OIO No.44/JC/2011
Dated 24.11.2011
lhek “kqYd ,oa dsUnzh; mRikn “kqYd vk;qDrky;]
dsUnzh; mRikn “kqYd Hkou]
jsl dkslZ] fjax jksM jktdksV-360001
OFFICE OF THE COMMISIONER OF CUSTOMS & CENTRAL EXCISE
RACE COURSE RING ROAD, RAJKOT-360001
F.No V.ST/15-217/Adj./10
By RPAD/HAND DELIVERY
Ekwy vkns”k Lka.
Order in Original NO.
44/JC/2011
vkns”k dh frfFk
24.11.2011
Date of Order:07.12.2011
tkjh djus dh frfFk
Date of Issue:-
,e- KkulqUnje
vkns”kdrkZ dk uke :
संयक्
ु त आयक्
ु त
Passed by:
ds lanHkZ esa :
ds0 m-0 “kqYd vk;qDrky;]
jktdksV
M/s Payal Electric Decoration,
Rajyog Apartment,
Virani Chowk, Tagore Road,
Rajkot.
dkj.k crkvksa uksfVl la- V.ST/AR-JMR/231/JC/2010
Dated : 14.10.2010
&frfFk
Show Cause Notice No. &
Date.
In the matter of
1gSA
1.
;g izfrfyfi ml O;fDr dks futh mi;ksx ds fy, fu%'kqYd nh xbZ gSA ftls ;g tkjh fd;k x;k
This copy of order is granted free of charges to the person to whom it is issued.
2bl vkns'k ls ;fn dksbZ O;fDr vlarq"V gS rks bl vkns'k ds fo:) fuEufyf[kr dks vihy dj
ldrk gSA&vk;qDr ¼vihy½ lhek ,oa dsUnzh; mRikn 'kqYd] jsl dkslZ fjax jksM jktdksVA
2.
Any person deeming himself aggrieved by this order may appeal against this order to the
Commissioner (Appeals), Customs & Central Excise, Central Excise Bhavan, Race Course Ring
Road, Rajkot.
3vihy dk QkeZ ,l-Vh-&4 nks izfr esa Hkjk tk, ,oa mlds lkFk fu.kZ; dh izfrfyfi ;k lsokdj
fu;e] 1994 dh dye 8 esa fofufnZ"V vuqlkj vkns'k ds fo:) vihy dh izfrfyfi gksuh pkfg,A
3.
The Appeal should be filed in form ST-4 as per Rule 8 of Service Tax Rules, 1994 and it
shall be signed by the person as specified in Rule 3 (2) of the Central Excise (Appeals) Rules,
2001.
4ikVhZ }kjk bl vkns'k dks O;fDrxr izkIr fd, tkus dh rkjh[k ls ;k Mkd }kjk izkfIr dh rkjh[k
ls rhu eghus ds vanj vihy Qkby dh tkuh pkfg,A
4.
The appeal should be filed within three months from the date of receipt of this order.
[Section 85 of the Finance Act, 1994].
5.
5.
blds lkFk fuEufyf[kr dkxtkr gksuh pkfg,A
The appeal should be accompanied by:
¼v½ ,slk vkns'k dh izfrfyfi ;k nwljs dh d izfrfyfi ftl ij uhps n'kkZ, v?khu fu/kkZfjr dksVZ
dh Qhl LVsEi gksuh pkfg,A
(a)
Copy of this order which should bear court fee stamp as prescribed under Schedule 1 of
Article 6 of the Court Fee Stamp Act, 1870, as under:
(i) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls de gks rks :i;s 00-25 gksA
(i) If the amount or value of subject matter is rupees fifty or less, then Rs.0.25;
(ii) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls v/khd gks rks :i;s 00-50
gksA
(ii) If such amount exceed Rs.50, then, Rs.0.50 paisa.
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Dated 24.11.2011
¼c½ vihy izfrfyfi ftl ij :i;s 2-50 dh dksVZ Qh LVsEi gksuh pkfg,A
(b) A copy of the appeal should also bear a court fee stamp of Rs.2.50.
6. lsok dj ]naM ¼isuYVh½ vkfn ds Hkqxrku dk izek.k A
Proof of payment of duty, penalty etc., should also be attached to the original form of appeal.
BRIEF FACTS OF THE CASE:
M/s. Payal Electric Decoration [here-in-after referred to as “the
noticee”] are having their office at Rajyog Apartment, Virani Chowk, Tagore
Road, Rajkot and are engaged in the business of providing “Pandal and
Shamiana service”.
2.
An audit was conducted on 29.12.2009 and 06.01.2010 during which it
was observed that the noticee had provided “Pandal and Shamiana services”
viz. temporary electrical installation and standby power supply through DG
set to the Govt. of Gujarat’s various functions held at different places viz.
Kanya Kelavni & Shala Pravesh, Svarnim Gujarat Celebration, Gujarat
Sthapana Divas, Silver/Golden Jubilee Celebrations and other functions. The
said noticee had entered into a contract with the representative of Govt. of
Gujarat and prices including Service Tax for a particular task or project were
fixed on the entire lighting work including the DG set charges which the
noticee were supposed to provide for the lighting work.
The noticee had
paid Service Tax on part income received from such lighting work such as
hire charges for metal halide lamps and heavy duty flood lights, luminaire
comprises die cast aluminum body with heat resistant toughened front glass,
lighting switch gears and accessories viz. lights, bulbs, halogen, wire fittings,
ceiling fans, desert coolers etc.
The noticee had raised final bill for the
particular project and had received payment under different parts describing
the electrical installation work in separate hire charges. The income of the
DG set was shown as hire charges for supplying, erecting, operating
and dismantling 3 phase A.C. acoustic sound proof diesel generating
set
with
necessary
fuel,
mains,
switchgears
and
accessories
complete with continuous running on load / no load as per
requirement and was collected as part of the single contract for a
particular task. Service Tax on the same was not paid by the noticee
during the audit period i.e. January, 2007 to March, 2009.
3.
As per Rule 3 of the Service Tax (Determination of value) Rules, 2006,
the manner of determination of value subject to the provisions of Section 67
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Dated 24.11.2011
of the Finance Act, 1994 the value of taxable service, where the
consideration received is not wholly or partly consisting of money, shall be
determined by the service provider in following manner:
(a)
the value of such taxable service shall be equivalent to the gross
amount charged by the service provider to provide similar
service to any other person in the ordinary course of trade and
the gross amount charged is the sole consideration;
(b)
also sub-rule (1) of Rule (5) defines that any expenditure or
costs that are incurred by the service provider in the course of
providing taxable service shall be treated as consideration for
the taxable service provided or to be provided and shall be
included in the value for the purpose of charging Service Tax on
said service;
4.
In view of the above, it appeared that the noticee had provided a
composite service termed as ‘Pandal and shamiana’ service and the income
received from the hire charges of the DG set is part of their service, as
without the DG set, they cannot electrify any temporary lighting work carried
out for any project/function. Therefore the gross income from any
project/function is chargeable to the Service Tax. However, in some of the
cases, the noticee had supplied only the DG set which appeared to fall under
the category of ‘Supply of tangible goods’ and comes into the purview of
Service Tax from 16.5.2008 and therefore that portion in the calculation of
Service Tax needs to be deducted. Thus, it appeared that service tax with
cess for Rs. 24,18,350/- on the income of Rs. 1,96,43,432/- ( Net taxable
income Rs. 56964058 – Value shown in Service Tax returns Rs. 37320626 )
required to be recovered from the said noticee along with interest.
5.
Further, the noticee some times used to supply only DG sets to
different parties. Such supply of DG sets falls within the service of ‘supply of
tangible goods’ which came into the purview of Service Tax with effect from
16.5.2008.
The noticee had received income of Rs. 6,61,347/- from such
services and had not paid any Service Tax on it which comes to Rs. 81,742/and is required to be recovered with interest. The said service was brought
under the purview of Service Tax is defined in Section 65(105)(zzzzj) as
follows:
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“Services provided in relation to supply of tangible goods, without
transferring right of possession and effective control of said tangible
goods”.
6.
Thus from the above it appeared that they had not only failed to
comply with the various provisions of the Finance Act, 1994/ rules but had
also suppressed the facts regarding providing such services which showed
their clear intention to evade payment of Service Tax under the said
category. The noticee had neither shown the value of such services provided
by them in their ST-3 returns nor disclosed such information to the
department at any point of time before inquiry by the audit party. Therefore,
extended period under proviso to sub-section (1) of Section 73 of the
Finance Act, 1994 appeared to be invokable for recovery of said amount of
Service Tax, education cess and higher education cess along with interest
under Section 75 of the Finance Act, 1994. It also appeared that they were
liable for imposition of penalty under Section 76, Section 78 and Section 77
of the Finance Act, 1994 for non-filing/ filing incorrect return for the relevant
period for the said services and for late applying for registration.
7.
In view of the foregoing paras, it appeared that the notice had
contravened the provisions of the Finance Act, 1994/Rules as under:
(i) the provisions of Section 66 of the Finance Act, 1994 in as much as
they have not discharged their Service Tax liability at applicable rate
on the amount charged for services provided during the relevant
period;
(ii) the provisions of Section 67 of the Finance Act, 1994 in as much as
they have escaped the assessment of tax on the services provided by
them;
(iii)
the provisions of Section 68 of the Finance Act, 1994 read with
rule 6 of the Service Tax Rules, 1994 in as much as they have not
discharged their Service Tax liability on the amount charged for the
services provided during the relevant period;
(iv)
the provisions of Section 70 of the Finance Act, 1994 read with
rule 7 of the Service Tax Rules, 1994
in as much as they failed to
assess the correct tax liability on said services and also failed to file
their correct returns within the stipulated time;
(v)Rule 5 of the Service Tax Rules, 1994 in as much as they failed to
furnish list of all records maintained by them in relation to Service
Tax;
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Dated 24.11.2011
8.
Accordingly, a show cause notice No. V.ST/AR-JMR/JC/231/2010 dated
14.10.2010 was issued to M/s. Payal Electric Decoration, Rajyog Apartment,
Virani Chowk, Tagore Road, Rajkot by the Joint Commissioner, Customs &
Central Excise, Rajkot asking them as to why :(i)
Service Tax of Rs. 25,00,092/- (Rs. 24,18,350/- + Rs. 81,742/-)
(Rupees Twenty Five lacs Ninety Two only) should not be recovered
from them under proviso to Section 73(1) of the Finance Act, 1994;
(ii)
Interest at the appropriate rate should not be demanded and
recovered from them under the provisions of Section 75 of the Finance
Act, 1994;
(iii)
Penalty should not be imposed upon them under Section 76 of
the Finance Act, 1994 for failure to make full payment of Service Tax
within prescribed time limit;
(iv)
Penalty should not be imposed on them under Section 78 of the
Finance Act, 1994, and:
(v)
Penalty should not be imposed on them under Section 77 of the
Finance Act, 1994.
DEFENCE & PERSONAL HEARING
9.
The noticee vide letter dated 02.12.2010 submitted the defence reply
to the show cause notice wherein they interalia submitted that their firm has
provided services on temporary rental basis in official and social, business
and state, central and local government functions as well as private parties;
that for the said work, they entered into contract with various government
concerns and the prices and rates are inclusive of conveyance charges,
transportation charges, assignment charges, labour charges, installation and
dismantling charges etc. to be counted with material of goods and services
also and including of service tax; that the Government of Gujarat has
prescribed the Schedule of Rate which was not observed by the audit party;
that they have a doubt regarding applicability as well as clarification to
service tax; that in the temporary service provided by them, some services
are taxable and some are not; that the contract amount was collected as
part of a single contract for a particular task, so the service tax amount on
some part was not paid by them for the period January -07 to March-09.
10.
The noticee further submitted that Exemption No. 12/2003-ST would
be applicable in their case; that supply of DG set and other items fall under
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Dated 24.11.2011
the service category of “Supply of Tangible Goods” which came into the
service tax net w.e.f. 16.05.2008 and so service tax on the same was not
paid them them during the period January – 07 to March – 09; that they
have also paid VAT and service tax on said contract income which the audit
party did not observe and wrongly interpreted the value of taxable amount;
that double taxation should not be there and therefore the demand SCN
should be waived; that they have provided composite services i.e. taxable
service and non taxable service; they had not prepared any kind of bill or
invoice against taxable service provided by them; that no bifurcation has
been made as to how much service tax is given for a particular service. They
referred to Circular No. 98/1/2008-ST dated 04.01.2008 and relied on the
case law Shri Kartar Singh Kochar Vs. Commissioner of Service Tax, Delhi.
11.
The noticee submitted that they do not hold any malafide intentions to
evade the service tax; that on the contrary, they have been in time to file all
the returns even though they had not received the said amount from their
clients; that delay or non filing of tax for the period Jan-07 to Mar.-09 had
take place due to ignorance; that even though they had not collected the
service tax amount from their customers, they had paid tax; that their
mistake was bonafide and may be condoned. They requested to drop the
show cause notice. They also requested for personal hearing.
12.
Personal hearing was held on 08.11.2011. Shri Rajesh D. Vora,
Authorised Signatory of the noticee appeared on behalf of the noticee and
submitted a further defence reply to the show cause notice wherein they
interalia submitted that they are engaged in providing light decoration
services/temporary electric illumination services mainly to Govt. Agencies for
illuminating Govt. buildings on the occasions of Independence Day, Republic
Day etc and they also provide Diesel Generation Set on hire basis; that for
providing the said service, they provide light fittings viz. Metal halide lamps
and heavy duty flood lights, laminate comprises die cast aluminium body
with heat resistant toughened front glass, lighting switch gears and
accessories such as lights, bulbs, halogen, wire fittings, ceiling fans, desert
coolers etc; that the power required for illuminating work is drawn from the
regular GEB line but as per the Government norms they have to
supply/provide Diesel Generation set along with electric illumination which is
kept as “standby” so that in the event of power failure, the power can be
drawn from the DG set and the illumination is not disrupted during important
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Dated 24.11.2011
functions; that they are registered with the service tax department under
the category of “Pandal or Shamiana Service” since 2005.
13.
They further submitted that on going through the SCN, they found that
the period involved, rate of service tax and how the income figure of
Rs.1,96,43,432/- was arrived at is not mentioned and therefore, it appeared
that the SCN was issued arbitrarily; that they are paying service tax on the
light fittings supplied to Govt. Department for temporary electric illumination
purpose but the DG set supplied by them on hire basis would not be covered
under “furniture, fixtures, lights and lighting fittings or floor coverings” used
in the definition of the Pandal and Shamiana Services; that the words “and
other articles” used in the definition will have to be interpreted keeping in
mind the doctrine of ejusdem generic; that the words “other articles for use
therein” mentioned in the definition will have to draw their colour from the
accompanying earlier words which form a class by themselves; that if the
legislature had intended, then DG set would have been mentioned alongwith
“furniture, fixtures, lights and lighting fittings, floor coverings” in the
definition; that DG set cannot be considered as “light fittings” as the two are
different and distinct classes. They relied upon the judgement in the case of
SALEM DISTRICT SOUND SYSTEM ASSOCIATION V/s. Union of India
reported in 2001 (131) ELT 6 (Mad.) and requested to drop the demand.
14.
The noticee further submitted that they are regularly paying service
tax on the income received for supplying DG set on hire basis under the
category of “supply of tangible goods service” subsequent to 16.05.2008 i.e.
the date from which the service was covered under service tax; that as the
demand is not sustainable proposal to impose penalties under Section 76,77
and 78 is also without merit; that penalty under section 78 is invokable for
fraud, suppression, willful misstatement etc. which does not exist in their
case as they have not suppressed anything and all the incomes are duly
reflected in their books of account; that the SCN has not brought out any
grounds for imposing penalty under Section 78 and thus the same is not
imposable. In support of their contention, they relied on the judgement of
H’ble Supreme Court in the case of Hindustan Steel Vs. State of Orissa 1978
(2) ELT J159 (S.C.). They also submitted that imposing simultaneous
penalties under sections 76 and 78 of the Finance Act, 1994 is also without
merits in view of amendments made in the Finance Act on 10.05.2008.
DISCUSSION AND FINDINGS:
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15.
I have carefully gone through the case records and the written as well
as oral submissions made by the party.
16.
The issue to be dealt with is whether the services of supply D.G Sets
as part of a component in providing light decoration services /temporary
illumination services falls under the purview of pandal or shamiana services.
For better appreciation of the issue I reproduce below the relevant
definitions:
The
“Pandal
or
Shamiana”
service
is
defined
under
section
65(105)(zzw) of the Finance Act, 1994 as follows :
“(zzw) [to any person], by a pandal or Shamiana contractor in
relation to a Pandal or Shamiana in any manner and also includes the
services, if any, [provided or to be provided] as a caterer ”
The “Pandal or Shamiana” is defined under section 65(77a) of the
Finance Act, 1994 as follows :
“[(77a) ‘Pandal or Shamiana’ means a place specially prepared or
arranged for organizing an official, social or business function;
[Explanation. — For the purposes of this clause, “social function”
includes marriage;]”
The “Pandal or Shamiana contractor” is defined under Section 65(77b)
of the Finance Act, 1994 as follows :
“(77b) ‘Pandal or Shamiana contractor’ means a person engaged in
providing any service, either directly or indirectly, in connection with
the preparation, arrangement, erection or decoration of a pandal or
shamiana and includes the supply of furniture, fixtures, lights and
lighting fittings, floor coverings and other articles for use therein;”
17.
As seen above a Pandal or Shamiana service is done by a Pandal or
Shamiana contractor in relation to a pandal or shamiana and also includes
any service given as a caterer. The words in relation to have been held to
be equivalent to or pertaining to and as a word of comprehensiveness which
might both have a direct significance as well as indirect significance
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Dated 24.11.2011
depending on the context. Hence it can be said that any service which has
a direct or indirect connection has to be treated as in relation to that
service. I find that supply of DG set has been covered under “supply of
tangible goods” service w.e.f. 16.05.2008. In this case the supply of D.G
sets have a direct relation with setting up of a Pandal or Shamiana and
hence it has to be treated as part and parcel of Pandal or Shamiana service
prior to 16.05.2008.
The noticee have relied upon the judgement dated
19.04.2001 of the High Court of Madras in the case of Salem District Sound
System Association Vs. Union of India reported in 2001 (131) ELT 6 (Mad.).
I find that at para 9 of the above cited judgement, the Hon’ble High Court
has observed as under:
“However, it is clarified that if such persons have provided any other
service, the situation would be entirely different. But, that would
depend upon the facts and circumstances of each individual case.”
I find in the instant case the noticee are providing DG sets along with
supply of light fittings, switch gears, bulbs, wire fittings, fans etc. It is seen
that without the D.G. Set in case of emergency when the power is off the
service cannot be completed. Hence DG set becomes a vital component for
provision of Pandal or Shamiana service. The High Court judgement
becomes relevant to the situation on hand as no tax has been demanded on
supply of DG sets as such. This judgement is only supporting the stand of
the department that any component used for provision of service of Pandal
or Shamiana will be taxable.
18.
The noticee in their defence have stated that the period involved, rate
of service tax and how the income figure of Rs. 1,96,43,432/- was arrived
at is not mentioned in the show cause notice.
I find that the period
involved i.e. January 2007 to March 2009 is specifically mentioned at para 2
of the show cause notice.
If the noticee had any doubts regarding the
working out of the income figure of Rs.1,96,43,432/- and the rate of service
tax, they could have approached the department for obtaining the detailed
calculation sheet. I find that at no point of time has the noticee requested
for the same. The submission of the noticee that the show cause notice is
arbitrary therefore does not hold ground.
19.
Further in their defence, the noticee have submitted that they are
regularly paying service tax on the income received for supplying DG sets
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Dated 24.11.2011
on hire basis under the category of tangible goods service subsequent to
16.05.2008. However, the noticee have failed to produce any documents
regarding payment of the same in support of their claim. In absence of
documents/evidence relating to payment of service tax, the claim of the
noticee that they have regularly paid service tax is not acceptable.
20.
As there is a short payment of service tax the natural corollary is that
appropriate interest has to be paid for the same. Provisions for imposition of
penalty have also been invoked in the show cause notice. I find that there
has been a failure on the part of the noticee to pay the appropriate service
tax on the value of the services rendered by them. The failure on their part
to pay the service tax due on time is liable to be punished under the
provisions of Section 76 of the Finance Act 1994.
The noticee have tried to
explain this non payment on the ground that they had doubts regarding
collecting the tax from their customers and also due to the reason that they
were not aware about the provisions of Service Tax.
I find the reasons
given by them are not convincing enough to explain their failure to make
the due payments of service tax. In this case, I find that the noticee were
registered with the department under the category of Pandal or Shamiana
service from 28.7.2005 onwards. The act of the noticee in taking
registration proves that they knew that they were providing a taxable
service and that there was a levy of service tax on the same. Hence, now
they cannot take a stand that they had doubts regarding the collection of
tax from their customers. Therefore I am convinced that this is a clear case
of willful suppression of facts to evade payment of appropriate Service Tax
and for their actions they are liable to be punished by imposition of penalty
under section 78 of the Finance Act, 1994. They are also liable for
imposition of penalty under Section 77 of the Finance Act, 1994 for filling
incorrect returns.
21.
Accordingly I pass the following order
ORDER
1.
I confirm and demand the Service Tax of Rs. 25,00,092/- (Rupees
Twenty Five Lakh Ninety Two only) under section 73 of the Finance Act
1994.
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Dated 24.11.2011
2.
I order the noticee to pay interest on the above confirmed amount at
the appropriate rate for the relevant periods under section 75 of the Finance
Act 1994.
3.
I impose a penalty of Rs. 200/- per day or two percent per month on
the demand confirmed at Sl. No. (i) above, whichever is higher, on the
noticee, under the provisions of Section 76 of the Finance Act, 1994 starting
with the first day after the due date till the date of actual payment of service
tax, provided that the total amount of the penalty payable in terms on this
account shall not exceed the service tax payable as confirmed at sl no 1
above.
4.
I impose a penalty of Rs.5,000/- under Section 77 of the Finance Act,
1994.
5.
I impose a penalty of Rs. 25,00,092/- (Rupees Twenty Five Lakh
Ninety Two only) under the provisions of Section 78 of the Finance Act,
1994. If the amount, as determined under Sr. No. (i) above, is paid within
30 days from the receipt of the order along with interest payable then as per
proviso to Section 78 the penalty will be only 25% of the service tax
determined at Sl. No. (i) above. The benefit of reduced penalty shall be
available only if the amount of penalty so determined has also been paid
within the period of thirty days from the date of receipt of the order.
(M. GNANASUNDARAM)
JOINT COMMISSIONER,
F.No. V.ST/15-217/Adj./10
BY REGD. POST A.D.
To,
M/s. Payal Electric Decoration,
Rajyog Apartment,
Virani Chowk, Tagore Road,
Rajkot.
Copy to:
1. The Assistant Commissioner (RRA), Central Excise, Rajkot.
2. The Deputy Commissioner, Service Tax Division, Rajkot.
3. The Superintendent, Service Tax Range-II, Rajkot.
4. Guard file.
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