IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF MARCH, 2019 BEFORE THE HON’BLE MRS.JUSTICE S.SUJATHA W.P.Nos.34990 – 34991/2016 c/w W.P.Nos.40985 & 42354/2017 (T – RES) IN W.P.Nos.34990 – 34991/2016:
BETWEEN :
1. M/s KIN-SHIP SERVICES (INDIA) PVT. LTD., FLAT NO.104, 1ST FLOOR, VEEKAY TOWERS KULUR, MANGALORE-575 013 REP. BY ITS MANAGING DIRECTOR Mr. M.PRABHAKER KINI 2. Mr. M.PRABHAKER KINI AGED ABOUT 51 YEARS MANAGING DIRECTOR M/s KIN-SHIP SERVICES (INDIA) PVT. LTD., FLAT NO.104, 1ST FLOOR, VEEKAY TOWERS, KULUR, MANGALORE-575 013 ...PETITIONERS (BY SRI JOSEPH KOORIANTHARA, SENIOR ADV. A/W SRI JAYSHANKAR P.G. FOR SRI THOMAS VELLAPALLY, ADVS.) AND :
1. UNION OF INDIA REP. BY ITS SECRETARY MINISTRY OF FINANCE NORTH BLOCK, NEW DELHI-110001 2. THE COMMISIONER OF CENTRAL EXCISE AND SERVICE TAX 7TH FLOOR, TRADE CENTRE BUNTS HOSTEL ROAD MANGALORE-575 003 3. THE DEPUTY COMMISSIONER OF CENTRAL EXCISE HEAD QUARTERS PREVENTIVE UNIT 7TH FLOOR, TRADE CENTRE BUNTS HOSTEL ROAD MANGALORE-575 003 4. THE SUPERINTENDENT OF CENTRAL EXCISE AND SERVICE TAX (RANGE-III MANGALORE) 5TH FLOOR, PUNJA BUILDING ANNEXE LALBAGH, MANGALORE-575 003 5. THE SUPERINTENDENT OF CENTRAL EXCISE AND SERVICE TAX (PREVENTIVE SECTION-HEAD QUARTERS) 7TH FLOOR, TRADE CENTE, BUNTS HOSTEL ROAD, MANGALORE-575 003 …RESPONDENTS (BY SRI K.V.ARAVIND, ADV.) THESE WRIT PETITIONS ARE FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE LETTER BEARING O.C.NO.889/2016 ST-III/1710 DATED 01.04.2016 ISSUED BY THE R-4 (ANNEXURE-E) BY HOLDING THE SAME AS CONTRARY TO LAW AND WITHOUT JURISDICTION.
IN W.P.Nos.40985 & 42354/2017: BETWEEN :
1. M/s KINSHIP SERVICES (INDIA) PVT. LTD., FLAT NO.104, 1ST FLOOR, VEEKAY TOWERS KULUR, MANGALORE-575 013 REP. BY ITS MANAGING DIRECTOR Mr. M.PRABHAKER KINI 2. M.PRABHAKER KINI S/O LATE M.BHASKER KINI, AGED 52 YEARS R/AT FLAT No.1A, THE PORTICO, MUTTATHIL LANE, KADAVANTHARA, KOCHI – 682020, MANAGING DIRECTOR M/s KINSHIP SERVICES (INDIA) PVT. LTD., FLAT NO.104, 1ST FLOOR, VEEKAY TOWERS, KULUR, MANGALORE-575 013 ...PETITIONERS (BY SRI JOSEPH KOORIANTHARA, SENIOR ADV. A/W SRI JAYSHANKAR P.G. FOR SRI THOMAS VELLAPALLY, ADVS.) AND :
1. UNION OF INDIA REP. BY ITS SECRETARY DEPARTMENT OF REVENUE MINISTRY OF FINANCE 3RD FLOOR, JEEVAN DEEP BUILIDING, SANSAD MARG, NEW DELHI-110001 2. CENTRAL BOARD OF EXCISE AND CUSTOMS CENTRAL SECRETARIAT, NORTH BLOCK, NEW DELHI-110001, REP. BY ITS CHAIRMAN.
