Hon'ble Shashi Kant,J.
(Delivered by Hon'ble Rajes Kumar, J.) Since in both the appeals, arising from the comon order of the Tribunal, controversy involved is inter-connected, therefore, both the appeals are being decided by this one and common judgment.
These two appeals, under Section 35 of the Central Excise Act, read with Finance Act, 1994, are arising from the order passed by the Central Excise and Service Tax Tribunal, dated 16.8.2013. Appeal No. 337 of 2013 has been admitted on the following substantial questions of law:
"I. Whether after having initiated assessment proceeding twice against the appellant by show cause notice dated 9.10.2002 and notice dated 20.5.2003, the Department was right under the law to issue third show cause notice dated 23.9.2003 (from 1.9.1999 to 31.3.2003) on the same basis, same very issue and same very period and the said show cause notice dated 23.9.2003 and procedings thereon is legal and valid under the law?
II. Whether the adjudicating order dated 14.2.2008 passed in respect of show cause notice dated 23.9.2003, almost after 4 1/2 years without giving any explanation for such delay for which after first hearing on 12.4.2004, another hearing held after 4 years on 9.10.2007 is sustainable in eyes of law in view of settled position of law?
III. Whether the Tribunal was right in passing the impugned order without examine that the validity of show case notice dated 23.9.2003 without the existence of conditions laid down for issuance of under section 73 (1) (a) of the Finance Act, 1994?
IV. Whether the Tribunal is right to hold that activities of the appellant covered under "consignment agent" under section 65 (72) (now 105) (j) read with section 65 (16) (now 25) of the Finance Act, 1994 and also the demand of Rs.21,64,603 in respect of reimbursement for other charges is taxable under the Finance Act, 1994?
V. Whether the penalty, under Section 78 of the Finance Act, 1994 can be imposed when the appellant has paid the admitted amount before the Order-in-Original and further when there is no suppression or concealment of the service tax?"
Central Excise Appeal No. 338 of 2013 has been admitted on following substantial question of law:
"I Whether in the facts and circumstances, the impugned Final Order No.ST/A/57309-57310/2013-CU(DB) dated 16.8.2013 whereby allowed the Departmental Appeal No.ST/350/3008 passed by the Hon'ble Tribunal is valid under the law?
II. Whether the Hon'ble Tribunal is right in allowing the Departmental Appeal No.ST/350/2008 on the basis of the provisions of Section 76 substituted by the Finance Act, 2006 w.e.f. 18.4.2006 whereas dispute is for the period from 1.9.1999 to 31.3.2003?"
Brief facts, giving rise to the present appeals, are that the appellant is a Company, which is incorporated under the Indian Companies Act, 1956, entered into an agreement with TISCO on 2.4.1998, which has been renewed from time to time. However, a fresh agreement has been entered into on 21.12.2002. It is informed that the terms and conditions of the earlier agreement were same to the agreement dated 21.12.2002. By the said agreement, the appellant has been appointed as a consignment agent to perform the jobs mentioned therein. According to the appellant, though in the agreement, it is stated that the appellant is being appointed as a Consignment Agent, but having regard to the scope of work mentioned in the agreement, in law, he was not a Consignment Agent, but was only the Handling agent.
The appellant has been issued a notice on 18.4.2002, asking therein that since the appellant is providing taxable service under the category C & F, the appellant is liable to pay the service tax from 16.7.1997. The appellant has been required to furnish the details of the Service Tax paid from the date mentioned above and in case the service tax has yet not been paid, the appellant has been requested to apply for the registration in the prescribed form alongwith the required documents, file the returns with payment of service tax, interest etc. within seven days.
The appellant filed reply, dated 15.5.2002, stating therein that they are acting as an agent of TISCO which is loosely called as consignment agent, but in form and in substance not strictly a consignment agent inasmuch as required to cut/bend or bundle the iron and steel for transportation and that the remuneration received from TISCO also includes such charges of cutting/bending and bundling of iron and steel as also the cost of transportation of goods by the transporter and having regard to the nature of the service rendered to TISCO, it does not come within the provisions of Section 65(72) of the Finance Act, 1994. In support of this claim, various pleas have been taken. The reply of the appellant is Annexure-4 to the writ petition. The appellant requested the authority to consider his reply/representation and pass the order before proceeding with the matter. It has been further pleaded that the appellant is not liable to pay service tax @ 5% on gross receipt from TISCO, which includes sundry expenditure. The sundry expenditure includes payment to make sundry party for rendering service to TISCO and to that extent, the appellant is not liable to pay service tax as claimed by the department. It has been further stated that it may be placed on record that it would be beneficial for the revenue and for the appellant if the revenue consider appellant's submission made in this behalf and ask the appellant to produce the records and documents to substantiate the same to come to a decision in this behalf. It appears that by an order dated 16.5.2002, the appellant has been asked to furnish the details. However, on the pursuation of the authority, the appellant applied for the registration on 22.6.2002, got its registration done in the category C & F Agent vide Registration No. 2803.ST/C&F/2/2002, dated 22.6.2002.
The appellant received a show cause notice dated 9.10.2002 from the office of the Deputy Commissioner, Central Excise, Divisioin III, Ghaziabad, demanding service tax for the period, 1.9.1999 till the date of issuance of the show cause notice, under Section 73 for making the assessment and also imposing the penalties, under Sections 75A, 76, 77 and 78 of the Finance Act, 1994, under the category of C & F agent services. The appellant submitted its reply vide letter dated 8.11.2002 and requested the authority to consider the written submission dated 15.5.2002, while adjudicating the matter as they have complied with the requirement of depositing the service tax. The Deputy Commissioner, vide letter dated 13.11.2002, asked the appellant to appear on 25.11.2002. The appellant responded to the aforesaid letter vide letters dated 18.11.2002 and 22.11.2002 and appeared. Vide letter dated 8.11.2002, it has been informed that the service tax for the period April, 2002 to September, 2002 was deposited. The detail of the Chalan has also been given.
It appears that no further action has been taken on the show cause notice.
It appears that the appellant has furnished ST-3, returns for the period 1.9.1999 to 30.9.2003 and paid the service tax due for the aforesaid period.
Thereafter, the Superintendent, Central Excises, Ghaziabad, issued a notice dated 12.5.2003, under Section 71(2) of the Act for verification of the tax assessed in ST-3 returns for the period from 1.9.1999 onward upto 30.9.2003. In the said notice, it has been mentioned that the undersigned has to verify the correctness of the service tax, so assessed, and paid, under the provision of Section 71(1) of the Act. The appellant was requested to produce all the books of accounts, records containing all the details of transactions (including payment received) of any kind undertaken between them and TISCO alongwith the copy of the contract entered into by them with the principal detailing the terms and conditions of appointing the appellant TISCO's consignment agent on 28.5.2003. Said notice is Annexure 11.
The appellant filed the reply to the notice on 28.5.2003 wherein it has been submitted that by a detailed submission made on 15.5.2002, it has been clarified that the appellant does not come within the ambit of service tax. The amount of service tax has been deposited under protest. However, the copy of the contract entered into between the appellant and the TISCO, copies of the bills were filed. The appellant appeared before the Superintendent, Central Excise on 28.5.2003. The said reply is Annexure-13. In the proceeding, copy of the contract entered into between the appellant and the TISCO and the bills raised for the period between 1.9.1999 and 31.3.2003 were examined.
After the notice and the proceeding being taken, neither the Superintendent, Central Excise has passed any order, nor has referred the matter to the Assistant Commissioner, as required under Section 71(3) of the Act, which, at the relevant time, provided that if on verification, under sub-section (2), the Superintendent of Central Excise is of the opinion that service tax on any service provided has escaped assessment or has been under-assessed, he may refer the matter to the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise, who may pass order of assessment as he thinks fit.
Subsequently, third notice dated 6.9.2003 has been issued by the Deputy Commissioner, under Section 73 of the Act. In the notice, it is specifically mentioned that the notice is being issued under Section 73 (1) (a) of the Act. In the notice, the petitioner was required to show cause why an amount of Rs.55,31,773/= should not be determined as service tax on the gross value of Rs.11,06,35,467, realized towards taxable service rendered to their client, i.e. TISCO during the period from 1.9.1999 to 31.3.2003. To show cause why the appellant should not be asked to pay, by way of penalty, under Section 78, in addition to service tax and the interest, under Section 75; why the appellant should not be required to pay a penalty of Rs.2,00/=, under Section 76, for every day, for the period during which the appellant failed to pay the service tax and also for the period during which such failure continued; to show cause why penalty should not be imposed, under Sections 70 and 77 of the Act for not furnishing the details in the prescribed ST-3 returns in the manner provided under the Service Tax Rule, 1994.
The appellant filed a detailed reply to the show cause notice on 9.10.2007 and appeared in person as well for personal hearing. The said reply is Annexure-15. Apart from various submissions made, the validity of notice was challenged on the ground that it did not fulfil the requirement of Section 73(1)(a).
The Commissioner, Central Excise, passed the order on 14.2.2008, confirmed the demand of Rs.55,31,773/- demanded towards service tax; interest at Rs.12,86,155/- on the unpaid amount; imposed the penalty @ of Rs.2,00/- per day, from the date till the date of the payment, penalty of Rs.1000/-, under Section 77 and penalty of Rs.55,31,773/- under Section 78 of Chapter V of the Finance Act, 1994.
Being aggrieved by the order, the appellant filed the appeal before the Tribunal. Revenue also filed the appeal against the order of the Commissioner, Central Excise. Both the appeals have been decided by the impugned order, dated 16.8.2013. The Tribunal, by the impugned order, rejected the appeal of the appellant and has allowed the appeal of the revenue.
The Tribunal has accepted plea of the revenue that the penalty under Section 76 for the period 18.6.2006 to 9.5.2008 should be paid as per the amended provision of Section 76 of the Act.
Heard Sri J.K. Mittal, learned counsel for the appellant and Sri Ashok Singh, learned Senior Standing Counsel, Union of India, appearing on behalf of the revenue.
Learned counsel for the appellant advanced following submissions:
(a)The notice, under Section 73(1)(a) of the Act is illegal inasmuch as at the time of issuance of the notice, there was no material to form the belief that there was omission or failure on the part of the assessee to make the return under Section 70 for any prescribed period, or failed to disclose fully and truly all material facts, as required for verification of the assessment, under Section 71. Unless either of the two conditions are attracted, the authority cannot assume the jurisdiction to issue the notice under Section 73(1)(a).
(b) In the present case, it is not the case that there was a failure on the part of the assesseee to make a return, under Section 70 for the relevant period. The returns in ST-3 were duly filed for the relevant period and the same is apparent from the notice itself. In pursuance of the order of the authority, the appellant applied for the registration, got the registration done, furnished ST-3 return, disclosed receipts and also deposited the service tax under protest. Right from the very beginning, the appellant disputed the liability and requested the authority to adjudicate the matter. In pursuance of the first notice, dated 18.4.2002, complete details have been furnished. The first notice was also issued under Section 73 pursuant to which, complete details have been furnished, but the authority has chosen not to pass any order and to raise the demand on the ground that there was any escaped assessment or under-assessment. In pursuance of the notice under Section 71(2), the copy of the contract and the bills etc. were produced before the Superintendent, Central Excise and the same have been examined in detail. The notice under Section 71(2) is being issued in such a situation where the returns are being filed by the assessee under Section 70 and to verify the correctness of the tax assessed by the assessee on the services provided, requiring the assessee to produce accounts, documents or other evidence, which he may deem necessary for such verification as and when required. Sub-section (3) of Section 71 provides that if on verification, under sub-section (2), the Superintendent of Central Excise is of the opinion that service tax on any service provided has escaped assessment or has been under-assessed, he may refer the matter to the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise, who may pass order of assessment as he thinks fit. In the present case, after verification of the documents, the Superintendent, Central Excise, has not referred the matter to the Assistant Commissioner or to the Deputy Commissioner. It means that the Superintendent, Central Excise was satisfied that there was no case of escaped assessment or under-assessment. In the third impugned show cause notice, no case has been made out that any material fact, which was required for verification of the assessment, under Section 71 could not be furnished. On the basis of the material, provided by the appellant, a view has been taken that there was an escaped assessment and service tax has been short paid.
(c) It is submitted that once the primary material facts necessary for verification has been disclosed by the appellant, the obligation on the part of the appellant was discharged. It was not the duty of the appellant to suggest to the authority concerned how and in which manner to pass or not to pass the assessment order. Therefore, in the absence of fulfilment of the ingredients, as required, under Section 73(1)(a) of the Act, the notice is wholly illegal.
(d) It is also submitted that the word 'the reason to believe' has been considered by the Apex Court in various cases wherein it has been held by the Apex Court that there must be a material on which the belief can be formed that there is an escaped assessment. The belief should be formed objectively, in good faith and not merely on pretence. To buttress his submission, learned counsel for the appellant placed reliance on various decisions of the Apex Court.
(e) He submitted that once on the same issue, a notice under Section 73 has been issued and no order has been passed and further a notice under Section 71(2) has been issued on that too no order has been passed, thus, third notice for the same cause, under Section under Section 73 is not justified. The submission is that in the notice, there is a specific mention that it is being issued under Section 73(1)(a). The Tribunal has illegally observed that the notice was within time as it has been issued within one year from the date of filing of the ST-3 return. The limitation of one year is provided for Section 73(1)(b) inasmuch as no case has been made out that the notice is being issued in consequence of an information. Reliance is being placed on the three decisions of the Tribunal, namely, CCE Indore v. Siddharth Tubes Ltd. 2004 (170) ELT 331 (Delhi Tribunal), Bridgestone India Pvt. Ltd. v. CCE, Indore, 2013 (294) ELT (Delhi Tribunal) and Shreeji Colourchem Industries v. CCE & Cus., Vadodara, 2013 (294) ELT 615 (Ahmedabad Tribunal).
(f) The notice was issued on 6.9.2003. The reply was filed on 9.10.2007. The impugned order has been passed on 14.2.2008, after four and a half years from the date of the show cause notice. Such belated order is not justified. Reliance is being placed on the decisions reported in 2011(24) STR 97 (Bombay, Hindustan Lever Ltd. v. Union of India and 1993 (68) ELT 27 (Bombay), Universal Generics Pvt. Ltd. v. Union of India.
(g) Section 73 stood omitted on 10.9.2004. There was no saving clause. On the date of passing of the order, Section was not available and, therefore, no order could be passed, under Section 73. Reliance is being placed on the decisions of the Apex Court, reported in 2000 (119) ELT 257, Kolhapur Canesugar Works Ltd. v. Union of India (Paragraphs 37 & 38) and (2002) 7 SCC 1 (Paragraphs 4 & 9).
(h) The period of limitation is to be counted from the relevant date. The notice was barred by limitation. Reliance is being placed on the decision of the Gujarat High Court reported in 2012 (285) ELT 336, CCE, & C., Vadodara-II v. Gujarat Narmada Vertilizers Co. Ltd. (Paragraph 11).
(i) Rule 68 provides for procedure for computation of service tax for rendering the services of forwarding and clearing. Only the remuneration is taxable and not any other receipt. The appellant has paid service tax under protest on the remuneration. Even assuming that the service tax is payable, it is chargeable only on the remuneration not on the gross receipt. The gross receipt, includes other charges, which are not taxable. Reliance is being placed on the following decisions:
(1) 2014(33) STR 137 (Madras), Commissioner of S.T., Chennai v. Sangamitra Services Agency.
(2)2013(39) STR 9 (Del.), Intercontinental Consultants & Technocrats Pvt. Ltd.
(j) The Tribunal has not considered that the detailed reply has been given to the show cause notice in this regard and the same has been challenged in the appeal, but the Tribunal has left to consider the same. He placed reliance on the decision of the Apex Court reported in 2005 (183) ELT 225 (SC), SACI Allied Products Ltd. v. Commissioner of C. Ex. Meerut (Paragraph 17).
(k) The submission is that having regard to the scope of the work mentioned in the agreement, such act does not bring the appellant within the purview of consignment agent. Under the agreement, the appellant has no authority to sell the goods. As per law, a person, who sells the goods on behalf of the principal and has the authority to sell can be said to be a consignment agent. Since under the agreement, the appellant has no authority to sell the goods, the appellant cannot be treated to be a consignment agent. Reliance is being placed on the decision of the Karnataka High Court reported in 2010(17) STR 225 (Kar), Commissioner of C. Ex., Bangalore-I (Paragraphs 11, 12 & 13). The submission is that the nomenclature is not decisive, but it is the real nature of the transaction, which is decisive.
(l) On the point of penalty, he submitted that the penalty cannot be levied, both under Sections 76 and 77. Reliance is being placed on the decisions reported in 2006 (197) ELT 465 (SC), Nizam Sugar Factory v. Collector of Central Excise, A.P., 2010 (2) STR 622, Punjab & Haryana, 2012 (27) STR 225 (Karnataka), Commissioner of Service Tax, Bangalore v. Motor World, 2000 (197) ELT 465 (Paragraph 9).
(m) Learned counsel for the appellant submitted that in view of Section 80, as it existed at the relevant time, no penalty could be levied, unless a case is made out that there was no reasonable cause. The appellant has made out a case of reasonable cause and, therefore, penalty could not be levied upon the appellant.
(n) With regard to the appeal filed by the revenue, he submitted that the appeal has been filed highly belatedly. Objection in this regard was filed before the Tribunal, the same has been noted, but has not been dealt with.
Sri Ashok Singh, learned Senior Standing Counsel, Union of India, appearing on behalf of the respondent, referred paragraphs 6, 8, 9, 16, 20, 22 23, 26, 27 and 29 of the show cause notice to demonstrate that there was no full and true disclosure of the material fact. He submitted that under the agreement, the appellant has been appointed as a consignment agent. The consignment agent is included under the definition of forwarding and clearing agent as defined under clause (23), therefore, the appellant was liable to pay the service tax as provided under the provisions of the Act, but the appellant neither has taken registration nor has paid service tax and when the notice was issued, the appellant got the registration done, filed the ST return and paid the excise duty. The excise duty has not been paid on the total amount of receipt and has only been paid on the amount of remuneration, while service tax was payable on the entire gross amount, thus, it is a clearcut case of escaped assessment, under-assessment, and the case of short payment of service tax. He submitted that in the case of assessee itself, the Tribunal at Kolkata, vide order dated 29.5.2008, on consideration of the terms of the agreement has held the services rendered by the appellant taxable. So far as the penalty is concerned, the submission advanced by the learned counsel for the respondent is that penalty can be levied, both, under Section 76 and 78. Reliance is being placed on the decisions of the Delhi High Court reported in 2012 (25) STR 417, Bajaj Travels Ltd. v. Commissioner of Service Tax.
He further submitted that it is a case of misstatement and, therefore, Section 78 was applicable. Thus, the penalty has rightly been levied under Section 78. It is submitted that since the return has not been filed, within the specified period and the service tax has also not been deposited, therefore, penalty under Section 76 has rightly been imposed.
In the end, he submitted that the Tribunal has examined each and every aspect of the matter and rejected the plea of the appellant. However, he very fairly submitted that the notice has been issued under Section 73(1) (a) of the Act.
We have considered rival submissions and perused the material on the record.
It would be appropriate to refer relevant provisions of the Service Tax Rules to adjudicate the issues.
Rule 90 defines taxable service, which reads as under:
"90."taxable service" means any service provided,-
(3) If on verification under sub-section (2), the Superintendent of Central Excise is of the opinion that service tax on any service provided has escaped assessment or has been under-assessed, he may refer the matter to the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise, who may pass such order of assessment as he thinks fit.
72. Best judgment assessment.
If--
(a) any person fails to make the return under section 70, or
(b) any person having made a return fails to comply with the provisions of section 71, or
(c) the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise is not satisfied with the correctness or the completeness of the accounts of the assessee, the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise, after taking into account all the relevant material which he has gathered, shall, by an order in writing, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment.
73. Value of taxable services escaping assessment (1) If--
(a) the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise has reason to believe that by reason of omission or failure on the part of the assessee, to make a return under section 70 for any prescribed period or to disclose wholly or truly all material facts required for verification of the assessment under section 71, the value of taxable service has escaped assessment or has been under-assessed or service tax has not been paid or has been short-paid or any sum has erroneously been refunded, or
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise has in consequence of information in his possession, reason to believe that the value of any taxable service assessable in any prescribed period has escaped assessment or has been under-assessed or service tax has not been paid or has been short-paid or any sum has erroneously been refunded, he may, in cases falling under clause (a), at any time within five years, and in cases falling under clause (b), at any time within one year, from the relevant date, serve notice on the person chargeable with the service tax which has escaped assessment or has been under-assessed or has not been paid or has been short-paid, or to whom any sum has been erroneously refunded, requiring him to show cause why he should not pay the amount specified in the notice.
Explanation. -- 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 period of five years or six months, as the case may be.
(2)The Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
(3)For the purposes of this section, "relevant date" means,-
(i) in the case of taxable service in respect of which service tax has escaped assessment or has been under-assessed or has not been paid or has been 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;
(ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof;
(iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.
Rule 6(1) and sub-rule (8) 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:
.... ..... .....
(8)The value of the taxable service in relation to the services provided by a clearing and forwarding agent to a client for rendering services of clearing and forwarding operations in any manner shall be deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client engaging such agent.
Rule 7 reads as under:
7. Returns.--(1) Every assessee shall submit a half-yearly return in Form 'ST-3' or 'ST-3A' , as the case may be, alongwith a copy of the Form TR-6, in triplicate for the months covered in the half-yearly return.
Every assessee shall submit the half-yearly return by the 25th of the month following the particular half-year.
Sections 76, 77 and 78, which deal with the imposition of penalty on failure to collect or payment of service tax, read as under:
Section 76. Penalty for failure to collect or pay service tax Any person responsible for collecting service tax in accordance with the provisions of sub-section (1) or sub-section (1A) of section 68, as the case may be, who--
(a) fails to collect such tax; or
(b) having collected the service tax, fails to pay such tax to the credit of the Central Government in accordance with the provisions of sub-section (2) or who fails to pay the service tax in accordance with sub-section (3) of that section, shall pay,--
(i)in the case referred to in clause (a), in addition to paying the tax in accordance with the provisions of sub-section (3) of that section and interest in accordance with the provisions of section 75, by way of penalty, a sum equal to the amount of service tax that he failed to collect; and
(ii) in the case referred to in clause (b), in addition to paying the tax in accordance with the provisions of sub-section (2) or, as the case may be, sub-section (3) of that section and interest in accordance with the provisions of section 75, by way of penalty, a sum which shall not be less than one hundred rupees but which may extend to two hundred rupees for every day during which the failure continues, so, however, that the penalty under this clause shall not exceed the amount of service tax that he failed to pay.
Sections 77, 78 and 80 of the Finance Act reads as under:-
Section 77. Penalty for failure to furnish prescribed return.- If a person fails to furnish in due time the return which he is required to furnish under Section 70 or the rules made thereunder, he shall be liable to a penalty which may extend to an amount not exceeding one thousand rupees.
Section 78. Penalty for suppressing value of taxable service.- If the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise in the course of any proceeding under this Chapter is satisfied that any person has, with intent to evade payment of Service tax, suppressed or concealed the value of taxable service or has furnished inaccurate value of such taxable service, he may direct that such person shall pay by way of penalty, in addition to Service tax and interest, if any, payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of income tax sought to be evaded by reason of suppression or concealment of the value of taxable service or the furnishing of inaccurate value of such taxable service.
Section 80. Penalty not to be imposed in certain cases.- Notwithstanding anything contained in the provisions of Section 76, Section 77, Section 78 or Section 79, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure.
It would also be appropriate to refer the relevant extracts of the agreement, entered into between the parties, which are as under:
Scope of Work 2.1 This agreement is for unloading and handling of all steel materials consigned by TATA STEEL, to the Ghaziabad stockyard and thereafter loading the steel materials for transportation to the customer's premises.
2.2 Naresh Kumar shall receive or dispatch the consignments by rail and by road. The consignments shall be dispatched to Naresh Kumar either directly from TATA STEEL's plant or through its other stockyards/consignments agents/processing agents.
2.3 Naresh Kumar shall take delivery of the incoming materials, arrange transport to the yard, sort and stock them after weighment, if necessary, quality-wise, section by section, length by length in good countable order, with intervening bars in the godowns, shed or in the open yard as instructed by TATA STEEL's representative. CR products shall be stored in a covered shed only.
2.4 Naresh Kumar shall load and unload the wagons and complete the same within the free time allowed by the Railway Authorities. Naresh Kumar shall be responsible for all demurrage, wharfage and/or any other incidental charges incurred due to his failure to hand over the wagons to the Railways either empty or loaded within free time allowed. All charges incurred in connection with booking of/or taking delivery of the materials shall be borne by Naresh Kumar itself, and such sundry expenses are presumed to be covered by the consolidated rate indicated in the PaymentTerms clause. Demurrage/Wharfage or incidental charges even when they are incurred due non-placement of wagons in the right position, condition of road during the rainy season etc. shall be borne by Naresh Kumar.
2.5 Naresh Kumar shall be responsible for damage to any rolling stock of the railways or property of TATA STEEL lying at its premises. TATA STEEL's claim or claims in this regard shall be met by the Naresh Kumar and shall be adjusted against the dues/bills of Naresh Kumar.
2.6 If the materials are booked to any public siding, Naresh Kumar shall unload and transport the incoming materials from the Public Siding to Ghaziabad stockyard. They shall be responsible for any shortage found while unloading the materials at Ghaziabad stockyard, and in such case the value of shortages shall be realized from Naresh Kumar at the prevailing market prices.
2.7 Naresh Kumar shall not stack any materials for any other party/agencies except TATA STEEL in the said premises or outside. IN case of any mixing of TATA STEEL's materials with any other materials, Naresh Kumar shall compensate for any loss or damage of TATA STEEL's materials.
2.8 Naresh Kumar shall be responsible for any shortage/demurrage due to non-transporting of the materials from the railways siding to the Ghaziabad premises in time, which shall be borne by them.
2.9 TATA STEEL shall not be obliged to provide Naresh Kumar with any equipment/man and machinery for doing the handling job; it has to employee its own contrivance, manual, equipment, man and machinery for handling of all types of materials.
2.10 Naresh Kumar shall arrange and take all necessary steps for protection of the steel materials of TATA STEEL sent to its premises during the monsoon period or otherwise. It shall be the responsibility of the Naresh Kumar to procure tarpaulins or any other such materials for covering the CR materials and HR sheets of TATA STEEL and other equipments.
2.11 Naresh Kumar shall nominate a responsible and experienced representative at the yard for twenty four hours to supervise the work at Ghaziabad stockyard on the directions of the Hub Manager from time to time.
2.12 Naresh Kumar shall deliver material to TATA STEEL's customers on production of the original delivery order/invoice issued by TATA STEEL and submitted by the customers for delivering the materials from the premises. If so required, Naresh Kumar shall load the materials on the transport of the customers or transporters nominated by TATA STEEL as and when instructed by the Hub Manager.
2.13 Naresh Kumar shall not in any manner make use of the handling agency agreement with TATA STEEL for publicity or any other promotional purpose in its favour, without any written approval of TATA STEEL.
2.14 Naresh Kumar shall be responsible for maintaining the stockyards/warehouse/offices in its premises in a neat and clean condition. It shall maintain the weigh bridge in proper operating condition and other places inside the yard, which shall be clean and maintained promptly and properly each and every day.
2.15 Naresh Kumar shall not pass any information or any other understandings arrived at between TATA STEEL and Naresh Kumar to any other person without the written consent of TATA STEEL. It shall maintain secrecy of all documents and information.
2.16 Naresh Kumar shall be solely responsible for the safe custody of TATA STEEL's materials once they have received the same at the premises, till such materials are dispatched to the customer as per TATA STEEL's advise.
2.17 All the expenses from the time the materials are received by Naresh Kumar at their premises till the time they are dispatched from Naresh Kumar's factory premises shall be borne by Naresh Kumar. It is clearly understood that If Naresh Kumar is unable to account for the stocks, Naresh Kumar would be responsible for all the consequences arising there from.
2.18 It is agreed that Naresh Kumar on signing this agreement is fully familiarized and aware of the nature of all requisite details in connection with this agreement. No claim shall be entertained for any increase in rates or otherwise on account of the works involved, on any ground whatsoever.
PAYMENT TERMS 5.1 Naresh Kumar shall be paid following charges as per the services rendered by them towards handling the materials on behalf of TATA STEEL, which is inclusive of its remuneration and other taxes as well as expenses.
LOCATION GHAZIABAD All rates in Rs./MT of dispatched tonnage from the yard.
MATERIAL (Mode) 01.11.02 To 31.10.04 HR/CR Coil (Rail) 100 Others (Rail) 130 HR/CR Coil (Road) 46.5 Others (Road) 90
a) Transportation to BSSL : Rs.55/-
b) Clearance of goods from Faridabad public siding : Rs.45/- unloading from wagon & loading on trucks. c) Transportation from Faridabad to Ghaziabad yard : Rs.200/- 8. OWNERSHIP AND SAFETY OF MATERIALS: 8.1 Once the materials are received by Naresh Kumar, stacked in its premises or in transit, till the same are delivered to the customers of TATA STEEL, the ownership of the said materials shall be with TATA STEEL only. 8.2 Naresh Kumar shall not have any right and authority over the materials of TATA STEEL, to make any commitment on behalf of TATA STEEL to any customer or any other person except to the extent specifically authorized by TATA STEEL in writing. 8.3 Naresh Kumar shall on no account pledge, hypothecate or in any way encumber the steel materials or deal in any manner except to hold goods in stock and deliver them on behalf of or as desired by TATA STEEL.
8.4 Naresh Kumar shall be responsible for the safe custody of the materials from the time the materials are received at their premises till the materials are delivered to the nominated transporter of TATA STEEL. Naresh Kumar shall take all necessary steps to take delivery of the materials and ensure proper stacking of the materials in covered storage area. Any loss due to pilferage and/or shortage or mix up or improper stacking of materials, shall be borne by Naresh Kumar."
It would be appropriate to refer the reply dated 28th May, 2003, submitted pursuant to the notice under Section 71(2) and the proceedings recorded on 28th May, 2003, which read as under:
Reply to Notice NO.6065 dated 20th May, 2003 Dear Sir, We, M/s Naresh Kumar & Company (P) Limited, have received the above referred Notice treating us as 'Consignment Agent' of TISCO and thus making us liable for payment of Service Tax under the provisions of Finance Act, 1994.
At the outset, we would like to reiterate that we have submitted a detailed submission on 15th May 2002 in which it has been legally clarified that we do not come under the ambit of Service Tax at all. We once again contended the same vide our Letter dated 8th November 2002 and requested your honour to please consider the written submission dated 15th May 2002. We have also submitted that we have deposited the amount under protest till the matter is finally decided. The deposit of an amount does not mean admitting the tax liability legally.
We are submitting herewith copy of contracts entered between us and TISCO under which we have received the payments as well as some sample copies of the bills which proves that the services rendered by us are not liable to Service Tax under the provisions of Finance Act, 1994. These documents may please be considered in the light of our detailed discussions in submission dated 15th May 2002.
We request you to kindly provide us further opportunity in person before final adjudication of the matter, so that we would be able to satisfy you on all issues relating to this matter.
Hoping for early and favourable action."
Records of proceedings drawn on 28-5-2003 in pursuance to Notice C.No. V(1) STC/Notices/GZb/7/2003/6065 dated 20-5-2003 issued under section 71(2) of the Finance Act, 1994 (32 of 1994) in the case of M/s Naresh Kumar & Company (P) Limited, Ghaziabad (hereinafter referred to as 'N.K. & Company').
In response to the above mentioned Notice, Shri D.K. Grover, Senior Area Manager of N.K. & Company, Shri N.K. Mishra, officer of N.K. & Company, Shri Tarun Tyal, Account Supervisor of N.K. & Company attended the proceeding and submitted a letter dated 28-5-2003 along with the copy of the contracts (total number of accounts are twelve in number and last agreement is dated 12.12.2002) entered between N.K. & Company an Tata Iron & Steel Company Ltd. As per copy of the renewal of consignment agency contract dated 5.12.2000, earlier the business of consignment agency was being carried by M/s Naresh Kumar Coal Sales Ltd, which company was subsequently amalgamated and merged with M/s NK & Company under the orders of the Hon'ble High Court, Kolkata to carry out the business activities under the name and style of Naresh Kumar & Company (P) Ltd. Shri Grover promised that the copy of the said order of the High Court shall be submitted by 29th May, 2003. (now submitted).
They also produced the bills raised for the period from 1.9.99 to 31.3.2003 towards the remuneration payable to them for handling materials in the manner provided under the said agreement as extended from time to time till date, which inter-alia includes acknowledgement receipt of the incoming goods both by rail and road, taking delivery of wagons carrying materials from TISCO Plant/ other stockyards or consignment agent's yard, receiving the goods, unloading the goods at Ghaziabad public siding or the nearest Public Railway Station, as the case may be, transpiration of the goods to the stockyard of TISCO, weighment or re-weighment of the consignments, maintaining the stock in proper way, loading the materials/delivery of the materials to the customers of TISCO on production of the original delivery orders, maintainable of accounts and records as also proper documentations, keep the stock properly till they are delivered to the customers etc. and sometimes cutting and bending/bundling at the written request of the customers by gas cutting to facilitate unloading the materials [clause 8(iii) of the consignment agency contract dated 2.4.98 refers.] As per clause 8(iv) of the said contract, extended from time to time, in bills, remuneration and cutting/bending/bundling charges due in a month are to shown separately . In the agreement dated 21.12.2002, entered into for 1.11.2002 to 31.10.2004, scope of work is the same so far as the handling of the materials is concerned except that CR products shall be stored in a covered shed only. This agreement, however, does not assign any job of cutting/bending/bundling of the materials on the behest of the customers, as was earlier mentioned under clause 8(iii) of the contract dated 2.4.98. However, no bill from September 99 onwards has been raised on TISCO towards cutting/bending/bundling charges.
A chart containing bill-wise amount of remuneration payable to them, as raised and realized during 1.9.99 to 31.3.2003 has also been promised to be submitted by 29th May, 2003. Total amount of bills raised during the said period towards remuneration payable by TISCO aggregates to Rs.8,35,17,620/- and the service tax chargeable on this amount works out to Rs.41,75,881/-. On examination of the record produced by N.K. & Company and the chart submitted it has been noticed that they have not indicated in ST-3 returns submitted so far an amount aggregating to Rs.3,24,72,604/- approximately. It has been stated by the representatives of the company, appearing in response to the notice in question that this amount relates to transportation, loading and unloading, weighment charges, load and unload laborer charges in trucks and it is for this reason this amount has not been included in the amount taken for payment of service tax. However, this amount is included in the gross amount realized from TISCO.
Some of the paragraphs of the impugned show cause notice dated 6.9.2003, which are relevant, and have been placed by Sri Ashok Singh, learned counsel for the respondent, are being reproduced herein below:
8. The value declared in such quarter-wise ST-3 forms for calculating the aforesaid payment of service tax was not supported by any documentary evidence to verify the correctness of the tax assessed deposited. The copy of the consignment agency contracts/agreements, entered into by them with 'their clients' i.e. TISCO was also not forthcoming to ascertain the correctness of their contention. Hence notice under Section 71 (2) of the said Finance Act, 1994 (32 of 1994) was issued to them vide C.No.V (1) STCNotices/GZB/7/2003/6065 dated 20.5.2003, requiring them to present their all books of accounts/records, containing details of all transactions of any kind undertaken between them and the TISCO, their clients (including particulars of payments received). They were also asked to produce the copies of the contracts entered into by N.K. & Company with the said principal, detailing the terms and conditions of appointing them as the consignment agent of Ghaziabad stockyrd. Meanwhile inquiry was also made from their clients 'TISCO' under the provisions of Section 14 of the Central Excise Act, 1944, as made applicable in relation to Service Tax under Section 83 of the Finance Act, 1994 (32 of 1994). In the said inquiry, copy of consignment agency contracts/agreements entered into by TISCO with the said N.K. & Company as extended from time to time covering the period in dispute were also obtained.
9. On examination of the said copies of consignment agency contracts/agreements, it has been observed that initially M/s Naresh Kumar Coal sales Ltd., Ghaziabad were appointed as the consignment agent vide consignment agency contract No.SA/STD/CONS.AG9 dated the 2nd April 1998 for 'Handling steel materials at Ghaziabad'. However, this company was later on amalgamated in N.K.& Company w.e.f. 1.4.99 by order dated 10.1.2000 of the Hon'ble High Court, Calcutta. As per renewals, taken place from time to time, the amendments made thereunder were always treated as inseparable part of the original consignment agency contract dated 2.4.98 and all other terms and conditions as stipulated in the said original contract and addendum thereto remained unaltered. Defacto, such renewals contained only the revision of the rates of remuneration. Thus, subject to the terms and conditions contained in the consignment agency contract dated 2.4.98, the said TISCO paid remuneration to N.K. & Company towards services, rendered by them to TISCO as the consignment agent from time to time.
20. In response to Notice issued under Section 71 (2) of the said Act, Shri D.K.Grover, Senior Area Manager, Shri N.K.Mishra, officer and Shri Tarun Tayal, Accounts Supervisor, all representatives of N.K. & Company attended the said proceedings and tendered copies of contracts, which are twelve in number, as entered into between N.K.& Company and TISCO. They also presented the bills raised towards the remuneration payable to them for handling materials in the manner provided under the subject consignment agency contract/agreements during the period 1.9.99 to 31.3.2003. They tendered few copies of such bills for the different periods as sample bills. During the said enquiry, they also prepared and submitted a chart duly signed by the above representatives of the N.K.& Company, containing bill-wise details of remuneration raised and received during the period from 1.9.1999 to 31.3.2003. Copies of all such sample Bills and the charts the forms part of this Notice as ANNEXURE A-1 to A-102 and ANNEXRE-B respectively.
21. It was further revealed from the enquiry made that the said N.K.& Company and TISCO have entered into another fresh agreement bearing No.SC/LPAX/2D7005 dated 21.12.2002. The said agreement dated 21.12.2002 has been made operative for the period from 1.11.2002 to 31.10.2004. (The copy of the said agreement dated 21.12.2002 forms part of this Notice as ANNEXURE-D). It is seen from this agreement that the terms, conditions and scope of work under this agreement are also more or less same as were in the earlier consignment agency contract/agreement dated 2.4.98 and which terms and conditions remained inseparable part of subsequent renewals of the said contract/agreement till 31.10.2002. Briefly stated, the activities to be undertaken under this fresh consignment agency contract dated 21.12.2002 inter-alia include unloading and handling all steel materials, consigned by TISCO to Ghaziabad stockyard, loading the steel materials for transportation to the customer/s premises, receiving or dispatching the consignments by rail or road, taking delivery of the incoming materials, arrange transport to the yard, sort and stock them after weighment, if necessary, loading and unloading the wagons, holding responsibility for demurrage, wharfage and/or any other incidental charges incurred due to failure on their part, loading of the materials on the transport of the customers or transporters, nominated by TISCO, maintaining the stockyard/warehouse/office etc. However, in this agreement-dated 21.12.2002, work of cutting bending or bundling on the behest of the customers has been taken away.
22. Further the Clause 5.3 of this agreement-dated 21.12.2003 very clearly provides that the rates of remuneration, as indicated therein are inclusive of all taxes and levies including the service tax payable by N.K. & Company. It is thus apparent that it remained in the knowledge and to the proper understanding of the said N.K.& Company that they were covered within the ambit of service providers in terms of section 65 (j) of the said provisions and also that the services provided by them under the said consignment agency contracts/agreements were 'taxable services' within the meaning of Section 65(105) [earlier Section 65(72) or Section 65(90), as such provisions remained in force from time to time] and were accordingly chargeable to service tax at the prevailing rate. However, it appears that the said N.K.& Company having full knowledge that services tendered by them to TISCO are taxable, did not only avoid the payment of service tax on such services but also mis-stated and mis-represented the contents of such contracts/agreements in their letter dated 15.5.2002 and 8.11.2002. The said act of N.K. & company appears to be with an intent to evade payment of service tax on the remuneration received by them from their clients for rendering such taxable service during 1.9.99 to 31.3.2003.
23. On examination of the respective bills issued for claiming remuneration charges, it is seen that while charging such remuneration charges, N.K. & Company have indicated in the bills raised for this purpose 'To Amount Payable As Handling Charges For the Month of ....' under the column 'Particulars'. However, while paying service tax for the period from September, 1999 to September, 2001 and April, 2002 to March, 2003. N.K.& Company did not take into account the entire charges of remuneration as per bills raised and payments received from TISCO in respect of the services, rendered to them under the description 'Handling the steel materials at Ghaziabad stockyard', though entire charges of remuneration, in the light of the description contained, hereinabove, appears to be the charges of remuneration collected for the taxable services. For the sake of gravity few bills are being discussed in Para 20 below.
25. The representatives of the said N.K.& Company, during the course of proceedings dated 28.5.2003, drawn in pursuance to section 71(2) of the said provisions, stated, on being pointed out this failure on their part that the differential amount (i.e. the difference of the gross amount and the amount on which Service Tax is paid) relates to transportation, loading and unloading, weighment charges, load and unload labourer charges in trucks. From this, it appears that N.K.& Company in spite of having proper knowledge of taxability and nature of taxable services willfully categorized the gross amount of remuneration by separating a fraction thereof and paid the Service Tax only on the remaining portion. Thus, it also appears that they have willfully evaded the payment of Service Tax and reflected only rest amount in their quarter-wise ST-3 forms (Copy of the record of the said proceedings forms part of this Notice as ANNEXURE-E).
27. The above illustration makes it clear that the said N.K.& Company have only disclosed a part of such charges of remuneration for paying service tax liability, whereas as per Rule 6(8) of the Service Tax Rules, 1994 the value of such kind of taxable service are deemed to be the gross amount of remuneration or commission (whatever name called) paid to such agent by the client engaging such agent. ON investigation, the above example has been found to be a practice followed by the said N.K.& Company during the entire period covered under this Notice. During the said period they have raised bills and received payments aggregating to Rs.11,06,35,467/- and service tax payable on this gross amount of remuneration works out to Rs.55,31,773/-. Out of this service tax liability, they have deposited as yet an amount of Rs.33,67,170/- only. It, therefore, appears that they are further liable to pay an amount towards the service tax liability aggregating to Rs.21,64,603/- on the balance amount of charges of remuneration including such portion of remuneration, which was not wholly and truly disclosed in quarter-wise ST-3 return submitted (A chart containing aggregate amount of remuneration received, amount of remuneration declared in ST-3 forms submitted, amount of remuneration suppressed and the service tax involved on such suppressed amount of remuneration forms part of this Notice as ANNEXURE F-1/1 to F-1/2).
28. The examination of bills raised and payments received reveals that the said N.K.& Company have failed to disclose wholly and truly, rather they have willfully suppressed the correct (entire) value of taxable services, rendered by them, to the tune of Rs.3,24,72,604/- approximately. It resulted in short payment of service tax of Rs.16,23,631/- on such portion of remuneration and forms part of the said further liability of Service Tax aggregating to Rs.21,64,603/-. Remaining amount of Rs.5,40,972/- is the Service Tax for the period October 2001 to March 2002, which was payable but has not yet paid. A chart containing aggregate amount of remuneration received, amount of remuneration declared in ST-3 forms submitted, amount of remuneration suppressed and the service tax involved on such suppressed amount of remuneration already forms part of this Notice as ANNEXURE F-1/1 to F-1/2.
29. In view of the foregoing facts and materials emerging during enquiry, it appears that the said N.K.& Company have willfully attempted in the manner, stated herein above, right from the very beginning to evade payment of service tax, payable on the taxable services rendered by them to their clients i.e. TISCO in accordance with the above referred consignment agency contracts/agreements, suppressed and concealed wholly and truly the accurate value of such taxable services, and under-assessed wilfully the taxable value while depositing part amount towards their service tax liability consequent to issue of Notice dated 9.10.2002, referred to above.
The findings recorded by the Tribunal on the issues raised in the Appeal are very relevant to be referred for adjudication of the case, which are being reproduced hereinbelow:
Findings of the Tribunal
14. After hearing both sides, we find in this case Order-In-Original has been issued by the Commissioner adjudicating the Show Cause Notice V(91) STC/NK & Co/GZB/19/2003 173 dated 23.09.2003. Main issue involved in this appeal is whether appellants are liable to pay service tax on their activities under Clearing & Forwarding Agents Service and Consequently liable to interest, and penalties under Finance Act.
15. Appellants have raised the preliminary objection that when two notices dated 09.10.2002 and other notice under Section 71 (2) of Finance Act on 20.05.2003 were issued to them, third Show Cause Notice is not sustainable. On the other hand Revenue's contention is that appellants did not submit any details about Commission received and notice dated 09.10.2002 was issued to them for getting correct details and in absence of details amount of service tax was not specified in the Show Cause Notice dated 09.10.2002. Notice dated 20.05.2003 was issued under Section 71 (2) of the Finance Act asking the appellant for producing, books of accounts. Notice dated 20.05.2003 was not under Section 73 of the Finance Act. We find that this appeal is against the impugned order passed in adjudication proceeding of the Show Cause Notice dated 23.09.2003. It is not case of the appellants that other two notices have also been adjudicated against them on the same issues and same period. Issue whether extended period of limitation can be invoked in view of earlier Show Cause Notice issued to time will be discussed in subsequent paragraph of this order.
16. Appellants also contended that the Show Cause Notice dated 23.09.2003 can not be issued when Show Cause Notice was already issued for the same period and appellants relying on decision of Tribunal and court in the support of contention.
17. In case of Siddharth Tubes (Supra) this Tribunal held Show Cause Notice can not be issued to same period on different grounds. That case is distinguishable from the present case as assessee did not provide any information to the Department as evident from first Show Cause Notice.
In case of Commissioner of Income Tax Guyjarat Vs. Bhanji 79 ITR 582(SC), the Apex Court has held that "when the primary facts necessary for assessment are fully and truly disclosed, he is not entitled to change of opinion to commence proceedings for reassessment." This decision is also not applicable as appellants have not submitted the information asked for by the Department in Show Cause Notice dated 09.10.2002 and 20.05.2002.
In case of Duncans Industries Ltd. Vs. CCE, New Delhi, 2006 (201) ELT 517 (SC), the apex court has held that once dues for entire period of dispute settled and paid under Kar Vivad Samadhan Scheme 1998, no further proceedings could be initiated or proceeded by any authority under the Act. This decision is not applicable as the matter is neither under KVSS nor all dues have been paid by the appellants.
IN R.C.Fabrics case, assessee waived the Show Cause Notice and hearing and thereafter a adjudication under dated 10/15 Jan 1991 was passed by the Assistant Collector of Customs. Thereafter DRI took up investigation and issued another Show Cause Notice 18.02.1991 which was adjudicated by the Additional Collector on 25.02.1991 on the basis of Test reports dated Nove 26/Dec 4 1990. Delhi High Court held that since first adjudication order has attained finality and fresh proceedings in report of same goods are null and void. We find that this decision is not applicable to present case on two grounds firstly in present case Show Cause Notice dated 09.10.2002 has not been adjudicated and secondly the said decision of Delhi High Court is reversed by Supreme Court as reported in 2002 (139) ELT 12 (SC).
In case of SACI Allied Products Ltd. Tribunal has decided the issue which was not raised in Show Cause Notice and in order passed by Collector. There is no such situation here in the present case:
In Toyo Engineering India Ltd. (2006(201) ELT 513 (SC) the Supreme Court held that department can not travel beyond the Show Cause Notice. We find that impugned order has been passed by the Commissioner as per Show Cause Notice dated 23.09.2003.
Present case is different from above cases as appellants did not provide any information to the Department at the time of issue of earlier Show Cause Notice.
18. It is also pointed out by the appellants that first Show Cause Notice is still valid without specifying the amount of tax in view of decision of Tribunal (LB) in case of Bihari Silk & Rayon Processing mills (P) Ltd., (Supra). In this case the Show Cause Notice which was adjudicated was not specifying any amount and Larger Bench held that Show Cause Notice is not invalid for want of amount specified as other details were mentioned in the Show Cause Notice. This decision also not applicable to present case as Show Cause Notice dated 09.10.2002 is not adjudicated and is not subject matter of present appeal.
19. We are therefore of the view that the objection raised by the appellants on Show Cause Notice dated 23.09.2003 are not sustainable.
20. Now coming to merit, we find that Clearing & Forwarding Agent and taxable services are defined under Section 65(16) and 65(72) of the Finance Act.
"Under Section 65 (16) of the Finance Act, 1994, "C&F agent" means, any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent. As per clause (j) to Section 65 (72), taxable service means, any service provided to a client by clearing and forwarding agent in relation to clearing and forwarding operations in any manner."
We find that as per Agreement with TISCO, the appellants are consignment agents and as per inclusive definition, they are taxable under Clearing and Forwarding Agent Service.
It is contention of appellant that appellants are not engaged in any clearance of goods and therefore in view of decision of High Court of P & H in case of Kulcip Medicines (P) Ltd. 2009 (14) STR 608 (P & H) they are not covered under Clearing & Forwarding Agent Service. We find that the decision of P & H High Court was considered by Karnataka High Court in case of Mahaveer Generics 2010 (17) STR 225 (KAR) and Court has disagreed with decision of P & H High Court and has held that since agreement mentioned the words Consignment Agent and Consignment Agent brought under statutory definition by inclusive clause of Clearing & Forwarding Agent Service, activities of consignment agent are classifiable as Clearing & Forwarding Agent Service.
We also note that activities of appellant have been classified Clearing & Forwarding Agent Service in appellant's own case by this Tribunal vide order dated 29.05.2008 reported in 2008 (11) STR 578 (Tri - Kol.). We therefore following the said decision hold that appellants are chargeable to service tax for their activities under Clearing & Forwarding Agent Service. We order accordingly;
It is the contention of the appellant that extended period is not applicable in present case as Show Cause Notice were issued to them by the Department on 09.10.2002 and 18.05.2003 and in view of the fact that Show Cause Notices were issued to the appellants Revenue can not invoke extended period. We find that Show Cause Notice in this case was issued on 23.09.2003. ST-3 Returns were submitted by the appellants on 22.11.2002. Therefore Show Cause Notice is within one year from date of filing of ST-3 Returns which is relevant date for computing the time limit. We therefore hold that demand is within time limit of normal period. We therefore hold that Commissioner has rightly confirmed the Service Tax along with interest against the appellant.
21. It is the contention of appellants that they are eligible for cum tax benefit. This contention has been rejected by the Commissioner on the ground that Section 67 was amended with effect from 18.04.2006. Since demand pertains to period prior to 18.04.2006 he rejected this contention of the appellants. We note that cum tax benefit is available to the assessee if assessee shows that price includes tax payable by him in view of the Supreme Court decision in case Amrit Agro Industries Ltd. (Supra). We therefore reject this contention of the appellant. Deduction on account of reimbursement amount is not permissible as tax is to be paid on gross amount charged under Section 67 of the Act.
22. Appellants contended that no penalty is imposable on them and they are entitled to benefit of Section 80 of the Finance Act. We note appellants did not get themselves registered till 20.05.2002 and filed the returns only in 22.11.2002 and amount of service tax and interest was not paid in full and under these circumstances, they can not claim any relief under Section 80 of the Finance Act.
23. It is also the contention of the appellant that penalty is not imposable under Section 76 and 78 of the Act, simultaneously in view of various decisions cited by the appellants. We find that in view of decision of Delhi High Court in case of Bajaj Travels Ltd., (Supra) penalties are imposable under Section 76 & 78 simultaneously prior to 10.05.2008 i.e. date of amendment of Section 78 of the Act. We therefore uphold the imposition of penalties under Section 76 and 78 of the Act.
24.In Revenue appeal, Revenue has submitted that with effect from 18.04.2006, Section 76 was amended and penalty under Section 76 was made subject to 2% per month on tax due or Rs.200 per day whichever is higher till tax is paid. It is the contention of Revenue that for the period 18.04.2006 to 09.05.2008, penalty should be paid as per amended provision of Section 76 of the Act. Since we have upheld the penalty under Section 76 of the Act, we agree with contention of Revenue and allow the Revenue appeal with regard to penalty during the 18.04.2006 to 09.05.2008.
There is no dispute that show cause notice has been issued under section 73(1)(a) of the Act for the period 1.9.1999 to 31.3.2003 to show cause that why the amount of Rs.55,31,773/- should not be demanded as service tax on the gross value of Rs.11,06,35,467/- and why the interest under Section 75 of the Act be not demanded and the penalty under Sections 76, 77 and 78 may not be levied.
On consideration of the reply, by the order dated 14.2.2008, the Commissioner of Central Excise confirmed the demand of Rs.55,31,773/- towards service tax, interest at Rs.12,86,155/- on unpaid amount, imposed the penalty @ Rs.2,00/- per day, from the date till the date of the payment, penalty of Rs.1,000/-, under Section 77 and penalty of Rs.55,31,773/- under Section 78 of Chapter V of the Finance Act, 1994.
The primary question for consideration is whether on the date of issue of notice, all the ingredients of Section 73 (1)(a) of the Act were available.
Section 73(1)(a), as it existed at the relevant time, which has been referred hereinabove, provides that if the Assistant Commissioner or Deputy Commissioner has reason to believe that by reason of omission or failure on the part of the assessee, to make a return under Section 70, for any prescribed period, or failed to disclose fully and truly all material facts required for verification of the assessment under section 71, the value of taxable service tax has escaped assessment or has been under-assessed or service has not been paid or has been short-paid, he may, at any time, within five years, from the relevant date, serve notice on the person, charegable with the service tax, which has escaped assessment.
In the present case, there is no dispute that the appellant has filed return in ST-3 for the relevant period. It is not the case of the revenue also that notice under Section 73(1)(a) of the Act has been issued for non-filing of return under Section 70 for a presecribed period. Notice has been issued on the allegation that the appellant had not disclosed fully and truly all material facts required for verification of the assessment under Section 71 and it amounts to escaped assessment.
For invoking the aforesaid provisions, the following ingredients should be available-
(1) the officer has 'reason to believe';
(2) by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts required for verification of the assessment under Section 71;
(3) resulting into the value of service tax has escaped assessment or has been under assessed or service tax has not been paid or has been short-paid.
Section 73(1)(a) is pari materia to Section 34(1)(a) of the Income Tax Act, 1922 and Section 147(1)(a) of the Income Tax Act, 1961 as it stood before amendment in the year 1989. Section 34(1)(a) and Section 147(1)(a) came up for consideration before the Apex Court in several cases.
In the case of Shiv Nath Singh v. Appellate Assistant Commissioner of Income Tax (S.C.) (Supra), the Apex Court has considered the word "reason to believe". The Apex Court held as follows:
"In our judgment, the law laid down by this court in the above case is fully applicable to the facts of the present case. There can be no manner of doubt that the words 'reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court.
There is no material or fact which has been stated in the reasons for starting proceedings in the present case on which any belief could be founded of the nature contemplated by section 34(1A). The so-called reasons are stated to be beliefs thus leading to an obvious self-contradiction. We are satisfied that the requirements of section 34(1A) were not satisfied and, therefore, the notice which had been issued were wholly illegal and invalid."
In the case of Income Tax Officer, I Ward, Distt. VI, Calcutta and others v. Lakmani Mewal Das, reported in 103 ITR 437 (SC), the Apex Court has observed as follows:
"..The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment."
"...The expression "reason to believe" does not mean a purely subjective satisfaction the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section...."
"....As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefininte, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence."
"....The live link or close nexus which should be there between the material before the Income-tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assess from assessment because of the latter's failure of omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment....."
In the case of Calcutta Discount Co. Ltd. vs. Income-Tax Officer, Companies District I, Calcutta, and another, reported in 41 ITR-191, the Apex Court noted that from the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of fact disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately, from the primary facts.
In the case of Fenner (India) Ltd. v. Deputy CIT, reported in (2000) 241 ITR 672 (Mad.), the Madras High Court has held that in case where the initiation of proceeding is beyond a period of four years from the end of the assessment year, the assessing authority must necessarily record not only his reasonable belief that the income has escaped the assessment, but also the default or failure committed by the assesee and failure to do so could vitiate the notice and the entire proceeding.
In the case of Vikram Kothari (HUF) v. State of U.P., reported in (2011) 200 Taxman 152(All.), the Division Bench of this Court, in paragraphs 14 and 15, held as follows:
"Thus, on the plain reading of Section 147 and Section 149 legal position in respect of limitation emerges as follows:
(i) In view of proviso to Section 147 no action can be taken under Section 147 beyond the period of four years if the case does not fall within the exception of the proviso mentioned in the proviso itself namely, if there is no case of failure on the part of the assessee to disclose fully and truly all material facts which are necessary for assessment for the year of assessment etc.
(ii) If the case falls under the exception mentioned in the proviso to Section 147, namely there is failure on the part of the assessee to disclose fully and truly all material facts which are necessary for assessment for the year of assessment etc., then action can be taken beyond four years subject to the issue of notice under Section 148 of the Act within the limitation provided under Section 149 of the Act.
(iii)Where case falls under the exception to proviso to Section 147 and escaped income exceed rupees one lac the notice under Section 148 can be issued beyond the period of 4 years but within 6 years under Section 149 (1) (b).
(iv) In case when the escaped income is less than rupees one lac the limitation to issue the notice under Section 148 is only four years, even if the case falls under the exception of proviso to Section 147.
15. It may be mentioned here that our above view is supported by the decision of the Bombay High Court in the case of Anil Radhakrishna Wani Vs. Income-tax Officer and others, reported in (2010) 323 ITR, 564 (Bom), in the case of Multiscreen Media P. Ltd. Vs. Union of India and another (No.1), reported in (2010) 324 ITR 48 (Bom), in the case of IPCA Laboratories Ltd. Vs. Gajanand Meena, Deputy Commissioner of Income-Tax and others (No.2), reported in (2001) 251 ITR, 416, and in the case of Supreme Treves Pvt. Ltd. Vs. Deputy Commissioner of Income-Tax and others, reported in (2010) 323 ITR, 323 (Bom) and the decision of the Gujrat High Court in the case of Arvind Mills Ltd. Vs. Deputy Commissioner of Income-Tax (Assessment), reported in (2000) 242 ITR, 173, in the case of Gujarat Fluorochemicals Ltd. Vs. Deputy Commissioner of Income-tax, reported in (2009) 319 ITR, 282 (Guj.) and in the case of Inducto Ispat Alloys Limited Vs. Assistant Commissioner of Income-Tax (OSD), reported in (2010) 320 ITR, 458 (Guj).
Similar view has been taken by the Division Bench of this Court in the cases of Dhampur Sugar Mills Ltd. v. Assistant Commissioner of Income Tax and others (Supra) and in the case of Smt. Raj Rani Gulati v. Union of India and another (Supra).
In the present case, at the instance of the Central Excise Authority, the appellant had taken registration and furnished return in ST-3 for the relevant period. The appellant, all along disputed the liability of service tax on the amount received from TISCO. The excise duty had also been paid under protest on the amount of receipts towards remuneration, excluding the amount received relating to the expenses incurred on behalf of TISCO Company. The assessing authority issued the notice under Section 73 on 18.4.2002 for the period 1.9.1999 till the date of issue of the notice for making assessment and also for imposing penalty and on filing of reply by the appellant, no order has been passed. The Superintendent, Central Excise, Ghaziabad further issued notice on 12.5.2003, under Section 71(2) for verification of ST-3 returns for the period 1.9.1999 to 30.9.2003. The appellant requested to produce all the books of accounts, records containing all the details of transactions, including payment received in any kind undertaken between them and TISCO, along with copy of the contract entered into by them with the principal. The appellant filed reply on 28.5.2003 and submitted all the details. Thereafter, neither the Superintendent, Central Excise has passed any order nor has referred the matter to the Assistant Commissioner, as required under Section 71(3) of the Act regarding any satisfaction that in his opinion any service tax or any service provided has escaped assessment or has been under-assessed. This shows that he was fully satisfied that there is no escaped assessement or has been under assessment. When the third notice under Section 73(1)(a) of the Act had been issued on 6.9.2003 by the Deputy Commissioner, in pursuance of which the impugned order has been passed, the complete facts and details relating to the impugned transactions, namely, copy of the contract, gross amount received, the amount received towards remuneration, etc. were made available, therefore, it cannot be said that at the time of issue of notice, there was any material with the Deputy Commissioner to believe that by reason of omission or failure on the part of the appellant to disclose fully and truly all material facts, the value of taxable service has escaped assessment or has been under-assessed or service tax has not been paid.
For invoking the provisions, necessary ingredients as contained under the provisions must be present. There must be some materials to form 'the belief' that there was omission or failure on the part of the appellant to disclose fully and truly all material facts. "Omission or Failure" on the part of the assessee to disclose fully and truly all material facts, is a pre-requisite to invoke Section 73(1)(a).
From perusal of the show cause notice, it is apparent that the material already available on record has been referred to infer that there is escaped assessment. No case has been made out that primary facts, relating to transactions, had not been disclosed by the appellant and there was omission or failure on the part of the appellant to disclose fully and truly all material facts.
In the present case, the Deputy Commissioner failed to make out any case that he had the material to believe that there was omission or failure on the part of the assessee to disclose fully and truly all material facts and, therefore, we are of the view that the Deputy Commissioner has illegally invoked the provisions of Section 73(1)(a) of the Act and exercised the power to raise the demand under Section 73(1)(a) of the Act.
We are further of the view that since the demand is not sustainable, the consequential penalties are also not sustainable.
In view of the above, we are of the view that the impugned order passed by the Commissioner, Central Excise under Section 73(1)(a) of the Act is not sustainable and is liable to be quashed. The order of the Tribunal affirming the said order is also illegal. Since for the reasons stated above, we have held that the order of the Commissioner, Central Excise dated 14.2.2008 is not sustainable for want of jurisdiction and lack of necessary ingredients, we are of the view that it is not necessary to adjudicate other questions and, thus, they are being left open.
In the result, both the appeals are allowed. The order of the Commissioner, Central Excise dated 14.2.2008 and the order of the Tribunal dated 16.8.2013 are hereby quashed. Questions of law, raised in the Appeals, are decided accordingly.
Order Date :-23.05.2014 bgs/op