OIO No. 32/JC/2012
Dated :19.03.2012
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
By RPAD/HAND DELIVERY
F.No V.ST/15-63/Adj./2011
Ekwy vkns”k Lka.
Order in Original NO.
32/JC/2012
vkns”k dh frfFk
19.03.2012
Date of Order:19.03.2012
tkjh djus dh frfFk
Date of Issue:-
,e- KkulqUnje
vkns”kdrkZ dk uke :
संयक्
ु त आयक्
ु त
Passed by:
ds lanHkZ esa :
In the matter of
ds0 m-0 “kqYd vk;qDrky;]
jktdksV
M/s. Pavan Enterprise,
Jay Ambe Society,
Near Bank Colony, Arambhada,
Tal: Dwarka, Dist: Jamnagar
dkj.k crkvksa uksfVl la- V.ST/AR-JMR/45/JC/2011 dated 23.03.2011
&frfFk
Show Cause Notice No. & Date.
1gSA
;g izfrfyfi ml O;fDr dks futh mi;ksx ds fy, fu%'kqYd nh xbZ gSA ftls ;g tkjh fd;k x;k
1.
This copy of order is granted free of charges to the person to whom it is issued.
2-
bl 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.
vihy 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-
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.
ikVhZ }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-
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
(ii) If such amount exceed Rs.50, then, Rs.0.50 paisa.
gks rks :i;s 00-50 gksA
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.
Page 1 of 30
OIO No. 32/JC/2012
Dated :19.03.2012
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
Page 2 of 30
OIO No. 32/JC/2012
Dated :19.03.2012
Brief Facts of the Case:
M/s.
Pavan
Enterprise,
Jay
Ambe
Society,
Near
Bank
Colony,
Arambhada, Tal: Dwarka, Dist: Jamnagar (hereinafter referred to as
"noticee”) are engaged in providing services falling under the category of
“Cargo Handling Service” classifiable under Section 65 (105)(zr) of the
Finance Act, 1994, “Management, Maintenance or Repair Service” classifiable
under Section 65 (105)(zzg) of the Finance Act, 1994, “Supply of Tangible
Goods Service” classifiable under Section 65(105)(zzzzj) of the Finance Act,
1994, “Goods Transport Agency Service” classifiable under Section 65
(105)(zzp) of Finance Act, 1994 and “Manpower Recruitment and Supply
Agency Service” falling under Section 65(105)(k) of the Finance Act, 1994,
since 2005.
The noticee was not registered with the service tax
department at the relevant time. However, they have obtained Service
Tax Registration under the taxable category of ‘Cargo Handling Service’
on
30.06.2010
and
are
holding
Service
tax
registration
No.
AECPK3317CSD001.
2.
Intelligence gathered revealed that the noticee was indulging in
evasion of service tax, by not paying service tax on the payments received
in respect of
the taxable services rendered by them prior to obtaining
service tax registration. Accordingly, an inquiry was initiated against the
noticee.
3.
During the course of inquiry, a statement of Shri Versibha Jakharbha
Ker, Proprietor of the Noticee was recorded on 15.03.2011, wherein, he
interalia, stated that they started M/s. Pavan Enterprise in the year 2005-06
and were carrying out the work or providing services to M/s. Tata Chemicals
Ltd, Mithapur only; that they carried out work of (1) lifting of salt manually
and/or by machine at various premises of M/s. Tata Chemicals i.e.
Okhamadhi/Mithapur/Arambhada Salt Works, (2) loading of salt by machine
at Arambhada Salt Works, (3) transporting of salt through trucks from
Okhamadhi/Arambhada to Mithapur factory, (4) work of lifting of gypsum
marine at Charakala Salt Works, (5) loading gypsum marine into trucks and
transporting
the
same
to
the
Mithapur
factory
and
(5)
work
of
forward/return circuit water at Charakala Salt Works as and when work
order was given by the officer of M/s. Tata Chemicals; that they obtained
Service Tax Registration on 30.06.2010 and since then they collected service
Page 3 of 30
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Dated :19.03.2012
tax from M/s. Tata Chemicals Ltd. and paid the same; that for the period
from 2005-06 to 2010-11(upto Jun-10), they have not paid service tax as
they did not know that service tax was required to be paid on the services
provided by them to M/s. Tata Chemicals, Mithapur; that they were never
informed by M/s. Tata Chemicals about the service tax liability attached to
their work at the relevant time therefore they have not collected and paid
service tax for the period prior to obtaining of the service tax registration
certificate.
4.
During the course of recording of the statement, Shri Versibha
Jakharbha Ker submitted the Balance Sheet and Profit & Loss Account for
the year 2005-06 to 2009-10 and available invoices for the year 2005-06 to
2010-11 (upto September-2010). During the scrutiny of the invoices
submitted by the noticee, it was observed that they have not submitted all
the invoices issued by them. Hence, the service tax calculation worked out in
this notice is arrived at based upon the figures of income shown in Profit &
Loss Account for the period from 2006-07 to 2009-10, invoices for the year
2005-06 (October-2005 to March-2006) and invoices for the year 2010-11
(April-2010 to June-2010) submitted by the noticee during his statement.
5.
Whereas, it appeared from the statement of the partner of the Noticee
and invoices produced by him that they have rendered the services of
manpower
supply,
Salt
Loosening,
Salt
Lifting,
Salt
Loading,
Salt
Transportation, Gypsum Lifting, Gypsum Transportation and maintenance or
repair of various immovable property and hiring of vehicles.
It appeared
that all these services provided by the Noticee are classifiable under the
category of “Cargo Handling Service” as defined in Section 65 (23) of
Finance Act, 1994, “Manpower Recruitment or Supply Agency Service”
as defined in Section 65 (68) of Finance Act, 1994, “Management,
Maintenance or Repair Service” as defined under Section 65(105) (zzg)
of the Finance Act, 1994 and “Supply of Tangible Goods Service” as
defined under Section 65(105)(zzzzj) of the Finance Act, 1994. The
definitions of the same are reproduced below:5.1
Section 65(23)"Cargo Handling Service” means
loading, unloading, packing or unpacking of cargo and
includes,—
(a) cargo handling services provided for freight in special
containers or for non-containerised
freight, services
provided by a container freight terminal or any other
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Dated :19.03.2012
freight terminal, for all modes of transport, and cargo
handling service incidental to freight; and
(b) service of packing together with transportation of cargo
or goods, with or without one or more of other services
like loading, unloading, unpacking,
but does not include, handling of export cargo
passenger baggage or mere transportation of goods;”
or
A person satisfying the definition of ‘Cargo handling service” is
liable to pay service tax in respect of the ‘taxable service’ as defined in
the Finance Act, 1944. For this purpose, Section 65 (105) (zr) of the
Finance Act, 1944 is relevant, which defines that “taxable service” means
any service provided or to be provided - to any person, by a cargo handling
agency in relation to cargo handling services.
5.2
Section 65(68) “manpower recruitment or supply
agency” means any person engaged in providing any
service, directly or indirectly, in any manner for
recruitment or supply of manpower, temporarily or
otherwise, to any other person.”
A person satisfying the definition of ‘Manpower recruitment or
supply agency’ is liable to pay service tax in respect of the ‘taxable
service’ as defined in the Finance Act, 1944. For this purpose, Section 65
(105) (k) of Finance Act, 1944 is relevant, which defines that “taxable
service” means any service provided or to be provided – to any person, by a
manpower recruitment or supply agency in relation to the recruitment or
supply of manpower, temporarily or otherwise, in any.
5.3
“Section 65(64) “management, maintenance
repair” means any service provided by—
(i) any person under a contract or an agreement; or
or
(ii) a manufacturer or any person authorised by him, in
relation to,—
(a) management of properties, whether immovable or
not;
(b) maintenance or
immovable or not; or
repair
of properties, whether
(c) maintenance or repair including reconditioning or
restoration, or servicing of any goods, excluding a
motor vehicle;
‘Explanation.— For the removal of doubts, it is hereby
declared that for the purposes of this clause,—
(a) “goods” includes computer software;
(b) “properties” includes information technology software”
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Dated :19.03.2012
A person satisfying the definition of ‘Management, Maintenance or
repair service’ is liable to pay service tax in respect of the ‘taxable
service’ as defined in the Finance Act, 1944. For this purpose, Section 65
(105) (zzg) of Finance Act, 1944 is relevant, which defines that “taxable
service” means any service provided or to be provided - to any person, by
any person in relation to management, maintenance or repair.
5.4
Supply of Tangible goods :
Section 65(105)(zzzzj) “taxable service” means any service
provided or to be provided to any person, by any other person in
relation to supply of tangible goods including machinery,
equipment and appliances for use, without transferring right of
possession and effective control of such machinery, equipment
and appliances
6.
It further appeared that the Noticee obtained registration under the
taxable category of Cargo Handling Service with effect from 30.06.2010 and
started paying service tax thereafter on the work carried out by them in
respect of M/s. Tata Chemicals Ltd, Mithapur. However, they failed to pay
service tax on the income generated by virtue of the work/activities carried
out by them during the period from October-2005 to June-2010 and the
proprietor of the Noticee in his statement recorded on 15.03.2011, also
admitted about not payment of service tax during the said period.
7.
From the above, it appeared that the Noticee had rendered services
under the category of ‘Goods Transport Agency Service’, ‘Cargo Handling
Service’, ‘Management, Maintenance or Repair Service’, ‘Supply of Tangible
Goods Service’ and ‘Manpower Recruitment or Supply Service’ to M/s. Tata
Chemicals Ltd, Mithapur during the period from October-2005 to June-2010
and thereby received Rs.11,22,88,899/- as total income thereof. Out of the
above amount, the transportation income for the period from 2006-07 to
2009-10 totally amounts to Rs. 7,40,91,362/- (Rs.18,50,402/- as per the
Profit & Loss Account for the year 2006-07 and Rs. 7,22,40,960/- as per bills
/ invoices supplied by the notice for the year 2007-08 to 2009-10). Since
service tax on transportation is to be paid by M/s. Tata Chemicals Ltd.,
Mithapur being a recipient of service, the said amount/value is required to
be deducted from the total taxable amount for the purpose of charging
service tax. Therefore, it appears that taxable services provided by the
noticee to the tune of Rs. 3,81,97,537/- during the
period from October-
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Dated :19.03.2012
2005 to June-2010, after excluding the amount of transportation is liable for
service tax. It appeared that the Noticee, failed to pay service tax amounting
to Rs. 38,30,933/- on the taxable income of Rs. 3,81,97,537/- on the
aforesaid taxable services provided by them, as per the detailed calculation
attached at Annexure-A to this notice.
8.
It further appeared that the Noticee at no point of time disclosed to
the department, in any manner, that they were providing taxable services
and were liable to pay service tax.
This fact was disclosed only during
the course of inquiry when the statement of proprietor of the Noticee was
recorded on 15.03.2011. Thus, it appeared that the
Noticee had
deliberately suppressed the material facts from the department, so as to
avoid the payment of service tax. Non payment of service tax at any
point of time and not obtaining service tax registration, clearly shows
their malafide intention of evading the payment of service tax. Therefore,
extended period of five years is required to be invoked under provisions of
Section 73(1) of the Finance Act, 1994. Therefore, service tax of
Rs. 38,30,933/- is required to be recovered along with interest from the
Noticee under Section 73(1) of the Finance Act, 1994 read with Section
67, 68 & 75 of the Finance Act, 1994.
9.
As per Section 69 of the Finance Act, 1994, ‘every person liable to
pay the service tax under this Chapter or the rules made there under
shall, within such time and in such manner and in such form as may be
prescribed, make an application for registration’. In the present case, it
appeared that the Noticee have not applied for registration during the
relevant period under any of the service tax category as discussed above
and thereby appeared to have violated the provisions of Section 69 of the
Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994.
10.
As per Section 70 of the Finance Act, 1994, ‘every person liable to
pay the service tax shall himself assess the tax due on the services
provided by him, and furnish a return in such form and in such manner
and at such frequency as may be prescribed’. Further, the form, manner
and frequency of return are prescribed under Rule 7 of the Service Tax
Rules, 1994. In the present case, it appeared that the Noticee have failed
to assess the tax due on the services provided by them, as discussed in
paras supra, and also have not filed any returns during the period from
2005-06 (from Oct-05) to 2009-10 and thereby appeared to have violated
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Dated :19.03.2012
the provisions of Section 70 of the Finance Act, 1994 read with Rule 7 of
the Service Tax Rules, 1994.
11.
Further, as per Section 68 of the Finance Act, 1994, ‘every person
providing taxable service to any person shall pay service tax at the rate
specified in section 66 in such manner and within such period as may be
prescribed’. The manner and period of payment of Service Tax has been
prescribed under Rule 6(1) of the Service Tax Rules, 1994.
In the
present case, it appeared that the Noticee have not paid the service tax
at the rate, in the manner and period prescribed, which has resulted into
non payment of service tax amounting to Rs. 38,30,933/- as detailed
above, and thereby appeared to have contravened the provisions of
Section 68 of the Act, read with Rule 6 of the Service Tax Rules, 1994.
12.
In view of the foregoing paras, it appeared that the Noticee have
contravened the following provisions of the Act and rules made thereunder,
as below:
(i)
the provisions of Section 67 of the Finance Act, 1944, inasmuch
as they have not made any / correct assessment of tax on the
amount received by them;
(ii)
the provisions of Section 68 of the Finance Act, 1944, read with
Rule 6 of the Service Tax Rules, 1994 inasmuch as they have not
discharged their service tax liability on the amounts received by
them;
(iii)
Section 69 of the Finance Act, 1944, read with Rule 4 of the
Service Tax Rules, 1994 inasmuch as they failed to obtain
service tax registration certificate at material time; and
(iv)
Section 70 of the Finance Act, 1944, read with Rule 7 of the
Service Tax Rules, 1994 in as much as they failed to assess their
correct tax liability and also failed to file returns;
13.
In view of the above, it appeared that the Noticee had not paid Service
Tax of Rs. 37,24,027/-, Education Cess of Rs. 74,483/- & Secondary &
Higher Secondary Education Cess of Rs. 32,423/-, totally amounting to Rs.
38,30,933/- and therefore the same is required to be recovered under
Section 73(1) of the Finance Act, 1994 along with interest under Section 75
of the Finance Act, 1994.
It also appeared that they had suppressed the
material facts from the department with intent to evade the payment of
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Dated :19.03.2012
service tax. The noticee also, contravened various provisions of the Act/
Rules, as mentioned in paras supra and therefore, they have rendered
themselves liable to penalty under Section 76, 77 & 78 of the Finance Act,
1994.
14.
Therefore, M/s. Pavan Enterprise, Jay Ambe Society, Near Bank
Colony,
Arambhada
were,
vide
show
cause
notice
no.
V.ST/AR-
JMR/45/JC/11 dated 23.03.2011, called upon to show cause to the Joint
Commissioner, Central Excise & Customs, Rajkot, as to why: (i)
Services Tax of Rs. 37,24,027/-, Education Cess of Rs. 74,483/& Secondary & Higher Secondary Education Cess of Rs. 32,423/,
totally amounting to Rs. 38,30,933/-, should not be recovered
under Section 73(1) of the Finance Act, 1994 read with Section
68 of the Finance Act, 1994;
(ii)
Interest at the applicable rate on the said amount of Service tax
should not be recovered from under Section 75 of the Finance
Act, 1994 ;
(iii)
Late fee of Rs. 2000/- per return should not be recovered from
them under Section 70 of the Finance Act, 1994 readwith Rule
7C of the Service Tax Rules, 1994 for failure to file returns in
time;
(iv)
Penalty should not be imposed upon them under Section 76 of
the Finance Act, 1994 for failure to make the payment of service
tax payable by them;
(v)
Penalty should not be imposed upon them under Section 77 of
the Finance Act, 1994 for failure to obtain Service Tax
registration at the material time under Section 69 of the Finance
Act, 1994 readwith Rule 4 of the Service Tax Rules, 1994;
(vi)
Penalty should not be imposed upon them under Section 78 of
the Finance Act, 1994 for suppressing the value of taxable
services provided by them with an intention to evade payment of
service tax;
DEFENCE SUBMISSION AND PERSONAL HEARING:
15.
The noticee submitted reply to the SCN vide letter dated 07.12.2011
and inter alia, pleaded as under:
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Dated :19.03.2012
(i)
The SCN does not indicate the activity which is sought to be taxed
falls under which part of the definition of the terms mentioned in
respective definitions of the taxable services. Moreover, the SCN
seeks to levy service tax under taxable head of ‘Cargo Handling
Service’, ‘Manpower Recruitment or Supply Agency Services’,
‘Management, maintenance or repair services’, ‘Supply of Tangible
Goods’. No reason whatsoever has been provided in the SCN for
alleging that they provided such services. In absence of any
assertion about the activities and the sub-clause under which
head the said activity is covered, it is impossible for the
department to levy service tax. They relied upon the decision of
Hon. Supreme Court in the case of Amrit Food Vs. CCE – 2005
(190) ELT 433 (SC).
(ii)
It appears that the show cause notice alleges that the activities
carried out by the noticee like salt harvesting, salt lifting, salt
loosening, Gypsum Harvesting etc. are taxable under the taxable
category of Business Auxiliary Service or Cargo Handling
Services.
The process of salt harvesting, salt lifting, salt
loosening
Gypsum
Harvesting
etc.
are
the
process
of
manufacture of salt and Gypsum and therefore, cannot be taxed
under Business Auxiliary Service or Cargo Handling Services or
any other taxable category of the services.
They have also
referred the Board’s Circular No. 80/10/2004-ST dated 17-092004,
B1/6//2005-TRU
No.334/13/2009-TRU
contention.
dated
dated
27-07-2005
6-7-2009
in
and
support
of
DOF
their
They have contended that the process of salt
harvesting, salt lifting and salt loosening is the process incidental
or ancillary to the completion of a manufactured product i.e. salt
in the present case as per Section 2(f)(i) of Central Excise Act,
1944.
Hence, the process carried out by the noticee are
amounting to manufacture of excisable goods namely salt, falling
under Chapter 2501 attracting nil rate of duty, it is specifically
excluded from the purview of the definition of Business Auxiliary
Service or any other taxable services.
Similarly, the Gypsum
harvested by the noticee falls under 25201020 and attract NIL
rate of duty.
The process of harvesting gypsum is process of
manufacture as covered by Chapter Note 1 of Chapter 25 also
and therefore, demand of Service tax is not sustainable. They
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Dated :19.03.2012
have relied upon the following case laws and stated that the
show cause notice has not considered these relevant facts and
demanded the tax under the taxable category of Business
Auxiliary Services:

Nandi Printers Pvt. Ltd.-2001 (127) ELT 645(SC)

Vazir Sultan Tobacco Co. Ltd.-1996 (83) ELT 3 (SC)

All India Federation of Tax Practitioners-2007 (7) STR 625
(SC)
(iii)
The show cause notice proposes to charge service tax on the
activities of salt lifting, salt loading, salt harvesting, salt
loosening Gypsum harvesting under the taxable category of
cargo handling services. The above activities are not classifiable
under the taxable category of cargo handling services. In view
of
clarification
issued
by
the
Board
vide
circular
No.
B.11/1/2002-TRU dated 01.08.2002 and DOF No. 334/1/2008TRU dated 29.02.2008, it is clear that government wanted to tax
those activities under cargo handling services which are packing,
unpacking, loading and unloading of the goods and the activity is
meant
for
transportation
of
goods
by
any
means
of
transportation. While in the present case, the activities carried
out by the Noticee is the process of harvesting/ manufacturing
salt and Gypsum. The salt lifting, salt harvesting, salt loosening,
Gypsum harvesting are the processes incidental and ancillary to
the manufacture of salt and gypsum. These activities are not
carried out by the noticee for transportation of salt. These are
the processes of manufacturing of salt and/or gypsum. The
Noticee raised the invoices having description as “Salt Lifting
Charges” actually means that the Noticee have lifted the salt
from the salt pans and the salt so lifted was stacked nearby to
the salt pans. After lifting of the salt further processes such as
salt loosening, salt breaking are required to manufacture salt.
Therefore, the show cause notice has completely misunderstood
the activities carried out by the Noticee and demanded the tax
under Cargo Handling Services. Since, the activities carried out
by the noticee are the processes of manufacture of salt, the
same is not taxable under Cargo Handling Services.
(iv)
It is not clear that for which activity of the noticee the demand is
raised under the taxable category of Manpower Supply and
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Dated :19.03.2012
Recruitment Agency service. They are not engaged in supply or
recruitment of manpower in any way.
It appears that the
demand under Manpower Recruitment or Supply Agency services
has been raised merely going by the description of the invoice.
The SCN has not considered the exact nature of services
rendered by the noticee. The noticee were required to perform
activities of their own like salt harvesting, gypsum harvesting
etc. and for their own purposes they have availed the services of
personnel. They have not supplied manpower temporarily or
otherwise and the contract for harvesting salt and gypsum and
supply to Tata Chemicals Ltd is lump sum contract for the
noticee. They also relied upon the case law of S. S. Associates –
2010 (19) STR 438 (Tri-Bang), Divya Enterprises – 2010 (19)
STR 370 (Tri-Bang) and Ritesh Enterprises – 2010 (18) STR 17
(Tri-Bang).
(v)
They were given work order for harvesting of salt and Gypsum
and supply to Tata Chemicals Ltd. and not for any supply of
manpower. Therefore, the demand is liable to be set aside.
(vi)
It appears that the SCN demanded Service Tax under the
taxable category of Management, Maintenance or Repair Service
has been raised for the salt lifting, Gypsum lifting work
performed by the Noticees.
As per the work order
issued by
Tata Chemicals Ltd. for harvesting salt and Gypsum etc. it is the
responsibility of the noticees to perform the activity to complete
their job. The said activity is part and parcel of the work order
for harvesting of salt and Gypsum.
There is no separate
identifiable activity of management, maintenance and repair
services. Therefore, they are not liable for payment of Service
tax under the taxable category of Management Maintenance and
Repair Service.
(vii) The noticees have to use their own equipments for performance
of their activity as agreed in the work order.
Hence, the
Noticees have not supplied any tangible goods to anyone for use.
Service tax can be demanded under the taxable category of
supply of tangible goods for use service only in case where the
assessee has supplied the tangible goods to someone else for
use by the other person.
In the present case all these
ingredients are absent and therefore, the noticees are not liable
for payment of tax under the taxable category of supply of
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Dated :19.03.2012
tangible goods for use service. The show cause notice is liable to
be dropped on this ground alone.
(viii) Without prejudice, even if they are liable to pay service tax on
the amount received from service receivers, the tax calculation is
incorrect. The amount received from service receiver has to be
treated as inclusive of the amount of service tax payable. They
relied upon the Larger Bench decision in the case of Sri Chakra
Tyres – 1999 (108) ELT 361, which was affirmed by Hon.
Supreme Court, as reported in 2002 (142) ELT A279 (SC). They
also relied upon the Apex Court judgment in the case of CCE Vs.
Maruti Udyog Ltd. – 2002 (49) RLT 1 (SC). They also relied upon
the Trade Notice No. 20/2002 dated 23.05.2002 of Delhi-II
Commissionerate.
(ix)
The legislature has further clarified the legal position in respect
of value of the taxable service by incorporating Explanation No.
2 in section 67 of the Act. They also relied upon the following
decisions of Hon. CESTAT:
(x)
(a)
Rajmahal Hotel Vs. CCE – 2006 (4) STR 370 (Tri-Del)
(b)
Gem Star Enterprises (P) Ltd. Vs. CCE – 2007 (7) STR 342
(c)
Panther Detective Services Vs. CCE–2006 (4) STR 116 (Tri-Del).
The Show Cause Notice has not given any reason whatsoever for
imposing the penalty under Section 78 of the Act. The present
show cause notice has not brought any evidence/ fact which can
establish that the Noticee have suppressed anything from the
department. Since, no case has been made out on the ground of
suppression of facts or willful misstatement of facts with the
intention to evade the payment of service tax, penalty under
Section 78 of the Act cannot be imposed. Further, they are
entitled to entertain the belief that their activities were not
taxable. That cannot be treated as suppression from the
department. They rely on Hon’ble Gujarat High Court decision in
case of Steel Cast Ltd. 2011 (21) STR 500 (Guj).
(xi)
As there is no short payment of service tax, penalty under
section 76 cannot be imposed. They have always been and are
still under the bonafide belief that they were not liable to pay
service tax. Therefore, penalty under section 76 cannot be
imposed. They relied upon the decision of Hon. Supreme Court in
the case of Hindustan Steel Ltd. Vs. State of Orissa – AIR 1970
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(SC) 253, which was followed by the Tribunal in the case of
Kellner Pharmaceuticals Ltd. Vs. CCE – 2985 (20) ELT 80.
(xii) Even if any contravention of provisions was there, the same was
solely on account of their bonafide belief and such bonafide
belief was based on the reasons stated above. They relied upon
the judgment of the Hon. Supreme Court in the case of Pushpam
Pharmaceuticals Co. Vs. CCE – 1995 (78) ELT 401 (SC) and CCE
Vs. Chemphar Drugs and Liniments – 1989 (40) ELT 276 (SC).
(xiii) Penalties under section 76 and 78 of the Act cannot be
simultaneously imposed. Penalties under section 76 and 78 are
mutually exclusive. Section 78 is applicable if non-payment of
service tax is due to reasons specified therein with an intention
to evade payment of service tax. Section 76 is applicable in
cases other than those covered under section 78 of the Act. They
relied upon the following case-laws:
(a)
The Financers Vs. CCE, Jaipur – 2007 (8) STR 7 (Tri-Del)
(b)
CCE, Ludhiana Vs. Pannu Property Dealer-2009 (14) STR 687 (Tri-Del)
(c)
CCE, Chandigarh Vs. City Motors – 2010 (19) STR 486 (P&H)
(d)
CCE, Chandigarh Vs. M/s. Cool Tech Corporation (Service Tax Appeal
No. 47 of 2010) (P&H)
(e)
CCE Vs. M/s. First Flight Courier Ltd. – 2011 (22) STR 622 (P&H).
(xiv) This view is reinforced by the proviso to Section 78, which
provides that where penalty is payable under Section 78, the
provisions of Section 76 shall not apply.
(xv) It is settled principle of law that if a dispute is arising out of
interpretation
of
the
provisions
of
statute
or
exemption
notification, no penalty can be levied. They relied upon the
following case laws:
(a)
Bharat Wagon & Engg. Co. Ltd. Vs. CCE, Patna – (146) ELT 118
(Tri-Kolkota)
(b)
Boenka Woolen Mills Ltd. Vs. CCE, Shillong – 2001 (135) ELT 873
(Tri-Kolkota)
(c)
Bhilwara Spiners Ltd. Vs. CCE, Jaipur – 2001 (129) ELT 458
(xvi) Section 80 of the Act provides that no penalty shall be imposed
on the assessee for any failure referred to in Section 76, 77 or
78 of the Act, if the assessee proves that there was reasonable
cause for the said failure. Thus, the Act statutorily provides for
waiver of penalty. In the present case, there was a bonafide
belief that the activities carried out by them are not taxable.
Therefore, in terms of section 80 of the Act, penalties cannot be
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imposed under section 76, 77 and 78 of the Act. They relied
upon the following case laws:
16.
(a)
ETA Engineering Ltd. Vs. CCE, Chennai–2004 (174) ELT 19 (Tri-LB).
(b)
Flyingman Air Courier Pvt. Ltd. Vs. CCE – 2004 (170) ELT 417 (T)
(c)
Star Neon Singh Vs. CCE, Chandigarh – 2002 (141) ELT 770 (T).
Personal hearing in the matter was held on 11.01.2012, which was
attended by Shri Sumit Jain, CA and Miss Dipa Devani, CA representatives of
the noticee.
They briefed their defence reply dated 07.12.2011 and
requested to decide the case on the same.
DISCUSSION AND FINDINGS:
17.
I have carefully gone through the entire case records, SCN issued,
defence put forth by the noticee in written as well as contentions raised
during personal hearing. I find that the issue to be decided in the present
case is – whether the noticee is liable to pay service tax on the services
provided to M/s. Tata Chemicals Ltd. or otherwise.
18.
It is contended by the noticee that the SCN does not indicate specific
activities falling under which clause of definition of taxable service and
therefore department cannot levy service tax. They have also relied upon
the decision of Hon. Supreme Court in the case of Amrit Food Vs. CCE –
2005 (190) ELT 433 (SC). I find that the contention of the noticee is not
correct, inasmuch as the partner of the noticee, in his statement recorded on
15.03.2011, described the works carried out by them in Tata Chemicals Ltd.
and based on which it is proposed in the SCN that service of manpower
supply should be classifed under the category of Manpower recruitment or
supply
agency,
Salt
Loosening,
Salt
Lifting,
Salt
Loading,
Salt
Transportation, Gypsum Lifting, Gypsum Transportation should be classifed
under the category cargo handling service, maintenance or repair of various
immovable property should be classifed under the category managemnet,
maintenance or repair service and hiring of vehicles should be classifed
under the category supply of tangible goods service (Para 5 of the SCN).
Thus, the SCN has very clearly spelt out the different types of work carried
out by the noticee and their proposed classification under appropriate
category, according to type of work/service provided by the noticee. The
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SCN also clearly spelt out the breach of various provisions of the Act and
Rules framed thereunder. Therefore, it cannot be said that the SCN suffers
from any infirmities.
In view of the clear and unambiguous description of
services and violation of provisions provided in the SCN, the judgment cited
by the noticee is not applicable to the facts of the present case. Further, it is
also mentioned in the SCN that the noticee failed to produce copies of
invoices, though specifically called for (Para-4 of the SCN). It is but natural
that in absence of all the invoices, bifurcation of value of service categorywise is not possible. Therefore, department cannot be blamed for not
bifurcating the value of services category-wise, as the noticee has not
provided the requisite data.
19.
It is further contended by the noticee that the process of manufacture
of salt harvesting, salt lifting, salt loosening gypsum harvesting etc. are the
process of manufacture of salt and gypsum and therefore, cannot be taxed
under Business Auxiliary Service.
They have also referred the Board’s
Circular No. 80/10/2004-ST dated 17-09-2004, B1/6//2005-TRU dated 2707-2005 and DOF No.334/13/2009-TRU dated 6-7-2009 in support of their
contention.
It is seen that the show cause notice is not alleging the
classification of service tax under the category of service “Business Auxiliary
Service”, hence I find it is meaningless to discuss on the issue whether the
service is classifiable under ‘business auxiliary service’ or not.
Hence, the
noticees’ reliance on above mentioned various Board’s Circular and Case
Laws are not applicable to the present case.
20.
They have further argued that since the process of manufacture of salt
harvesting, salt lifting, salt loosening and gypsum harvesting etc. are the
process of manufacture of salt and therefore, cannot be taxed under Cargo
Handling Services also.
To appreciate the issue better, I reproduce the
definition of Cargo Handling Service as defined under Section 65(23) of the
Finance Act, 1994:
“‘cargo handling service’ means loading, unloading, packing or
unpacking of cargo and includes,—
(a)
cargo handling services provided for freight in special
containers or for non containerised freight, services provided
by a container freight terminal or any other freight terminal,
for all modes of transport, and cargo handling service
incidental to freight; and
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(b) service of packing together with transportation of cargo or
goods, with or without one or more of other services like
loading, unloading, unpacking,
but does not include, handling of export cargo or passenger
baggage or mere transportation of goods.”
On careful study of the working pattern, it is seen that M/s Tata
Chemicals Ltd. have assigned the Work Contract to the noticee comprising of
loosening of salt at Salt Spans, to make heaps, to keep it for some time to
ensure that all the brine get drained, to load the raw salt into vehicle, to
transport it to stack, to adjust the salt at the stack yard and make stack.
The noticees’ plea that the activity performed by them is a process of
manufacturing of salt is factually incorrect and without support of any
concrete evidence. These activities are undoubtly of the nature of handling
of cargo.
Hence, I am not convinced with the argument put forth by the
noticee that they are doing an activity related to manufacture of salt. From
the definition of Cargo Handling Service as given under Section 65 (23) of
the Finance Act, 1994 and the activities of the noticee, I come to the
conclusion that the work related to loosening of salt, making heap of it and
then to load this salt into vehicle and transport it to stack is of the nature of
handling of cargo. Hence, I hold that the demand is correctly made under
‘Cargo Handling Service’.
Further, I have also gone through the sample
copy of Bills issued by the noticee to M/s Tata Chemicals Ltd. and observe
that these are issued for ‘Salt Transportation from Okhomadhi Salt Work to
SSD Hopper, Salt Loading for Ohamadhi, Salt Loading for Mithapur Salt
Works, Salt Loosening for Mithapur Salt Works, Salt Lifting at Mithapur Salt
Works, Supervision charges of Transportation for Mithapur Salt Works to
S.S.D. Hopper at Mithapur, Salt Lifting-Rain Charges at Mithapur Salt Works,
Rain Charges of transportation for Mithapur Salt Works to H.D.D. Hopper at
Mithapur, for Gypsum Lifting at Charakla Salt Works etc.
For making it
clear, I reproduce Bill No. PE/Salt/010 dated 1.04.08, Bill No. 86/2010-11
dated 8.11.2010, Bill No. 139/2010-11 dated 23.03.2011, Bill No. 90/201011 dated 27.12.2010 and Bill No. 70/2010-11 dated 23.10.2010 issued by
the noticee to M/s Tata Chemicals Ltd., Mithapur:
(1)
Bill No. PE/Salt/010 dated 01-04-2008
PAVAN ENTERPRISE.
Jay Ambe Society, ARAMBHDA (SURAJKARADI)
To,
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TATA CHEMICALS LIMITED MITHAPUR
Bill No. PE/Salt/010
Contractor Code : P-00694 C00
Date
Date: 1.4.2008
Bill Type : Transport
: 23.3.08 to 31.3.08
P.O. NO.
: 5000000149
SALT TRANSPORT
Bill for Salt Transportation for Okhamadhi
Salt Works to S.S.D. Hopper at Mithapur
Quantity 15973.050
(2)
Tonnes Rate Rs.112
Amount Rs.17,88,981/-
Bill No.PE/LOD/003/07-08 dated 01.04.08
PAVAN ENTERPRISE.
Jay Ambe Society, ARAMBHDA (SURAJKARADI)
To,
TATA CHEMICALS LIMITED, SALT DEPARTMENT,
MITHAPUR.
Bill No.PE/LOD/003/07-08
Contractor Code : P-00694 C00
Date
Date: 01.04.08
Bill Type : Loading
: 23.03.08 to 31.03.08
P.O. NO.
: 5000000149
SALT LOADING
Bill for Salt Loading for Okhamadhi Salt Works
Quantity 15973.050
(3)
Per Tonnes Rate Rs.8.15
Amount
1,30,180.36
Bill No. 113/2008-09 dated 01.04.09
PAVAN ENTERPRISE.
Jay Ambe Society, ARAMBHDA-Surajkaradi
To,
TATA CHEMICALS LTD., SALT DEPARTMENT, MITHAPUR
Bill No. 113/2008-09
Date: 01.04.09
Contractor Code : P-00694 C00
Date
: 23.03.09 to 31.03.09
P.O. NO.
: 5000000
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BILL FOR SALT-LIFTING ADVANCE
Bill for Salt Lifting Advance at Mithapur Salt Works.
Block No.10
100% Quantity 7998 Tonnes
80% Quantity 1658
(4)
Per Tonne Rate Rs.44.07
Amount
281959.86
Bill No. 134/2009-10 dated 26.03.2010
PAVAN ENTERPRISE.
Jay Ambe Society, ARAMBHDA-Surajkaradi
To,
TATA CHEMICALS LIMITED, SALT DEPARTMENT, MITHAPUR
Bill No. 134/2009-10
Contractor Code : P-00694 C00
Date
Date: 26.03.2010
: 16.03.10 TO 22.03.10
P.O. NO.
: 5000000487
GYP LIFTING ADVANCE/FINAL
Mechanical Lifting
Bill for Final Payment of Gypsum Lifting
at Charakla Salt-Works.
Quantity 100% 967.920
21.
Tonne Rate Rs.69.00
Amount 66,786.48
From the above invoices, it is clear that the noticee have been
awarded contract of loading and unloading of cargo with transportation of
the same, hence when the cargo is meant for clearance by way of any mode
of transportation, handling of such cargo would certainly be liable to be
classified under “Cargo Handling Service”. Hence, I am convinced that the
activities carried out by noticee like salt harvesting, salt lifting, salt
loosening, salt tranportation and gypsum harvesting etc. are covered by the
definition of ‘Cargo Handling Service’ as defined under 65(23) of the Finance
Act, 1994 and the noticee is liable to pay service tax on the income
generated for providing such services.
22.
Regarding demand under the category of Manpower Supply and
Recruitment Agency, it is contended by the noticee that they have not
supplied any manpower temporarily or otherwise to M/s Tata Chemicals Ltd.
hence no service tax is demanded from them merely going by the
description of the invoice.
In this regard, it is seen that the demand under
this category pertains to various job for ‘M13 Channle for Gypsum’
Harvesting at Charakla Salt Works-Charakla performed by the noticee and
for
providing
this
service
they
have
raised
the
bills
on
‘Daily
Wages/attendance’ basis. Therefore, it is clear from these bills that the
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noticee had supplied manpower to Tata Chemicals Ltd. for performing
various miscellaneous jobs assigned to them.
Further, the case laws cited
by the noticee pertain to lump sump work carried out by the party, which
was not covered under manpower supply service.
Therefore, these case
laws, relied upon by the noticee, are not applicable to the present case. I
have also gone through the sample Bill No. PE/SW/005/07-08 dated
1.12.2007
and
found
that
the
noticee
has
raised
the
bill
for
‘Attendance/Daily Wages basis. So this clearly establishes the fact that the
noticee has provided ‘manpower supply service’ to M/s Tata Chemicals Ltd.
Details of Bill No. PE/SW/005/07-08 dated 01.12.2007 is reproduced below:
BILL No. PE/SW/005/07-08 DATED 01.12.2007
PAVAN ENTERPRISE.
Jay Ambe Society, ARAMBHDA-Surajkaradi
Bill No. PE/SW/005/07-08
P. O. No.:-4710002022
Date: 01.12.07
P. F. Code No. : GJ RJT 42408
Location: Charakla Salt Works, Charakla
Job : Various job for M13 Channle for Gypsum Harvesting
Period : 26.10.07 to 25.11.07
23.
Sr.
No.
1
Particulars
QTY
Rate
Amount
Various job for Gypsum
Total attendeds
Period 26.10.07 to 25.11.07
65
Attd.
105.90
Daily
Wages
6883.50
2
Hire Auto Ricksha
Period 26.10.07 to 25.11.07
5
days
350.00
per day
1750.00
3
To Hire Hitachi Include Cost
Oper. & Fuel for bypass
Road Repairing
12
Hours
1100.00
per hour
13200.00
4
JCB Charge Work at Charakla
Salt Works Site-M13
8
Hours
562.50
Per hour
4500.00
I find that the Hon’ble Tribunal in the case of M/s Future Focus
Infotech India (P) Ltd. vs. Commr of S.T., Chennai as reported at 2010
(S.T.R.) 308 (Tri-Chennai) while deciding the issue related to ‘Manpower
recruitment or Supply Agency Service’, at para 12 to 15 has held that:
“12. We find that the arguments advanced on behalf of the appellants are
mainly based on the various clauses in the agreements executed between
them and their clients namely TCS and Infosys. We are of the view that
not only the wordings of these clauses are to be considered but also how
different clauses of the contracts actually operate have to be seen. We
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find that the appellants are supplying various skilled personnel to TCS and
Infosys to work on software projects undertaken by TCS and Infosys from
their respective clients. The personnel deputed by the appellants appear
to be working at the site of the clients of TCS and Infosys or in the
premises of TCS and Infosys. There is no evidence produced before us to
indicate that any of the software projects undertaken by TCS and Infosys
from their respective clients has been sub-contracted to the appellants or
that the appellants are working on any such project on their own. What
has emerged clearly is that the appellants have deputed skilled personnel
including computer engineers to work under the supervision and control of
TCS and Infosys personnel in-charge of projects undertaken by TCS and
Infosys. The appellants are getting paid in terms of the man hours
for the persons deputed to work under the control and supervision
of TCS and Infosys.
13. No doubt there are clauses relating to deliverables and quality of
work in the contracts but these by themselves do not indicate that the
appellants are providing information technology software services to TCS
and Infosys. Any person or organization obtaining skilled personnel has to
ensure that such men deliver work of standard quality. No one would
employ a person who is not skilled enough and no one would pay for
shoddy work even if done by a skilled man. The relevant clauses in the
contract in this regard on which much emphasis was sought to be put by
the learned senior counsel for the appellants have to be viewed in the
light that TCS and Infosys are merely seeking to obtain personnel from
the appellants with necessary skill who will work diligently on the projects
undertaken by TCS and Infosys.
14. The learned special counsel for the Department has rightly pointed
out a significant provision in the contracts which require the appellants to
replace personnel who leave the job by suitably trained personnel as
substitutes. Such provisions in the contract go to show that the number of
skilled persons supplied is important from the point of view of TCS and
Infosys. If the appellants were actually to deliver the software projects,
TCS and Infosys would have nothing to say about how many personnel
the appellants engage to complete the project or who they employ.
15. Looking at all aspects of the case and taking into account all the
arguments made before us, we come to the conclusion that the appellants
are only supplying skilled manpower for which they are liable to pay
Service tax for supply of manpower services. We note that for similar
activities of the appellants in respect of two other clients namely IBM and
CAP GEMINI, the appellants have paid Service tax under the category
‘manpower supply service’ and their clients in turn took credit of such
Service tax paid by the appellants.”
I find that this order of Tribunal is applicable to the present case as the
facts of both the cases are identical. Here in this case the Hon’ble Tribunal
has given emphasis on supplying of manpower who diligently works on the
project undertaken by TCS and Infosys and that there was no evidence to
indicate that the projects were sub-contracted. Further, the appellants are
getting paid in terms of the man hours for the persons deputed to work
under the control and supervision of TCS and Infosys. Similarly, in case on
hand, the noticee have also supplied manpower to M/s Tata Chemicals Ltd.
for performing various jobs as assigned by M/s Tata Chemicals Ltd.,
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Mithapur and they are getting payment in terms of the ‘Attendance /Daily
Wage basis’ against supply of these labours/ manpower.
24.
In view of the above discussion and case laws, I hold that the
services provided by the noticee are liable for levy of service tax under
category ‘Manpower Recruitment or Supply Agency Service’ during the
period under dispute and hence the demand is liable to be confirmed.
25.
Regarding demand under the category of ‘Management, maintenance
or repair services’, it is contended by the noticee that in the SCN there is no
separate identifiable activity of management, maintenance and repair
service, therefore, they are not liable for payment of Service Tax under this
category of service.
To appreciate the issue better, I reproduce the
definition of ‘Management, maintenance and repair service as defined under
Section 65(64) of the Finance Act, 1994:
“Section 65(64) “management, maintenance or repair”
means any service provided by—
(i) any person under a contract or an agreement; or
(ii) a manufacturer or any person authorised by him, in
relation to,—
(a) management of properties, whether immovable or
not;
(b) maintenance or
immovable or not; or
repair
of properties, whether
(c) maintenance or repair including reconditioning or
restoration, or servicing of any goods, excluding a
motor vehicle;
‘Explanation.— For the removal of doubts, it is hereby
declared that for the purposes of this clause,—
(a) “goods” includes computer software;
(b) “properties” includes information technology software”
From above definition it is clear that a person satisfying the
definition of ‘Management, Maintenance or repair service’ is liable to pay
service tax in respect of the ‘taxable service’ as defined in the Finance
Act, 1944. For this purpose, Section 65 (105) (zzg) of Finance Act, 1944
is relevant, which defines that “taxable service” means any service
provided or to be provided - to any person, by any person in relation to
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management, maintenance or repair.
In the present case on hand, M/s
Tata Chemicals Ltd., Mithapur has awarded contract to the noticee for
‘Repairing of Boat’ and for this the noticee has raised bill to them which
clearly indicate that the noticee has provided repairing service to M/s Tata
Chemicals Ltd., Mithapur and hence this activity is covered under the
definition of ‘Management, maintenance and repair service’. I reproduce the
sample copy of Bill No. PE/Boat/051/2005-06 dated 18.02.2006 issued by
the noticee to M/s Tata Chemicals Ltd., Mithapur for repairing charges of
Wooden Boats for Gypsum Harvest:
BILL No. PE/SW/005/07-08 DATED 01.12.2007
PAVAN ENTERPRISE.
Jay Ambe Society, ARAMBHDA-Surajkaradi
PE/BOAT/051/2005-06
Date: 18/02/2006.
To,
TATA CHEMICALS LIMITED,
MITHAPUR
SUB: BILLING FOR REPAIRING CHARGES OF WOODEN BOATS
FOR GYPSUM HARVEST
Quantity of Boats
31
Rate /Boat
1680.00
Amount
52080.00
In view of the above, I hold that the services provided by the noticee
are liable for levy of service tax under category ‘Management, maintenance
and repair service’ during the period under dispute and hence the demand
is liable to be confirmed.
26.
Regarding demand under the category of ‘Supply of Tangible Goods’, it
is contended by the noticee that service tax can be demanded under the
taxable category of supply of tangible goods for use service only in case
where the assessee has supplied the tangible goods to someone else for use
by the other person.
They have added that in their case all these
ingredients are absent and therefore, they are not liable for payment of tax
under the taxable category of supply of tangible goods for use service. To
appreciate the issue better, I reproduce the definition of ‘Supply of Tangible
Goods as defined under Section 65(105)(zzzzj) of the Fiinance Act, 1994:
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Section 65(105)(zzzzj) “taxable service” means any service provided
or to be provided to any person, by any other person in relation to
supply of tangible goods including machinery, equipment and appliances
for use, without transferring right of possession and effective control
of such machinery, equipment and appliances”
From above definition it is clear that a person satisfying the
definition of ‘of Tangible Goods service’ is liable to pay service tax in
respect of the ‘taxable service’ as defined in the Finance Act, 1944.
In
the present case on hand, the noticee has raised the bills on M/s Tata
Chemicals Ltd. for hire of Hitachi include cost of operation & fuel/ JCB at
Charakla Salt Works Site-M13. To appreciate the issue better, I reproduce
the sample copy of Bill No. PE/SW/005/07-08 dated 01.12.07 issued by the
noticee to M/s Tata Chemicals Ltd., Mithapur for supply of Hitachi/JCB at
Charakla Salt works Site-M13:
BILL No. PE/SW/005/07-08 DATED 01.12.2007
PAVAN ENTERPRISE.
Jay Ambe Society, ARAMBHDA-Surajkaradi
Bill No. PE/SW/005/07-08
P. O. No.:-4710002022
Location: Charakla Salt Works, Charakla
Date: 01.12.07
P. F. Code No. : GJ RJT 42408
Job : Various job for M13 Channle for Gypsum Harvesting
Period : 26.10.07 to 25.11.07
Sr.
No.
2
Particulars
QTY
Rate
Amount
Hire Auto Ricksha
Period 26.10.07 to 25.11.07 days
5
per day
350.00
1750.00
3
To Hire Hitachi Include Cost
Oper. & Fuel for bypass
Road Repairing
12
Hours
1100.00
per hour
13200.00
4
JCB Charge Work at Charakla
Salt Works Site-M13
8
Hours
562.50
Per hour
4500.00
The noticee has contended that these equipments are used by the
noticee himself for carrying out activities as agreed in the Work Order
with M/s Tata Chemicals Ltd., hence no service tax can be demanded for
the same under the taxable category of supply of tangible goods as they
have not supplied the said equipments to M/s Tata Chemicals Ltd.
I am
convinced with the argument of the noticee that the equipments used by
themselves to carry out the activities as agreed in the work order of M/s
Tata Chemcials Ltd. cannot be classified under the category of service
‘supply of tangible goods’ as the same are not supplied by them to M/s
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Tata Chemicals Ltd., hence no service tax is demandable under this
category of service. However, these equipments were used to carry out
activities covered under the definition of ‘Cargo Handling Service’ without
which service could not have been rendered. Hence, the value of this has
to be amortised in the Cargo Handling Service provided by the noticee.
Therefore, I hold that the services provided under this classification by the
noticee are liable for levy of service tax under category ‘Cargo Handling
Service’ during the period under dispute and hence the demand is liable to
be confirmed.
27.
The noticee has also contended that the value taken for the purpose of
computing tax was required to be considered as cum-tax value as given
under Section 67 of the Finance Act, 1994.
They have cited case laws in
support of their claim. In this regard, I find that the Tribunal in its recent
judgement in the case of Dhillon Kool Drinks and Beverages Ltd as reported
at 2011 (263) ELT has held that the benefit of cum-duty-price is not be to
extended in cases where the duty / tax evasion occurred on account of
fraud, collusion, willful mis-statement, suppression of facts or contravention
of any of the provisions with intent to evade payment of duty/tax. The
Tribunal at para of the said judgement has held that:
“ … Moreover, Hon’ble Supreme Court in the case of Amrit Agro
Industries Ltd. V. Commissioner of Central Excise, Ghaziabad
reported in 2007 (210) ELT 183 (S.C.) has held that unless it has
been shown by the manufacturer that the price of the goods
includes the excise duty payable by him, no question of exclusion of
duty element from the price for determination of value under
Section 4(4)(d)(ii) will arise.”
28.
Further the Hon’ble Supreme Court in the case of Amit Agro Industries
Ltd. vs Commissioner of
Central Excise, Ghaziabad as reported in 2007
(210) ELT 183 (SC) has held that “unless it is shown by the manufacturer that
the price of the goods includes excise duty payable by him, no question of
exclusion of duty element from the price for determination of value under
Section 4 (4)(d)(ii) will arise”
29.
Both the above cited cases are squarely applicable to the present case
as the facts of both the cases are identical. In the case on hand, I find that
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the noticee at no point of time disclosed the entire facts to the department
in any manner and the same has come on records only when audit of the
records of M/s Tata Chemicals Ltd. was conducted by the department.
Hence, the noticee has deliberately suppressed material information from
the department regarding services under the category of ‘Cargo Handling
Service’, ‘Manpower Supply Service’, ‘Management, Maintenance and Repair
Service’ and ‘Supply of Tangible Goods Service’ to avoid payment of service
tax.
This information have been collected by the department only when
inquiry was initiated against them. Hence, by relying upon these decisions, I
hold that the cum-tax-value benefit cannot be extended to the noticee.
30.
With regard to the demand of interest, I find that the noticee has so
far not paid the service tax due to the exchequer. Section 75 of the
Finance Act, 1994 provides that every person liable to pay service tax in
accordance with the provisions of section 68 or the rules made
thereunder, who fails to credit the tax or any part thereof to the account
of the Central Government within the period prescribed, shall pay simple
interest at such rate fixed by the Central Government by notification, for
the period by which such crediting of the tax or any part thereof is
delayed. Thus, it is clear that interest is chargeable from an assessee who
has withheld the payment of any tax as and when it is due and payable.
Interest is compensatory in character as held by the Hon’ble Supreme
Court in the case of Pratibha Processors Vs. Union of India reported in
1996 (88) E.L.T. 12 (S.C.). In Pratibha Processors (supra), the Hon’ble
Apex Court held as follows:
“13.
In fiscal Statutes, the import of the words – “tax”, “interest”,
“penalty”, etc. are well known. They are different concepts. Tax is the
amount payable as a result of the charging provisions. It is a
compulsory exaction of money by a public authority for public
purposes, the payment of which is enforced by law. Penalty is
ordinarily levied on an assessee for some contumacious conduct or for
a deliberate violation of the provisions of the particular statute.
Interest is compensatory in character and is imposed on an assessee
who has withheld payment of any tax as and when it is due and
payable. The levy of interest is geared to actual amount of tax
withheld and the extent of the delay in paying the tax on the due
date (emphasis supplied). Essentially, it is compensatory and
different from penalty – which is penal in character.”
Thus, interest is chargeable from the noticee for the period for which
they have withheld the tax payable
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31.
The noticee has further contended that in the present case there is no
fraud, suppression, wilful mis-statement of facts and hence penalty under
Section 78 cannot be imposed. They have relied upon the decision of Hon
Gujarat High Court in the case of Steel Cast Ltd.-2011(21) STR 500 (Guj.) in
support of their contention. It is observed that the noticee has no point of
time disclosed the fact to the department in any manner that they were
providing taxable services. This fact was disclosed only when the statement
of Shri Versibha Jakharbh Ker, proprietor of the noticee was recorded on
15.03.2011.
Further, on going through the written submission of the
noticee, it is noticed that they have not contested the case on the grounds of
limitation which proves that they are admitting that the extended period of
five years is correctly invoked in the first SCN.
Therefore, I hold that the
noticee had deliberately supressed the facts from the department that they
were providing taxable service to avoid the payment of service tax and for
this deliberate act they need to be penalized under Section 78 of the Finance
Act, 1994. The case law cited by the noticee is also not applicable to their
case on this count.
32.
The noticee has further contended that there is no short payment of
service tax, penalty under Section 76 cannot be imposed. They have also
relied upon the decision of Hindustan Steel Ltd. vs State of Orissa-AIR 1970
(SC) 253, which was followed by the Tribunal in the case of Kellner
Pharmaceuticals Ltd. vs CCE-1985 (20) ELT 276 (SC).
They have further
argued that even if any contravention of provisions was there, the same was
soley on account of their bonafide belief. In support of this, they relied upon
the judgment of Hon Supreme Court in the case of Puspam Pharmaceuticals
Co. vs CCE-1995 (78) ELT 401 (SC) and CCE vs. Chemphar Drugs and
Liniments01989 (40) ELT 276 (SC). As discussed hereinabove, if there was
bonafide belief, the noticee would have paid service tax for the period prior
to under dispute but no such payment has been made by the noticee.
Further, when caught, anybody would say that he was ignorant about the
levy of tax. Thus, ignorance pleaded by the noticee cannot be the basis to
believe that there was any bonafide belief on the part of the noticee. It is
true that mere inaction cannot be held as suppression of fact. But, as
discussed, in the present case, the noticee has, till date, not shown their
bonafide by paying applicable service tax, therefore, the plea of the noticee
is not tenable. For the same reasons, the judgments of Hon. Supreme Court
in the cases of Collector Vs. Chemphar Drugs – 1989 (40) ELT 276 (SC) and
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Pushpam Pharmaceuticals Company Vs. CCE - 1995 (78) ELT 401 (SC) are
not applicable to the present case. Since the noticee has delayed payment of
service tax due, the noticee appears liable to be penalized under section 76
of the Finance Act, 1994, also
33.
Since the noticee has delayed payment of service tax due, the noticee
appears liable to be penalized under section 76 of the Finance Act, 1994,
also.
The use of the words, “who fails to pay such tax, shall pay, in
addition to such ….… a penalty which shall not be less than two
hundred rupees for every day during which such failure continues….” in
section 76, ibid indicates that it was an in-built provision in the
statute itself for payment of penalty at a specified scale for every
day for delay, in addition to the tax and interest, leviable thereon
under section 75 of the Finance Act, 1994. The words “shall pay” as
used in section 76 of the Finance Act, 1994, in regard to penalty on
account of non payment of tax within the stipulated time indicate that
the penalty there under has to be paid mandatorily by the tax payer.
34.
Regarding imposition of penalty under Section 77 of the Finance Act,
1994, I find that the noticee have not registered themselves under the
category of services viz. Cargo Handling Services at the material time and
also failed to file ST-3 returns hence for such contraventions penalty under
Section 77 of the Finance Act, 1994 is imposable.
35.
Further, Further, regarding impostion of penalty simultaneously under
Section 76
and 78 of the Finance Act, 1994, I find that the show cause
notices cover the period from 2005-06 onwards. It is during this period that
fifth proviso to Section 78 of Finance Act, 1994 has been added w.e.f.
10.5.2008 through a legislative amendment, providing that if penalty is
payable under section 78 ibid, the provisions of Section 76 shall not apply.
As already held, in the facts and circumstances of the case, penalty on the
noticee is imposable under Section 76 as well as Section 78 of Finance Act,
1994. Now the question is which legal provisions for imposition of penalty
on the noticee would apply in the case on hand in the backdrop of the fact
that the impugned notice covers the period running from 2005-06 onwards
and fifth proviso to Section 78 providing that if penalty is payable under
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Section 78, the provisions of Section 76 ibid, shall not apply, is added
through
a
legislative
amendment
mid-way,
w.e.f.
10.5.2008.
Since
amendment to Section 78 by way of insertion of the fifth proviso as
aforesaid is not with retrospective effect, the change has to have effect only
prospectively. Therefore, Section 76 as well as Section 78 would apply for
the period upto 9.5.2008 and w.e.f. 10.5.2008, the provisions of Section 76
ibid, would not apply if penalty is held payable under Section 78, and
penalty under Section 78 alone shall be payable by the noticee. As for the
case on hand, it is held that penalty is payable by the noticee under Section
76 as well as Section 78 of the Finance Act, 1994 for the period upto
9.5.2008 and with effect from 10.5.2008 only Section 78 of the Finance Act,
1994 be applicable in the facts and circumstances of the case. Therefore the
noticee is liable to penalty under section 76 as well as section 78 of the
Finance Act, 1994 accordingly.
In this case, since the noticee has failed to pay the tax within the due
date as indicated hereinbefore, penalty under Section 76, ibid, is imposable
for the period from 2005-06 to 09.05.2008 on the noticee at the rate
prescribed therein. Quantification of penalty payable under Section 76 ibid is
possible only when the noticee fully discharges the service tax liability
alongwith interest due on account of delayed payment of tax. However, as
specified in Section 76, ibid, penalty payable thereunder shall not exceed the
amount of service tax payable for the period from 2005-06 to 09.05.2008.
36.
In view of the above, I pass the following order:
ORDER
(i)
I confirm and demand the service tax Rs.38,30,933/- (Rupees
Thirty Eight Lakh Thirty Thousand Nine Hundred Thirty Three
only) from M/s. Pavan Enterprise, under proviso to
Section
73(1) of the Finance Act, 1994.
(ii)
I order the noticee M/s. Pavan Enterprise to pay interest on the
amount confirmed at Sl. No.(i) above, under the provisions of
Section 75 of the Finance Act, 1994 at appropriate rate.
(iii)
I impose a penalty of Rs.200 per day or two percent per month
whichever is higher on M/s. Pavan Enterprise, on the service
tax due and confirmed for the period from 2005-06 to
9.5.2008 under the provisions of Section 76 of the Finance
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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 shall not exceed the service tax
due and confirmed for the period from 2005-06 to 9.5.2008.
(iv)
For the service tax due and confirmed for the period from
10.5.2008 onwards, no penalty is imposed under Section 76 of
the Finance Act, 1994, as amended, in view of fifth proviso to
Section 78 inserted in Section 78 by the Finance Act, 2008 (18
of 2008) dated 10.5.2008.
(v)
I impose a penalty of Rs. 5000/- on M/s. Pavan Enterprise,
under the provisions of Section 77 of the Finance Act 1994.
(vi)
I impose a penalty of Rs.38,30,933/- (Rupees Thirty Eight Lakh
Thirty Thousand Nine Hundred Thirty Three only) on M/s Pavan
Enterprise, under the provisions of Section 78 of the Finance Act,
1994. If the amount as determined under Sr. No. (i) and (ii)
above is paid within 30 days from the receipt of the order
alongwith the interest payable then as per proviso to Section 78
the penalty will be only 25% of the service tax determined at Sl.
No. (i) and (ii) 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 receipt of the
order.
By Regd. Post AD
F. No. V.ST/15-63/Adj./11
(M. GNANASUNDARAM)
JOINT COMMISSIONER.
To,
M/s. Pavan Enterprise,
Jay Ambe Society,
Near Bank Colony, Arambhada,
Tal: Dwarka, Dist: Jamnagar
Copy to:
1. The Assistant Commissioner (RRA), Central Excise, Rajkot.
2. The Deputy Commissioner, Service Tax Division, Rajkot.
3. The Deputy Commissioner, Tax Recovery Cell, HQ, Rajkot.
4. The Superintendent, Service Tax Range-Jamnagar.
5. Guard file.
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