3. COMMISIONER OF CENTRAL EXCISE AND SERVICE TAX 7TH FLOOR, TRADE CENTRE BUNTS HOSTEL ROAD MANGALORE-575 003 4. SUPERINTENDENT OF CENTRAL EXCISE OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, 7TH FLOOR, TRADE CENTE, BUNTS HOSTEL ROAD, MANGALORE-575 003 …RESPONDENTS (BY SRI K.V.ARAVIND, ADV.) THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR THE RECORDS LEADING TO THE ISSUANCE OF SHOW CAUSE NOTICE DATED 19.04.2007 ISSUED BY R-3 VIDE ANNEX-M AND QUASH TEH SAME.
THESE PETITIONS HAVING BEEN HEARD AND RESERVED ON 21.03.2019, COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, S.SUJATHA J., PASSED THE FOLLOWING:
O R D E R The petitioners have sought for the following reliefs in W.P.Nos.34990-991/2016.
a. Quash the letter bearing O.C.No.889/2016 ST-III/1710 dated 1.4.2016 issued by the 4th respondent (Annexure-E) by holding the same as contrary to law and without jurisdiction.
b. Direct the respondents not to initiate any coercive action or recovery proceedings against the petitioners to recover any service tax for the period 01.04.2013 to 30.09.2014 without passing order under Section 73 of the Finance Act, 1994.
c. Declare that the arrest of the 2nd petitioner by the 5th respondent vide Arrest Memo bearing C No.IV/06/54/2012-13 HPU dated 26.04.2016 (Annexure-G) is illegal and contrary to law and as a consequence thereof, quash the entire proceedings in Case bearing C. No.IV/06-54/2012-13 HPU pending before the Principal Civil Judge (Sr.Dn.) and Chief Judicial Magistrate, Mangalore, by holding the same as illegal and contrary to law. ”
2. In the connected writ petitions, the show cause notice dated 19.04.2017 issued by respondent No.3- Commissioner of Central Excise and Service Tax is challenged.
3. The 1st petitioner is a private limited company and the 2nd petitioner is its Managing Director. The 1st petitioner is the provider of “clearing and forwarding agency, custom house agent and steamer agency” services to its customers and registered under Section 69 of the Finance Act, 1994 (‘Act’ for short). The amount of service tax due from the petitioner No.1 from April 2013 to September 2014 was Rs.1,93,83,000/- which the petitioner asserts has been discharged by utilising cenvat credit to the extent of Rs.1,33,73,768 and paying Rs.60,09,232/- by cash. It is the contention of the petitioners that even though they had discharged their service tax liability fully, the staff at Mangalore Branch filed NIL half yearly returns in Form ST-3 for the periods 01.04.2013 to 30.9.2013, 01.10.2013 to 31.03.2014 and 01.04.2014 to 30.09.2014 in their anxiety to meet the deadline fixed for filing of the said returns. However, no revised returns were filed within the stipulated time. The respondent Nos.2 to 5 have taken a stand that the availment and utilization of Cenvat credit to discharge service tax liability is wrong as the same has not been declared in ST-3 returns and therefore demanded payment of alleged short paid service tax of Rs.1,33,73,768/- along with interest.
4. It is the allegation of the petitioners that the 2nd petitioner was called by the Deputy Commissioner of Central Excise to his office on 26.4.2016 by threatening of dire consequences, forced him to sign his statement admitting evasion of tax as dictated by him to subordinate officer. As petitioner No.2 refused to sign the statement, he was made to stay late in the night beyond office hours. Thereafter, petitioner No.2 was arrested by respondent No.5 at 9 p.m. on that day and was produced before the learned Principal Civil Judge (Sr. Dn.) and Chief Judicial Magistrate, Mangalore. The learned Magistrate remanded the petitioner No.2 to judicial custody and later on, he was released on conditional bail by the learned I Additional District and Sessions Judge, D.K., Mangalore. The respondent No.4 issued a letter dated 01.04.2016 demanding service tax along with interest for the period October 2012 to September 2014. W.P.Nos.34990- 34991/2016 were filed challenging the same.
5. In view of the release of the second petitioner and the show cause notice issued by the Commissioner of Central Excise and Service Tax, subsequent to filing of the writ petitions, the reliefs sought in W.P.No.34990- 991/2016 are not pressed.
