, an architect for building a house. During the course of providing the taxable service, B incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc., to enable him to effectively perform the provision of services to A. In such a case, in whatever form B recovers such expenditure from A, whether as a separately itemised expense or as part of an inclusive overall fee, service tax is payable on the total amount charged by B. Value of the taxable service for charging service tax is what A pays to B.”
Rule 5(2) of Rules state that Subject to the provisions of sub-rule (1), the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the specified conditions are satisfied.
The contention of the Department was that as per the provisions of sub-rule (1) of Rule 5 of Rules, service tax was to be charged on the gross value including reimbursable and out of pocket expenses such as travelling, boarding and lodging, transportation, office rent, office supplies and utilities, testing charges, etc. which, were “essential expenses for providing the taxable service of consulting engineers”.
Held:
It was held that Section 67 authorises the determination of the value of the taxable service for the purpose of charging service tax under Section 66 as the gross amount charged by the service provider for such service provided or to be provided by him, in a case where the consideration for the service is money. It is only the value of such service which is that of a consulting engineer, that can be brought to charge and nothing more. The quantification of the value of the service can therefore never exceed the gross amount charged by the service provider for the service provided by him.
The contention of the petitioner that Rule 5(1) of the Rules, in as much as it provides that all expenditure or costs incurred by the service provider in the course of providing the taxable service shall be treated as consideration for the taxable service and shall be included in the value for the purpose of charging service tax goes beyond the mandate of Section 67 merits acceptance. Section 67 as it stood both before 01.05.2006 and thereafter. This section quantifies the charge of service tax provided in Section 66 (Replaced by Section 66B w.e.f 1-7-2012), which is the charging section. Section 67, both before and after 01.05.2006 authorises the determination of the value of the taxable service for the purpose of charging service tax under Section 66 as the gross amount charged by the service provider for such service provided or to be provided by him, in a case where the consideration for the service is money.
The underlined words i.e. “for such service” are important in the setting of Section 66 and 67. The charge of service tax under Section 66 is on the value of taxable services. The taxable services are listed in Section 65(105). The service provided by the petitioner falls under clause (g). It is only the value of such service that is to say, the value of the service rendered by the petitioner to NHAI, which is that of a consulting engineer, that can be brought to charge and nothing more. The quantification of the value of the service can therefore never exceed the gross amount charged by the service provider for the service provided by him. Even if the rule has been made under Section 94 of the Finance Act, which provides for delegated legislation and authorises the Central Government to make rules by notification in the official gazette, such rules can only be made “for carrying out the provisions of this Chapter” i.e. Chapter V of the Act which provides for the levy, quantification and collection of the service tax. The power to make rules can never exceed or go beyond the section which provides for the charge or collection of the service tax.
Rule 5(1) of Rules, which provides for inclusion of the expenditure or costs incurred by the service provider in the course of providing the taxable service in the value for the purpose of charging service tax is ultra vires Section 66 and 67 and travels much beyond the scope of those sections. The expenditure or costs incurred by the service provider in the course of providing the taxable service can never be considered as the gross amount charged by the service provider “for such service” provided by him.
Further, it was held that Section 66 levies service tax at a particular rate on the value of taxable services. Section 67(1) makes the provisions of the section subject to the provisions of Chapter V, which includes Section 66. This clarifies that the value of taxable services for charging service tax has to be in consonance with Section 66 which levies a tax only on the taxable service and nothing else. There is thus in built mechanism to ensure that only the taxable service shall be evaluated under the provisions of Section 67.
Furthermore, if the expenses such as on air travel tickets are already subject to service tax and is included in the bill, to charge service tax again on the expense would amount to double taxation.
Therefore, Hon’ble Delhi High Court, while allowing the petition, observed, “We have no hesitation in ruling that Rule 5 (1) which provides for inclusion of the expenditure or costs incurred by the service provider in the course of providing the taxable service in the value for the purpose of charging service tax is ultra vires Section 66 and 67 and travels much beyond the scope of those sections. To that extent it has to be struck down as bad in law. The expenditure or costs incurred by the service provider in the course of providing the taxable service can never be considered as the gross amount charged by the service provider “for such service” provided by him.”
Food for Thought:
This judgement will open up new debate & litigation across the Country on following points:-
♣  Whether application of this judgement can travel beyond territorial jurisdiction of the High Court
♣  Whether the Govt. is going to accept this judgment in right spirit to extend benefits to the Trade and Commerce
♣ Retrospective Amendment: The Government would be tempted to retrospectively validate an invalid levy – Rule 5 (1) of the Rules runs counter and is repugnant to Sections 66 (Replaced by Section 66B w.e.f 1-7-2012) and 67 of the Finance Act and to that extent it is ultra vires – So many instances under the Direct Tax & Indirect Tax e.g. – Renting of immovable Properties, etc.
—————————
Bimal Jain
FCA, ACS, LLB, B.Com (Hons)
Mobile: +91 9810604563
E-mail: bimaljain@hotmail.com

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Reimbursements in Service Tax - Ramification of Delhi HC Decision

DECEMBER 14, 2012
By S Sivakumar, Advocate
THE decision of the Delhi Court, in the case of Intercontinental Consultants and Technocrats Pvt Ltd v. Union of India and Anr, reported in 2012-TIOL-966-HC-DEL-ST, is a truly landmark judgment.
As reported, the Delhi High Court has unequivocally held and reiterated the well accepted principle that the Rules cannot override the statutory provisions contained in the Act and that Rule 5(1) of the Service Tax (Determination of Valuation of Services) Rules, 2006 is ultra vires Sections 66 and 67 of the Finance Act, 1994. The relevant extract of the decision is reproduced below…
Quote :
11. In the aforesaid backdrop of the basic features of any legislation on tax, we have no hesitation in ruling that Rule 5 (1) which provides for inclusion of the expenditure or costs incurred by the service provider in the course of providing the taxable service in the value for the purpose of charging service tax is ultra vires Section 66 and 67 and travels much beyond the scope of those sections. To that extent it has to be struck down as bad in law. The expenditure or costs incurred by the service provider in the course of providing the taxable service can never be considered as the gross amount charged by the service provider “for such service” provided by him. The illustration 3 given below the Rule amplifies what is meant by sub-rule (1). In the illustration given, the architect who renders the service incurs expenses such as telephone charges, air travel tickets, hotel accommodation, etc. to enable him to effectively perform the services. The illustration, therefore, says that these expenses are to be included in the value of the taxable service. The illustration clearly shows how the boundaries of Section 67 are breached by the Rule. Apart from travelling beyond the scope and mandate of the Section, the Rule may also result in double taxation. If the expenses on air travel tickets are already subject to service tax and is included in the bill, to charge service tax again on the expense would certainly amount to double taxation. It is true that there can be double taxation, but it is equally true that it should be clearly provided for and intended; at any rate, double taxation cannot be enforced by implication….
Unquote:
Now… in the aftermath of this important judicial development, several questions could arise. This piece is an attempt to quickly address some of these…
Any possibility of refunds?
Most assessees have been collecting service tax on reimbursements and have been remitting the service tax so collected to the account of the Government. Is there a possibility for such assessees to claim a refund of the service tax paid on such reimbursements? If the service tax burden has already been passed on to the service recipients, the service providers would not be allowed to file the refund claims. Of course, the service recipient, assuming that he has not passed on the service tax burden to his own customers/service receivers, is entitled to file a refund claim, subject to the time limit specified in Section 11B of the Central Excise Act, made applicable to service tax related refunds.
From a purely legal perspective since the amounts paid by the assessees cannot be treated as ‘service tax' in the first place a view can be taken that the provisions of Section 11B cannot be invoked in respect of these refund claims.
Economic Impact of this decision on current cases being litigated
Several appeals have been filed before the CESTAT, on the levy of service tax on expenses reimbursed by the service receiver to the service provider. Orders passed by Commissioners confirming several crores of rupees of service tax liability on the levy of service tax on reimbursements such as electricity supplied by Developers of commercial complexes, amounts charged by Advertising Agencies, etc. are currently being litigated before the various CESTAT benches. The CESTAT, as we know, is not authorized to go into the legality of Rule 5(1) vis-à-vis Section 67. Having said so, the CESTAT Benches would now be duty bound to follow the law laid down by the Delhi High Court and the Government could end up losing these cases resulting in a significant loss of revenue.
Can the Government amend Section 67?
This would be a very interesting development that we would need to wait and see. Given the stakes involved, one would not be surprised to see the Government taking the most predictable route of amending Section 67, albeit, retrospectively, apart from challenging the Delhi High Court decision, in the Supreme Court.
We must bear in mind the fact that the methodology for valuation of services derives its legal sanctity from Section 67 of the Finance Act, 1994 even under the new service tax law. Hence, the pain arising out of this decision will affect the Government, under the new service tax, as well.
One should definitely expect some kind of a legislative action in the coming Budget to overcome the effects arising out of this decision.
Inter-Group billings for reimbursements at actuals will now come out of tax net
Thanks to this decision corporates recovering costs or expenses, at actuals, from sister companies, etc. will no longer be required to discharge service tax on the reimbursement of expenses. Charging sister companies for reimbursements, at actuals, is a practice, widely practiced, even between companies in India and their associated enterprises. Most of these transactions including import transactions could get out of the service tax net.
Income tax angle?
It is a well-recognized principle under the Income tax law that, only ‘income' can be subjected to tax, especially, in the case of provisions related to tax deduction at source. Thus, an importer, who is only reimbursing the expenses incurred by his parent company, let's say, is not required to deduct tax at source under Section 195 of the Income tax Act. One is happy that this principle has got indirectly confirmed, in the decision of the Delhi High Court, inasmuch as, service tax can be levied only on the value of ‘services' rendered and not on claims of ‘reimbursements', which cannot be treated as services rendered. So far so good.
"Pure Agent" concept - no longer a pre-requisite for exemption of service tax on reimbursements
In terms of Rule 5, at it has stood from 19-4-2006, reimbursements are exempted only if the eight golden conditions laid down therein, are fulfilled, cumulatively. In most practical situations, it would be impossible to fulfil all the eight conditions laid down, with the result, that, most reimbursements are now being subjected to service tax. In terms of this decision, the concept of ‘pure agent' being a pre-requisite for claiming exemption from levy of service tax on reimbursements would no longer be valid.
Implications on valuation of free supply of materials by service receiver
As we know, practice of the service receiver providing materials for use by the service provider, is a widely used concept, especially, in the Realty Sector. There have been judicial decisions for and against the value of the materials supplied free of cost, by the service receiver (popularly known as FOC materials). While the Madras High Court in the L & T case [ 2007-TIOL-176-HC-MAD-ST ], the Delhi High Court in the Era Infra Engg Ltd's case [2008-TIOL-386-HC-Del-ST] and the Calcutta High Court in the Simplex Infrastructures Ltd's case [ 2010-TIOL-899-HC-KOL-ST ] have taken a prima facie view that, the value of the FOC materials cannot be included under the ‘gross amount charged', we also have the final decision of the CESTAT in the Jaihind Projects Ltd's case [ 2010-TIOL-124-CESTAT-Ahm ], taking the view that service tax has to be paid on the free supply of materials. It would seem that the validity of Rule 5(1) has not been considered in these cases. With the Delhi High Court now striking down Rule 5(1), the whole question of taxability of FOC materials would need to be looked into afresh. It is felt that there is a possibility to take the view that the FOC materials are nothing but a ‘cost' in terms of the project being executed and consequently cannot form part of the ‘gross amount charged', so long as adequate documentation is maintained by both the service provider as well as the service receiver.
Any planning possible, post this decision
There can be little doubt that, this decision gives rise to a number of legally sustainable planning possibilities for Industry. It would now make sense for service providers to keep documentation to clearly show the different categories of costs and expenses and bill these separately on service receivers, under claims of ‘reimbursement' and raise separate bills for services charging service tax at the full rates.
Before concluding...
The ramifications arising out of this decision could be far and wide. In the Realty sector, as I know, flat buyers are charged service tax by Developers/Builders on a host of ‘reimbursements' and with no mechanism to avail of cenvat credit, the overall cost of buying an apartment goes up significantly. Hopefully, post this decision, apartment buyers can get flats at lesser overall prices.
Similarly, the recoveries made by employers from employees of expenses would no longer be taxable as it can be said that the employer is only claiming a reimbursement from the employee of these expenses. In fact, post this decision, the reach of ‘Reverse Charge Mechanism' would seem to get limited.
The Department, on the basis of Rule 5(1) has been taking the view that all the money that flows, whether related to the services or not, from the service receiver to the service provider is to be included under ‘gross amount charged'. This decision comes as a huge relief in these cases also and the whole concept of ‘gross amount charged' is bound to undergo a sea change to the advantage of the service provider.
As mentioned a retrospective amendment cannot be ruled out…which, when it happens, would give rise to a fresh round of litigation

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W.P. (C) 6370/2008                   Page 1 of 17


*                IN  THE  HIGH  COURT  OF  DELHI  AT  NEW  DELHI

Reserved on: 1st
 November, 2012
%                                         Date of Decision: 30th
 November, 2012

+  W.P. (C) 6370/2008

  INTERCONTINENTAL CONSULTANTS AND
TECHNORATS PVT. LTD.          .....Petitioner
Through:  Mr. J. K. Mittal, Mr. Arun Gulati and
Mr. V. K. Jha, Advocate.
versus
  
  U.O.I. & ANR.                   ......Respondents
Through:  Ms. Sonia Sharma and Mr. V. C. Jha,
Advocates.

CORAM:
MR. JUSTICE S. RAVINDRA BHAT  
MR. JUSTICE R.V. EASWAR

R.V. EASWAR, J.:


  In this writ petition, the petitioner challenges the constitutional validity of
Rule 5 of the Service Tax (Determination of Value) Rules, 2006 to the extent it
includes re-imbursement of expenses in the value of taxable services  for the
purposes of levy of service tax.  The petitioner also contends, in the alternative that
the said rule is ultra vires of the provisions of Section 66 and 67 of Chapter V of
the Finance Act, 1994.
2.  The petitioner is a company providing consulting  engineering services.  It
specialises in highways, structures, airports, urban and rural infrastructural projects
and is engaged in various road projects outside and inside India.  In the course of
the carrying on of its business, the petitioner rendered consultancy services in
respect of highway projects to the National Highway Authority of India (NHAI). 
The petitioner receives payments not only for its service but is also reimbursed W.P. (C) 6370/2008                   Page 2 of 17

expenses incurred by it such as air travel, hotel stay, etc.  It was paying service tax
in respect of amounts received by it for services rendered to its clients.  It was not
paying any service tax in respect  of the expenses incurred by it, which was
reimbursed by the clients.  On 19.10.2007, the Superintendent (Audit) Group II
(Service Tax), New Delhi issued a letter to the petitioner on the subject “service
tax audit for the financial year 2002-03 to 2006-07” and informed the petitioner as
follows: -
“During the scrutiny of the records it was observed that you have
been charging and depositing service tax on remuneration income
only in the case of invoices issued in the name of M/s. NHAI
(National Highway Authority of India).  As per the provision of
sub-rule (i) of Rule 5 of the Service Tax (Determination of value)
Rules,  (Notification  number 12/2006-ST, dated 19.04.2006)  the
service tax is liable to be charged on the gross value including
reimbursable and out of pocket expenses like travelling, lodging
and boarding etc.
As per records, it was found that you have short paid
Service Tax amounting to  `1,30,26,572/-  for the financial year
2006-07.  You are hereby directed to deposit the due service tax
along with interest @ 13% under section 73 and 75 respectively of
the Finance Act, 1994 within 15 days.
The matter may please be treated MOST URGENT/ TIME
BOUND.”

3.  In response to the above letter the petitioner provided monthwise details of
professional income as well as reimbursable out of pocket expenses for the period
mentioned in the letter.  On 17.03.2008, a show-cause notice was issued by the
Commissioner, Service Tax Commissionerate by which the petitioner was asked to
show-cause why service tax of  `3,55,80,738/-  should not be recovered from it
along with interest and penalty under Sections 76 to 78 of the Finance Act, 1994. 
The aforesaid figure of service tax was arrived at in the following manner in the
show-cause notice. W.P. (C) 6370/2008                   Page 3 of 17


Period
Reimbursable
Income
Rate of
Service
Tax
Service Tax Payable
Total
Service Tax
Edu.
Cess
Oct’02 to
April’03
99,42,433/-  5%  4,97,122/-  -  4,97,122/-
May’03 to
Aug’04
4,87,83,282/-  8%  39,02,662/-  -  39,02,662/-
Sep’04 to
March’06*
13,22,66,980/-  10.2%  1,32,26,698/-  2,64,534/-  1,34,91,232/-
April’06 to
March’07
14,45,23,874/-  12.24%  1,73,42,865/-  3,46,857/-  1,76,89,722/-
Total  33,55,16,569/-    3,49,69,347/-  6,11,391/-  3,55,80,738/-
*(Note: - For the period prior to April’06, the reimbursable income on account of
traveling lodging and boarding have not been taken into account).

4.  The basis of the show-cause notice was the provisions of sub-rule (1) of
Rule 5 of the Service Tax (Determination of Value) Rules, 2006.  It was the case of
the respondent that under the aforesaid rule, service  tax was to be charged on the
gross value including reimbursable and out of pocket expenses such as travelling,
boarding and lodging, transportation, office rent, office supplies and utilities,
testing charges, etc. which, according to the respondent, were “essential expenses
for  providing the taxable service of consulting engineers”.  It was stated in the
show-cause notice that prior to 19.04.2006, under Section 67 of the Finance Act,
1994, the value of taxable services in relation to consulting engineer services
provided or to be provided by a consulting engineer to the client shall be the gross
amount charged from the client in respect of engineering services. W.P. (C) 6370/2008                   Page 4 of 17

5.  The petitioner has filed the present writ petition with  three  prayers; (i)
quashing rule 5 in its entirety of the Service Tax (Determination of Value) Rules,
2006 to the extent it includes the reimbursement of expenses in the value of taxable
service for the purpose of charging service tax and  (ii)  declaring the rule to be
unconstitutional and ultra vires Sections 66 and 67 of the Finance Act, 1994 and
(iii) for quashing the impugned show-cause notice-cum-demand dated 17.03.2008
holding that it is illegal, arbitrary, without jurisdiction and unconstitutional.
6.  There is no dispute that the petitioner obtained service tax  code  from
service tax authorities for future payment of service tax w. e. f. 01.07.2002, nor is
it in dispute that on 09.07.2007 the petitioner got itself registered with the service
tax department as consulting engineering services and was paying service tax since
1997 regularly.
7.  Service tax was introduced by Chapter V of the Finance Act, 1994.  Section
65 (105) defined “taxable service”.  It contains several  clauses but, herein we are
concerned only with clause (g) which is applicable to the petitioner.  Any service
provided to any person, by a consulting engineer in relation to advice, consultancy
or technical assistance in any manner in one or more disciplines of engineering
including the discipline of computer hardware engineering is defined to be a
taxable service under this clause.  The charge of service tax is effectuated in
Section 66 of the Act.  It says that “there shall be levy of tax (hereinafter referred
to as the service tax) @ 12% of the value of  taxable services referred to in sub-
clauses…………….of Section 65 and  collected  in such manner as may be
prescribed”.  Section 67 of  the Act as it stood  before  being substituted by the
Finance Act, 2006, w. e. f. 01.05.2006 was as under: -
“67.  Valuation of taxable services for charging service tax
For the purposes of this Chapter, the value of any taxable service
shall be the gross amount charged by the service provider for such
provided or to be provided by him.  W.P. (C) 6370/2008                   Page 5 of 17

Explanation 1.- For the removal of doubts, it is hereby declared that
the value of a taxable service, as the case may be, includes,-
(a) the aggregate of commission or brokerage charges by a broker
on the sale or purchase of securities including the commission or
brokerage paid by the stock-broker to any sub-broker.
(b) the adjustments made by the telegraph authority from any
deposits made by the subscriber at the time of application for
telephone connection or pager or facsimile or telegraph or telex or
for leased circuit;
(c)the amount of premium charged by the insurer from the policy
holder;
(d) the commission received by the air travel agent from the airline;
(e) the commission, fee or any other sum received by an actuary, or
intermediary or insurance intermediary or insurance agent from the
insurer;
(f) the  reimbursement  received by the authorized service station
from manufacturer  for carrying out any service of nay motor car,
light motor vehicle or two wheeled motor vehicle manufactured by
such manufacturer; and 
(g) the commission or any amount received by the rail travel agent
from the Railways or the customer,
But does not include-
(i) initial deposit made by the subscriber at the time of application
for telephone connection or pager or facsimile (FAX) or telephone
or telex or for leased circuit;
(ii) the cost of unexposed photography film, unrecorded magnetic
tape or such other storage devices, if any, sold to the client during
the course of providing the service;
(iii) the cost of parts  or accessories, or consumable such as
lubricants and coolants, if any, sold to the customer during the
course of service or repair of motor cars, light motor vehicle or two
wheeled motor vehicles; 
(iv) the airfare collected by air travel agent in respect of  service
provided by him; W.P. (C) 6370/2008                   Page 6 of 17

(v) the rail fare collected by rail travel agent in respect of service
provided by him;
(vi) the cost of parts or other material, if any, sold to the customer
during the course of providing maintenance or repair service;
(vii) the cost of parts or other material, if any, sold to the customer
during the course of providing erection, commissioning or
installation service; and 
(viii) interest on loan.
Explanation  2  –  Where the gross amount charged by a service
provider is inclusive of service tax payable, the value of taxable
service shall be such amount as with the addition of tax payable, is
equal to the gross amount charged.
Explanation 3.- For the removal of doubts, it is hereby declared that
the gross amount charged for the taxable service shall include any
amount received towards the taxable service before, during or after
provision of such service.”
8.  The new Section 67 which came into effect from 01.05.2006 is shorter and
it is as follows: -
  “67.  Valuation of taxable services for charging service tax
(1)  Subject to the provisions of this Chapter, where service tax
is chargeable on any taxable service with reference to its value,
then such value shall, -
(i)  in a case where the provision of service is for a
consideration in money, be the gross amount charged by
the service provider for such service provided or to be
provided by him;
(ii)  in a case where the provision of service is for a
consideration not wholly or partly consisting of money, be
such amount in money as, with the addition of service tax
charged, is equivalent to the consideration;
(iii)  in a case where the provision of service is for a
consideration which is not ascertainable, be the amount as
may be determined in the prescribed manner.
(2)  Where the gross amount charged by a service provider, for
the service provided or to be provided is inclusive of service tax W.P. (C) 6370/2008                   Page 7 of 17

payable, the value of such taxable service shall be such amount as,
with the addition of tax payable, is equal to the gross amount
charged.
(3)  The gross amount charged for the taxable service shall
include any amount received towards the taxable service before,
during or after provision of such service.
(4)  Subject to the provisions of sub-sections (1), (2) and (3),
the value shall be determined in such manner as may be
prescribed.
Explanation: For the purpose of this section, -
(a) “consideration” includes any amount that is payable
for the taxable services provided or to be provided;
(b) “money” includes any currency, cheque, promissory
note, letter of credit, draft, pay order, travelers cheque,
money order, postal remittance and other similar
instruments but does not include currency that is held
for its numismatic value;
(c) “gross amount charged”  includes payment by cheque,
credit card, deduction from account and any form of
payment by issue of credit notes or debit notes and book
adjustment, and any amount credited or debited, as the
case may be, to any account, whether called “Suspense
account”  or by any other name, in the books of
accounts of a person liable to pay service tax, where
the transaction of taxable service is with any associated
enterprise.”

9.  The Service Tax (Determination of Value) Rules, 2006, hereinafter referred
to as “Rules”,  was brought into effect from 01.06.2007.  Rule 5 provided for
“inclusion in or exclusion from value of certain expenditure or costs”.  It is
necessary to reproduce the rule, which is as follows: -
“5.  Inclusion in or exclusion from value of certain expenditure
or costs
(1)  Where any expenditure or costs are incurred by the service
provider in the course of providing taxable service, all such
expenditure or costs shall be treated as consideration for the W.P. (C) 6370/2008                   Page 8 of 17

taxable service provided or to be provided and shall be included in
the value for the purpose of charging service tax  on the said
service.
(2)  Subject to the provisions of sub-rule (1), the expenditure or
costs incurred by the service provider as a pure agent of the
recipient of service, shall be excluded from the value of the taxable
service if all the following conditions are satisfied, namely: -
  the service provider acts as a pure agent of the
recipient of service when he makes payment to third
party for the goods or services procured;
  the recipient of service receives and uses the goods or
services so procured by the service provider in his
capacity as pure agent of the recipient of service;
  the recipient of service is liable to make payment to the
third party;
  the recipient of service authorities the service provider
to make payment on his beahfl;
  the recipient of service knows that the goods and
services for which payment has been made by the
service provider shall be provided by the third party;
  the payment made by the service provider on behalf of
the recipient of service has been separately indicated in
the invoice issued by the service provider to the
recipient of service;
  the service provider recovers from the recipient of
service only such amount as has been paid by him to
the third party; and
  the goods or services procured by the service provider
from the third party as a pure agent of the recipient of
service are in addition to the services he provides on
his own account.
Explanation 1 : For the purposes of sub-rule (2), “pure agent”
means a person who –
  enters into a contractual agreement with the recipient
of service to act as his pure agent to incur expenditure
or costs in the course of providing taxable service; W.P. (C) 6370/2008                   Page 9 of 17

  neither intends to hold nor holds any title to the goods
or services so procured or provided  as pure agent of
the recipient of service;
  does not use such goods or services so procured; and
  receives only the actual amount incurred to procure
such goods or services.
Explanation 2 : For the removal of doubts it is clarified that the
value of the taxable service is the total amount of consideration
consisting of all components of the taxable service and it is
immaterial that the details of individual components of the total
consideration is indicated separately in the invoice.
Illustration 1 : X contracts with Y, a real estate agent to sell his
house and thereupon Y gives an advertisement in television. Y
billed X including charges for Television advertisement and paid
service tax on the total consideration billed. In such a case,
consideration for the service provided is what X pays to Y. Y does
not act as an agent behalf of X when obtaining the television
advertisement even if the cost of television advertisement is
mentioned separately in the invoice issued by X. Advertising
service is an input service for the estate agent in order to enable or
facilitate him to perform his services as an estate agent.
Illustration 2 :  In the course of providing a taxable service, a
service provider incurs costs such as traveling expenses, postage,
telephone, etc., and  may indicate these items separately on the
invoice issued to the recipient of service. In such a case, the
service provider is not acting as an agent of the recipient of service
but procures such inputs or input service on his own account for
providing the taxable service. Such expenses do not become
reimbursable expenditure merely because they are indicated
separately in the invoice issued by the service provider to the
recipient of service.
Illustration 3 :  A contracts with B, an architect for building a
house. During the course of providing the taxable service, B incurs
expenses such as telephone charges, air travel tickets, hotel
accommodation, etc., to enable him to effectively perform the
provision of services to A. In such a case, in whatever form B
recovers such expenditure from A, whether as a separately
itemised expense or as part of an inclusive overall fee, service tax
is payable on the total amount charged by B. Value of the taxable
service for charging service tax is what A pays to B. W.P. (C) 6370/2008                   Page 10 of 17

Illustration 4 : Company X provides a taxable service of rent-a-cab
by providing chauffeur-driven cars for overseas visitors. The
chauffeur is given a lump sum amount to cover his food and
overnight accommodation and any other incidental expenses such
as parking fees by the Company X during the tour. At the end of
the tour, the chauffeur returns the balance of the amount with a
statement of his expenses and the relevant bills. Company X
charges these amounts from the recipients of service. The cost
incurred by the chauffeur and billed to the recipient of service
constitutes part of gross amount charged for the provision of
services by the company X.”

10.  The contention of the petitioner that Rule 5(1) of the Rules, in as much as  it
provides that all expenditure or costs incurred by the service provider in the course
of providing the taxable service shall be treated as consideration for the taxable
service and shall be included in the value for the purpose of charging service tax
goes beyond the mandate of Section 67 merits acceptance.  Section 67 as it stood
both before 01.05.2006 and after  has been set out hereinabove.  This section
quantifies the charge of service tax provided in Section 66, which is the charging
section.  Section 67, both before and after 01.05.2006 authorises the determination
of the value of the taxable service for the purpose of charging service tax under
Section 66 as the gross amount charged by the service provider  for such service
provided or to be provided by him, in a case where the consideration for the
service is money.  The underlined words i.e. “for such service” are important in the
setting of Section 66 and 67.  The charge of service tax under Section 66 is on the
value of taxable services.  The taxable services are listed in Section 65(105).  The
service provided by the petitioner falls under clause (g).  It is only the value of
such service  that is  to say, the value of the service rendered by the petitioner to
NHAI, which is that of a consulting engineer, that can be brought to charge  and
nothing more.  The quantification of the value  of the service can therefore never
exceed the gross amount charged by the service provider for the service provided
by him.  Even if the rule has been made under Section 94 of the Act which
provides for delegated legislation and authorises the Central Government to make
rules by notification in the official gazette, such rules can only be made “for W.P. (C) 6370/2008                   Page 11 of 17

carrying out the provisions of this Chapter” i.e. Chapter  V  of the Act which
provides for the levy, quantification and collection of the service tax.  The power
to make rules can never exceed or go beyond the section which provides for the
charge or collection of the service tax.
11.  In the aforesaid backdrop of the basic features of any legislation on tax, we
have no hesitation in ruling that Rule 5 (1) which provides for inclusion of the
expenditure or costs incurred by the service provider in the course of providing the
taxable service in the value for the purpose of charging service tax is  ultra vires
Section 66 and 67 and travels much beyond the scope of  those sections.  To that
extent it has to be struck down as bad in law.  The expenditure or costs incurred by
the service provider in the course of providing the taxable service can never be
considered as the gross amount charged by the service provider “for such service”
provided by him.  The illustration 3 given below the Rule amplifies what is meant
by  sub-rule (1).  In the illustration given, the architect who renders the service
incurs expenses such as telephone charges, air travel tickets, hotel accommodation,
etc. to enable him to effectively perform the services.  The illustration, therefore,
says that these expenses are to be included in the value of the taxable service.  The
illustration clearly shows how the boundaries of Section 67 are  breached by the
Rule.  Apart from travelling beyond the scope and mandate of the Section, the Rule
may also result in double taxation.  If the expenses on air travel tickets are already
subject to service tax and is included in the bill, to charge service tax again on the
expense would certainly amount  to  double taxation.  It is true that there can be
double taxation, but it is equally true that it should be clearly provided for and
intended; at any rate, double taxation  cannot be enforced by implication.  A
Constitution Bench of the Supreme court in Jain Brothers v. Union of India, (1970)
77 ITR 107 observed as follows, expounding the principles relating to double
taxation: -
“It is not disputed that there can be double taxation if the
legislature has distinctly enacted it.  It  is only when there are
general words of taxation and they have to be interpreted, they W.P. (C) 6370/2008                   Page 12 of 17

cannot be so interpreted as to tax the subject twice over to the
same tax (vide Channell J. in Stevens v. Durban-Roodepoort Gold
Mining Co. Ltd.).  The Constitution does not contain any
prohibition against double taxation even if it be assumed that such
a taxation is involved in the case of a firm and its partners after the
amendment of section 23(5) by the Act of 1956.  Nor is there any
other enactment which interdicts such taxation.  It is true that
section 3 is the general charging section.  Even if section 23(5)
provides for the machinery for collection and recovery of the tax,
once the legislature has, in clear  terms, indicated that the income
of the firm can be taxed in accordance with the Finance Act of
1956 as also the income in the hands of the partners, the
distinction between a charging and a machinery section is of no
consequence.  Both the sections have  to be read together and
construed harmoniously.  It is significant that similar provisions
have also been enacted in the Act of 1961.  Sections 182 and 183
correspond substantially to section 23(5) except that the old
section did not have a provision similar to sub-section (4) of
section 182.  After 1956, therefore, so far as registered firms are
concerned the tax payable by the firm itself has to be assessed and
the share of each partner in the income of the firm has to be
included in his total income and  assessed to tax accordingly.  If
any double taxation is involved the legislature itself has, in express
words, sanctioned it.  It is not open to any one thereafter to invoke
the general principles that the subject cannot be taxed twice over.”
12.  There is ample authority for the proposition that the rules cannot override
or overreach the provisions of the main enactment.   In Central Bank of India v.
Their Workmen, AIR 1960 SC 12, a Constitution Bench of the Supreme Court was
concerned with the Banking Companies Act, 1949.  Section 10 of the Act prohibit
the grant of industrial bonus to bank employees in as much as such bonus is
remuneration which takes the form of a share in the profits of the banking
company.  Rule 5 of the Banking Companies Rules, 1949, which were statutory
rules, required a banking company to send periodically  to the principle office of
the Reserve Bank a statement in Form-I showing the remuneration paid during the
previous calendar year to officers of the company.  In a footnote to the Form, it
was stated that remuneration includes salary, house allowance, dearness allowance,
bonus, fees and allowances to Directors, etc.  The contention was that Rule 5
enlarged the meaning and content of Section 10.  The contention was repelled but W.P. (C) 6370/2008                   Page 13 of 17

not on  the ground that the rule can validly enlarge the content of the Section, but
on the ground that the Section itself used the word “remuneration” in the widest
sense.  It was however acknowledged by the Court that the Rule cannot go beyond
the statute.  The relevant observations are: -
“We do not say that a statutory  rule can enlarge the meaning of
S.10; if a rule goes beyond what the Section contemplates, the rule
must yield to the statute.  We have, however, pointed out earlier
that S.10 itself uses the word “remuneration” in the widest sense,
and R.5 and Form-I are to that extent in consonance with the
Section.”
It has not been suggested in the present case that the words “consideration in
money” or “the gross amount charged” themselves have been used in section 67 in
the widest sense of including the amounts collected by the service provider for his
travel, hotel stay,  transportation  and other out of pocket expenses.  These words
have been defined in the Explanation below the section and it is significant that the
out of pocket expenses such as travel, hotel stay, transportation etc. have not been
included in those expressions. 
13.  In  Babaji Kondaji Garad v. Nasik Merchants Co-operative Bank Ltd.,
(1984) 2 SCC 50, the Supreme Court (Three-Judge Bench) observed as under: -
“Now if there is any conflict between a statute and the subordinate
legislation, it does not  require elaborate reasoning to  firmly state
that  the statute prevails over subordinate legislation and the bye-
law, if not in conformity with the statute in order to give effect to
the statutory provision the Rule or bye-law has to be ignored.  The
statutory provision has precedence and must be complied with.”

14.  A learned  single Judge of this Court in Devi Datt v. Union of India, AIR
1985 Delhi 195 held that though the language of Rule 102 of the  Displaced
Persons (Compensation and Rehabilitation) Rules, 1955 was wider in its ambit and
covered the properties comprised in the compensation bill and entrusted to a
managing officer for management, “but obviously the said rule has to be construed W.P. (C) 6370/2008                   Page 14 of 17

in the light of the parent Section and it cannot be construed as enlarging the scope
of Section 19 itself.  It is a well settled canon of construction that the Rules made
under a statute must be treated exactly  as if they were in the Act and  are of the
same effect as if contained in the Act.  There is another principle equally
fundamental to the rules of construction, namely, that the Rules shall be consistent
with the provisions of the Act.  Hence, Rule 102 has  to be construed in conformity
with the scope and ambit of Section 19 and it must be ignored to the extent  it
appears to be inconsistent with provisions of Section 19”.  In making these
observations, the learned single Judge referred to and followed the judgment of the
Supreme Court in State of Uttar Pradesh v. Babu Ram Upadhyay, AIR 1961 SC
751.
15.  In the tax jurisprudence  the position is no different and  it has been held in
CIT v. S.Chenniappa Mudaliar, (1969) 74 ITR 41 that if a rule clearly comes into
conflict with the main enactment or if there is any repugnancy  between the
substantive provisions of the Act and the Rules made therein,  it  is the rule which
must give way to the provisions of the Act.  In Bimal Chandra Banerjee v. State of
M.P. and Ors., (1971) 81 ITR 105, Hegde J. was examining the provisions of the
M.P. Excise Act, 1915.  The legislature levied excise duty only on those articles
which came within the scope of Section 25 of that Act.  The rule-making authority,
which was the State Government, purported to levy duty on articles which did not
fall within the scope of the Section.  Holding this act of the State Government to be
ultra vires the Section, it was observed as under: -
“No tax can be imposed by any bye-law or  rule or  regulation
unless the statute under which the subordinate legislation is made
specially authorises  the  imposition even if it is assumed that the
power to tax can be delegated to the executive.  The basis of the
statutory power conferred by the statute cannot be transgressed by
the rule making authority.  A rule making authority has no plenary
power.  It has to act within the limits of the power granted to it.
16.  In CIT, Andhra Pradesh v. Taj Mahal Hotel, (1971) 82 ITR 44 it was held
by the Supreme Court that  W.P. (C) 6370/2008                   Page 15 of 17

“the  Rules  were meant only for the purpose of carrying out the
provisions of the Act and they could not take away what was
conferred by the Act or whittle down its effect.”
17.  In Commissioners of Customs and Excise v. Cure and Deeley Ltd., (1961) 3
WLR 788 (QB) the facts were these.  Section 33(1) of the Finance Act, 1940 of the
United Kingdom enacted  that the Commissioners might make regulations
providing for any method for which provision appeared to them to be necessary for
the purpose of giving effect to the provisions of the Act and of enabling them to
discharge  the  functions.  The Commissioners framed  Regulation  12 of the
Purchase Tax Regulations, 1945.   It stated that if any person failed to furnish a
return as required by the regulation or furnished an incomplete return, then the
Commissioners could determine the amount of tax appearing  to  them to be due
from such person, and demand payment thereof.  Such amount determined by the
Commissioners was to be deemed to be the proper tax due from such person and
the tax had to be paid within 7 days of the demand.  The regulations did not
provide for any appeal or for taking up the decision of the Commissioners to any
Court of law.  The validity of the regulation came up for consideration before the
Court.  Sachs J., observed as follows: -
“To my mind a Court is bound before reaching a decision on the
question whether a regulation is intra vires to examine the nature,
objects, and scheme of the piece of legislation as a whole, and in
the light of that examination to consider exactly what is the area
over which powers are given by the  section under which the
competent authority is purporting to act.”
It was ultimately held by the Court that  Regulation  12 was  ultra vires  on  three
grounds.  One of the grounds,  which  is relevant for our purpose, was that the
regulation rendered the subject liable to pay such tax as the Commissioner believed
to be due whereas the charging Section imposed a liability to pay such tax as  in
law was due.
18.  Section 66 levies service tax  at  a particular rate on the value of taxable
services.  Section 67 (1) makes the provisions of the  section subject to the W.P. (C) 6370/2008                   Page 16 of 17

provisions of Chapter V, which includes Section 66.  This is a clear mandate that
the value of taxable services for charging service tax has to be in consonance with
Section 66 which levies a tax only on the taxable service and nothing else.  There
is thus in built mechanism to ensure that only the taxable service shall be evaluated
under the provisions of 67.  Clause (i) of sub-section (1) of Section 67 provides
that the value of the taxable service shall be the gross amount charged by the
service provider “for such service”.  Reading Section 66 and Section 67 (1) (i)
together and harmoniously, it seems clear to us that in the valuation of the taxable
service, nothing more and nothing less than the consideration paid as quid pro quo
for the service can be brought to charge.  Sub-section (4) of Section 67 which
enables the determination of the value of the taxable service “in such manner as
may be prescribed”  is expressly made subject to the provisions of sub-section (1). 
The thread which runs through Sections 66, 67 and Section 94, which empowers
the Central Government to make rules for carrying out the provisions of Chapter V
of the Act is manifest, in the sense that only  the  service actually provided by the
service provider can be valued and assessed to service tax.  We are, therefore,
undoubtedly of the opinion that Rule 5 (1) of the Rules runs counter and is
repugnant to Sections 66 and 67 of the Act and to that extent it is ultra vires.  It
purports to tax not what is due from the service provider under the charging
Section, but it seeks to extract something more from him by including in the
valuation of the taxable service the other expenditure and costs which are incurred
by the service provider “in the course of providing taxable service”.  What is
brought to charge under the relevant Sections is only the consideration for the
taxable service.  By including the expenditure and costs, Rule 5(1) goes far beyond
the  charging provisions and cannot be upheld.  It is no answer to say that under
sub-section (4) of Section 94 of the Act, every  rule framed by the Central
Government shall be laid before each House of Parliament and that the House has
the  power to modify the  rule.  As pointed out by the Supreme Court in Hukam
Chand v. Union of India, AIR 1972 SC 2427: - W.P. (C) 6370/2008                   Page 17 of 17

“The fact that the rules framed under the Act have to be laid before
each House of Parliament would not confer validity on a rule if it
is made not in conformity with Section 40 of the Act.”
Thus Section 94 (4) does not add any greater force to the Rules than what they
ordinarily have as species of subordinate legislation.
19.  For the above reasons we quash the impugned show-cause notice and allow
the writ petition with no order as to costs.

 
(R.V. EASWAR)
                                                                      JUDGE



                                                                                      (S. RAVINDRA BHAT)
          JUDGE
NOVEMBER 30, 2012
hs
 


Sunday, November 11, 2012

EXTENDED PERIOD OF LIMITATION - JUDGEMENTS FROM JUDIS AND TIOL




IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL

SOUTH ZONAL BENCH AT BANGALORE
COURT - I

Cross Objection & Appeal No: ST/CO/27/2011 in ST/721/2010

 (Arising out of Order-in-Appeal No.3/2009 ST dt.5.1.2010 passed by the Commissioner of Central Excise, Bangalore.)
Date of Hearing: 28.09.2011
Date of decision: 28.09.2011

The Commissioner of Service Tax
Bangalore.
Appellant


Vs.

M/s. Gowri Computers (P) Ltd.
Respondent

Appearance

For the appellants : Ms. Sabrina Cano, DR for the department.
For the respondents : Mr. Pradyumna G.H, Advocate for the assessee

CORAM

SHRI P. G. CHACKO, HON BLE MEMBER (JUDICIAL)

FINAL ORDER No._______________________2011


      In the appeal filed by the department, the short question to be considered is whether the lower appellate authority is right in having set aside the penalties imposed on the assessee by the original authority under Sections 76 and 78 of the Finance Act, 1994. The assessee (respondent in the Revenue s appeal) has filed a counter styled as Cross Objection and inappropriately registered by the registry. I have examined the grounds of the appeal and the submissions of the respondent and have also heard both sides.

2.   There was a dispute between the assessee and the department as to whether the former was liable to pay Service Tax under the head Commercial Training and Coaching Service over a period including the period from 27.9.2004 to 8.3.2005. The assessee had not paid Service Tax even after collecting it from the students (service recipients) during the said period, nor had they filed Service Tax returns. However, during the course of investigations launched by the department, the party paid Service Tax with interest thereon for the period from 27.9.2004 to 8.3.2005. This payment was made on 13.8.2005. The department issued a show-cause notice on 9.1.2006 for appropriating this payment under Sections 73 and 75 of the Finance Act, 1994 and imposing penalties on the party under Sections 76 to 78 of the Act. The proposal to impose penalties was contested. The Assistant Commissioner (adjudicating authority) confirmed the demand of Service Tax of Rs.1,95,436/- and interest of Rs.8,254/- against the assessee under Sections 73 and 75 respectively and appropriated the payment towards the demand. He imposed a penalty of Rs.100 per day on them under Section 76 and a penalty equal to Service Tax under Section 78 of the Act. In an appeal filed by the assessee, learned Commissioner (Appeals) set aside both the penalties by relying on the Board s Circular No.137/167/2006-CX-4 dated 3.10.2007. The decision of the Commissioner (Appeals) was reviewed in the department. Hence the present appeal.

3.   Learned DR submits that the Board s circular is not applicable to this case as this case involves suppression of facts and contravention of Rules by the assessee with intent to evade payment of Service Tax. It is submitted that this case is governed by Section 73(1A) of the Act and that the provisions of Section 73(3) of the Act are not applicable. Learned DR has also claimed the benefit of the following decisions :

(i) Kedia Business Centre Vs. CCE, Mumbai-I - 2009 (15) STR 550 (Tri.-Mumbai)
(ii) Global Telecom Vs. CST, Mumbai - 2009 (15) STR 553 (Tri.-Mumbai)

4.   Learned counsel for the respondent submits that any suppression of taxable value of the service was not alleged in the show-cause notice and also that a major part of the demand of Service Tax is within the normal period of limitation as reckoned from the due date of filing Service Tax returns. In this connection, reliance is placed on Ashpra Textiles Pvt. Ltd. Vs. CCE, Mumbai-II - 2010 (253) ELT 138 (Tri.-Mumbai). Therefore, according to the learned counsel, the show-cause notice cannot be considered to have been issued under the proviso to Section 73(1) of the Finance Act, 1994 and consequently there can be no penalty on the respondent under Section 78 of the Act. It is also argued that the respondent cannot be penalized under Section 76 in view of the Board s circular. Finally, it is urged that the appeal of the Revenue be dismissed.

5.   Neither of the rival arguments can be accepted in toto. The show-cause notice in this case was issued on 9.1.2006 principally for confirming demand of Service Tax against the assessee for the period from 27.9.2004 to 8.3.2005. The demand for the said period barring a few days (27th to 30th September 2004) was within the normal period of limitation as reckoned from the due date of filing Service Tax returns. This fact is not in dispute. Though, in the show-cause notice, there was a proposal to impose penalty under Section 78 of the Act for willful suppression of the value of taxable services rendered by them , there was no allegation of any such suppression elsewhere in the notice in the context of demanding / appropriating Service Tax. Nowhere in the show-cause notice was there any specific allegation of suppression of taxable value, nor was it stated as to how much of the taxable value was suppressed. The show-cause notice also did not allege any of the other ingredients of the proviso to Section 73 (1) of the Act for invoking the extended period of limitation. In this scenario, it can hardly be inferred that the show-cause notice invoked the proviso to Section 73(1) of the Act. Mere mention of the proviso to Section 73(1) of the Act in the operative part of the show-cause notice would not suffice. It has, therefore, to be held that the proviso was not invoked by the department. Consequently the appellant s prayer for imposing penalty on the respondent under Section 78 is not acceptable.

6.   The Board s circular dated 3.10.2007 deals with two situations. In one situation, Section 73(1A) of the Finance Act, 1994 (which proviso is no more in the statute book today) is invoked in the show-cause notice and the noticee pays Service Tax with interest thereon along with penalty equal to 25% of the Service Tax within 30 days of receipt of the notice. In such a situation, as per the Board s clarification, the payments so made by the party should conclude the adjudication proceedings. In other words, the party will have no further liability including penalty. In the second situation, a person liable to pay Service Tax self-determines it and pays it up before service of show-cause notice on him. Alternatively, he makes the payment as determined by a Central Excise Officer before issue of show-cause notice. In either case, the payment is made under intimation to the Central Excise Officer whereupon no show-cause notice shall be served on the party in respect of the amount paid. According to the Board s circular, such payments made by the party should conclude all proceedings against them.

7.   Neither sub-section (1A) nor sub-section (3) of Section 73 is applicable to the facts of this case and, therefore, the Board s clarification is irrelevant. This apart, the Board s clarification under Section 73(3) of the Act seems to be incorrect inasmuch as this provision only prohibits issue/service of show-cause notice under sub-section (1) in respect of the amount paid by the party. The amount paid by the party is an amount of Service Tax. As per Section 73(3), there shall be no show-cause notice under sub-section (1) of Section 73 in respect of the Service Tax already paid by the party. There is no bar to issuance of a show-cause notice for imposing a penalty. The Board s clarification on the point, therefore, does not disclose the correct legal position.

8.   Reverting to the penal issue, I have, now, to consider the question whether the respondent is liable to be penalized under Section 76 of the Act. Default of payment of Service Tax from 27.9.2004 to 8.3.2004 is an admitted fact. The Service Tax for that period was paid only in August 2005. Such default in payment of Service Tax would per se invite Section 76 as rightly found by the original authority. Indeed, nobody has argued before me that Section 76 is not applicable to cases involving default of payment of Service Tax. Therefore the decision of the lower appellate authority in relation to Section 76 of the Finance Act, 1994 cannot be accepted. The original authority imposed penalty at the rate of Rs.100 per day in terms of Section 76, which is correct in law.

9.   In the result, the Revenue s appeal is partly allowed by restoring the penalty imposed by the original authority under Section 76 of the Finance Act, 1994. The respondent shall pay this penalty without unreasonable delay. The Cross Objection is also disposed of for the records.

(Pronounced and dictated in Open Court)






(P. G. CHACKO)
Member (Judicial)



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    IN THE ,CUSTOMS, EXCISE & SERVICE TAX
 APPELLATE TRIBUNAL
 SOUTH ZONAL BENCH, FKCCI  COMPLEX, K.G. ROAD,
BANGALORE  56009.

                            DATE OF HEARING  : 30/3/2011
                     DATE OF DECISION : 30/3/2011

Cross Objection No. 56/2007
                 Service Tax  Appeal No. 194 of 2006

[Arising out of Order-in-Appeal No. 56/2006 Central Excise dated 28.4.2006, passed by the Commissioner of Central Excise (Appeals), Bangalore)

For approval and signature:

Hon ble Shri M. V. Ravindran, Member (Judicial)
Hon ble Shri P. Karthikeyan, Member (Technical)

1    Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?  No
2.   Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not ?   No
3.   Whether Their Lordships wish to see the fair copy of the Order?     Seen
4.   Whether Order is to be circulated to the Departmental authorities?     Yes


Commissioner of Service Tax,                      Appellant
Bangalore.


Vs.


M/s Indian Institute of Management,               Respondent
Bangalore.


Present for the Appellant  :  Shri D. P. Nagendra Kumar, Jt. CDR
Present for the Respondent : S/Shri ARJ Nayak & Sai Prasad, Advocates

CORAM : Hon ble Shri M. V. Ravindran, Member (Judicial)
     Hon ble Shri  P. Karthikeyan, Member (Technical)

     ORDER No..Dated 30/3/2011

PER :  M. V. RAVINDRAN
This appeal is filed by the Revenue against the Order-in-Appeal No. 56/2006-Central Excise dated 28.4.2006.  The assessee has also filed Cross Objection No. ST/Cross/56/2007 against the same Order-in-Appeal. Since the issue involved has arisen out of the same impugned order, both the appeal filed by the Revenue as well as the Cross Objection filed by the assessee are disposed of  by this common order.

2.   The facts of the case for consideration are that the respondent herein  periodically conducts Campus Recruitment Programme in which various business organizations participate and select the candidates for employment in their organizations. The institute collects fees from the companies for participation and for recruitment of the candidates separately.  The Revenue authority is of the view that the activity undertaken by the respondent is covered under Manpower Recruitment Agency attracting service tax under the provisions of Finance Act, 1994.   It is undisputed that in this case, the entire period is prior to 1.5.2006.  The adjudicating authority had held against the respondent herein.  Against such an order, the respondent had  filed an appeal before the Commissioner (Appeals).  The Commissioner (Appeals) allowed the appeal filed by the respondent and set aside the Order-in-Original by recording the following findings :
From the definition of Commercial Concern and definition of commercial provided in various dictionaries it is very clear that a commercial concern must be engaged in business or trade having profit as the primary aim.  An educational institution such as Indian Institute of Management which is solely engaged in imparting education and at times facilitates recruitment on their campus through interviews which is incidental or ancillary to their main objective cannot be called as a commercial concern, as they are not engaged in trade or commerce.   Further the essence of trade or commerce viz., the profit motive.   No commercial concern does the business for the sake of business without a profit motive.   The case law cited by the appellants in the case of Deputy Commissioner Vs. South India Textile Research Association and State of Tamil Nadu Vs. Cement Research Institute are very  much relevant and the ratio of decisions rendered are squarely applicable to the appellants case.
    
In view of the above I hold that the appellants are not a commercial concern for the purpose of charging service tax under the category manpower recruitment agency.

The adjudicating authority in her order observed that the appellants have registered themselves with the service tax department for Management Consultancy Service , therefore they should have registered themselves and paid service tax under the category of man power recruitment agency also.  This observation is meaningless., because in the definition of management consultant the term commercial concern is not found and whoever renders management consultancy services including institutes like Indian Institute of Management should pay service tax.
    
Regarding demand made for five years under Section 73 of the Finance Act, 1994, it is seen that the show cause notice does not contain any allegation about fraud, collusion, suppression of facts with an intent to evade payment of service tax.  The adjudicating authority also agreed that the appellant had reasonable cause for failure to register themselves to pay service tax on the impugned service.   This being the case demanding service tax for extended period of five years is not tenable.

In view of the foregoing facts, I set aside the impugned Order-in-Original and allow the appeal.

Aggrieved by such an order, the Revenue filed an appeal before the Tribunal.

3.   The learned Jt. CDR reiterates the Grounds of Appeal which are as under :
(i) The order of the Commissioner (Appeals) in setting aside the OIO is not correct in fact or in law.  It is an undisputed fact that the Institute is organizing / conducting periodical Campus Recruitment programmes and various business organizations participate in the said programmes and recruit the students / candidates for employment in their organizations.  As a consideration towards service, the Institute collects fee from all the business organizations for participation and for recruitment of the candidates separately.  It is admitted fact that the Institute receives a consideration for the services provided by them.  Therefore, the activity of the Institute in allowing interviews inside their campus for a consideration is an activity of Commercial Concern.  The activity of the Institute to facilitate Recruitment to various business organizations, even if undertaken at times, merits to be categorized under Manpower Recruitment Agency , as defined under Section 65 (68) of the Finance Act, 1994.  The reference to various dictionary meanings by the Commissioner (Appeals) is not correct, as the expression Commercial Concern is defined in the Collection of Statistics Act, 1953 (32 of 1953), an Act of the Parliament.  It is well settled that the expression defined in any law will prevail over dictionary meanings.

(ii) Indian Institute of Management, Bangalore is an academic institution.  However, nothing prevents them to get themselves engaged in activities of commercial concern.  Whenever the Institution provides services of the aforesaid nature viz., recruitment, the institution becomes a commercial concern and accordingly, the said services rendered shall be taxable under Section 65 (68) of the Finance Act, 1994.

(iii) The Commissioner (Appeals) erroneously held that the demanding of Service Tax invoking the extended period of five years is not tenable.  In this case, the Institute was engaged in the activity of providing taxable service of Manpower Recruitment Agency .  They have (i) failed to obtain Registration under Section 69 of the Act in respect of the above services; (ii) failed to pay appropriate Service Tax on the taxable value realized by them, as required under Section 68 of the Act and (iii) failed to file periodical ST-3 returns under Section 77 of the Act.   They had not informed the Department of their activity pertaining to above service or its taxable value in any other manner.  The evasion of Service Tax is clearly established from the facts of the case.  The assessee violated the provisions of law with intent to evade payment of Service Tax.  Therefore, the extended period of five years under Section 73 (1) of the Act as invoked in the show cause notice is legally tenable.  In view of the above, the impugned OIA is not proper nor legal and is liable to be set aside.

4.   The learned Counsel on behalf of the respondent submits that the period involved in this case is prior to 1.5.2006 and the Board vide Circular No. 86/4/2006-ST dated 1.11.2006 has clarified that the institutes like IITs or IIMs were not liable to pay service tax for the period  prior to 1.5.2006.   It is the submission that the cross objection filed by the assessee is nothing but in support of the order of the Commissioner (Appeals).

5.   On a careful consideration of the submissions made by both sides, we find that the finding of the Commissioner (Appeals) as reproduced in Para 2 above is squarely as per law settled by various judicial fora.  It is undisputed that the definition of manpower recruitment or supply agency prior to 1.5.2006, was indicating  any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment of supply of manpower, temporarily or otherwise, to a client. However with effect from 1.5.2006, the words commercial concern have been replaced by the words any person .   This would indicate that the Government is of the view that prior to 1.5.2006, services rendered by the institutes which are not commercial concern would not fall under the service tax net.    Since the issue involved in this case is prior to 1.5.2006 is squarely covered various judicial fora and followed by Government s view, we hold that the impugned order passed by the Commissioner (Appeals) is correct and legal and does not suffer from any infirmity.   The appeal filed by the Revenue is dismissed.  Cross Objection filed by the assessee in support of the impugned order is also disposed.
(Pronounced and dictated in the open court)


   (P. Karthikeyan)                                      (M. V. Ravindran)
Member (Technical)                                   Member (Judicial)

/vc/






















IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI


ST/219/2009
                        

 [Arising out of Order-in-Original No.01/2009 dated 05.01.2009  passed by the Commissioner of
Central Excise, Chennai-III]


M/s. T.V.S. Motor Company Limited
Appellant

        
                              Versus
    

Commissioner of  Central
Excise, Chennai-III
Respondent


Appearance :

None
Shri V.V. Hariharan, JCDR
For the Appellant
For the Respondent

                
                           Heard and reserved on: 7.6.2012                                       
                                     Pronounced:   13.6.2012  

CORAM: 


Dr.  Chittaranjan Satapathy, Hon ble Technical Member
Shri D.N. Panda,  Hon ble  Judicial Member


Final Order No.652/2012 dt.13.6.2012


Per D.N. Panda


1.   Pursuant to Miscellaneous Order No.258/2011  passed by the Bench on 6.6.2011 against Revenue s application dated 30.11.2009 for early hearing, this matter  came up for hearing today after 3 (Three) years of passing Stay order vide No.411/2009  dt. 18.5.2009 granting full waiver of predeposit to the appellant against service tax demand of Rs.1,65,53,563/- followed by levy of equal amount of penalty imposed under Section 78 of Finance Act, 1994 (hereinafter referred to as the Act ) and interest on the said service tax demanded.  
2.   None present for Appellant even though the matter was repeatedly called  and  stay order as well as Miscellaneous order aforesaid disclosed  name of Shri K.S. Venkatagiri and  Shri V. Panchanathan learned  Counsels respectively in the case.
3. An application addressed to the Assistant Registrar of  Tribunal and signed by an unnamed person  for Lakshmikumaran and Sridhanan was filed  in Court today and none was found to be present to state  reasons of default of Appellant or its Authorized Representative.  The application stated  that the matter is listed today for final hearing at serial number 37 and Shri K.S. Venkatagiri, Advocate who is authorized to appear in this matter  is unable to appear due to his personal reasons.  Prayer was  made  therein  to adjourn to a short date after  two weeks.     
4.   The application  aforesaid not being signed naming the signatory, an enquiry was made from record to ascertain whether any Vakalatnama of Sri K.S. Venkatagiri is existing on record.  But on thorough scrutiny of record containing 8 pages of order sheets  and 278 pages  appeal memo    and other papers (in appeal folder I) no vakalatnama  was found on record.  The Court Master accordingly noted as under:     
     No vakalatnma has been filed by any one
         in this case.  Shri K.S.Venkatagiri, Advocate
         who sought for adjournment has also not filed
         vakalat.      

5.   Record further revealed that although early hearing application of Revenue was allowed on 6.6.2011, for hearing the matter on 11.8.2011, due to no Benches available,  the matter was adjourned from time to time  on 3 (three) occasions  and finally came up to Board today.  It is also apparent from record   that the  adjournments were noted under some signatures.      
6.   Law is laid down by Apex Court in para 21 of the judgment in the case of Uday Sankar Triyar  Vs.  Ram Kalesawar Prasad Singh and Anr.  AIR 2006 SC 269  with regard to filing up proper Vakalatnama in a proceeding before Courts. which reads as under:
  21.?We may at this juncture digress and express our concern in regard to the manner in which defective Vakalatnamas are routinely filed in courts. Vakalatnama, a species of Power of Attorney, is an important document, which enables and authorizes the pleader appearing for a litigant to do several acts as an Agent, which are binding on the litigant who is the principal. It is a document which creates the special relationship between the lawyer and the client. It regulates and governs the extent of delegation of authority to the pleader and the terms and conditions governing such delegation. It should, therefore, be properly filled/attested/accepted with care and caution. Obtaining the signature of the litigant on blank Vakalatnamas and filling them subsequently should be avoided. We may take judicial notice of the following defects routinely found in Vakalatnamas filed in courts :
(a)  Failure to mention the name/s of the person/s executing the Vakalatnama, and leaving the relevant column blank;
(b)  Failure to disclose the name, designation or authority of the person executing the Vakalatnama on behalf of the grantor (where the Vakalatnama is signed on behalf of a company, society or body) by either affixing a seal or by mentioning the name and designation below the signature of the executant (and failure to annex a copy of such authority with the Vakalatnama).
(c)  Failure on the part of the pleader in whose favour the Vakalatnama is executed, to sign it in token of its acceptance.
(d)  Failure to identify the person executing the Vakalatnama or failure to certify that the pleader has satisfied himself about the due execution of the Vakalatnama.
(e)  Failure to mention the address of the pleader for purpose of service (in particular in cases of outstation counsel).
(f)  Where the Vakalatnama is executed by someone for self and on behalf of someone else, failure to mention the fact that it is being so executed. For example, when a father and the minor children are parties, invariably there is a single signature of the father alone in the Vakalatnama without any endorsement/statement that the signature is for self and as guardian of his minor children . Similarly, where a firm and its partner, or a company and its Director, or a Trust and its trustee, or an organisation and its officebearer, execute a Vakalatnama, invariably there will be only one signature without even an endorsement that the signature is both in his/her personal capacity and as the person authorized to sign on behalf of the corporate body/firm/society /organisation.
(g)  Where the Vakalatnama is executed by a power-of-attorney holder of a party, failure to disclose that it is being executed by an Attorney-holder and failure to annex a copy of the power of attorney;
(h)  Where several persons sign a single vakalatnama, failure to affix the signatures seriatim, without mentioning their serial numbers or names in brackets. (Many a time it is not possible to know who have signed the Vakalatnama where the signatures are illegible scrawls);
(i)  Pleaders engaged by a client, in turn, executing vakalatnamas in favour of other pleaders for appearing in the same matter or for filing an appeal or revision. (It is not uncommon in some areas for mofussil lawyers to obtain signature of a litigant on a vakalatnama and come to the seat of the High Court, and engage a pleader for appearance in a higher court and execute a Vakalatnama in favour of such pleader).
We have referred to the above routine defects, as Registries/ Offices do not verify the Vakalatnamas with the care and caution they deserve. Such failure many a time leads to avoidable complications at later stages, as in the present case. The need to issue appropriate instructions to the Registries/Offices to properly check and verify the Vakalatnamas filed requires emphasis. Be that as it may [Emphasis supplied].   
7.   Following aforesaid rulings  of Apex Court, Hon ble High Court of Delhi  disposing a writ petition W.P.No.2651 of 2009  on 8.10.2009  in the case of Deepak Khosla Vs. UOI directed as under: 
13.?We direct that henceforth while scrutinizing the vakalatnamas filed, be it in the Registry of this Court, the Subordinate Courts in Delhi or the Tribunals, Authorities and Foras in Delhi, failure/defect in the vakalatnamas, noted in sub paras a to e of Para 21 of the decision of the Supreme Court in Uday Shankar s case (supra), shall be treated as a deficiency in the execution of the vakalatnamas making liable the said vakalatnama to be returned Further, in the situation contemplated by sub paras f to i of Para 21 of the decision in Uday Shankar s case (supra), vakalatnamas not executed in the manner indicated in the said sub paras shall also be treated as a deficiency in the execution of the vakalatnama, making liable said vakalatnama to be returned.
14.?We are passing the directions in public interest for the reason even we have come across vakalatnamas which are filed in a most lackadaisical manner. Many a times, precious judicial time is lost in determining whether a proper representation is being made under a proper authority . [Emphasis   supplied]   
     The Hon ble Court further directed  as under; 
      ?   16.  The Registrar General of this Court is directed to make available a copy of this order to the Registry of this Court and to forward a copy thereof to all the District Judges in Delhi with a direction that strict compliance should be made with the letter and spirit of the law and our directions pertaining to execution of vakalatnamas. Similarly, to the Registrars of the Tribunals and Foras functioning in Delhi, a copy of this order may be sent for compliance. [Emphasis supplies]        

8.    It is surprising that in this case, Advocates  from the cited  law firm have appeared earlier and have obtained waiver of pre-deposit and stay without there being any vakalatnama in their favour.  In the absence of  a valid vakalatnama, they can neither be allowed to represent the appellants nor any adjournment request from them can be entertained. Hence, the adjournment request is declined.                
9.   Considering that the appeal is already 3 years old and prayer  of Revenue was to expeditiously dispose the appeal due to blockage of crores of rupees of tax and penalty involved in the appeal  as well as Appellant s knowledge of hearing  granted by the  Miscellaneous order aforesaid, the matter was taken up for hearing  with assistance of Representative for Revenue.  
10.  Heard Revenue.   
11.  Shri V.V. Hariharan, ld. Commissioner (AR) for Revenue submitted that for the period March 2004 to September 2007, the  Appellant was recipient of technical consultancy and project consultancy services from service providers abroad having no place of business in  India and such service falls under Consultancy Engineering Service.  The service so received being taxable service under the Act, the recipient was liable to pay service tax in terms of Section 66A of the Act read with Rule 2(1)(d)(v)  of the Service Tax Rules, 1994.  Admittedly the appellant paid service tax on the reduced value of  such taxable servicve without including the income  tax deducted at source under Income tax Law to the consultancy fees  paid to foreign consultant.   That resulted in short payment of service tax for which  adjudication was made and that resulted in proper demand  by adjudication order.  It was categorically submitted by Revenue  that  there was difference between   the value paid to foreign service provider and value disclosed in the service tax return giving rise to understatement of gross amount resulting in short  payment of service tax.   Tax deducted  at source under income tax law was not included in gross payment. Therefore,  adjudication order which levied service tax on the gross value of taxable service was correct and invocation of proviso to Section 73(1) of the Act was justified for which that  does not call for interference in the present appeal.  According tax, interest and penalty levied in adjudication should be upheld.             
12.  Examined the adjudication order thoroughly in absence of Appellant.       
13.  Record reveals that Learned Adjudicating Authority examined the Service tax  Returns of the appellant for the admitted  period i.e. March 2004 to September 2007 and considered pleadings of the appellant to complete adjudication to the best of his judgment when there was no proper  disclosure of gross amount  in the return. He confirmed adjudication for above period during which  technical consultancy and project consultancy services  were availed by appellant from abroad and nature of service remained undisputed. 
14.  One of the grounds of present appeal of appellant is that services rendered outside Indi were not liable to service tax prior to 18.4.2006 in view of no provision in that regard existed to realize service tax from service recipient.   There is no difference to this proposition when there was no law to tax the impugned service received from abroad  prior to 18.4.2006.  Section 66A was incorporated into the statute book  with effect from 18.4.2006 to tax the taxable services provided  by  foreign service providers having no permanent address or usual place of residence  in India.   The service so provided made  recipients of  the  service in India who have  their place of business or fixed establishment or permanent address or  usual place of residence is in India, liable to pay the service tax as if such service  is provided by the recipients in India.  Also Rule 2(i)(d)(iv) of Service tax Rules, 1994 made provision for recovery of service tax from such recipients.   Thus the value of service received by the appellant prior to 18.4.2006 shall not be liable to tax and adjudication order to such extent shall get modified following the decision of Apex Court in Union of India Vs  Indian National Shipowners Association [(2010 (17) STR j57 (SC)] where the decision of Hon ble High Court of Bombay in Indian National Shipowners Association  Vs. UOI [2009 (13) STR 235 (Bom)] holding no liability arises  against assessee  was merged. 
15.  The crucial ground of appeal which caused anxiety to Revenue is valuation of of taxable service.  While appellant claimed that assessable value of Consultancy Engineering service provided by the foreign consultant shall be exclusive of income tax deducted  at source under the Income tax law  for levy of service tax if there shall be levy at all,  Revenue claims that gross amount to be exigible to service tax shall be  before deduction of income tax at source therefrom  to tax.   Appellant s further claim was that as per contract it was obligation of appellant to make payment to the service provider  the  engineering consultancy fees net of tax for which the amount actually remitted to the service provider shall be basis of levy.
16.  Section 67 of the Act has made provision for valuation of taxable service for charging service tax.  According to Section 67(1)(a) of the Act where there is a monetary consideration paid to  provide taxable  service,  the assessable value for levy of service tax is gross amount charged by the Service provider for the taxable service provided.   Sub section (2) of the said section has made provision to include the amount of service tax to the gross valuie of consideration  where taxable service provided is inclusive  of service tax.   The term consideration   for the  valuation  of taxable service is defined by explanation appearing under Section  67 meaning that consideration includes any amount that is payable for the taxable service provided or to be provided. 
17.  The liability of the appellant arose under the Act in terms of Section 66A  of the Act as recipient of service of Engineering Consultancy   from  the Consultant abroad.   Rule 7 (1) of the  Service tax (determination of value) Rules, 2006 which came into  force with effect from 19.4.2006   has made provision in respect of services covered by Section 66A  of the Act.  According to this  Rule, measure of value for taxation of  service covered by that Section   shall be such amount as is equal to the actual consideration charged for the services provided or to be provided.  
18.  Although the Show Cause Notice dated 19.11.2002 refers to para 5.1 at page 19 (Appendix 2  Terms and conditions) of the Agreement and a copy thereof was enclosed to the said notice,  that paper was not available in the   paper  book filed by the appellant.   The show cause notice indicates that on perusal  of the agreement entered into between the assessee and  M/s. Prodrive Automation Technology (Europe)  Ltd (one of the service providers  abroad) it appears that  the price set out  in the Consultancy  Agreement as was examined  by notice issuing authority  noticed that to be  net of all duties, taxes and other Government charges which, where applicable were payable in addition to the price.   Accordingly, Revenue held that income deducted at source formed part of gross amount of consideration paid to  foreign consultant.   It appears that there were 22 service providers as per Annexure to Show Cause Notice appearing at page 58 to 61 of the Paper Book filed by the appellant.  But no agreement copy was available on record or Paper Book. There was no pleading on material facts by the appellant as to how the facts in issue suggest and support defence of appellant that income tax deducted at source shall not form part of the gross amount of taxable service received when Rule 7(1) of Service Tax (Determination of Value) Rules, 2006 provides that actual consideration charged for the service provided or to be provided shall be assessable value in respect of services covered by Section 66A of the Act. Therefore, the expression what is actual consideration charged for service provided or to be provided shall depend on the facts and circumstances of each case. Further, in terms of Section 66A of the Act the service covered by that section is treated as if the recipient had himself provided the service in India. Thus by such legal fiction the consideration inclusive of income tax deducted at source shall be assessable value for the purpose of the Act in the hands of the service recipient. Since the Show Cause Notice states that the agreement with M/s.  Prodirve Automation Technology (Europe)  Ltd. in terms of para 5.1 at page 19 (Appendix 2  Terms and Conditions) of the agreement speaks of the price of contract payable was net of taxes and taxes if any payable   in addition to the price of contract was payable by the payer thereon as price of the contract  and such factual aspect remaining unrebutted by appellant clearly establishes that tax payable in India was to form part of contract price. Thus consideration charged for the service provided shall include income tax deducted at source as per terms of contract and is in accord with Section 66A read with Rule 7(1) of the Service Tax (Determination of Value) Rules 2006 for the reason that net price of contract agreed to be paid to foreign consultant was to include income deducted at source thereon to be price also. Thus the tax demand on the assessable value comprising the consideration inclusive of income tax deducted at source relating to the period (9.4.2006 to September 2007) which was agreed to be price of the contract  sustains.
19.  The appellant in para 22 of appeal memorandum stated  that in reply to Show Cause Notice dated 19.11.2007 it was pleaded that the notice was barred by limitation upto 30.9.2006. There is no quarrel to such proposition since law was not in force prior to 18.4.2006 to bring the appellant to the purview of service tax on the disputed issue following apex court decision  in National Ship-owners Association case (supra). Therefore, the appellant shall be liable to tax for the normal period covered by the Show Cause Notice and tax demand with interest if any shall be computable for such period and the adjudication order gets suitably modified to this extent.   
20.  One of the grounds  of Appeal is to grant cum-tax benefit.  The Authority may consider such grounds at the time of raising  modified demand in accordance with law.
21.  So far as levy of penalty under Section 78 is concerned, considering the difficulty in understanding the law applicable at inception    and date of incidence to  taxability, it would be proper to waive the penalty imposed under that Section.
22.  In the light of the aforesaid discussions it is ordered:-
(1)  That there shall not be levy of service tax on the engineering consultancy services availed from foreign consultant abroad prior to 18.4.2006.
(2)  There shall be levy of service tax at the applicable rate for the period 19.4.2006 to 30.9.2007 on the gross amount of consideration inclusive of income tax deducted at source involved in availing engineering consultancy service availed under Section 66A of the Act.
(3)  Adjudication order gets modified by the extent indicated in (1) and (2) above.    
(4)  Cum tax benefit if any admissible shall be granted in accordance with law.
(4)  There shall not be penalty under Section 78 of Finance Act, 1994.
( Pronounced in open court on  13.6.2012)                  



  (D.N. PANDA)         (DR. CHITTARANJAN  SATAPATHY)                  JUDICIAL MEMBER              TECHNICAL MEMBER                          

Swamy
1


17
                                                                                                 ST/219/2009

ST/219/2009








     IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI


S/128/2006


(Arising out of Order in Appeal No. 19/2006  (CE) dated 21.02.2006, passed by the Commissioner of Central Excise (Appeals), Madurai).


For approval and signature  

Hon ble Ms. JYOTI BALASUNDARAM, VICE PRESIDENT
_________________________________________________________
1.    Whether Press Reporters may be allowed to see the   :
       order for Publication as per Rule 27 of the
       CESTAT (Procedure) Rules, 1982?

 2.   Whether it should be released under Rule 27 of the      :
       CESTAT (Procedure) Rules, 1982 for publication
       in any authoritative report or not?

3.    Whether  the Hon ble Member wishes to see the fair      :     
       copy of the  Order.

4.    Whether order is to be circulated to the           :
       Departmental Authorities?  _________________________________________________________

M/s. Kumaravel Packers and Movers     :    Appellant

 
           Vs.

CCE,  Madurai                         :    Respondent


Appearance

Shri Joseph Prabhakar, Adv., for the appellant
Shri  T. H. Rao, SDR,  for the respondent 


CORAM

Ms. JYOTI BALASUNDARAM, VICE PRESIDENT


                             Date of  hearing   :  28.01.2010 
                                                Date of  decision  :  28.01.2010
     

FINAL ORDER No. _____________

       Heard both sides on the appeal against the confirmation of demand of service tax on the ground that the assessees were rendering Cargo Handling Service, and imposition of penalty under the provisions of Section 76 & 77 of the Finance Act, 1994.  I find that on merits the issue stands against the assessees by the Tribunal s decision in the case of J.K. Transport Vs. CCE, Raipur  2006 (2) STR 3 (Tri.-Del.), wherein it has been held that a proprietary firm, cannot be said to be an individual undertaking the activity of loading and unloading of cargo in individual capacity and hence covered under cargo handling services.  However, I find merit in the submission of the assessees that the demand for the period from August, 2002 to 31.01.2004, is barred by limitation for the reason that the show cause notice neither invokes the proviso to Section 73(1)(a) nor does it spell out any ingredient of any suppression/misdeclaration with an intention to evade payment of duty so as to make the extended period applicable.  Since the period in dispute is from August, 2002 to 12.10.04, while the show cause notice is dated 31.1.2005, I accept the contention of the assessees that the demand for the period up to 31.01.2004 is barred by limitation.  The demand for the period from February,2004 to 12.10.2004 is upheld and required to be requantified, for which purpose the case is remanded to the adjudicating authority.  Since, part of the demand is upheld, imposition of penalty under Section 76 and Section 77 are also required to be assessed and I order accordingly.  The appeal is thus partly allowed in the above terms.
     (Order dictated and pronounced in the open Court)


                                                                                
       (JYOTI  BALASUNDARAM)      
                                                                               VICE PRESIDENT


BB









IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI


Appeal No.E/161/08


[Arising out of Order-in-Original No.3/2007-CE dated 31.12.2007 passed by the Commissioner of Central Excise, Madurai]


For approval and signature:

Hon ble Ms.JYOTI BALASUNDARAM, Vice-President


1.   Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT   (Procedure) Rules, 1982?                             :

2.   Whether it should be released under Rule 27 of the
     CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?                               :

3.   Whether the Member wishes to see the fair copy of
     the Order?                                            :

4.   Whether Order is to be circulated to the Departmental
     Authorities?                                     :

    
Fenner (India) Ltd.
Appellants

        
       Versus
    

Commissioner of Central Excise,
Madurai
Respondent





Appearance:

Shri K.S.Venkatagiri, Advocate
Shri C.Rangaraju, SDR
For the Appellants
For the Respondent


CORAM:

Hon ble Ms.Jyoti Balasundaram, Vice-President
                  

Date of hearing  :  13.11.2009
Date of decision :  13.11.2009


Final Order No.____________



          The appellants herein, inter alia, manufacture
V Belts of three varieties for use in automobile industry as well as industrial V Belts. A show-cause notice dt. 28.6.96 was issued to them alleging gross undervaluation of V Belts sold through depots and proposing recovery of approx. Rs.6 Crores towards differential duty short-paid between 1.6.91 to 31.12.95 and proposing imposition of penalty on the company and its officers.   Vide order dt. 30.9.97, the Commissioner confirmed the demand and imposed a penalty of Rs.1,20,00,000/- on the appellant-company which filed appeal before the Tribunal, along with its officers.  Vide the final order No.1582-1592/2000 dt. 27.10.2000, the Tribunal remanded the case to the adjudicating authority for determination of the duty for a period of six months prior to the issue of the SCN, setting aside the demand beyond the normal period of limitation.  The Tribunal also directed that the question of imposition of penalty and its quantum should be re-determined in the facts of the case and hence left open the question of penalty, including its leviability. The appeal of the Revenue against the Tribunal s order was dismissed by the apex court vide its order dt. 31.8.06 in Civil Appeal Nos.4103 to 4110/2001.  The Commissioner confirmed the duty demand of Rs.17,22,209/-, dropped the proceedings for recovery of interest but imposed a penalty of Rs.1 lakh under the provisions of Rule 173Q of the Central Excise Rules, 1944. It is the penalty that is challenged in the present appeal.
2.        We have heard both sides.  While it is true that
mens rea is not a necessary ingredient for imposition of penalty under sub-clauses (a), (b) and (c) of Rule 173Q(1),  I agree with the appellants that the ingredients of either Rule 173(1) (a) or (b) or (c) have not been made out against them.  Rule 173Q(1) provides that if any manufacturer, producer, registered person  of a warehouse or a registered dealer (a) removes any excisable goods in contravention of any of the provisions of these  Rules or (b) does not account for any excisable goods manufactured, produced or stored by him or (bb) takes credit of duty or money  or (bbb) enters wilfully any wrong or incorrect particulars  or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under Section 6 of the Act  then, all such goods shall be liable to confiscation and the manufacturer . shall be liable to penalty.  The adjudicating authority has not arrived at a conclusion as to whether the provisions of Rule 173Q (1) (a) or (b) or (c) have been made out against the appellants, although he was required to do so in terms of the Tribunal s remand order.  Ld. DR has not been able to explain as to how the case against the appellants fits in with the requirements of any of these sub-clauses of Rule
173Q (1). Hence penalty on the appellants is not sustainable.  Accordingly, I set aside the same and allow the appeal.

                 (Operative part of the order was
     pronounced in open court on 13.11.09)


                                                                                                                   (JYOTI BALASUNDARAM)
                                            VICE-PRESIDENT  


gs



2

















CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
DIVISION BENCH
COURT NO.3

Service Tax Appeal No.531 of 2008-Cus                                  
       
(Arising out of Order-in-Appeal No.46/VKG/2008 dt.5.5.08   passed by the Commissioner of Service Tax, New Delhi)

                                             Date of Hearing/Decision: 18.10.2011
                                                   
For approval and signature:
Hon ble Mrs.Archana Wadhwa, Member (Judicial)
Hon ble Mr.Mathew John, Member (Technical)


1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3
Whether Their Lordships wish to see the fair copy of the Order?

4
Whether Order is to be circulated to the Departmental authorities?


CST, New Delhi                                Appellant

                 Vs.
M/s.J.R.C.Grid Engineers Pvt. Ltd.                       Respondent                              
Present for the Appellant:    Shri Amrish Jain, SDR
Present for the Respondent: Shri A.K.Batra, Advocate

Coram: Hon ble Mrs.Archana Wadhwa, Member (Judicial)
             Hon ble Mr.Mathew John, Member (Technical)

           
ORDER NO._______________

PER: ARCHANA WADHWA
     
     Being aggrieved with that part of  order of the Commissioner of Service Tax, New Delhi vide which while confirming the demand of service tax, he has not imposed any penalty on the respondent by invoking section 80 of Finance Act,1994, the Revenue has filed the present appeal. We have heard Shri Amrish Jain, learned SDR appearing for the Revenue and Shri A.k.Batra, learned Advocate appearing for the respondents.

2.   It is seen that the adjudicating authority has confirmed the demand of service tax against the respondents, who are working as contractors for the construction of residential flats of welfare organisations. The adjudicating authority, while holding that services provided by the respondents fall under the category of Construction of Complexes as defined under section 65 (30a) of Finance Act, 1994 has confirmed demand of service tax of Rs.3,65,17,896/- which stands appropriated against service tax liability paid by the respondents subsequently. The said part of order stands accepted by the respondents. However, the adjudicating authority has not imposed any penalty on the respondents under sections 76, 77 & 78 of Finance Act, 1994, which part is impugned before us by the Revenue.

3.   After hearing both sides and after going through the impugned order, we find that the adjudicating authority has observed that during the relevant period, there was general confusion as regard taxability on the projects involving non-profit/welfare organisation i.e. residential welfare housing complexes, defence housing complexes, etc. Even the contracts entered into between the respondents and service recipients did not include element of service tax.  He has observed that the respondents responded to the investigations by the department and deposited all their service tax liability well before issuance of show cause notice.  He also observed that it is also evident from record that the matter was clarified only after the start of investigation and the respondents had immediately made prompt payment of service tax.  They also applied for centralized service tax registration on 17.8.06 and started making voluntary payments of service tax with effect from 25.8.06.  As such, he has observed that the above factors constitute reasonable cause in terms of the provisions of section 80, thus calling for non imposition of penalty under various sections of Finance Act, 1994.  For the above proposition, he relied on the various decisions of the Tribunal.  As against that part of the order, the Revenue in their memo of appeal have contended that the respondents suppressed the material fact with intention to evade payment of service tax and as such proviso to section 73(1) of Finance Act has been correctly invoked against them. They have paid service tax only being pointed out by the department. As such, they have made prayer that non imposition of penalty by the adjudicating authority by placing reliance on the Board s Circular F.No.137/176/2006-CX.4 dated 03.10.07 was not legal and correct.

4.   After appreciating the submissions made by both sides, we find that the Commissioner had advanced valid and sufficient reason for invoking section 80 of Finance Act, 1994.  Merely because the service tax was paid by the respondents at the start of the investigations by the Revenue, by itself cannot be indicative of the fact that there was malafide intention and suppression on their part.  The Revenue in their memo of appeal have not rebutted the findings of the Commissioner there was utter confusion in the field during the relevant period regarding the taxability on the projects involving non profit/welfare organization i.e. residential complexes, defence housing complexes which were constructed by the respondents for various organisations and the same can lead to a reasonable belief that no service tax liability arises in respect of such construction.  Further, we find that the reliance by the Commissioner on the Board s circular dated 03.10.07 and various clarification issued by the Ministry which are to the effect that once dues of service tax stands paid alongwith interest by the assessee and intimated to the department, the entire proceedings are deemed to be concluded, is legal and proper.  We find  no reason to take view different than the one taken by the Commissioner.  Accordingly, the appeal filed by the Revenue is rejected.    

             (Pronounced in the open court)
     
                              (ARCHANA WADHWA)
      MEMBER (JUDICIAL)
     
     
                               (MATHEW JOHN)
      MEMBER (TECHNICAL)

     
mk


    




















IN THE CUSTOMS, EXCISE & SERVICE TAX  APPELLATE TRIBUNAL
    
              Date of Hearing:29.09.2011
               Date of Decision :29.09.2011.

     Service Tax  Appeal No.736 of 2007

M/s.Sonam Regency Inn Pvt. Ltd.                              Appellant                               

Versus

CST, Delhi                                           Respondent

[Arising out of Order-in-Original No.9/VKD/2007 dated 21.05.2007 passed by the Commissioner of Service Tax, New Delhi]

For approval and signature:

Hon ble Smt. Archana Wadhwa, Member (Judicial)
Hon ble Shri  Rakesh Kumar, Member (Technical)
                                 
1.   Whether Press Reporters may be allowed to see       
CESTAT (Procedure) Rules, 1982.
      
2.   Whether it should be released under Rule 27 of the           
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?

3.   Whether Their Lordships wish to see the fair copy     
of the Order?

4.   Whether Order is to be circulated to the Departmental
authorities?      


Appearance:  Rep. by Shri Tarun Chawla, Advocate for the appellant.
            Rep. by Shri Sheo Narayan Singh, Jt. SDR

CORAM : Hon ble Smt. Archana Wadhwa, Member (Judicial)
        Hon ble Shri Rakesh Kumar, Member (Technical)


      Order No. ________________ Dated : 29.09.2011

Per Rakesh Kumar:

     The appellant are engaged in the business of running of guest house and rent-a-cab to their various clients.  The appellant company was incorporated in the month of February, 2002. Their company have two Directors  namely Shri Bharat Bhushan Suri and Smt. Sikha Suri. The services of rent-a-cab operator as defined under Section 65(91)  read with Section 65(105)(o) of Finance Act, 1994 become taxable  w.e.f. 16.10.98. In December, 2003, the appellant s activities of rent-a-cab service came to the notice of the department and on inquiry, it was found that though they had obtained  service tax registration on 20.06.2001, they  were not paying service tax and were not filing any return to the department in this regard. It was found that during the period 2000-2001 to 2003-2004, they had received gross amount of Rs.8,91,80,169/-  on which service tax chargeable was Rs.55,15,317/-,  which had not been paid by them. In this background, a show cause notice dated 6.5.2005 was issued to the appellant for demand of allegedly non-payment of service tax of Rs.55,15,370/- along with interest and also for imposition of penalty on them under Sections 75A, 76 & 78 of Finance Act, 1994. The show cause notice was adjudicated by the Commissioner vide order-in-original dated 21.05.2007 by which
(a) service tax demand of Rs.55,15,370/- was upheld against the appellant along with interest under Section 75 of the Finance Act, 1994;
(b) penalties of Rs.500/-  and Rs.1,000/- were imposed on the appellant under Section 75A and 77 respectively;
(c) penalty of Rs.100/- per day for every day of failure  to pay the tax amount  due, till the date of payment of tax,  subject to the total penalty not exceeding the amount  of service tax amount i.e. R.55,15,370/- was imposed  under the provisions of Section 76 of the said Act; and
(d) penalty of Rs.55,15,370/- was imposed on the appellant under Section 78 of the Finance Act, 1994.
1.2  The service tax demand was confirmed by invoking longer limitation period under Section 73(1) by holding that non-payment of tax was deliberate as the appellant had knowingly had not paid the tax and filed  the returns.
1.3  Against this order of the Commissioner, this appeal has been filed.
3.   Heard both the sides.
4.   Shri Tarun Chawala, Advocate, ld. Counsel for the appellant,  pleaded that the impugned order was passed behind the back of the appellant and thus, the principles of natural justice have been violated, that there was no suppression of any facts on the part of the appellant, and longer limitation period under Section 73(1)has been arbitrarily  invoked, that no penalty was imposable on the appellant under Section 75A, 76, 77 and 78 of the Finance Act, 1994, and that in any case, the appellant were eligible for 60% abatement under Notification No.2/06-ST but the same has not been given. He, therefore, pleaded that the impugned order is not correct.
5.   Shri Sheo Narayan Singh, ld. Jt. CDR defended the impugned order by reiterating the findings of the Commissioner (Appeals) in it and pleaded that in view of the judgment of the Punjab & Haryana High Court in the case of CCE, Chandigarh Vs. Kuldeep Singh Gill reported in 2010 (18) STR 708 (P&H),  there is no doubt that the appellant s activities attracted service tax, that the appellant had not disclosed their activities to the department, though the services being provided by them were taxable since 1998, and that the extended period under Rule 73 (1) has been rightly invoked and penalty under Section 78 and 76 has been correctly imposed.
6.   We have carefully considered the submissions from both the sides and perused the records. We find that Shri Kulbhushan Sinha, Accountant of the appellant in his statement recorded under Section 14 of the Central excise Act read with Section 83 of the Chapter V of  Finance Act, 1994  has stated that during the period of dispute, the appellant company was providing rent-a-cab facility to their various clients in addition to running their guest house. Shri Bharat Bhushan Suri, Director of the appellant company in his statement dated 4.6.2004 has admitted that they had not paid the service tax.   On going through the memorandum of appeal, we find that the appellant have not disputed that during the period of dispute, they were renting cabs to their clients. Therefore, we hold that their activities were covered under Section 65 (91) read with Section 65 (105)(O) of the Finance Act, 1994 and hence, the same attracted service tax. Though the appellant in their memorandum of appeal have pleaded that the service tax demand is not sustainable, they have not given any reasons for the same. However, we find merit in their plea that the adjudicating authority has confirmed the demand by calculating the service tax at the applicable rate on the gross amount received by them without considering the exemption under notification no.2/06-ST (predecessor Notification No.9/04-ST), which subject to conditions as specified in it  provided for exemption in relation to service provided by rent-a-cab scheme operator for renting a cab from levy of Service Tax under Section 66 of Finance Act, 1994, as is in excess of the service tax calculated on the value which is equivalent to 40% of the gross amount charged from any person by such operator for providing such taxable service. If, the appellant satisfy the conditions for this exemption, they would be eligible for the same. But in the impugned order, the applicability of this exemption has not been considered at all.
7.   In view of this, the impugned order is set aside and  the matter is remanded to the Commissioner for de novo adjudication after considering the appellant s claim for exemption under Notification No.2/06-ST and its predecessor notification, which were in force during the period of dispute.
[Operative part of the order already pronounced in open court]


                             (Archana Wadhwa )
                              Member (Judicial)


                               (Rakesh Kumar)
                             Member (Technical)
Ckp.



1


CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI

PRINCIPAL BENCH  COURT NO.1

LARGER BENCH


For approval and signature:

Hon ble Justice Shri R.M.S. Khandeparkar, President
Hon ble Dr. Chittaranjan Satapathy, Technical Member
Hon ble Shri Ashok Jindal, Judicial Member
1.Whether Press Reporters may be allowed to see under
 Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication
   
2. Whether it should be released under Rule 27 of the
    CESTAT (Procedure) Rules, 1982 for publication in
     any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy
    of the order?

4. Whether order is to be circulated to the Departmental
    Authorities?

ST/Appeal No. 32/2007

(Arising out of order in appeal No.143/CE/Appl/Noida/06 dated 18.10.2006 passed by the Commissioner (Appeals), Customs & Central Excise, Meerut-II, Noida)

M/s Agauta Sugar & Chemicals          Appellant

     Vs

CCE, Noida                                 Respondent


Present for the Appellant    : Shri A.R.M. Madhav Rao, Advocate
Present for the Respondent   : Shri R.K. Verma, DR

                   .

                        ST/Appeal No. 88/2007

(Arising out of order in Appeal No. 104/GRM/ST/JPR.I/2006 dated 7.12.2006 passed by the Commissioner (Appeals), Customs & Central Excise, Jaipur)

M/s Jaipur Glass & Potteries                       Appellant

     Vs

CCE, Jaipur-I                         Respondent

Present for the Appellant    : Shri Hemant Bajaj, Advocate
Present for the Respondent   : Shri R.K. Verma, DR  

                   ..

                        ST/Appeal No. 532/2006

(Arising out of order in Appeal No. 65/GRM/CE/JPR.I/2006 dated 29.8.2006 passed by the Commissioner (Appeals), Customs & Central Excise, Jaipur)

M/s Guljag Industries Ltd                  Appellant

     Vs

CCE, Jaipur-I                         Respondent

Present for the Appellant    : None
Present for the Respondent   : Shri R.K. Verma, DR

Coram: Hon ble Justice Shri R.M.S. Khandeparkar, President
           Hon ble Dr. Chittaranjan Satapathy, Technical Member
        Hon ble Shri Ashok Jindal, Judicial Member


                   Date of Hearing:             30.6.2010
         
                   Date of Pronouncement:       01.9.2010

               
Misc. Order Nos. 219/2010 SM (Br.)

Per Dr. Chittaranjan Satapathy

     These appeals involve a common issue as to whether service tax in relation to goods transport service received by the appellants during the period 16.11.1997 to 1.6.1998 can be recovered by issue of show-cause notice in the year 2004. The issue has been referred to the Larger Bench by a Single Member Bench of the Tribunal vide Agauta Sugars Vs. CCE  2007 (8) STR 496 taking note of difference of opinions expressed by different Benches of the Tribunal as reflected in the cases of BPL Engineering Ltd. Vs. Commissioner of Service Tax  2006 (3) STR 747 (Tri.  Bang.) and R.K. Marbles Pvt. Ltd. Vs. CCE, Jaipur  II  2007-TIOL-29-CESTAT-DEL on the one hand and CCE Vs. Mangalam Cement  2007 (7) STR 673 (Tri.  Del.) on the other.
2.   In the case of R.K. Marbles (supra), it has been held on 3.1.2006 by the Single Member Bench of the Tribunal that the issue is squarely covered by the decision of the Tribunal in the case of L.H. Sugar Factories Vs. CCE, Meerut  2004 (165) ELT 161 on 1.1.2004 which has been upheld by the Hon ble Supreme Court in CCE, Meerut Vs. L.H. Sugar Factories Ltd.  2005 (187) ELT 5 (SC) on 27.7.2005. Hence the demand of tax was set aside.
3.   In the case of BPL Engineering (supra), it has been held on 10.5.2006 by the Division Bench that the demands cannot be confirmed as the show-cause notice had not been issued prior to the amendment made in the law in 2004 following the decision in L.H. Sugar (supra).
4.   In the case of Mangalam Cement (supra), it has been held in favour of the Revenue that the show-cause notice issued in 2004 is clearly within the prescribed period and therefore the demand is valid.

STATUTATORY/ LEGAL DEVELOPMENTS:-
5.   For a better understanding of the issues involved in these cases, we briefly indicate the statutory/ legal developments that have taken place from time to time in respect of levy on goods transport service:-
1997

(i)  Goods transport service was made taxable vide Section 65(4)(m) by amendment of the Finance Act, 1994 by the Finance Act, 1997.

(ii) The levy was to become effective upon notification in terms of Section 66(3) of the Act.

(iii)     Under Section 68(1A), service tax was to be collected from such person and in such manner as was to be prescribed and such person was to be treated as the person responsible for collecting the service tax.

(iv) By notification bearing No. 41/97-ST dated November 5, 1997, the levy was made effective from November 16, 1997.

(v)  By Notification bearing No. 42/97-ST dated November 5, 1997,  Rule 2(1)(d)(xvii) of the Service Tax Rules, 1944 ( the Rules ) was made treating the customer of the goods transport operator as the person responsible for collecting the service tax.

1998

(i)  By notification bearing No. 49/98-ST dated June 2, 1998, exemption was granted in respect of goods transport service.

(ii) By the Finance (No.2) Act 1998, the provisions in the Act relating to levy of service tax on goods transport service were done away with.

July 27, 1999

      The Hon ble Supreme Court in Laghu Udyog Bharati v. Union of India - 2006 (2) S.T.R. 276 (S.C.) = 1999 (112) E.L.T. 365 (S.C.) held, inter alia, that Rule 2(1)(d)(xvii) making the customer of the goods transport operator as responsible for collecting the service tax was ultra vires the Act. It was held that Section 68(1A) did not make the customer the assessee and Section 70 providing for filing of return was not applicable in the customer s case.

2000

(i)  By Section 16 of the Finance Act, 2000, the provisions of the Act were amended to provide for levy of service tax on goods transport service for the period July, 16, 1997 to August 1, 1998. The definitions of assessee and taxable service and the charging and valuation Sections 66 and 67 were amended and definitions of goods carriage and goods transport operator were inserted.

(ii)?Section 117 of the Finance Act, 2000 validated Rule 2(1)(d)(xvii) and previous actions on the basis thereof.

2003

(i)  By Section 158 of the Finance Act, 2003, the provisions of the Act was modified with effect from July 16, 1997. A proviso was inserted below Section 68(1) making the customer of the goods transport operator as the person liable to pay service tax to the credit of the Central Government. Section 71A was inserted making the customer liable to furnish service tax return within six months from the date on which the Finance Bill, 2003 received the assent of the President. The rule-making power under Section 94 was amended to include the making of rule for furnishing the return under Section 71A.

(ii) Rule 7A was inserted in the Rules with effect from May 14, 2003 providing for furnishing of return by the customer of a goods transport operator for the period November 16, 1997 to June 2, 1998 within a period of six months from May 13, 2003 failing which the interest and penal consequences as provided in the Act were to follow.

2004

     Section 73 was substituted by the Finance (No.2) Act, 2004 with effect from September 10, 2004. Prior to the said substitution, it applied to a case where return was to be filed under Section 70 but not where it was to be filed under Section 71A. The substituted section sought to cover a Section 71A read with Rule 7A situation.

March 17, 2005

      The Hon ble Supreme Court upheld the amendments made by Finance Acts, 2000 and 2003 in the case of Gujarat Ambuja Cements Ltd. v. Union of India, 2006 (3) S.T.R. 608 (S.C.) = 2005 (182) E.L.T. 33 (S.C.).

SUBMISSIONS BY THE APPELLANTS:-
6 (a) The issue that no show cause notice can be issued even after 10.9.2004 is already settled by the Tribunal in R. K. Marble (supra) and in B.P.L.Engineering (supra). In the present cases, the show cause notices have been issued after that date and hence, they require to be set aside.
(b)  The relevant period is 16.11.1997 to 1.6.1998. No demand could have been raised prior to amendments made in Section 73 with effect from 10.9.2004. As such the demand is time-barred by the time amendment is made and therefore the show-cause notice issued in the year 2004 is invalid.
(c)  Even under the amended Section 73, the present demand is time-barred. The appellants were required to file a single return under Rule 7A and not a periodical return under Rule 7. As such, Section 73(6)(i)(c) was applicable in respect of the appellants and therefore, the relevant date was the date when service tax was required to be paid by the appellants. As per Rule 6(1), the service tax for the period 16.11.1997 to 1.6.1998 was required to be paid by 15th day of the following month i.e., by 15th December, 1997 for the first period and by 15th July 1998 for the last period. As such, the demands raised in the year 2004 are time-barred. The Tribunal has erred in Mangalam Cement (supra) by ignoring Rule 6 of the Service Tax Rules.
(d)  A demand which is time-barred under an existing provision of law cannot be revived by an amendment made to the said provisions as held by the Hon ble Supreme Court in the case of S.S. Gadgil Vs. Lal & Co.  (1964) 53 ITR 231 (SC).
SUBMISSIONS ON BEHALF OF THE DEPARTMENT:-
7 (a)     The legislative intent must be the foundation of the interpretation of the statute. As has been held by the Hon ble Supreme Court in the case of British Airways PLC Vs. Union of India  2002 (139) ELT 6 (SC), it is the duty of the Court to make such construction of a statute which shall suppress the mischief and advance the remedy. He also cites the decision of the Hon ble Supreme Court in the case of Directorate of Enforcement Vs. Deepak Mahajan  1994 (70) ELT 12 (SC) which has held that every law is designed to further the ends of justice and not to frustrate the same on the mere technicalities.
(b)  After the Hon ble Supreme Court rendered the decision in the case of Laghu Udyog Bharati (supra), the necessary amendments have been made in the law to make clear the Legislative intent and to enable the Department to collect the tax levied on recipients of transport service. No interpretation should be placed on the law which would defeat the legislative intent.
(c)  In the case of L.H. Sugars (supra), show-cause notices were issued in 2002 prior to the amendments made in 2003 and 2004 and the said decision is not applicable to the present cases where the show-cause notices have been validly issued in 2004.
(d)  Mangalam Cement (supra) has adequately dealt with the issue relating to show-cause notices issued in the year 2004 and the ratio of the same is applicable to the present cases.
(e)  In the case of S.S. Gadgil (supra), time limit was sought to be extended after the expiry of the prescribed period and in that context the said judgment was delivered by the Hon ble Supreme Court, but in the instant cases, the time limit was prescribed under Section 71A which was inserted by the Finance Act, 2003 and hence the ratio of S.S. Gadgil (supra) is not applicable to the present cases.
FINDINGS
8.   We have considered the arguments from both sides as well as the case records and the cited decisions. First, we examine the applicability of the decision in L. H. Sugar (supra) to the cases under reference.

APPLICABILITY OF L.H. SUGAR DECISION:-
9.   In the case of L.H. Sugar (supra), the Tribunal took note of the fact that the show-cause notices were issued to the appellants on different dates in 2002 demanding service tax from them for the services received from the goods transport operators. In para 8, the Tribunal held that the appellants are deemed to be persons liable to pay service tax but went on to hold that appellants were required to file returns only under Section 71A and since Section 73 applied only to assessees who are liable to file return under Section 70, the show-cause notices issued to the appellants under Section 73 as it stood on the date of issue of show-cause notice and also under the provisions as amended by Finance Act, 2003 were not sustainable and hence the order demanding service tax was also set aside. On appeal from the Department, the Hon ble Supreme Court held as follows:-
    We have heard counsel for the parties.

2.   Learned Counsel for the parties have drawn our notice to the relevant provisions of the Finance Act as it stood in the year 1994 and thereafter as it stood after the various amendments to the Act in subsequent years. Having considered the relevant provisions of the Act, the Tribunal has, inter alia, recorded the following conclusion.

The above would show that even the amended Section 73 takes in only the case of assessees who are liable to file return under Section 70. Admittedly, the liability to file return is cast on the appellants only under Section 71A. The class of persons who come under Section 71A is not brought under the net of Section 73. The above being the position show cause notices issued to the appellants invoking Section 73 are not maintainable.

3.   We entirely agree with the conclusion arrived at by the Tribunal. We find no merit in these appeals and the same are accordingly dismissed. No order as to costs.

10. The L.H. Sugar (supra) decision, as stated earlier, has been applied by the Tribunal to the cases of BPL Engineering (supra) and R.K. Marbles (supra) though in those cases the show-cause notices were issued in the year 2004 and hence those cases were different from that of L.H. Sugars (supra) in which the show-cause notices were issued in 2002. In the case of BPL Engineering (supra) the date of the show-cause notice is not mentioned but it is stated by the Tribunal therein that the show-cause notice had been issued only after the amendment in 2004. In the case of R.K. Marbles (supra), the Tribunal has noted that the show-cause notice was issued on 5.11.2004. Both the Tribunal Benches have granted relief in BPL Engineering (supra) and R.K. Marbles (supra) applying the decision of the L.H. Sugars (supra) but without taking into account the fact that Section 73 was amended with effect from 10.9.2004. On the other hand, the effect of the amendment has been taken into consideration by the Tribunal in the case of Mangalam Cement (supra) as is evident from the following findings: -
10.The relevant? provisions of Sections 68(1), 71A and 73 as amended by Finance Act, 2004, with effect from 10-9-2004 read as under :-
68. Payment of service tax. - Every person providing taxable service to any person shall pay?(1) service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed. Provided that -
     xxx???xxx???xxx    xxx  xxx  xxx  xxx
(ii) in relation to services provided by goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage for the period commencing on and from the 16th day of November, 1997 and ending with 2nd day of June, 1998,
shall be deemed always to have been a person liable to pay service tax, for such services provided to him, to the credit of the Central Government.
Filing of return?71A. by certain customers. - Notwithstanding anything contained in the provisions of Sections 69 and 70, the provisions thereof shall not apply to a person referred to in the proviso to sub-section (1) of Section 68 for the filing of return in respect of service tax for the respective period and service specified therein and such person shall furnish return to the Central Excise Officer within six months from the day on which the Finance Bill, 2003 receives the assent of the President in the prescribed manner on the basis of the self-assessment of the service tax and the provisions of Section 71 shall apply accordingly. (emphasis added).
73.?Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. - (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.
xxx???xxx???xxx    xxx  xxx  xxx  xxx
11.The provisions of Rule 6 and Rule 7A of the Service Tax Rules, 1994 read as under :-
6.?Payment of service tax. - (1) The service tax on the value of taxable services received during any calendar month shall be paid to the credit of the Central Government by the 25th of the month immediately following the said calendar month.
Provided further that where the assessee is an individual or proprietary firm or partnership firm, the service tax on the value of taxable services received during any quarter shall be paid to the credit of the Central Government by the 25th of the month immediately following the said quarter.
The assessee shall deposit the service tax liable to be paid?(2) by him with the bank designated by the Central Board of Excise and Customs for this purpose in Form TR-6 or in any other manner prescribed by the Central Board of Excise and Customs.
     xxx xxx xxx xxx
7A.?Returns in case of taxable service provided by goods transport operators and clearing and forwarding agents. - Notwithstanding anything contained in Rule 7, an assessee, in case of service provided by -
(a)  goods transport operator for the period commencing on and from the 16th day of November, 1997 to 2nd day of June, 1998; and
(b)  clearing and forwarding agents for the period commencing on and from the 16th day of July, 1997 to 16th day of October, 1998,
shall furnish a return within a period of six months from the 13th day of May, 2003, in Form ST-3B along with copy of Form TR-6 in triplicate, failing which the interest and penal consequences as provided in the Act shall follow.
12.Relevant Form? ST-3B in which returns of service tax for the period in question were to be filed required the mode of payment, challan Nos. and date of challans to be mentioned. The amount of service tax payable was also required to be mentioned against item No. 7. A declaration in the self-assessment memorandum included in the said Form to the effect that the particulars were in accordance with the records and books maintained and were correctly stated, was to be made and it was also to be stated that the assessee had assessed and paid the service tax correctly in terms of the provisions of the Act and the Rules made thereunder. The contents of the said form clearly indicate that it required the tax to be paid with particulars of challans of payments to be shown therein. This form indicates that it was prescribed for a specific situation arising by virtue of the validating provisions that necessitated insertion of Rule 7A for filing of the returns by the recipient of services provided by goods transport operators for the specific period from 16th day of November 1997 to 2nd day of June 1998. The returns were to be furnished within a period of six months from 13-5-2003 in the said form, along with copy of TR-6 in triplicate, which is a challan showing payment of tax. If the return was filed within the time prescribed, no interest or penalty was to be paid. Rule 7A was inserted in the context of Section 71A, which was inserted on or before 16-7-1997. The said provision of Section 71A reproduced hereinabove, inter alia, provided that any person referred to in the proviso to sub-section (1) of Section 68 shall furnish return within six months from the date on which the Finance Bill, 2003 received the assent of the President, in the prescribed manner on the basis of the self-assessment of the service tax and provisions of Section 71 shall apply accordingly. The provisions of Section 71A and Rule 7A were necessitated because the liability arising due to the validating provisions, which were upheld by the Apex Court, required making of special provisions of fixing a date for filing of the returns and payment of the tax dues. Such returns required to be filed by virtue of the validating provisions, which made the liability survive in respect of the period in question, could not have obviously been filed periodically, as contemplated by Section 70. Section 70 was not applicable to such special contingency and the provision applied to the normal situation, which required that the person liable to pay service tax shall himself assess and furnish a return in the prescribed form and in the prescribed manner. Such returns were to be filed under Rule 7 under which every assessee was required to submit half yearly returns in ST-3 Form or ST-3A by 25th of the month by following the particular half-year. Therefore, the scheme of Section 70 read with Rule 7 read with prescribed Forms ST-3 and ST-3A was wholly inapplicable to the situation, which arose by virtue of service tax liability of the receiver of GTO services, which arose by virtue of the validating laws at the much later but with effect from 16-11-1997. The special provisions enacted under Sections 71A and Rule 7A were designed to give effect to and realize the purpose underlying the validating provisions. It can be seen from the proviso to sub-section (1) of Section 68, which was inserted with effect from 16-7-1997, in relation to the services provided by goods transporter operator, that every person who was liable to pay the freight for the transportation of goods for the period commencing from 16th November, 1997 and ending with 2nd June, 1998, shall be deemed always to have been a person liable to pay service tax for such services provided to him, to the credit of the Central Government. This provision made the respondents-assessees liable to pay the service tax in respect of the services provided by the goods transport operators to them during the said period and the respondents-assessees having failed in their attempt to challenge the constitutionality of Section 116, which inserted the said proviso in Section 68(1) and their petition along with writ petitions of Gujarat Ambuja Cement Ltd. having been dismissed by Hon ble the Supreme Court, they were liable to pay service tax by the time extended by Hon ble the Supreme Court as per the directions contained in the order, which was passed in a group of petitions including that of the present respondents. The contention that the service tax was payable by the respondent-assessees on 25th of the next calendar month as contemplated by Rule 6, which should be treated as the relevant date , is, therefore, wholly misconceived and if accepted, will make the validating provisions redundant though upheld by Hon ble the Apex Court. Rule 6 relating to payment of service tax on the value of taxable services received during any calendar month by 25th of the month immediately following the calendar month has obvious reference to the periodic returns and payment of tax contemplated by Section 70 read with Rule 7 and the prescribed Forms ST-3 and ST-3A. Sub-rule (5) of Rule 6 refers to Form ST-3A, and Explanation to sub-rule (6) of Rule 6 refers to Form TR-6. In the very scheme of things, the provisions of Rule 6 cannot apply to the specific liability arising to pay service tax on the basis of validating provisions for which special provisions were required to be made under Section 71A and Rule 7A and a special Form ST-3B was required to be prescribed. Since the date of filing of returns was specially prescribed for cases where the recipients of services of GTO for the said period were made liable, only the special provisions of Rule 7A could be applicable, which required the return to be filed and service tax paid by such assessees within the outer date of six months from 13-5-2003, and such payment was to be evidenced by furnishing TR-6 challans and indicating their particulars as well as the particulars of the tax paid in the ST-3B Form itself.
?13.The reliance of the respondents-assessees on the ratio of the decision in L.H. Sugar Factory (supra), which is affirmed by Hon ble the Supreme Court by its order reported in 2006 (3) S.T.R. 715 (S.C.) = 2005 (187) E.L.T. 5 (S.C.) is wholly misconceived in view of the amendments in the law, particularly, by insertion of the proviso to Section 68(1) and Section 71A which created enforceable liability of the recipients of services from GTOs during the period from 16-11-1997 to 1-6-1998. As held in J.K. Industries Ltd. v. CCE, Indore reported in 2006 (3) S.T.R. 14 (Tri.-Del.), such assessees were bound to file returns as mandatorily required by Section 7A. In the present case, the returns were filed by the respondents as per the said machinery provisions of Section 71A read with Rule 7A, though the service tax was paid by them subsequently, having lost on their writ petitions being dismissed by Hon ble the Supreme Court. The respondents paid up the service tax in consonance with the outcome of their petitions by the decision of Hon ble the Supreme Court, in a group of petitions in Gujarat Ambuja Cement Ltd. (supra). The service tax liability was assessed by the respondents-assessees in their ST-3B Form and was declared to be a correct self-assessment, as required by that Form. They have asserted that they had filed the ST-3B Form required to be filed under Rule 7A read with Section 71A within the time prescribed which was extended by Hon ble the Supreme Court by fifteen days from 14-11-2003. Under Section 71A, it was provided that notwithstanding anything contained in the provisions of Sections 69 and 70, the provisions thereof shall not apply to a person referred to in the proviso to sub-section (1) of Section 68 for the filing of return in respect of service tax for the respective period and service specified therein, and such person shall furnish return in the prescribed manner on the basis of the self-assessment of the Service tax, and the provisions of Section 71 shall apply accordingly. Even in cases where returns were furnished under Section 70 they were required to be taken up for verification under Section 71. Under Section 72, which provided for best judgment assessment also, there was reference to both the returns filed under Section 70 as well as cases where any person having made a return failed to comply with the provisions of Section, as also the cases where the proper officer was not satisfied with the correctness or the completeness of the accounts of the assessee. Under Section 73(1)(a) as it existed at the relevant time, there was reference not only to return made under Section 70, but also to cases where the proper officer had reason to believe that by reason of omission or failure, on the part of the assessee, to disclose wholly or truly all material facts required for verification of the assessment under Section 71, the value of taxable service had escaped assessment or had been under-assessed, the requisite show cause notice would be issued. If action of recovery was not contemplated in accordance with Section 73, there was no sense in enacting the provisions of Section 71A. The interpretation of these provisions in the context of the decisions relied upon by the learned Counsel had come up for consideration before the Hon ble Supreme Court in Gujarat Ambuja Cement Ltd. v. Union of India reported in 2006 (3) S.T.R. 608 (S.C.) = 2005 (182) E.L.T. 33 (S.C.), in which Hon ble Supreme Court held that the law must be taken as having always been as was now brought about by the Finance Act, 2000 and that the statutory foundation for the decision in Laghu Udyog Bharati - 2006 (2) S.T.R. 276 (S.C.) = 1999 (112) E.L.T. 365 (S.C.) was replaced and the said decision had ceased to be relevant for the purposes of construing the provisions of the Act, as amended by the Finance Act, 2000. Therefore, reliance placed on behalf of the respondents on the earlier decision of the Hon ble Supreme Court in Laghu Udyog Bharati and the decision of the Tribunal in L.H. Sugar Factories Ltd. case in which the ratio of the Laghu Udyog Bharati was followed, is misplaced.
?14.It will be noticed from the decision in L.H. Sugar Factories Ltd. (supra) that the show cause notice was issued in that case in the year 2002 and it is in that context the Tribunal concluded in Para 9 that the show cause notice issued to those appellants was not sustainable because under the provisions of Section 73, as it stood on the date of issue of the show cause notice and also under the provisions as amended by Finance Act, 2003 were not sustainable. Affirmation of that decision by Hon ble the Supreme Court by order dated 27-7-2005 cannot be construed as nullifying the effect of the ratio of the decision of the Apex Court in Gujarat Ambuja Cement Ltd., (supra), in which it was categorically held, in the context of the said provisions, that the law must be taken as having always been as is now brought about by the Finance Act, 2000, and that the statutory foundation for the decision in Laghu Udyog Bharati (which was followed in L.H. Sugar Factories Ltd. by the Tribunal) had been replaced and the decision has thereby ceased to be relevant for the purposes of construing the amended provisions. The Hon ble the Supreme Court in the context of the provisions of Section 71A held as under :-
In addition, Section 71 which provides for the filing of?returns was amended to provide, with retrospective effect, for the insertion of Section 71 A. Under the newly inserted section, the provisions of Sections 69 and 70 do not apply to a person referred to in the proviso to sub-section (1) of Section 68 as far as the filing of returns in respect of service tax for the period commencing from 16th July 1997 was concerned. It seeks to provide that such persons shall furnish return to the Central Excise Officer within six months from the day on which the Finance Bill, 2003 receives the assent of the President in the prescribed manner on the basis of the self-assessment of the service tax and the provisions of Section 71 shall apply accordingly. This period was extended by this Court by order dated 17-11-2003 for a period of two weeks with effect from the date of the order. Section 94 as originally enacted for the rule making power of the Central Government was amended to read with effect from 16th July 1997, that the Central Government would also have the power to frame rules relating to the manner of furnishing returns under Section 71A.
There cannot be any doubt that the object of these sections?20. is to nullify the effect of this Court s decision in Laghu Udhdyog Bharati by retrospectively amending and validating provisions held to be illegal. It is a well settled principle that validation of a tax declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal (vide Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, 2000 (123) E.L.T. 3 (S.C.) = (1970) 1 SCR 388; Indian Aluminium Co. & Ors. v. State of Kerala, (1996) 7 SCC 637; K. Sankaran Nair v. Devaki, (1996) 11 SCC 428; B. Krishna Bhat v. State of Karnataka, (2001) 4 SCC 227; N.A. Co-operative Mfg. Federation v. Union of India, AIR 2003 SC 1329). As a proposition of law this cannot be and is not disputed. The question is whether by enacting Sections 116 and 117 of the Finance Act, 2000 and Section 158 of the Finance Act, 2003, the bases on which this Court struck down Rule 2(1)(d), (xii) and (xvii) of the Service Tax Rules, 1994 had been displaced or removed.
?15.Relying on the decision of the ratio in Gujarat Ambuja Cement Ltd. this Tribunal in J.K. Industries Ltd. v. CCE, Indore (supra) held as under :-
It is a settled legal position that a statutory Act may be?enacted prospectively or retrospectively. The retrospective effect can be given in case of curative and validating statutes. The curative statutes by their very nature are intended to operate upon and affect past transactions having regard to the fact that they operate on conditions already existing [See, ITW Signode India Ltd. v. Collector of Central Excise reported in 2002 (158) E.L.T. 403 (S.C.)]. In the present case, as already held by the Hon ble Supreme Court in Gujarat Ambuja Cement Ltd. (supra), the law must be taken as having always been as was brought out by Finance Act, 2000 and that the statutory foundation for the decision of the Supreme Court in Laghu Udyog Bharati has been replaced and that decision has ceased to be relevant for the purposes of construing the provisions of the Act as amended by the Finance Act, 2000 and 2003. Therefore, the reliance on behalf the appellant on the earlier decision of the Supreme Court in Laghu Udyog Bharati case (supra) and on the decision of this Tribunal in L.H. Sugar Factories Ltd. case (supra) in which relying upon, the decision in Laghu Udyog Bharati, it was held that the show cause notices issued in that case by invoking Section 73 of the goods were not maintainable, is misconceived, as their ratio will now be applicable and the matter has to be viewed in the context of the amended provisions, the constitutionality of which has been upheld by the Apex Court in Gujarat Ambuja Cement case (supra).
The earlier position under which the recipient of service? provided by goods transport operator could not have been liable was drastically altered by the amended provisions. By Section 116 of the Finance Act, 2000 it was provided that during the period commencing on and from 16th day of July 1997 and ending with the 16th day of October 1998, the provisions of Chapter V of Finance Act 1994 (i.e. relating to service tax) shall be deemed to have effect subject to the modifications made thereunder. Section 65 of the Finance Act, 1994 was modified by substituting clause (6) thereof, as a result of which definition of assessee was altered so as to, inter alia, include in relation to services provided by a goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage. Thus, in respect of the services provided to the appellant for the said period in question the appellant, by virtue of the said amendment, became assessee who was liable for collecting the service tax under the amended definition clause.
The provisions of Section 71A which were inserted by the Finance?8. Act, 2003 retrospectively w.e.f. 16th July 1997 were enacted to enable such persons falling under the proviso of sub-section (1) of Section 68 like the appellant to file the returns in respect of service tax for the said period within six months from the day on which the Finance Act, 2003 received the assent of the President in the prescribed manner, on the basis of the self-assessment of the service tax, as provided therein. It was also provided in Section 71A that the provision 71 shall apply accordingly, to such returns. Rule 7A thereupon came to be inserted by the Service Tax (Amendment) Rules, 2003 w.e.f. 14-5-2003 in which it was provided that, notwithstanding anything contained in Rule 7 which related to half-yearly return, an assessee in case of service provided by goods transport operator for the period from 16th day of November 1998 to 2nd day of June, 1998 shall furnish a return within a period of six months from the 13th day of May, 2003, in Form ST-3B along with copy of Form TR-6 in triplicate, failing which the interest and penal consequences as provided in the Act shall follow. It is, therefore, clear to us that not only the past recoveries were validated by Section 117, the amendment also provided for continuance of the liability of persons falling in the proviso of Section 68(1) who were to be deemed always to have been liable to pay service tax, for such services provided, to the credit of the Central Government. In such cases there was no scope for the applicability of Section 70 of the said Act and, therefore, the special provision for filing of returns was necessarily required to be made as per Section 71A, because, they could not have filed return earlier. Validating of legislation retrospectively curing defects in a taxing statute is a well recognized course, and the appellant did not acquire any vested right from the earlier defect in the statute and cannot seek a wind fall from the legislatures mistakes. The Parliament has enacted a valid law with retrospective effect and therefore the earlier judgments become irrelevant and the matter has to be viewed only in the context of the provisions now existing, which clearly provided for the liability of the appellant in respect of the services provided by the goods transport operators for which the appellant paid the freight and was deemed always to have been liable to pay service tax for the period in question from 16th July, 1997. The appellant was bound to file the returns as mandatorily required by Section 71A and accordingly the return was filed as per this machinery provision, with the payment of service tax as per the challan.
15.1?It was further held :
The service tax paid on the basis of self-assessment as per the statutory provision was a valid collection of tax by the government and therefore, it was in no way refundable to the appellant who was liable to pay the same under the amended provisions. The period for filing of the returns was provided in Section 71A, which was six months from the date on which the Finance Act, 2003 received the assent of the President, and the appellant filed the return within the period so prescribed. In a case which was covered by Section 71A read with Rule 7A, the date of filing of return cannot be drawn from the provisions of Section 70. In fact Section 71A clearly specified that the provision of Section 70 did not apply to persons referred to in the proviso to sub-section (1) of Section 68 for the filing of return. It cannot, therefore, be accepted that the time limit for filing of return by the appellant should be computed on the basis of the provision of Sections 70 and 73 as from the date on which the half-yearly return could have been filed under Section 70 read with Rule 7 which were wholly inapplicable in case of the appellant when specific provision of Section 71A was made in the context of the persons like the appellant for filing of the return and period within which the return was to be furnished was also provided. The contention that the appellant was not liable to pay the service tax since the recovery would have been time-barred on the basis of the deemed liability having been arisen earlier on the expiry of the relevant period in 1998, is, therefore, wholly misconceived .
16.In view of the? clear ratio of the decision of the Hon ble the Supreme Court in Gujarat Ambuja Cement Ltd. (supra), which was followed by this Tribunal in J.K. Industries Ltd. (supra), any contrary decisions simply giving directions without dealing with or showing dissent from the ratio laid down in these decisions or attempting to distinguish them, cannot be considered to be laying down any precedent on the doctrine of ratio decidendi. Mere directions, issued contrary to the settled legal position, cannot be said to be laying down any contrary ratio, so as to constitute an opposite precedent or laying down a contrary proposition. We are of the opinion that the ratio of the decision of Hon ble the Supreme Court in Gujarat Ambuja Cement Ltd. (supra), cannot be overlooked on the spacious plea of a learned Authorized Representative of the respondents-assessees that later is better . It is obvious that while affirming the decision of the Tribunal in L.H. Sugar Factories Ltd. (supra), the Hon ble the Supreme Court was not concerned with the validating provisions which prompted the decision in Gujarat Ambuja Cement Ltd. (supra). In fact, there could be no conflict between the two decisions, which dealt with different situations, one dealing with challenge against a show cause notice in a situation prevailing before the validating law and the other dealing with the effect of the validating provisions. Therefore, even if the decision of the L.H. Sugar Factories Ltd. rendered by the Tribunal came to be affirmed later on, that is, after the decision in Gujarat Ambuja Cement Ltd., the subsequent decision was relevant only in the context of the law, as stood prior to the validating provisions, the constitutionality of which came to be upheld by the Hon ble the Supreme Court in Gujarat Ambuja Cement Limited. For the same reason any contrary decision rendered by this Tribunal cannot be followed, because that would be defying the law laid down by the Hon ble the Supreme Court in Gujarat Ambuja Cement Limited.
?17.The contention that the notices were barred by limitation is wholly misconceived in view of the fact that the revised show cause notices were issued as per the amended provisions of Section 73 which came into force from 10-9-2004 within one year from the relevant date which was defined in sub-section (6) of Section 73 as under :-
Section 73(6). - For the purposes of this section, relevant date means, -
(h)  in the case of taxable service in respect which service tax has not been levied or paid or has been short-levied or short-paid -
(a)  where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
(b)  where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
(c)  in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;
17.1It will be? seen from the above provisions that the show cause notice was required to be served within one year from the relevant date in cases where there was no fraud, collusion etc. The relevant date in cases where periodic return is filed and in cases where periodic return is not filed was governed by clauses (a) and (b) of sub-section (6)(i) of Section 73. In the present case, there is no dispute that the return which was filed as per the prescribed Form ST-3B under Rule 7A was not a periodic return, but a return which was required to be filed by the specified date, as contemplated by Section 71A read with Rule 7A. In sub-clause (c) of clause (i) of Section 73(6)(c) all other cases where no periodic return was involved, the date on which the service tax was to be paid was to be considered as the relevant date . In the present case, the service tax was to be paid within six months from 13-11-2003 by filing the return in the prescribed Form ST-3B under Section 71A read with Rule 7A. The relevant date, therefore, in the present case for filing such return was 14-11-2003. Therefore, even if 14-11-2003 is considered and not 30-11-2003, which was the date extended by the Supreme Court, the show cause notices issued on 4-11-2004 were clearly within the prescribed period of one year.

11.  We thus find that in these two cases of BPL Engineering (supra) and R.K. Marbles (supra), the Division Bench of the Tribunal and the Single Member Bench of the Tribunal which respectively decided these two cases did take note of the fact that the show-cause notices in both the cases were issued after the amendment made in the year 2004. Yet they applied the ratio of the decision of L.H. Sugar (supra) which dealt with cases where show-cause notices were issued on different dates in 2002 i.e. prior to the 2004 Amendment. Therefore, with great respect, we are of the considered view that these two decisions have been rendered by wrong application of the ratio of the decision in the case of L.H. Sugar (supra) which dealt with a totally different fact situation. Hence, these two decisions cannot have any precedential value. On the other hand, in the case of Mangalam Cement (supra), the Division Bench has duly taken note of the amendment made in the year 2004 and has rightly distinguished the earlier decision in the case of L.H. Sugar (supra). Interestingly, Shri A.R.M. Rao, the learned counsel for one the appellants, in his written submission dated 22.6.2010, does not rely on the ratio of the L.H. Sugars (supra) nor any argument has been made before us in regard though reliance has been placed on both BPL Engineering (supra) and R.K. Marbles (supra). In view of the fact that the learned Single Member who heard the case of Agauta Sugar & Chemicals (supra) had three decisions before him, two of which [BPL Engineering (supra) and R.K. Marbles (supra)] were rendered by wrong application of the ratio of the decision in the case of L. H. Sugar (supra), he had no choice but to follow the third decision of the Division Bench in the case of Mangalam Cement (supra).
12.  However, the learned counsel for the appellants has raised a new argument which was not taken up before the Division Bench in the case of Mangalam Cement (supra) as stated in his written submission, we proceed to deal with the submissions made in this regard by both sides. The main challenge by the appellants is against the action taken by the department to recover the service tax remaining unpaid by the appellants.
13. Article 265 of the Constitution of India stipulates that no tax shall be levied or collected except by authority of law. It has been held in the case of Mafatlal Industries Ltd. Vs. Union of India  1997 (5) SCC 536 that law means valid law and tax levied or collected contrary to law is to be refunded provided it has not been passed on to the consumer. It is not in dispute that the goods transport service was made taxable by the Finance Act, 1997 and that the levy of service tax on such service was made effective from 16th November 1997 and was leviable till issue of the exemption notification dated 2.6.1998. In Laghu Udyog Bharati (supra), the levy of the tax was not under challenge but its collection from the customers was challenged. The retrospective amendments made subsequently in the year 2000 and 2003 have been upheld by the Hon ble Supreme Court in the case of Gujarat Ambuja Cements (supra). It was specifically held by the Hon ble Supreme Court in that case that a legislature is competent to remove infirmities retrospectively and make any imposition of tax declared invalid, valid.
14.  Once a valid levy is authorized under the law which meets the constitutional mandate, the tax becomes payable by the taxpayers. It is well recognized that taxes are required to be paid so that the Governments can run and provide essential amenities to the citizens. In the words of Chief Justice Oliver Wendell Holmes, Taxes are what we pay for a civilized society . It is also well recognized in all civilized countries that large proportion of the taxes are paid voluntarily by the taxpayers and the tax administration has to collect only the amounts which are not voluntarily paid. The degree of voluntary compliance with tax laws is usually high in most developed countries and the tax administrations have to collect only a small percentage of tax by their own efforts.
15.  In the case of service tax on transport service, we find that the levy is authorized by the statute, its collection from the recipients of the service is also authorized by the statute even for the past period, by way of retrospective amendment, the validity of which has also been upheld by the Hon ble Supreme Court. Many of the taxpayers have paid the taxes as per such levy and no refund of such tax paid is required to be made to such taxpayers in terms of the retrospective amendment made. The tax administrators are required to recover the tax from the remaining taxpayers, who have not voluntarily come forward to comply with the tax laws and pay up the tax levied, such as the appellants in these cases. The tax officials are not only mandated to recover the taxes not paid, it is their solemn duty to ensure legally levied taxes are paid to the public exchequer. A three Judges Bench of the Hon ble Supreme Court in the case of Commissioner of Customs, Mumbai Vs. Virgo Steels  2002 (141) ELT 598 (SC) has held as follows:-
  While the absence of notice may invalidate the procedure adopted by the proper officer under the Act, it will not take away the jurisdiction of the Officer to initiate action for the recovery of duty escaped. This is because of the fact that the proper Officer does not derive his power to initiate proceedings for recovery of escaped duty from Section 28 of the Act. Such power is conferred on him by other provisions of the Act which mandate the proper Officer to collect the duty leviable................ A cumulative reading of these provisions found in the Act clearly shows that the jurisdiction of a proper Officer to initiate proceedings for recovery of duty which has escaped collection is not traceable to Section 28. The power to recover duty which has escaped collection is a concomitant power arising out of the levy of customs duty under Section 12 of the Act.


This judgment of the Hon ble Supreme Court makes it very clear that the jurisdiction of a tax collector to initiate proceedings for recovery of tax which has escaped collection, is not traceable to the legal provision which provides for issue of notice (e.g. Section 28 of the Customs Act, 1962). Rather, the power to recover tax which has escaped collection is a concomitant power arising out of the legal provision levying the tax (e.g. Section 12 of the Customs Act, 1962). The ratio of this judgment was relied upon by the Larger Bench of the Tribunal in Bombay Hospital Trust Vs. Commissioner of Customs, Sahar, Mumbai  2005 (188) ELT 374 (Tri.  LB) to repel the argument that duty cannot be demanded in the absence of a specific legal provision for issuing a notice. The said Larger Bench order has since been affirmed by the Hon ble Bombay High Court vide Bombay Hospital Trust Vs. CC (ACC), Mumbai  2006 (201) ELT 555 (Bom.).
16.  As regards issue of the demand notice, the Hon ble Supreme Court has also time and again held that citing a wrong provision of law in the demand notice will not vitiate a demand. For example, in the case of J.K. Steel Ltd. Vs. Union of India  (1969) 2 SCR 418 = (AIR 1970 SC 1173) = 1978 (2) ELT J355 (SC), it was held as follows:-
If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under different power does not vitiate the exercise of the power in question. This is a well settled proposition of law. In this connection, reference may usefully be made to the decisions of this court in B. Balakotaiah v. Union of India, (1958) SCR 1052 = (AIR 1958 SC 232); and Afzal Ullah v State of U.P., (1964) 4 SCR 1991 = (AIR 1964 SC 264).


The same principle was reiterated in the case of N.B. Sanjana, ACCE, Bombay Vs. The Elphinstone Spinning and Weaving Mills Co. Ltd.  1978 (2) ELT (J 399) (SC). Several High Courts and the Tribunal have followed this principle without exception and in the case of CCE, Calcutta Vs. Pradyumna Steel Ltd.  1996 (82) ELT 441 (SC) it has been reiterated,
It is settled that mere mention of a wrong provision of law when the power exercised is available even though under a different provision, is by itself not sufficient to invalidate the exercise of that power .
 This decision was rendered while overruling the Tribunal s order which had held that since the provision mentioned in the show-cause notice was inapplicable, the show-cause notice was invalid.
17. The Hon ble Supreme Court in the case of Assistant Director of Mines & Geology v. Deeccan Cements Ltd. - 2008 (9) S.T.R. 449 (S.C.) = 2008 (222) E.L.T. 321 (S.C.) has observed in para 7 that :-
7.?The matter can be looked from another angle. Supposing somebody has paid the taxes and in other words there has been collection of the amount levied. There may be another person who may not have paid it. The latter person cannot be placed at a better footing than the former one.
As mentioned earlier, some assesses have paid the tax and they can not be refunded the amount in view of the levy validated retrospectively. The retrospective legislation also contained a provision in Section 117 of the Finance Act, 2000 to recover any refund of service tax granted:-
(ii) ?any service tax refunded in pursuance of any judgment, decree or order of any court striking down sub-clauses (xii) and (xvii) of clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994 before the date on which the Finance Act, 2000 receives the assent of the President shall be recoverable within a period of thirty days from the date on which the Finance Act, 2000 receives the assent of the President, and in the event of non-payment of such service tax refunded within this period, in addition to the amount of service tax recoverable, interest at the rate of twenty-four per cent. per annum shall be payable, from the date immediately after the expiry of the said period of thirty days, till the date of payment.
Interpreting a similar retrospective law, the Hon ble Supreme Court had held in the case of R.C. Tobacco Pvt. Ltd. Vs. U.O.I. - 2005 (188) E.L.T. 129 (S.C.) that the retrospective legislation did not provide for issue of any notice and it provided a special time limit for tax recovery. The Hon ble Supreme Court also observed that having upheld the constitutional validity of the retrospective legislation, it would be a pyrrhic victory for the Union of India if they could not in fact recover the tax.
18. In the light of the foregoing, when we consider the submissions made on behalf of the appellants, we arrive at the following inescapable conclusions: -
(i) The decision in Mangalam Cement (supra) lays down the correct proposition in law holding that the relevant date has to be determined with reference to Section 71A of the Finance Act, 1994 read with Rule 7A and that the time period for issue of a valid demand has to be calculated with reference to such relevant date under the amended Section 73.
(ii) The appellants can not now take a stand that the tax was payable during November 16, 1997 to June 1, 1998 when in fact no tax could be successfully demanded and recovered from them earlier in view of Hon ble Supreme Court s decisions in the case of Laghu Udyog Bharati (supra) and L. H. Sugar (supra). Having laid a successful challenge against the demand during the earlier period, now they can not turn around and say that the department should have raised the demand during that period itself. Such arguments are in the nature of Heads I win, tails you lose logic designed to deprive the public revenue its legitimate dues even after the levy has been declared valid by the highest Court of the land.
(iii) As rightly pointed out by the ld D.R, in the case of S.S. Gadgil (supra), time limit was sought to be extended after the expiry of the prescribed period and in that context the said judgment was delivered by the Hon ble Supreme Court, but in the instant cases, a special time limit has been prescribed under Section 71A which was inserted by the Finance Act, 2003 to operationalise the retrospectively validated levy and hence the ratio of S.S. Gadgil (supra) is not applicable to the present cases.
(iv) The decisions given in R. K. Marbles (supra) and in B.P.L. Engineering (supra) do not lay down the correct proposition of law having been rendered by wrong application of the decision in L.H. Sugar and hence those have no precedential value.
19. As the issue involved in these appeals relate to demand of tax and hence to determination of the rate of tax applicable, after answering the reference as above, we direct the Registry to list the appeals before the concerned Division Bench for final orders.

(Pronounced in open court on 1.09.2010)




(Mr. Justice R.M.S. Khandeparkar)
                     President



    (Dr. Chittaranjan Satapathy)   
                   Technical Member


                            
                                           (Ashok Jindal)
                                           Judicial Member
Rex
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- 2 -
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
.
APPEAL NO. ST/6/08

(Arising out of Order-in- Original No.18/P-III/STC/COMMR/2007 dtd. 22/11/2007   passed by the Commissioner of Central Excise, Pune.III )

For approval and signature:

Hon ble  Mr. Ashok Jindal, Member(Judicial)
  Hon ble Mr.Sahab Singh, Member(Technical)
============================================================
1.   Whether Press Reporters may be allowed to see        :     No
     the Order for publication as per Rule 27 of the
     CESTAT (Procedure) Rules, 1982?

2.   Whether it should be released under Rule 27 of the         :    Yes
     CESTAT (Procedure) Rules, 1982 for publication
       in any authoritative report or not?

3.   Whether Their Lordships wish to see the fair copy            :     seen
     of the Order?

4.   Whether Order is to be circulated to the Departmental      :    Yes
     authorities?

=============================================================

M/s. Suzlon Infrastructure
:
Appellants



VS





Commissioner of Central Excise, Pune.III

Respondent

Appearance

Shri V.Sridharan, Advocate for Appellants
Shri K.M.Mondal, Spl.counsel for Respondent

CORAM:

Mr.Ashok Jindal, Member(Judicial)
Mr.Sahab Singh, Member(Technical)

                                          Date of hearing:  17/08/2011
                                          Date of decision:14/02/2012
                                          
ORDER NO.

Per : Sahab Singh

         This appeal has come up before this Bench for hearing and disposal pursuant to CESTAT Misc. Order No. M/434/CSTB/WZB/ 2009/C.II dated 7.10.2009.   This appeal arises out of the Order-in-Original No.18/P-III/STC/COMMR/2007 dtd. 22/11/2007 passed by the Commissioner of Central Excise, Pune.III.       

2.     Background of the case.
       Briefly stated, the facts of the case are that the appellant, M/s. Suzlon Infrastructure Limited (in short M/s. SIL) formerly known as M/s. Suzlon Developers Limited is an associate company of M/s. Suzlon Energy Limited (in short M/s. SEL). It is engaged,  interalia, in erection, commissioning  or installation of windmills or wind turbine generators for its customers on contract basis.  The Wind Turbine Generators (in short WTG) are manufactured and supplied by M/s. SEL.  It had taken Service Tax Registration for installation & commissioning services on 18.7.2003 which was subsequently amended to endorse other services also.
2.1     Based on intelligence that M/s. SIL was indulging in evasion of service tax  under the category of Erection, Commissioning or Installation service as defined in Sec,65(39a) of the Finance Act, 1994, the officers  of Directorate General of Central Excise Intelligence (DGCEI), New Delhi  conducted investigation into the matter.  In the course of investigation,  the officers examined the relevant records and recorded statements of some of the functionaries of the appellant company.  In his statement dated 27.10.2005, Shri Bipin Shah, General Manager had, interalia,  stated that their company is engaged in project execution work  comprising civil construction work, erection installation and commissioning of WTG on exclusive basis to the customers of M/s. SEL  as per Agreement dated 11.6.2005 entered into between M/s. SEL and the appellant company.
2.2     Similarly, in his statement dated 7.11.05 Shri Harish H.Mehta, Director of the appellant company had, interalia, stated that M/s. SIL  is engaged in developing wind farm related infrastructure, project execution covering civil work, electrical work, assembly /erection and commissioning of the windmill exclusively for M/s. SEL or its clients.  As soon as a client is identified by M/s. SEL and order is confirmed for sale of WTG, the customer is introduced to their company and thereafter, they finalise the contract for erection, installation and commissioning of the WTG with the customer as per mutually agreed terms and conditions.  He also stated that the complete plant, machinery and equipment of the WTG are supplied by M/s. SEL and M/s. SIL is not supplying  plant, machinery and equipment except  electricals required for the project.  
2.3      On examination of the Agreement dated 11.6.2005, between M/s. SEL and M/s. SIL, the officers found that M/s. SIL was required to provide services of erection, commissioning or installation of WTG and establishment  of Wind Farm Project  exclusively for customers of M/s. SEL.  It was also found that M/s. SIL was entered into the contract with its customers for services of erection, commissioning or  installation of WTG  and for this purpose, it was issuing four types of invoices to its customers relating to :-
(i)  Construction of civil foundation, control room, transformer plinth,  crane platform, road for crane movement, electrical yarn fencing etc.
(ii)  Supply and installation of HT Electrical yard with VCB, outdoor type CT/PT and HT Transmission line from windmill to grid interconnection and related facilities.
(iii)  Erection and installation of windmill consisting of unloading and safe-keeping of windmill equipment, assembly, erection and installation of windmill tower and Wind Turbine Generator.
(iv)  Charges towards final testing and commissioning of the wind mills.
2.4.     It appeared that civil foundation is an integral part of erection and installation of the wind mill and the control room and electrical yard etc. also form an integral part for commissioning of the wind mill without which the commissioning of wind mill or WTG is not complete.
2.5      It was also found that M/s. SIL was discharging its service tax liability on the full value realized by it from its customers in respect of invoices mentioned at Sr.No.(iii) and (iv) above.  However, in respect of invoices mentioned at Sr.No.(i) and (ii) above, it was availing the benefit under Notification No.19/2003-ST dated 21/8/2003 which provides that in case of a contract involving erection,  commissioning or installation services along with the supply of plant, machinery or equipment, service tax will be payable only on 33% of the gross amount charged by the service provider from its customers for  erection,  commissioning or installation  and  supply of plant, machinery and  equipment,
   2.6     Since M/s. SIL was providing only the services of erection, commissioning or installation of WTGs, it appeared that it was not eligible to the benefit of Notification No.19/2003-ST dated 21.8.2003.   M/s. SIL, was, therefore, served with a show-cause notice dated 28.8.2006  demanding service tax of Rs. 22,04,53,114/-  and Education Cess of Rs. 44,09,131/- for the period 10.9.04 to 30.9.2005.  The notice also proposed to impose penalty on it under Sec.76 for contravention of provisions of Section 68 and penalty under Section 78 of  Chapter V of the Finance Act, 1994  for evasion of service tax by wilful suppression of facts.  The notice also demanded interest on the service tax not paid during the period 10.9.2004 to 30.9.2005 under the provisions of Section 75 of the Finance Act, 1994.
2.7.    M/s. SIL contested the notice by its reply dated 24.11.2006, inter alia, contending that the contract of electrical work  is distinct and separate from the contract of erection of tower and  civil work.  Hence it is entitled to the benefit of Notification No.19/2003 dated 21.8.2003.
2.8.     After hearing the appellant and considering the submissions, both written and oral,  the Commissioner vide his order dated  22.11.2007, confirmed the service tax including Education Cess amounting to Rs. 22,48,62,245/- under the category of erection, installation and commissioning service .  The Commissioner also ordered adjustment of Rs. 8,55,15,594/- already paid against its service tax liability.   The Commissioner also ordered  adjustment of Rs. 2,90,480/-  already paid by M/s. SIL towards interest.  In addition, the Commissioner also imposed a penalty @ of Rs. 100/- per day from the date it is payable till the date it is paid under Section 76 of the Act.  The Commissioner also imposed a penalty of Rs. 22,48,62,245/- under Section 78 of the Finance Act, 1994.  Aggrieved by this order, the appellant has filed this appeal.
3.      We have heard Shri V.Sridharan, Sr.Advocate for the appellant and Shri K.M.Mondal, ld.Consultant for the respondent. 
4.     Referring to a Work Order , placed on the appellant by its customer, Sr.Advocate contended that the Work Order would show that the appellant had four separate contracts embodied in a single work order. According to the appellants, it carried out 4 types of activities namely.
(i) civil work  including  foundation and allied activities of Wind Farm Project,
     (ii) supply and installation of electrical equipments;
     (iii) erection and installation of windmill and
     (iv) final testing and commissioning of windmill. 
4.1     He submitted that the disputes are limited to two activities namely
 (i) civil work including foundation and allied activities of Wind Farm Project and 
     (ii) supply and installation of electrical equipments.
4.2      Elaborating his submission, the Ld.Sr.Advocate submitted that each of the four types of activities carried out by the appellant is distinct and separate.  Civil work has been done by a sub-contractor who is registered under the category of commercial or  industrial construction service and that the sub-contractor has paid service tax of 33% of the gross amount charged from the appellant by availing the benefit of Notification No.15/2004-ST dated 10.9.2004 as amended.  Similarly, electrical work has been done by a sub-contractor who is registered under the category of Erection, Commissioning or Installation service and has discharged service tax on the entire gross amount charged from the appellant without claiming any abatement under Notification No.19/2003ST dated 21.8.2003 as amended.   Hence the appellant has claimed benefit of Notification No.19/2003 ST dated 21.8.2003 as amended. 
4.3    The Ld.Sr.Advocate finally limited his submission to supply and installation of electrical equipments.  He contented that erection, commissioning or installation of electrical equipments is a separate activity having no relation to erection, commissioning or installation of windmill or WTGs.  In this connection, he relied upon the decisions of the Hon ble Supreme Court in the case of Nicco Corporation Ltd. vs. CCE, Kolkotta -2006(203)ELT 362 (S.C.), Skytone Electricals (India) Ltd.  vs. Commissioner -2008(225)ELT A 97(S.C)  holding that  wires and cables are not parts of windmill.
4.4    On limitation, he submitted that the present case involves a pure question of interpretation of law and that the appellant was under bona fide belief that the activity of civil work and electrical work are distinct and separate from the activity of erection, commissioning or installation of windmill.  Hence, in the facts of the case, the extended period of limitation could not be invoked.
5.   Supporting the contention of the Commissioner, the Ld.Consultant for the Revenue, submitted that it is a case of composite contract for erection, commissioning and installation of Wind Farm Project, in terms of the Agreement dated 11.6.2005 between M/s. SEL and the appellant and in terms of various work orders placed on the appellant by its customers, it is quite clear that the appellant has provided composite service of erection, commissioning or installation of windmills or WTGs.   He submitted that it is a common knowledge that without civil foundation,  erection of tower is not possible.  It is an integral part of erection and installation of the windmill.  Similarly,  without electrical installation, commissioning of windmill is not possible inasmuch as electricity generated by the WTGs cannot be evacuated from the windmill to the Electricity Board grid.  Electrical installation is, therefore, an integral part of the Windmill.  Therefore, the appellant s claim that civil foundation and electrical installation are separate activities is not acceptable.  Consequently, the appellant s claim for the benefit of Notification No.19/2003 ST dated 21.8.2003 as amended is not available to it.  He also submitted that the appellant s contracts with its sub-contractors are not relevant as the same are not under dispute.
5.1  In regard to the case laws cited by the Sr.Advocate, the Ld.Consultant submitted that the case laws cited have no application to the facts of this case.  He submitted that the Ld.Sr.Advocate overlooked the fact that the appellant had undertaken the entire services of erection, commissioning or installation of wind farm project  of which electrical installation is a part.   In his submission, wind farm project is not complete without electrical installation.  In the context of service under the Finance Act, 1994, the case laws cited are totally misplaced.
5.2.   On limitation, the Ld.Consultant submitted that it is not at all a case of bona fide belief.  The appellant is guilty of suppression of facts.  It had not declared the correct value of taxable services in ST.3 returns filed with the department.  It had suppressed the fact from the department that it had availed the benefit of Notification No.19/03 ST dated 21.8.03 although it did not supply WTGs to its customers.  Therefore, the extended period of limitation has been correctly invoked in this case.  In his submission, the appellant has no case both on merit as well as on limitation.  He, therefore prayed for dismissal of the appeal.
6.    We have carefully considered the submissions of both sides.   We have also examined the relevant records including the impugned order and the written submission filed earlier by both sides. 
7.    We find that the following issues arise for our consideration:-
 I)  Whether the appellant s contracts with its customers are composite contract for erection, commissioning or installation of Wind  Farm Project  of which electrical installation is a part, as contended by the Revenue or  the electrical  work is a separate activity distinct  from Wind Farm Project, as contended by the appellant ;
(II)  Whether the appellant is eligible for the benefit of Notification No.19/2003 ST dated 21.8.2003 as amended ;  and
(III)   Whether the extended period of limitation under the provisions of Sec.73(1) of the Finance Act, 1994 is applicable to the facts of this case.
8.    We record our findings issue-wise herein below:-
9.   Issue No.(I)
      According to the appellant, it had received from each of its customers four separate contract embodied in a single document viz. the Work Order.  It would, therefore, be necessary to see the work orders placed on the appellant by  its customers.   We find that one of the work orders relied upon in the show-cause notice is in respect of M/s. Hercules Hoists Limited dated 18.11.2004 (available at Page No.331-333 of Paper Book.I Vol.III).   For the sake of convenience and ready reference we reproduce the entire Work Orders herein below:



9.1      On perusing the Work Order,  we find that it is for erection and installation of 2 Nos. of WTGS (1250 KW each)  at Dhulia Site in Maharashtra.  We also find that in the Work Order indicates Scope of Work which includes the following under the  broad heading of
     A) Civil,
     B) Electrical,
     C) Erection & Commissioning,
     D) Loading & Unloading,
E) Temporary road for movement of crane and preparation of crane platform. 
 9.2   At page 2 of the Work Order, the price per WTG is shown as Rs. 75 lakhs  and then price break-up is shown in the tabular form under the  Column Description   in respect of each item of work.  At page 3 of the Work order, we also find that payment schedule had been indicated as follows:-
     * Rs. 82.50 lakhs with order 
     * Rs. 40 lakhs on 15.12.2004 (PDC)
     * Rs. 27.50 lakhs on 15.01.2005 (PDC).
9.3    We have also perused 4 types of related invoices raised by the appellant on its customers ( available at page 335-338 of Paper Book Vol.III).  It is seen that description of items of work is same as  shown in the price break up at page 2 of the Work Order.
9.4    In view of the factual position, as seen from the Work Order, we are unable to appreciate that the appellant had received 4 separate contracts embodied in a single document.  From the Work Order, it is clear that it is a composite contract for erection, commissioning or installation of WTGs.  We, therefore, agree with the Revenue s contention that by showing 4 separate invoices, it cannot be contended that appellant had executed 4 separate and distinct contracts with its customers.  It is clearly a composite contract and the intention of the appellant is quite obvious from the Work Order.
10.     According to the Revenue, in terms of Agreement for Services dated 11.6.2005, between M/s. SEL and the appellant, the appellant is required to provide services  to M/s. SEL or its customers on an exclusive basis for the purpose of setting up  Wind Farm Project. It is, therefore, necessary to examine the said Agreement for Services.   We reproduce below some of the clauses relevant for the present purpose:- 
    A.  The company is a public limited company incorporated in India and is a leading manufacturer of Wind Turbine Generators ( WTGs )  in India and in addition to supply of WTGs, offers total solutions    in wind power generation comprising wind resource mapping, identification of suitable sites, establishment of wind farm project including civil work and installation and commissioning of WTGs and provision of operations and maintenance services to its customers in conjunction with its subsidiaries and associate companies. (underlined and emphasis supplied). 
B.   SDL, a limited company incorporated in India and owned by the promoters of the Company, is primarily engaged in the business of providing Services ( as hereinafter defined)  for the establishment  of windfarm projects for  the  customers  of  the   company ( the Customers ).  SDL is also engaged in the business of generating and selling electricity through the ownership of WTGs.  
C.   The Services are provided to the Company or to the customers of the Company, on an exclusive basis, for the purposes of setting up windfarm projects. 
  The agreement defines Services as follows - 
Services mean all of the services required for the erection, installation and commissioning of the windfarm project including, without limitation, the following services:
a.   development of infrastructure  for setting up of wind farm project including construction of evacuation facilities and construction of approach roads; and
 b.   laying of foundation and erection, installation and commissioning of WTG, construction of control rooms, construction for the transformers, construction of evacuation facilities, construction of approach roads; and 
c.     all related electrical work including material.  
 3.   Agreement for Services      
3.1.   SDL shall provide the Company with such information as it requests from time to time in order to submit proposals to Customers for setting up WTGs.
3.2    SDL hereby undertakes that it shall offer to provide all or any of the Services to Customers, at the instance of the Company.  The procedure for which shall be as follows:-
 (a)  The Company may at any time at its discretion instruct SDL to perform the services for its customers;
(b)  The Company shall specify the location, the date by which the services have to be provided to the customer as well as the terms and conditions on which such services shall be provided to the customer in accordance with Clause 4 below;  
(c) SDL shall provide such services as specified by the company to the customer(s) on the terms and conditions specified by the Company;  
(d)  SDL shall provide the services to the customers at the consideration as determined in accordance with Clause 5 below.
3.4      SDL undertakes that it shall at all times ensure that the terms and conditions specified in this Agreement shall be strictly adhered  to and shall not be varied or amended in the agreements for services with the customer except with the prior written consent of the company.
4.  Provision of Services.
4.1  The provision of services to the customer shall be completed by SDL in a timely manner in accordance with the schedules as agreed to by the customer with the company.
4.2 SDL hereby undertakes and covenants that it shall not provide services to the customer(s) or any other entity, other than as required by the company or without the prior written consent of the company. 


7. Undertakings
   SDL undertakes that:
        (a) It shall not in any manner whatsoever impose or seek to impose any onerous term or condition in any agreement for the provision of services with any customer which may (i) be inconsistent with the terms and conditions agreed to between the company and the customer; or (ii) prevent the customer from entering into such agreement with SDL; (iii) result in company being unable to provide integrated solutions in wind power generation to such customer;  (underlined and emphasis supplied) and
(b) It shall not commence or carry on any other business other than presently carried on without the prior written consent of the company
(c)  It shall obtain all government and regulatory approvals, and registrations, necessary for the carrying on of the business of providing the services to the customers;
(d)  It shall ensure that the provision of services does not in any way contravene any Applicable Laws; 
(e)  It shall ensure that it complies with Applicable Laws in the conduct of its business.
The Company undertakes that
   a.  It shall notify SDL about the terms of the arrangement with the customer in relation to the integrated solutions   offered to the customer. (underlined and emphasis supplied)
10.1      On a careful examination of the various clauses of the  Agreement for Services   reproduced  above,  we find that the company (M/s. SEL) offers total solutions   to its customers in establishment of windfarm project including civil work and installation and commissioning of WTGs and in this endeavour the appellant (M/s. SIL) provides the required services ( as defined in the Agreement ) to the customers of the company.  It is quite obvious from Agreement of Services   that the appellant has to provide integrated solutions to the customers in wind power generation.  From the definition of Services   as reproduced above, we note that the services required for the erection, installation and commissioning of the windfarm project , inter alia, include all related electrical work including material.  Reading the definition of Services together with the various clauses reproduced above, we have no doubt in our minds that the main object of the Agreement, in so far as the appellant is concerned, is to provide all of the services required for the erection, installation and commissioning of the Windfarm project (WTGs) to the customers.  In that process, while carrying out related electrical work, the appellant will also provide material in relation to the electrical work.  In our view, the material provided by the appellant in relation to the electrical work is only incidental to the services for erection, installation and commissioning of the Windfarm Project.   The contention of the appellant that the electrical work is separate activity distinct from Windfarm Project cannot be accepted as correct.  We hold that the electrical installation is a part of Windfarm Project (WTG) inasmuch as without electrical installation, evacuation of electricity  from WTG to the State Electricity  grid is not possible.  It is needless to mention that the establishment of Windfarm Project becomes complete only after commissioning of the WTGs.
10.2  In support of its contention that the electrical installation is distinct and separate from WTGs, the applicant has relied upon two judgments of the Hon ble Apex Court in the case of
(1) Nicco Corporation Ltd.  vs. CCE, Calcutta  2006(203)ELT 362(S.C) and
(2) Skytone Electricals (India) Ltd. vs. Commissioner  2008 (225) ELT A 97 (S.C) .
10.3    We have gone through the judgments.  In both the judgments, the Hon ble Apex Court has held that wires and cables cannot be considered as parts of Windmill and hence the benefit of Notification No.205/88 C E dated 25.5.88 as amended cannot be extended to the assessee.  In our considered view, these judgments have no application to the facts of this case.  We are not concerned with the classification of Windmill or its part under Central Excise Tariff Act 1985.  We are concerned herewith the classification of  services of erection, commissioning or installation of Windfarm Project (WTGs) under the Finance Act, 1994.  Undisputedly, the appellant is providing integrated services of erection, commissioning or installation of Windfarm Project (WTGs) of which electrical installation is a  part.  It is needles to say that  without electrical installation, Winfdarm Project will remain incomplete.  We therefore, hold that the appellant s contracts with its customers are composite contracts for erection, commissioning or installation of Windfarm Project of which electrical installation is a part.  Consequently, we hold that electrical installation is not a separate activity distinct from Windfarm Project.


11.  Issue  No.II .  
   We shall now examine the issue No.(II)  that is,   whether the appellant is eligible for the benefit of Notification No.19/03 ST dated 21.8.2003 in respect of electrical installation.  It is the contention of the appellant that while providing the service of erection, commissioning or installation of electrical installation to its customers, it has also supplied the material including wires and cables required for the same.  Hence it is eligible for the abatement under the aforesaid Notification.   For the sake of convenience, we reproduce the Notification itself inserted by Notification  No.12/2004 ST dated 10.9.2004.
NOTIFICATION No. 19/2003-S.T., DATED 21-8-2003


In exercise of the powers conferred by section 93 of the Finance act, 1994(32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided to a customer in relation to erection 1 commissioning or installation by a commissioning and installation agency, form so much of the service tax leviable thereon under Section 66 of the said Act, as is in excess of the amount of service tax calculated on a value which is equivalent to thirty-three per cent. of the gross amount charged from the customer under a contract for supplying a plant, machinery or equipment and erection 1 commissioning or installation of the said plant, machinery or equipment, subject to the following conditions, namely:-

(i) the exemption contained in this notification is optional to the commissioning and installation agency; and

(ii) the benefit under this notification shall be allowed only if the commissioning and installation agency has not availed the benefit under the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax dated the 20th June, 2003, [G.S.R. 503 (E), dated the 20th June, 2003], for the said contract; and

1 [(iii) The benefit under this notification shall be allowed only if no credit of duty paid on capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004]

Explanation.  For the purposes of this notification, the gross amount charged shall include the value of the plant, machinery, equipment, parts and any other material sold by the commissioning and installation agency, during the course of providing erection 1 commissioning or installation service.

1   (Inserted by Notification NO. 12/2004-ST dated 10.09.2004)

11.1     On a plain reading of the Notification including the explanation appended to it, we find that its benefit could be available only where the service provider i.e a  commissioning and installation agency also supplies under a contract a plant, machinery or equipment, parts and any other material during the course of providing erection, commissioning or installation of services. 
11.2    As per the Revenue, the benefit of the Notification was not available to the appellant, because they hand not supplied the WTGs to its customers.  They had only provided the services of erection, commissioning or installation of WTGs supplied by M/s. SEL, which is altogether an independent entity.
11.3     We find that M/s. SEL are manufacturers of WTG. They had supplied WTGs and parts thereof and also electrical items to the customers under separate invoices.  One such invoice dated 7.2.2005 issued by M/s. SEL to M/s. Hercules Hoists Limited  is found at page 17 of the Revenue s written submission.  The relevant portion of the invoice is reproduced below for better understanding and appreciation.
SUZLON ENERGY LTD,
Plot No. H-24/25 M.G Udhyog Nagar,
OlDC Industrial Estate, Near Water Tank,
Dabhel, Daman 396 210 (U.T.) India
ST. No. DI-600 dt.26.09.1996 C.S.T. No. DI/CST/371 DT. 26.09.1996
INVOICE

To,
M/s. Hercules Hoists Limited
110, Minerva Industrial Estate
Mulund (West)
Mumbai 400080
Delivery Address:
M/s. Hercules Hoists Limited
Village : Petle
Taluka : Sakri
District: Dhule
Maharashtra
P.O. No.:  PO45-00221-A
Date      :  18/11/2004
Invoice No: SEL/DAMAN/SUPPLY/2004-2005/055
Date: 28.02.2005 Reference No. 7444000055
Sr. No.
Description
Qty.
Rate Per Unit (Rs.)
Value in Rupees
00020
Supply of SUZLON WTG 1.25MW S66 TubTcwr72M Ht {Ex works Daman) Wind Turbine Generator comprising mainly of :
* Nacelle
* Hub and Set of 3 Blades
* Controller (Micro Processor)
* Tower and Hardware 
  
1
47,30,000
47,30,000

Packing, Handling, Loading, Insurance and Transportation Charges for Delivery at your site

825,000
825,000

Supply of Electrical Items Including Transformers up to D.P. structure internal line up to Metering

1,500,000
1,500,000

Total
49,625,000
AGAINST C FORM

Amount in Words: RUPEES FOUR CRORS NINETY-SIX LAC TWENTY-FIVE THOUSAND ONLY
Mode of Dispatch:  By Road
Dispatch Particulars     From Daman factory lo your sits
Insurance       :    Arranged by us up to site 
Customer's L.S.T. No.   : 400021/S/3293 DTD 21 -08-1998
Customer's C.S.T. No.  : 400080/C DTD 01-APR-95

Central Excise Exempted under G.E. (Notification) No. 6/2002-CE did. 01-3-2002 Sr. No. 237. List No  9, Hem No   13 - Wind Operated Electricity Generators and pans thereof, as amended by Notification No  23/2004-CE did. 09-07-2004.

Subject to Daman Jurisdiction only
For SUZLON  ENERGY LTD.

Authorised Signatory

11.4     Perusing the above invoice, we find that M/s. SEL have not only supplied WTG and its parts, but also electrical items of substantial value.  We find that the Commissioner has  rejected the appellant s claim for the benefit of Notification No.19/2003 dated 21.8.2003 on the ground that the benefit of Notification is applicable only to those cases where under a contract the services provider  not only supplies a plant, machinery or equipments but also provides the service of commissioning or installation of the said plant, machinery or equipment. Since the appellant had not supplied WTGs to its customers and provided only the service of erection, commissioning or installation of WTGs supplied by M/s. SEL, they were not eligible for the benefit of the Notification.
11.5    It is claimed by the appellant that under separate contract with their customers, they had not only supplied electrical components but also carried out the work of electrical installation and hence they were eligible for the benefit of Notification.   This claim merits to be rejected for the reason more than one.  Firstly, we have already held herein-before that as far as the appellant is concerned, supply of some material including some electrical items was only  incidental to the services of erection, commissioning or installation of WTGs.  Secondly, in terms of the Agreement for the Services dated 11.6.2005 between M/s. SEL and the appellant as also in terms of various Work Orders placed on the appellant by its customers, there cannot be any doubt that the contracts were composite contracts for providing services of erection, commissioning or installation of WTGs.  Thirdly, civil works and electrical works are inseparable parts of Wind Farm Project.  It is needless to say that without civil foundation, erection of tower is not possible.  Similarly, without electrical installation, commissioning of Wind Mill is not possible inasmuch as electricity generated by WTGs cannot be evacuated from the Wind Mill to the Electricity Board.     
  11.6    We find that  in his findings the Commissioner has observed that the mere issue of 4 different invoices would not make the activities independent of each other.  The Agreement for Services  specifies the service as services required for erection, installation and commissioning of Windfarm Project.  In his findings, he has observed that the entire gamut of the installation commences  with construction of the civil foundation and progresses into installation of electrical yard and transmission line for grid connectivity to erection of the windmill to testing and commissioning of the windmills.  Thus, each process is dependant on every subsequent process and thus are inherent and inseparable parts of the work of the entire agreement relating to complete erection, installation and commissioning of the WTGs.  In short, civil foundation and electrical installation are inseparate part of windfarm project.
11.7  Once it is held that electrical installation is a part of the composite contract for erection, commissioning or installation of WTGs, the appellant s claim  for the benefit of  Notification No.19/2003 ST for electrical installation  cannot be accepted only on the basis that it had supplied some electrical materials for electrical installation.  We, therefore, hold that the benefit of Notification No.19/2003 ST is not available to the appellant.
12.     Issue No.III.
       It is contended by the appellant  that the show-cause notice dated 2.8.2006 demanded service tax for the period  10.9.2004 to 30.9.2005.  Therefore,  the period of 10.9.2004 to 31.3.2005 is beyond the normal period of limitation.  It is also contended that the appellant was under the bona fide belief that the activities of civil work and electrical work are distinct and separate from the activity of erection, commissioning or installation of wind mills.  Hence, the extended period of limitation could not be invoked in this case.  The contention of the appellant was contested by the ld.Consultant for the Revenue.  He stated that the assessee is working under self-assessment scheme.   As per provisions of Section 70 of the Finance Act, 1994, the assessee is required to make self-assessment of service tax due on the services provided by it and file ST 3 Returns with the jurisdictional Supdt. of Central Excise.  Examination of ST 3 returns shows  that the assessee has incorrectly assessed the service tax payable and has suppressed the correct value of taxable services provided by it.   Further, the assessee has also suppressed the fact from the department  that it has availed benefit of Notification No.19/2003 ST dated 21.8.2003 although it did not supply WTGs to its customers.
12.1    We have given careful consideration to the above submissions of both the sides.   We do not find any basis or foundation established  of bona fide belief.  We do not find anything on record to suggest that the appellant had ever approached the Service Tax authorities to ascertain the details of their liability to pay service tax.    It is needless to say that the belief can be said to be bona fide only when it is formed after all the reasonable consideration are taken into account.   In the present case, we do not find any such consideration having been taken by the appellant.  We are, therefore, of the view that the department has rightly invoked the extended period of limitation.
13.    In view of our foregoing findings, we find no merit in the appeal.   We, therefore, reject the appeal and confirm the order of the Commissioner.
14.      Appeal rejected.
         (Pronounced in Court on 14th Feb.,2012)
     
Ashok Jindal
Member(Judicial)

Sahab Singh
Member(Technical)


pv




33









































IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT  NO. II
APPLICATION NO.  E/S/351, 352 and 357/10
     IN APPEAL NO. E/277, 278 and 288/10 Mum

(Arising out of Order-in-Appeal No. SB (83-84)83-84/MV/2009 dated 20.11.09 passed by the Commissioner of Central Excise Customs (Appeals)  Mumbai and  arising out of Order-in-Original No. 18/ANS/09-10 dated 20.11.09 passed by the Commissioner of Central Excise, Mumbai III).

For approval and signature:

Shri. Ashok Jindal, Member (Judicial)
Shri. P.R. Chandrasekharan, Member (Technical)

1.   Whether Press Reporters may be allowed to see        :     No
     the Order for publication as per Rule 27 of the
     CESTAT (Procedure) Rules, 1982?

2.   Whether it should be released under Rule 27 of the         :      
     CESTAT (Procedure) Rules, 1982 for publication
       in any authoritative report or not?

3.   Whether Their Lordships wish to see the fair copy            :     Seen
     of the Order?

4.   Whether Order is to be circulated to the Departmental      :    Yes
     authorities?


Monginis Foods Pvt. Ltd.
Hindustan Forging and Steel Industries
:
Appellant



Versus





Commissioners of Central Excise,
Mumbai III and V

Respondent

Appearance

Shri Vinod Awtani, C.A.  and   
                            for appellants
Shri Vishal Agarwal, Advocate

Shri H.B. Negi, SDR and
Shri Kishori Lal, SDR


For Respondent

CORAM:

Shri. Ashok Jindal, Member (Judicial)
Shri. P.R. Chandrasekharan, Member (Technical)
Date of Hearing : 28.01.11
 Date of Decision : 28.01.11


ORDER NO.


Per : Ashok Jindal

     By the impugned order the appellants were directed to reverse 8% or 10% as per Rule 6(3) of CENVAT Credit Rules, 2004 on the clearance of the exempted goods as the appellants are not maintaining separate account of inputs / input service which have gone to manufacture of dutiable as well as non-dutiable final products.
    
2.   After hearing both sides for some time on the stay applications, it is seen that the issue involved is in narrow compass.   Hence, the applications for waiver of pre-deposit of the amounts are allowed and the appeals are taken up for disposal with the consent of both the sides.

3.   We find that by an amendment inserted through Section 73 of the Finance Act, 2010 the CENVAT Credit Rules, 2004 are being amended such as :-
     Amendment of rule?6 of CENVAT Credit Rules, 2004.  
73. (1) In the CENVAT Credit Rules, 2004, made by the Central Government in exercise of the powers conferred by section 37 of the Central Excise Act, as published in the Official Gazette vide notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 600(E), dated the 10th September, 2004, rule 6 shall stand amended and shall be deemed to have been amended retrospectively, in the manner specified in column (3) of the Eighth Schedule, on and from and up to the corresponding date specified in column (4) of that Schedule against the rule specified in column (2) of that Schedule.
Where a person opts to pay the amount in accordance with?(2) the provisions as amended by sub-section (1), he shall pay the amount along with interest specified thereunder and make an application to the Commissioner of Central Excise along with documentary evidence and a certificate from a Chartered Accountant or a Cost Accountant, certifying the amount of input credit attributable to the inputs used in or in relation to the manufacture of exempted goods, within a period of six months from the date on which the Finance Bill, 2010 receives the assent of the President.
The Commissioner of Central Excise shall, on receipt of an?(3) application under sub-section (2), verify the correctness of the amount paid within a period of two months from the date of receipt of the application and in case the amount so paid is found to be less than the amount payable, he shall call upon the applicant to pay the differential amount along with interest, which shall be paid within a period of ten days from the date of receipt of the communication from the Commissioner in this regard.
Notwithstanding anything contained in any judgment, decree?(4) or order of any court, tribunal or other authority, any action taken or anything done or purported to have been taken or done, at any time during the period commencing on and from the 10th day of September, 2004 and ending with the 31st day of March, 2008, relating to the provisions as amended by sub-section (1), shall be deemed to be and deemed always to have been, for all purposes, as validly and effectively taken or done as if the amendment made by sub-section (1) had been in force at all material times.
For the purposes of sub-section (1), the Central?(5) Government shall have and shall be deemed to have the power to make rules with retrospective effect as if the Central Government had the power to make rules under section 37 of the Central Excise Act, retrospectively, at all material times.
Explanation.  For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable had this section not come into force.
      THE EIGHTH SCHEDULE
      [See section 73(1)]

Sl. No.
Provisions of CENVAT Credit   Rules, 2004 to be amended
Amendment
Period of effect of amendment
(1)
(2)
(3)
(4)

Rule 6 of the CENVAT Credit Rules, 2004 as published vide notification   number G.S.R. 600(E), dated the 10th September, 2004 [23/2004-CENTRAL    EXCISE (N.T.) dated the 10th September, 2004].
In the CENVAT Credit Rules, 2004, in rule 6, after sub-rule (6), the following sub-rule shall be inserted, namely :
(7) Where a dispute relating to adjustment of credit on inputs or input services used in or in relation to exempted final products relating to the period beginning on the 10th day of September, 2004 and ending with the 31st day of March, 2008 (both days inclusive) is pending on the date on which the Finance Bill, 2010 receives the assent of the President, then, notwithstanding anything contained in sub-rules (1) and (2), and clauses (a) and (b) of sub-rule (3), a manufacturer availing CENVAT credit in respect of any inputs or input services and manufacturing final products which are chargeable to duty and also other final products which are exempted goods, may pay an amount equivalent to CENVAT credit attributable to the inputs or input services used in, or in relation to the manufacture of, exempted goods before or after the clearance of such goods :
Provided that the manufacturer shall pay interest at the rate of twenty-four per cent. per annum from the due date till the date of payment of the said amount.
Explanation.  For the purpose of this sub-rule, due date means the 5th day of the month following the month in which goods have been cleared from the factory. .
10th  day of September, 2004 to the   31st   day   of March, 2008 (both days inclusive).

4.   On going through the above provisions we find that now the appellants are required to reverse only the amount of inputs / input service availed by them which has gone in manufacturing of the exempted goods.  In view of the above observations, we find that it would be in the interest of justice to remand the matters back to the original adjudicating authority to requantify the demand accordingly, and to give the benefit of the amendment made in the Finance Act, 2010 to the appellants.   Hence, the matters are remanded to the original adjudicating authority to reexamine the issue in the light of the above observations and to pass an appropriate order after giving a reasonable opportunity to the appellants to present their case.  Appeals are allowed by way of remand and the stay applications are disposed of in the above manner.
(Pronounced in open Court)
    
(P.R. Chandrasekharan)
Member (Technical)                                                                                                                   

(Ashok Jindal)
Member (Judicial)  




nsk












3

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. IV

Appeal No. ST/83/09

(Arising out of Order-in-Appeal No. JAK (271-272) 111 & 112/08 dated 14.11.2008  passed by the Commissioner of Central Excise & Customs  (Appeals), Aurangabad).

For approval and signature:

Hon ble Shri Ashok Jindal, Member (Judicial)

======================================================
1. Whether Press Reporters may be allowed to see          :    No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?

2.   Whether it should be released under Rule 27 of the   :    Yes  CESTAT (Procedure) Rules, 1982 for publication
     in any authoritative report or not?

3.   Whether their Lordships wish to see the fair copy    :    Seen
     of the order?

4.   Whether order is to be circulated to the Departmental     :    Yes
     authorities?
======================================================

M/s Nath Cold Retreads
Appellant

Vs.

Commissioner of Central Excise, Aurangabad
Respondent

Appearance:
Shri D.R. Gadekar
Consultant
for Appellant

Shri Kishori Lal
SDR
for Respondent


CORAM:
SHRI ASHOK JINDAL, MEMBER (JUDICIAL)

Date of Hearing: 16.06.2010  

Date of Decision: 02.07.2010 







ORDER NO.                                    WZB/MUM/2010


Per: Shri Ashok Jindal, Member (Judicial)

      In this appeal, the appellants are seeking setting aside of the impugned order, wherein the penalties under Sections 76, 77 & 78 of the Finance Act, 1994 have been confirmed against the appellants.

2.   The brief facts of the case are that a show-cause notice was issued to the appellants alleging that the appellants have undervalued the taxable service and have made short payment of Service Tax amounting to Rs.3,70,492/- for the period 16.06.2005 to 31.03.2007. It was alleged that the appellants were providing the service of Retreading of Tyres covered under the category of Management, Maintenance or Repair Service and paying Service Tax only on the 30% of the Labour charges element charged to the customer instead of gross bill amount by excluding the cost of materials used in the service from taxable value by wrongly availing the exemption under Notification No. 12/2003-ST dated 20.6.2003. The said Notification is available only in cases where the sale of goods is evidenced and the sale value is quantified separately in the invoice/bills as per the conditions contained in the Notification. Two show-cause notices were issued for demand of Rs.3,70,492/- under Section 73(1) of the Finance Act, 1994. Interest under Section 75 of the Finance Act, 1994 and penalty under the provisions of Section 76, 77 & 78 of Finance Act, 1994 was also proposed. The same was adjudicated by the adjudicating authority and he confirmed the demand, interest and penalties. On an appeal preferred before the Commissioner (Appeals) by the appellant, the Commissioner (Appeals) dropped the demand against the appellant in the impugned order  and the Service Tax demand was re-quantified, which was reduced to Rs.23,075/- for the period 16.6.2005 to 30.9.2006 and there was an excess deposit of Service Tax of Rs.1757/- during the period 1.10.2006 to 31.3.2007, but the penalties of Rs.1,95,863/- was confirmed under Section 76 and 78. Aggrieved from the same, the appellants are before me.

3.   The learned Consultant appearing on behalf of the appellants submits that the appellants are engaged in retreading of old tyres and they were under the impression that retreading of old tyres is not covered under category of taxable service of Management, Maintenance & Repair . When they realized that this activity falls under the category of Management, Maintenance & Repair Service they obtained the Service Tax registration, paid the service tax on labour charges by reducing the cost of materials and filed returns to the department. The Commissioner (Appeals)  has rightly held in his order that the appellants are entitled for cum duty price following the judgment of Hon ble Supreme Court in the case of Maruti Udyog Ltd.  2002 (141) ELT 3 (SC). But, while re-quantifying the Service Tax demand, the Assistant Commissioner made an error by raising a demand of Rs.23,075/-. In fact nothing is payable by the appellants. Moreover, in the impugned order  there is no finding given by the Commissioner (Appeals)  while confirming the penalties against the appellant mere saying that as regards to imposition of penalties , I find that the appellants were registered under Service Tax on 25.10.2005, but they paid the service tax alongwith interest only on 13.10.2006. Therefore, I find that the imposition of penalties under Section 76, 77 & 78is justified. Without coming out the decision of suppression, the penalties are not warranted in this case.    

4.   On the other hand, the learned SDR submitted that in this case, the appellant was registered on 25.10.2005 but did not pay the Service Tax on time. Hence, the penalty under Section 76 is rightly imposed. But, he fairly agreed that no intention to evade Service Tax has been established, for which penalty can be imposed under Section 78 of the Finance Act, 1994. But, he reiterated the impugned order  for imposition of penalties.

5.   Heard both sides.

6.   On careful consideration of the submissions made by both sides in this case, I find that the show-cause notice was issued to the appellant for undervaluation of the taxable service and short payment of Service Tax. There is no allegation against the appellant for late payment of Service Tax or there was any intention to evade Service Tax by the appellants. The appellants have not challenged the quantification of the Service Tax demand of Rs.23,075/- as confirmed by the Assistant Commissioner in consequence to the impugned order  in the appeal but the Consultant argued the quantification. As the quantification has not been challenged, I need not to consider the claim of the appellant on that aspect. Further, the penalties confirmed against the appellants without any coercive finding against the appellants are not sustainable in this case as held by the Tribunal in the case of Rajarani Exports reported in 2010 (18) STR 77 (Chennai), wherein it was held that the burden on revenue to establish suppression on the part of assessee with intent to evade payment of Service Tax has not been discharged and no penalty is leviable under Sections 76, 77 & 78 of the Finance Act, 1994. Accordingly, in the facts and circumstances of this case, the Revenue has not discharged the burden of proof that the appellant has suppressed the facts with intent to evade payment of Service Tax. There is no allegation of suppression in the show-cause notice also. Hence, I do not find that any penalty is warranted in this case against the appellants. Accordingly, the impugned order to the extent of imposition of penalties is set aside. With the above directions, the appeal is disposed of.   

(Pronounced in Court on)

   (Ashok Jindal)          
Member (Judicial)     

Vks/



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6































LIMITATION FOR DEMAND OF SERVICE TAX

M. Govindarajan


SYNOPSIS

Service tax is remitted to the credit of Central Government on receipt basis.   The provisions of service tax make the service tax providers to levy service tax, collect service and remit service tax.   The non levy or short levy or non payment of service tax would attract interest as well as penalty.   In such cases the Central Excise Officers are given power to raise demand for the payment of service tax within one year from the relevant date.   The Department may invoke the extended period of limitation if the non payment or non levy or short levy or short payment of service tax by reason of fraud or collusion; or willful misstatement; or suppression of facts; or contravention of any of the provisions or the rules with intent to evade the payment of service tax.  This articles discusses the same in details with reference to recent decided case laws.

INTRODUCTION:

1.                     Sec. 66 of the Finance Act, 1994 (‘Act’ for short) provides that the service tax shall be levied by the service providers who are coming the net of service tax.  Sec. 66A of the Act provides for the charging of service tax on services received from outside India.  Sec. 68 of the Act provides for the payment of service tax by the service providers within the time stipulated and in the manner prescribed.   The service tax is remitted to the credit of the Central Government on receipt basis.  The service tax is paid by the service provider on self assessment basis.  Demand of service tax by the department arises when the service provider fails to pay service tax.  Sec. 73A provides that service tax collected from any person is also to be deposited with Central Government.  Sec. 75 provides that interest is payable on delayed payment of service tax.  The Act gives power to the Central Excise Officers to recover the service tax and time limit is also prescribed for such demand of service tax.

LIMITATION:

2.                     Sec.73 provides that where any service tax-

  • has not been levied; or
  • has not been paid; or
  • has been short levied; or
  • has been short paid; or
  • has been erroneously refunded

the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short levied or short paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

2.1.                  Sec.73 (6) defines the terms ‘relevant date’ as-
(i) in the case taxable service in respect of which service tax has not been levied or paid or has been short levied or short paid-

  • where under the rules made the provisions of service tax, a periodical return showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
  • where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
  • in any other case, the date on which the service tax is to be paid under the provisions of service tax or the rules made there under;
  • in a case where the service

(ii) in a case where the service tax is provisionally assessed the date of adjustment of the service tax after the final adjustment;

(iii) in a case where any return relating to service tax, has erroneously been refunded, the date of such refund.

2.2.                  The said limitation of one year will be extended to five years to the department where any service tax has not been paid or has been short paid or short levied or erroneously refunded by reason of –

  • fraud; or
  • collusion; or
  • willful misstatement; or
  • suppression of facts; or
  • contravention of any of the provisions or the rules with intent to evade payment of service.

Where the service of the notice is stayed by an order of a Court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years as the case may be.

2.3.                  Errors and omissions are common.  The service provider is to be more vigilant in service tax matters.   Regarding the limitation of demand of service tax nearly fifteen case laws are discussed in this article of various types.

3. Relevant case laws:

1. Nirav Industries V. Commissioner of Central Excise & Customs, Rajkot – 2009 (16) STR 69 (Tri. Ahmd)

It is well settled law that, when there are favorable or contradictory decisions holding the field, entertaining bona fide belief by an assessee cannot be faulted upon.   The Tribunal held that the demand of tax beyond the normal period of limitation is not justified.   The Tribunal set aside the impugned order.

2. Aditya College of competitive Examinations V. Commissioner of Central Excise, Vishakapatnam – 2009 (16) STR 154 (Tri. Bang)

A part of demand of service tax relates to inclusion of mess charges.   The Tribunal held that by no stretch of imagination, the mess charges collected can be considered as receipt for rendering the services of ‘commercial training and coaching’.  There should always be a nexus between the amount collected and service rendered.   The mess charges have been collected for availing the facility of the mess which is meant for providing food to trainees.   It cannot be brought under the category of receipt for ‘Commercial Training or Coaching’ and subject to service tax.   The show cause notice was issued on some audit objection.   There is no justification for invoking the longer period.

3. Ridhi Sidhi Transport V. Commissioner of Central Excise, Belgaum – 2009 (16) STR 271 (Tri. Bang)

The appellants contended that non application of extended period has not been discussed and no finding has been given by the Tribunal.   The Tribunal accepted the contention of the appellant.   The Tribunal held that in the interest of principles of natural justice, the final order was recalled and matter would be reheard.

4. Commissioner of Central Excise, Kanpur V. Taj Tours & Travels – 2009 (16) STR 273

The respondent is rendering Tour Operator Service.   In the ST-3 returns filed by the respondent, the Tribunal found that clear remarks had been made for exclusion of certain amount from the value of taxable service on the ground that the tax on this amount was to be paid by the Principal Tour Operators.   Therefore, in respect of this amount the respondent cannot be accused of suppression of facts.   When all the records, as required by the Department had been produced by the respondent for scrutiny their ST-3 returns, it would not be correct to accuse the respondent of willful misstatement, suppression of facts etc.,   The Tribunal upheld the order of the Commissioner (Appeals) holding that the demand is time barred and that there was absolutely no suppression of any fact or information on the part of the respondent.

5. Korpan Ltd., V. Commissioner of Central Excise, Raigad – 2009 (16) STR 279 (Tri. Mumbai)

It is now well settled that once suppression or mis-declaration is established, the time limit available to the Department for raising the demand is five years from the relevant date.   The present show cause notice invoking the extended period has been issued in October 2006, whereas the earlier show cause notice dated 16.04.2003 was dropped on 28.12.2006.   Further earlier show cause notice was dropped not on the ground of time bar but on the ground that the demand was not sustainable under the category of ‘consulting engineer’  The position would be different had the present demand related to a period after 28.12.2006, i.e., the date of decision in the show cause notice dated 16.4.2003.   In other words, the department forms a final view on a matter, it cannot involve extended time limit for the subsequent period.   This is not a case here.   Hence prima facie extended period of limitation seems to be invocable.

6.   Mahaveer Generics V. Commissioner of Central Excise, Bangalore – 2009 (16) STR 289 (Tri. Chennai)

The application is for waiver of pre-deposit of service tax confirmed under the proviso to Sec. 73(1) together with interest and penalty.   The appellant, carrying on Consignment Agency Services is liable to pay the service tax under the heading ‘Business Auxiliary Service’.   M/s Cipla has been penalized because it is the Principal whose products were being promoted by the appellants.

The Tribunal found that a strong prima  facie case for total waiver has been made out on the ground that the entire demand covers the period from 01.07.2003 to 08.07.2004 and raised in the show cause notice dated 13.06.2006 is barred by limitation as the activity of the appellant was very well within the knowledge of the department and service tax was demanded on it under the category of ‘Clearing and Forwarding Agent’ which demand was set aside by the Tribunal, rejecting the interpretation of the Revenue.  The agreement entered into by the appellant with M/s Cipla was the subject matter of earlier show cause notice and the subject matter before the Tribunal also.   The Tribunal, therefore, held that prima facie, the applicant cannot be held to be guilty of suppression of facts with intent to evade payment of duty so as to attract the extended period of limitation.

7. Essvee Express Logistics Private Ltd., V. Commissioner of Service Tax, Bangalore – 2009 (16) STR 317 (Tri. Bg)

As regards the extended period of time, the Tribunal found that the appellants have field Service tax returns on 01.12.2003 for the entire period i.e., from 30.09.2000 to 30.09.2003 which is totally incorrect as the appellant is mandated to file the return half yearly.   Hence having filed the returns belatedly the extended period is correctly invoked by authorities.

8. Saurin Investments Pvt. Ltd., V. Commissioner of Service Tax, Ahamedabad – 2009 (16) STR 446 (Tri. Ahmd)

The demand is barred by limitation, having been raised beyond the normal period.   The appellants were filing regular ST-3 returns.   No suppression or misstatement can be attributed to the appellant in which case, the demand would be barred by limitation.  

9. Yadav Security & Crime Investigation V. Commissioner of Central Excise, Ahamedabad – I – 2009 (16) STR 510 (Tri. Ahmd)

The service tax was confirmed against the appellant for providing security services for the period from April 2001 to September 2005.   The first show cause notice was issued on19.10.2004 which is within the normal period of limitation.   The Officers searched the premises on 07.10.2005.   Thereafter the second show cause notice was issued on 13.10.2006 invoking longer period of limitation.   The appellants contended that at the time of issuance of second show cause notice, all the facts were within the knowledge of the Revenue, inasmuch as they had issued the first show cause notice on 19.10.2004.   As such second show cause notice is barred by limitation.   The Tribunal, prima facie, found force in the contention of the appellant on the point of limitation.

10. Commissioner of Service Tax  V. Kothari Products Ltd., - 2009 (16) STR 657 (SC)

In the present case the Tribunal has set aside the order-in-original passed by the Commissioner and held that in view of the earlier decision given by the Tribunal revenue was not justified in issuing a fresh show cause notice and the same was barred by limitation as well as by the principles of res judicata.

11. Idea Cellular Ltd., V. Commissioner of Central Excise, Rohtak – 2009 (16) STR 712 (Tri. Del)

ST-3 return provides the details of service tax paid through CENVAT credit and cash.   The allegation of utilization of credit in excess of 20% is not sustainable.   Demand is beyond normal period of one year is not maintainable.

12. Padam Chand Mutha & Co., V. Commissioner of Central Excise, Jaipur – II – 2009 (16) STR 721 (Tri. Del)

It was contended by the Revenue that the appellants failed to submit the return and to observe the procedure.    In our view, the Tribunal held that the procedural failure on the part of the appellant was a result of bona fide belief.   As such demand of tax is barred by limitation and the impugned order is liable to be set aside.

13. Nizam Sugar Ltd., V. Commissioner of Central Excise – 2006 (197) ELT 465 (SC)

The Supreme Court held that the extended period is not available to the department for the subsequent show cause notice which was issued based on the same set of facts of the earlier show cause notice.

14. In re – Emerson Climate Technologies (India) Ltd., - 2009 (16) STR 783 (Commr. Appeals)

As regards the grounds of limitation, the lower authority has held that non payment of service tax was pointed out by the Audit Party and the assessee did not disclose the same to the Department till the audit party pointed out the irregularities and accordingly the assessee is found to be guilty of suppression of facts with intend to evade payment of service tax.   Whereas the appellant claims that the extended period of limitation is not available to the department since for the earlier period on the same issue the department had issued show cause notice-cum demand notice and when the department was already aware of the relevant facts in view of the show cause notice it was obligatory on the part of the department to issue show cause notice-cum demand notice for the subsequent period within the limitation period and accordingly the show cause notice-cum-demand notice is time barred.   The Commissioner (Appeals) held that the extended period is not available to the Department.

15. In Re. Makjai Laboratories – 2009 (16) STR 788 (Commr. Appeals)

The appellant willfully failed to take registration, failed to pay service tax and failed to file the returns which amount to contravention of the Act and Rules.   The extended period is rightly available to the Department.

CONCLUSION:

4.                     The Department in many a case invoked the larger period for the demand of service tax.  The provisions are interpreted to the convenience of the Department.   Therefore the service tax provider is compelled to agitate before the Tribunals which give rescue to the assessee in many cases.   If there is a fault or delay on the part of the assessee the Tribunals do not show mercy on the service providers by paving way to the Department to proceed to take action according to the provisions of Service tax and rules made there under.




Extended period not invokable
2010-TIOL-765-CESTAT-MUM
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, MUMBAI
APPEAL No.E/1248/2008
Arising out of Order-in-Appeal no. JAK(244)133/08 Dated : 17.9.2008
Passed by the Commissioner (Appeals) of Central Excise & Customs, Aurangabad
Date of Decision: 11.5.2010
CCE, AURANGABAD
Vs
TRANS DELTA ELECTRICALS
Appellant Rep by: Shri S M Vaidya, JDR
CORAM: Ashok Jindal, Member (J)
It is the duty of the department to verify the exemption sought by the appellant as mentioned in the ER-1 returns to the extent why the exemption has been claimed and whether the credit has been reversed or not - Department having failed in its duty, extended period not invokable
ORDER NO.A/213/10/SMB/CIV
Per: Ashok Jindal:
Revenue has filed this appeal.
2. The facts of the case are that the respondents are engaged in the manufacture of Electrical Transformers.  A show cause notice was issued on 17.1.2008 asking to the respondent as to why 10% of the price of exempted goods cleared during the period from August 2006 to May 2007 amounting to Rs.4,37,100/- should not be demanded and recovered under Rule 14 of the CENVAT Credit Rules read with proviso to Section 11A(1) of the Central Excise Act, 1944 with interest.  A proposal of penalty under Rule 15 of the Cenvat Credit Rules, 2004 was also made.  It was alleged in the show cause notice that the respondent has cleared their finished product i.e Electrical Transformer on payment of Central Excise duty as well as at the rate of nil rate of duty by availing the benefit of exemption vide notification no. 6/2006-CE dated 01.03.2006 and availing the facility of CENVAT credit as well.  However, they have intentionally not paid 10% price of the exempted goods as required under Rule 6(3)(b) of the CENVAT Credit Rules, 2004, as no separate accounts were maintained by them.  The extended period was invoked and the adjudicating authority confirmed the duty demand along with interest and penalties.  On appeal, the Commissioner(Appeals) dropped the demand for the extended period.  Aggrieved from the same the Revenue is before me.
3. The learned DR submitted that the respondent is clearing their final product which is exempt and are not maintaining separate account on the duty payable goods as well as exempted goods are liable to reverse the 10% value of the exempted goods availed as CENVAT credit.  He further submitted that in the ER-1, the respondent has mentioned goods are exempted but did not give any details to the department and it is the duty of the respondent to furnish each and every detail to the department for the exempted goods.  Accordingly, the extended period is invokable and impugned order is to be set aside.
4. No one appeared on behalf of the respondent but respondent opted to file written submissions which are taken on record and considered.
5. Heard the Ld. JDR.
6. I have careful examination of the records before me.  I find that the respondent has mentioned in the ER-1 returns about the clearance of the exempted goods, although the department has not verified the entry claiming exemption.  It is the duty of the department to verify the exemption sought by the appellant to the extent why the exemption has been claimed and whether the credit has been reversed or not?, which the department has failed to do.  It was well within the knowledge of the department that the goods have been cleared as exempted goods, the said fact has been confirmed by the Superintendent of Central Excise in his report to invoke extended period.  Department was having the knowledge as it is clear that the respondent is clearing their goods as an exempted goods shown in the ER-1 returns, which were being filed periodically by the respondent.  As the show cause issued on 17.1.2008 for the period 1.8.2006 to 10.5.2007, the period prior to 18.1.2007 is barred by limitation.  The Commissioner(Appeals) has rightly held in the impugned order.  The Commissioner(Appeals) also has held that there is no suppression of the facts and when there is no suppression of the extended period is not invokable and no penalty under section 11AC can be imposed.  I am also having the same view.
7. With these observations, I do not find any reason to interfere with the impugned order, the same is upheld.  Appeal filed by the Revenue is rejected.
         
(Pronounced in Court)

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2008-TIOL-2308-CESTAT-BANG
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Appeal No. Service Tax/339/2007
Arising out of Adjudication Order No.15/2007 (VR) Dated :17.05.2007
Passed by the Commissioner of Central Excise & Customs, Visakhapatnam-II Commissionerate
M/s CHANDRA SHIPPING AND TRADING SERVICES, KAKINADA
Vs
COMMISSIONER OF CENTRAL EXCISE & CUSTOMS,
VISAKHAPATNAM-II COMMISSIONERATE
Date of Hearing: 25.08.2008
Date of Decision: 25.08.2008
Appellant Rep by: Mr MSV Prasad, Adv.
Respondent Rep by: Ms Sudha Koka, SDR
CORAM: S L Peeran, Member (J)
T K Jayaraman, Member (T)
Service Tax – When ST3 returns and CENVAT Credit returns are filed regularly extended period not invokable – Board Circular allows deduction of reimbursable expenses and 85% abatement for lump sum payment to CHA – Service Tax not leviable on reimbursed expenses like statutory levies and chares paid to various agencies – Benefit of doubt given to appellant in the absence of rebuttal evidence by Revenue
Appeal allowed with consequential relief
Case laws referred :
Ranadey Micronutrients vs. CCE [1996 (87) ELT 19 (SC)] = [2002-TIOL-184-SC-CX]
FINAL ORDER No. 1108/2008
Per: T K Jayaraman:
This appeal has been filed against the Adjudication Order No.15/2007 (VR) dated 17.05.2007 passed by the Commissioner of Central Excise & Customs, Visakhapatnam-II Commissionerate.
2. Shri MSV Prasad, the learned Advocate, appeared on behalf of the appellants and Ms Sudha Koka, the learned SDR for the Revenue.
3. We heard both sides.
4. The appellants M/s. Chandra Shipping and Trading Services are registered as “Custom House Agent”. They also have registration as GTA. Revenue proceeded against the appellants on the ground that they had not paid the proper amount of service tax for the period from 2001, 2002 to 2004, 2005. There was also an allegation of wrongful availment of input credit. The Adjudicating Authority after adjudication passed the impugned order. In the impugned order, the Commissioner confirmed the following amounts:
a) An amount of Rs.16,86,640/- on the amount received by the appellant during the period from 2001, 2002-2004, 2005 and also Rs.51,384/- towards Service Tax on the extra amounts received during 2001, 2002 under proviso to Section 73 (1) read with Section 66 and Section 68 of the Finance Act, 1994.
b) the following amounts alleged to have been taken as input credit irregularly.
(i) Rs.9,56,600/- during the year 2003-2004 from May 2003 to March
2004.
(ii) An amount of Rs.16,33,840/- during the year 2004-2005 from April 2004 to December 2004.
(iii) An amount of Rs.26,66,213/- during the year 2005-2006 from January 2005 to December 2005.
(iv) Totally an amount of Rs.52,56,653/- under Proviso to section 73 (1) of the Finance Act as amended read with Rule 6 of the Service Tax Credit Rules, 2002 and Rule 14 of the Cenvat Credit Rules, 2004. Interest was demanded. Penalties were demanded under Section 76 & 78 of the Act.
5. The learned Advocate urged the point that the demand is hit by time bar. It was stated that the Commissioner has given a finding at para 31 in page 50 that the assessee had shown certain nominal amount as service charges as value of taxable service in their ST-3 returns and that they had suppressed details of credits taken/utilized in respect of inputs services in their ST-3 returns filed and that the facts of actual value of taxable service provided and credit taken/utilized in respect of input services have come to light only during the course of audit by the audit party. It was stressed by the learned Consultant that this finding is factually incorrect, since the assessee had been filing ST-3 returns in the prescribed format showing the taxable value in terms of Board's circular and had been filing Cenvat credit returns indicating the credits taken and utilized. Our attention was invited to page 73-76 and 104 and 91 of the paper book Volume-II wherein they enclosed the copies of the ST-3 returns and the Cenvat credit returns submitted by them to the department. It was urged that the department was fully aware as to how the appellant is calculating the taxable value and using the input service credit. The detailed work sheets are available in the paper book Volume-II. It was also stated that the appellant was under the bonafide belief in view of the Board's circular that reimbursable amounts need not be included in the value of service tax for purposes of service tax calculation. This is the understanding of the appellant and when they are not by law needed to pay tax on the reimbursable amounts, it was not necessary to show them. Therefore, it was strongly pleaded that the demand is time barred except for the month of December 2005. On merits also, the learned Consultant argued both the points. The Commissioner has not allowed the reimbursements. Our attention was invited to Board's circular dated 06.06.1997 wherein it has been clearly stated that the reimbursable charges are not to be included in the taxable value of the CHA services and where there is a lump sum amount charged 85% abatement is permissible. However, the Commissioner has not allowed the re-imbursement and also the 85%. The learned Consultant pleaded that the Board's circular cannot be brushed away by the Commissioner and it is binding on all filed formations. He relied on the decision of Supreme Court in Ranadey Micronutrients reported in 1996 (87) ELT 19 (SC) = [2002-TIOL-184-SC-CX] . It was also pleaded that the Board's circular does not mention about requirement of any evidence to show to the department regarding the reimbursements. It was stated that if they are not reimbursable amounts why should the importer pay them to the CHA. There is no evidence that the reimbursements had not been received by the appellant. Moreover, the assessee had maintained detailed accounts of these expenses which were categorized and given to the audit party besides evidences of invoice raised and payments raised. The audit never questioned the correctness of the expenses shown or the records where they are entered. In respect of an amount of Rs.9,61,335/- it represents abatement of 85% from lump sum service charges claimed in terms of para 2.5 of the Board's Circular. This also the Commissioner has disallowed on the ground that the bills raised show separate breakup of expenses. It was pleaded that apart from the lump sum fee several activities were undertaken for discharge and clearance of cargo and whatever activity is not covered in the lumpsum fee was charged separately and this should not be included in the value for service tax purposes. This was ignored by the learned Adjudicating Authority. As regards the denial of the credit of input services for the period from December 2004, it was stated that the Commissioner denied these credits on the following grounds:
i. The credit was taken on the services not used.
ii. Payments for the input service as well as the service tax, there are not
to be paid by the importers/exporters.
iii. Invoice issued by the service provider contains the names of concerned importer as well as the appellants and the appellants have not produced any evidence to prove that these importers/exporters have not availed the service tax credit.
6. The learned Consultant stated that in terms of Rule 3(1) of Service Tax Credit Rules 2002 and Rule 3(1) of Cenvat Credit Rules 2004, an output service provided shall be allowed to take credit of the service tax paid on input service. The grounds on which the credit was denied are extraneous to these rules which have to be interpret strictly as they are. Whether the importer has taken the credit or not is required to be verified by the department and the credit cannot be denied to the appellant who had actually paid the service tax on input services from out of their account current maintained with the input service provider. Credit cannot be denied on suspicion. It was also pleaded that in view of their two issues covered by merit in favour of the appellants, the penalty cannot be imposed. However, the learned Consultant stated that they are prepared to pay an amount of Rs.51,384/- on extra amounts collected along with interest voluntarily.
7. The learned Departmental Representative reiterated impugned order. She stated that the Commissioner has given a very detailed finding regarding the suppression of facts and justification for invoking the longer period.
8. On a very careful consideration of the issue, we find that the Service Tax-3 returns and also the Cenvat credit returns have been filed regularly by the appellant. In view of this, the larger period cannot be invoked. Therefore, we are inclined to give the benefit of time bar to the appellants. Hence, all demands excepting for December 2005 are not sustainable. As for December 2005, demands are confirmed and the appellant has to pay them. As regards the merits of the case, we find that the Board's circular allows deduction on account of reimbursable expenses and where lumpsum amount is charged 85% deduction can be claimed on account of reimbursable account. The CHA apart for (from) taking his commission spends money on account of several statutory levies and charges which have to be paid to various other agencies. It would not be correct to charge service tax on these amounts. There is no evidence with department that the appellant had not spent these amounts. When the returns are filed, if there is any doubt the department has to verify the correctness of the particulars given in the returns, both ST-3 returns and also the Cenvat credit returns. The department has not done that. Therefore, the allegations that the appellants have spent these amounts on reimbursement and have not made payment towards tax on input service are not sustainable. The appellants have stated that the service tax on input services have been paid from out of their own account maintained with the input service providers. These facts could have been verified by the Revenue. In the absence of verification, we have to give the benefit of doubt to the appellant. It is for the department to prove the allegations with solid evidence. The burden of proof is always on the department. In view of this above findings, we do not find that there is any suppression of facts, especially when the appellants had filed service tax returns and Cenvat tax returns regularly. Hence, we allow the appeal with consequential relief. The penalties are set aside. Only the demand for December 2005 is to be paid along with interest.
[Operative portion of this Order was pronounced in open court on conclusion of hearing]
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Important

2006-TIOL-1930-CESTAT-BANG
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, BANGALORE
Appeal No: E/251 to 252/2003
Arising out of Order-in-Appeal No. 725/2002 CE dated 16.11.2002
Passed by the Commissioner of Customs& Central Excise (Appeals) Bangalore.
Date of decision : 16.10.2006
(i) M/s SLM GLASS WORKS
(ii) SRI B L NARAYANASWAMY
Vs
COMMISSIONER OF CENTRAL EXCISE, BANGALORE
Appellant Rep. by : Sh. M.G. Varadarajan
Respondent Rep. by : Sh. Anil Kumar
CORAM : Dr.S.L.Peeran, Member (Judicial)
Shri.T.K. Jayaraman, Member (Technical)
Central Excise – SSI – Brand name – Demands for Longer period set aside – The benefit of cum duty and modvat has to be granted
Final Order No. 1757 & 1758/2006
Per : Dr. S.L. Peeran :
This appeals arises from Order-in-Appeal No. 725/2002 dated 15.11.2002 by which Two appeals were disposed of by the Commissioner (A), Bangalore upholding the allegation for by the revenue and confirming in Order-in-Original No. 20/99 dated 24.08.1999 by which demands have been confirmed on 55 Nos. of “SAFEX” brand, Automobile Safety Glass by extending larger period.

2. The learned Counsel submits that the reason for denying the benefit of SSI Notification is that the brand “SAFEX” was being used by M/s. Hidustan Safey Glasses Limited, Calcutta. He submits that they had also filed an application for registration of the said brand name. They held a bonafide belief that in the light of several judgments of the Tribunal affirmed by the Apex Court that the benefit of Notification cannot be denied merely because that the brand name used and affixed by them happen to be the brand name of another person. However, he points out that the latest judgments of the apex court in the case of CCE Vs. Grasim Industries – 2005 (183) ELT 123 is against the party. It has been held therein that use of brand or trade name of another person will disentitle the party from the benefit of SSI Notification. however, he points out that in the present case, the demands pertain to the period 1996-1998, the department had drawn Mahazar on 13.02.1998 and the show cause notice was issued on 09.08.1998 invoking larger period. He submits that the appellants were under bonafide belief that their application for registration of the said brand name would be accepted and even otherwise there were several judgments during the period in assessee’s favour granting the benefit of SSI Notification. He relies on the following judgment wherein the benefit of time bar has been granted. He also pleads that they are entitled for the benefit of cum duty and modvat credit. The written submissions made with regard to time bar, cum duty and imposition of penalty and interest are given herein below.
Time Bar
Assuming but not admitting that the duty demand is sustainable the demand is clearly barred by limitation for the following reasons and grounds.
1. The appellant had no intention to evade duty.
2. They have not suppressed any information with willful intention to evade duty.
3. The records enclosed and the investigation undertaken by the appellant clearly prove that they have not affixed the brand name on the same products on which M/s Hindustan Safety Glass have obtained the registration. The search report clearly indicate that the SAFEX brand can be registered by the appellant in their own name for their products. The search report itself clearly shows that the brand SAFEX has been pending for registration of the sane brand name for different class of goods. In view of this it cannot be alleged that the appellant had intention to evade duty. In these circumstances larger time limit cannot be invoked.
1. Champhor Drugs & linaments - 1989 (40) ELT 276 (SC)
2. Cosmic Dye Chem - 1995 (75) ELT 721 SC
3. Pushpam Pharmaceuticals - 1995 (78) ELT 401 SC
4. Singareni Colleries - 1998 (37) ELT 361 SRB
5. Padmini Products - 1989 (43) ELT 195 SC
6. Cadilla Lab Pvt. Ltd., - 2003 (55) RLT 1 SC
7. Ambika Steel Rolling Mills - 1991 (52) ELT 15 (DEL)
8. Thermo Electrics - 1991 (54) ELT 92 (T)
9. Applied Industrial Products - 1992 (62) ELT 364 (kar)
10. Raymond Cement Works - 1995 (76) ELT 346 (T)
11. Tamilnadu Housing Board - 1994 (74) ELT 9 (SC)
12. Ellora Mechanical - 1998 (98) ELT 109
4. The submissions made in the above paragraphs prove that the bonafide view entertained by the appellant that they are not affixing brand name belonging to M/s Hindustan Safety glass is vindicated.
5. It is also well settled law that larger time limit is not invokable when assessee entertains a bonafide view. In this case the decisions prevalent at the relevant period of time. The following ratio decisions fully support the above contention.
a. Hyderabad Vs. ITW Signod India Ltd. - 2004 (65) RLT 828.
b. CCE Vs Dewarane Macnelli & Co. Ltd. - 1991 (56) ELT 645
c. Refco Icematic Company Viz, CCE - 1998 (27) RLT 327
d. Shakti Iron & Steel Co. Ltd., - 1999 (30) RLT 641
e. Vallabh Cement - 1998 (98) ELT 106
f. Ellora Machanical - 1998 (98) ELT 109
g. Movika Pharmaceuticals - 1998 (27) RLT 230
h. New Vikram Cement - 1998 (27) RLT 474
i. Jana Jeevan Foods (P) Ltd., - 1999 (30) RLT 686
j. Sterllite Industries (I) Ltd., - 1998 (27) RLT 419
k. Gurunanak Steel & Allied Industries - 2001 (42) RLT 37 (T)
l. Aldowin & Others _ 2003(56)RLT620 (T)
m. Surat Textiles - 2004(62)RLT351(SC)
6. Apart from the above ratio decisions the appellant relies on the following ratio decisions to support their plea that the demand is clearly barred by limitation.
1. 2004(167) E.L.T. 494 (S.C) MENTHA & ALLIED PRODUCTS LTD.
Demand and penalty – Different views expressed at different stages by Tribunal and High Court – Supreme Court – Supreme Court also not clear as to whether law is absolutely clear on matter or not and authorities issuing clarification from time to time – Section 11A of Central Excise Act, 1944 not invokable – Penalty and application of extended period of limitation not justified.
2. 2002 (150) E.L.T. 284 (Tri.- Chennai) QUEEN ELECTRICAL INDUSTRIES
Demand – limitation – Suppression – Non-disclosure of brand name in the declaration – Same brand name being used by sister concern though not registered in their name – Larger period under Section 11A of Central Excise Act, 1944 not invokable.
3. 1998 (80) E.L.T 445 (Tribunal) INTERCITY CABLE SYSTEM (P) LTD.
SSI Exemption – Brand name ‘Shyam’ belonging to another person in respect of different product affixed by appellant in respect of EPABX and telephone equipments – Brand name of other person not eligible for exemption under the notification being used by appellant, benefit of exemption under Notification No. 175/86-C.E., dated 01.03.1986 as amended by Notification No. 223/87-C.E., dated 22.09.1987 not available.
4. 2006 (199) E.L.T. 855 – M/s Tisco Ltd.,
Demand – Limitation – Suppression of facts – Bonafide doubt about excisability due to divergent judicial views – Extended period not invokable, especially in absence of positive act on part of assessee – Date of knowledge of department found to be irrelevant – Section 11A of Central Excise Act 1944.
5. 2006 (199) ELT 159 – Prakash Udyog Samiti
Demand - Limitation – Intent to evade payment of duty – As appellants adopted the view adopted by Larger Bench of Tribunal they could not have intention to evade payment of duty – Extended period of limitation not invokable – Section 11A of CEA 1944.
6. 2006 (201) ELT 27 – Mahindra & Mahindra Ltd.
Impression of non-excisability prevailed during material period among assessees and officers – decisions during material period favouring assessee – Charge of suppression of facts not sustainable – Extended period of limitation not invokable – demands hit by time bar.
14. In the case of M/s Grasim Industries M/s Rukimini Packwell Traders M/s Mahan Dairy etc., the original decisions of the Tribunal were all in favour of the appellant as it was held by the Tribunal in those cases that the benefit cannot be denied if the brand name/ trade name is affixed is of a different class. These ratio decisions were reversed by Apex Court only recently. Hence the ratio decision of Honorable Apex Court in the case of Mentha and Allied products limited reported in 2004 (167) ELT 494 is clearly applicable as the Honorable Apex Court has held that larger time limit is not invokable when different views are expressed at different stages by various judicial forums. Hence the demand for extended period is clearly barred by limitation and assuming but not admitting duty is payable, it can be only for a period of six months prior to date of issue of show cause notice.
Alternate submissions
1. Assuming but not admitting duty is payable, the benefit of cum duty price is to be granted as per the Apex court decision in the case of M/s Maruthi Udyog Limited reported in 2000 (49) RLT 1.
2. The benefit of modvat credit is to be extended in respect of inputs purchased by the appellant as per the following ratio decisions.

a. Supreme Industries Limited - 2004 (64) RLT 135
b. Multiplex Lami Prints - 2004 (64) RLT 532
c. CCE Vs Suromed Pvt Ltd. - 2004 (172) ELT 318
d. Formica India - 1995 (77) ELT 511 SC
e. Chamundi Re-rolling Mills - 1996 (81) ELT 563

3. The appellant is entitled to modvat credit not withstanding the fact that they did not follow the procedure at the relevant period of time. Though this ground was not raised in the appeal memorandum a misc. application has been filed along with documents and requisite fee of Rs. 500-00 seeking for admitting this ground as additional ground and the eligibility to modvat credit being question of law can be raised at this stage also.
Penalty and interest
1. the mandatory penalty has been imposed under Section 11AC and 11AB even though it is well settled law that the provisions of these sections arte applicable only for the period after 28.09.1996. Though this ground is raised at all stages no finding is given.
2. Even otherwise no penalty can be imposed in this case as can be seen from the narrations made in the preceding paragraphs that lot of ratio decisions were in favour of the appellant during the relevant period of time and hence it cannot be concluded that the appellant violated the provisions and hence liable for penalty. The apex court in the case of CCE Vs. Crasim Industries reported in 2005 (183) ELT 123 has held that no penalty is imposable when bonafide belief is caused by Tribunal’s decisions. Hence no penalty can be imposed in this case either prior to 28.09.1996 or after 28.09.1996 and we pray for setting aside the entire penalty.
3. Interest under section 11AB can only be for the period after 28.09.1996 and this interest can be demanded only if the duty liability stands confirmed. As already stated the major demand is barred by limitation and hence the interest can be if any only for period of normal limitation.
Penalty on Sri B.L. Narayanaswamy
4. As per the ratio decision of Grasim Industries cited supra, and number of other ratio decisions, no penalty can be imposed when there are conflicting decisions and hence the penalty on Sri B.L. Narayanaswamy is also liable to be set aside.
5. It is also well settled law that penalty cannot be imposed simultaneously on partnership firm and individual partners.
Shyam Traders - 2002 (143) ELT 95
Darshan C Sandhviv CCE - 2002 (142) ELT 676
Alfa Ceramics - 2002 (145) ELT 454
Swem Industries - 2003 (154) ELT 417
Compusoft - 2003 (154) ELT 241
Kamdeep Marketing - 2004 (165) ELT 206
Sarpin Pharmacal - 2004 (167) ELT 472
Ramashyama Papers - 2004 (63) RLT 130
Vinaykumar Baid - 2004 (164) ELT 33
J.B. Industries - 2004 (168) ELT 316
6. We therefore pray that the Honorable Tribunal may be pleased to set aside the impugned order with consequential benefits as per law.
He submits that the demands have to be restricted for six months in the facts and circumstances of the case in the light of the written submissions.
3. Heard learned JDR, who submits that they are not eligible for the SSI Exemption in view of the Apex Court judgment rendered in the case of CCE Vs. Grasim Industries (supra). He submits that the appellant had not informed the department about the affixing of the said brand name “SAFEX” and hence, larger period was invokable.
4. On a careful consideration, we notice that in the present case that the department had investigated and drawn Mahazar on 13.02.1998 and show cause notice has been issued on 09.08.1998, this would save the period for six months. Revenue has not proved that appellants have suppressed any material information with an intention to evade duty. The appellants had also filed an application for registration of their brand name in their favour. There were several factors including Tribunal rulings in the appellant’s favour to grant the benefit of the Notification. Therefore, in such a circumstance, it cannot be said that there was intentional suppression of facts to avail the benefit of the Notification. The written submission made by the learned Counsel in this behalf and circumstances referred to in the said Notification, the demands for larger period has to be set aside. Ordered accordingly. The benefit of cum duty and modvat has to be granted to the assessee. The demands for six months is sustainable, therefore, the matte is remanded to Original Authority to re-compute the duty by granting the benefit of cum and modvat credit for six months. The appellants shall be heard in the matter and matter shall re-adjudicated within four months from the receipt of this order. As the appellants had not deliberately suppressed any facts, therefore in the light of several judgments cited by the assessee, the imposition of penalty is not justified and penalty is set aside in the matter. Appeal is allowed by remand to the Original Authority to re-compute the duty as ordered.
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