6. The petitioners are issued with a show cause notice dated 19.04.2017 asking them to show cause inter alia why the services rendered by the 1st petitioner should not be considered as part of services and consequently why the amounts mentioned therein should not be demanded and recovered from the 1st petitioner along with applicable interest and penalties. The petitioners have filed reply to the said notice specifically seeking for permission to cross examine respondent No.4 (in W.P.No.40985 and 42534/2017) as well as petitioner No.2, in order to bring to light the context in which the statements were extracted from the petitioner No.2. The said request for cross examination sought by the petitioners in the reply has been denied by the 4th respondent (in W.P.No.40985 and 42534/2017) and the matter was further posted for hearing. Being aggrieved by the same, W.P.Nos.40985 and 42534/2017 are filed. The primary grievance of the petitioners is the denial of permission to cross examine the respondent No.4 and the petitioner No.2.
7. The learned Senior counsel Sri. Joseph Koorianthara representing the petitioners submitted that the respondent No.4 misinterpreting the law laid down by the Hon’ble Tribunal Ahmadabad in the case of Niko Extrusions P. Limited Vs. Commissioner of Central Excise, VAPI denied the cross-examination. The Tribunal, indeed observed that there cannot be any dispute about the fact that cross examination cannot be claimed as a matter of right. Request for cross examination has to be examined in the context of facts and circumstances of that particular case. However in that case, cross examination of the witnesses whose statements were relied upon was permitted. Further, reliance was placed on the judgment of the Hon’ble High Court of Kerala in the case of Mohammed Fariz & Company Vs. Commissioner of Customs in W.A.No.1841 of 2018 (D.D. 30.10.2018).
It was thus argued that the cross examination of respondent No.4 and petitioner No.2 is necessary to test the veracity of the statements recorded by the Authorities. The queries raised by respondent No.4 are predetermined including the issuance of show cause notice and the proposed personal hearing. It was argued that denial of cross-examination of the persons concerned, whose statement would be relied on, would render the order a nullity and against the principles of natural justice.
8. The learned counsel Sri. K.V.Aravind appearing for the revenue contended that the petitioner No.2 is the Managing Director of petitioner No.1 company. The petitioner No.1 Company is represented by its Managing Director-petitioner No.2. The petitioner No.2 cannot seek permission for cross examination of himself. However the petitioners are at liberty to lead any independent evidence but the statements of the petitioner No.2 recorded inasmuch as liability to pay service tax with interest cannot be discarded with the improved version of calculated theory now advanced, to wriggle out of the tax liability.
9. I have carefully considered the submissions advanced by the learned counsel for the parties and perused the material on record.
10. Indisputably, the statements of the petitioner No.2-the Managing Director of petitioner No.1 company were recorded by the respondent Nos.3 and 4 (in W.P.No.34990-34991/2016). Petitioner No.2 cannot seek for cross examination of himself. Similarly respondent No.4 is the Superintendent, who is the adjudicating authority, has discharged the statutory functions, exercising the powers vested under the provisions of the Act.
11. In the case of Nico Extrusions Private Limited, supra, the statements of the transporters, owners and the drivers of the said vehicles were recorded. The said statements were in contradiction to the statements of the buyers who had stated to have sold the goods to the appellants therein and the appellants having made the payment by cheque, it was held to be necessary to test the veracity of the said statements of the buyers on the touchstone of cross-examination.
12. In the case of Mohammed Fariz and Company supra, the Hon'ble High Court of Kerala considering the statements of two witnesses recorded by the adjudicatory authority held that the statements have to be tested with the other materials available and the adjudicating authority cannot come to a conclusion as to whether the said statements should be relied or not. The finding of the learned single Judge relegating the proprietary of adjudication decision is held not appropriate.
13. As discussed above, no cross-examination of any witnesses whose statements are recorded by the adjudicating authority is sought in the present proceedings, petitioner No.2 is requesting to cross- examine himself and the adjudicating authority which is inappropriate and cannot be acceded to. However, considering the totality of the circumstances of the case, this Court deems it fit to provide an opportunity to the petitioners to adduce any evidence to substantiate their stand. Keeping open all the rights and contentions of the parties, the proceedings are restored to the file of the Commissioner of Central Excise and Service Tax to provide an opportunity to file reply/objections and to adduce evidence, if any, to the petitioners. The Commissioner shall consider the same and pass appropriate orders in accordance with law after providing an opportunity of hearing to the parties. The petitioners shall file the objections/reply within a period of two weeks from the date of receipt of the certified copy of the order and are at liberty to adduce evidence, if any. Thereafter, Commissioner shall pass appropriate orders in accordance with law in an expedite manner preferably within a period of eight weeks from the date of the receipt of the reply/objections.
With the aforegoing observations and directions, writ petitions stand disposed of.
Sd/- JUDGE Dvr/NC: