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BRIEF FACTS OF THE CASE:M/s Vimal Stocks., having Office at 2nd floor, 201, Parth Milan Avenue, opp.
Forever Jewelers, Near Hotel Nest, Off. C.G.Road, Navrangpura, Ahmedabad-380 009
(here-in after referred to as “the said assessee” for the sake of brevity) is a Proprietary firm
and is carrying out its business activities in India. They had not obtained any service tax
registration for payment of service tax on the services provided by them to their various
clients under Section 69 of the Act and Rule 4 of the Service Tax Rules, 1994.
2.
An intelligence was gathered by the Directorate General of Central Excise
Intelligence (here-in-after referred to as “DGCEI” for the sake of brevity) Ahmedabad
Zonal Unit (AZU) that the said assessee was not paying service tax on the services
provided by them under the category of “Banking and Other Financial Services” as defined
in section 65 of Finance Act, 1994. The said assessee was engaged in the business of
providing Stock Market related Tips and advice based on the Technical Analysis of the
stocks of various companies, which were traded in the Stock Markets. The said assessee is
charging a fee for providing such service. The said services were provided by the said
assessee only after the said fee was paid in advance by the client. Accordingly,
investigations were initiated against them under Summons proceeding.
3.
During the course of Summons proceeding and investigation, statement of
Shri Darshan Vijaykumar Shah, Chief Executive Officer of M/s Vimal Stocks Pvt. Ltd who
is also the Proprietor of M/s Vimal Stocks, was recorded on 24-09-2010 . Shri Darshan
Vijaykumar Shah has in his statement inter-alia stated as that:their Company was a Private Limited company, wherein there were seven
Directors and he was one of the Director, as well as Chief Executive officer of
the company.
initially in the year 2006, they started their business in the name of a firm
called M/s Vimal Stocks, which was a Proprietorship firm, wherein he was
the Proprietor of the firm. The said firm had been functioning since then,
however, during the financial year 2008-09, on 19-06-2008, they incorporated
one Limited Company in the name of M/s Vimal Stocks Ltd, wherein there
were seven directors, including himself. Further, during the current financial
year, the status of the said company i.e. M/s Vimal Stocks Ltd., had been
changed to a Private Limited Company, however, the directors of the
company remained the same.
4.
He further stated that he looked after the overall work of the said company, which
includes mainly Research work, marketing, Administration and all other aspects of their
company and in his Proprietorship firm also, he was carrying out the same work, which he
had been doing in the Private limited company. He stated that M/s Vimal Stocks has been
functioning since 2006, and it had been engaged in the business of providing Stock Market
related tips and advice, based on the Technical Analysis of the stocks of various companies,
which are traded in the Stock Markets of the country i.e. Bombay Stock Exchange and
National Stock Exchange of India Ltd. As part of the business, they carry out Research
analysis of different stocks, on the basis of their performance in Stock Markets and on the
basis of the said analysis, they provide stock related tips and advice to their customers. The
tips/advice, which are provided by them were categorized into five categories.
1. Delivery
2. Intraday
3. Intraday Jackpot
4. F&O
5. Nifty Vimal
4.1
Further, they have a website, in the name of www.vimalcorporate.com, which
demonstrated the details of the above-mentioned categories of services and also gave the
estimated income, which can be generated by purchase/sale of the stock/stocks, they
recommend, in the time limit given, to trade that stock/stocks. For the tips/advisory services
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provided by them as per the 5 above- mentioned categories, they charge different monthly
charges, the details of which were also given in their website itself. He further stated that
the customers/clients, who wish to avail the above-mentioned services from their company,
are required to pay the charges as given in the website, in the Banks accounts displayed in
their website only. He furnished one page print-out, showing the details of the abovementioned five types of services provided by their company at present, like the charges,
time period, etc. In their above-mentioned website, they provide the facility of registration
for the customers, who wish to avail the facility of getting stock related tips/advice. The
customers are registered as their clients, only when they pay the charges mentioned in their
website in Bank accounts mentioned in their website, or alternatively, if it is not possible, in
such cases, they also receive the charges in cheque/cash from their customers at their
offices. Once, the person is registered as their client, they start providing their advisory
services to the said client.
4.2
Further, apart from the above activities, they were also involved in tele-calling to the
prospective customers, wherein, they give telephonic calls elaborating the details of the
services provided by them and offer free trails of their services. Such an activity is carried
out by them to explore new customers. He categorically stated that they were not engaged in
trading of Stocks on behalf of the clients, at any point of time.
4.3
He further stated that they operate their business from five different locations out of
which four are located in Ahmedabad and one office is located in Vadodara. The detailed
address of all the five location was given as under :
1.
Our head office is located at 201, 2nd floor, Parth Milan Avenue, Opp.
Forever Jewellery, near Hotel Nest, Off. C.G. Road, Navrangpura,
Ahmedabad.
2.
4th floor, Gratik complex, C.G. Road, Navrangpura, Ahmedabad.
3.
1st floor, Gratik complex, C.G.Road, Navrangpura, Ahmedabad.
4.
2nd floor, Shoppers Plaza, Opp. Municipal Market, C.G.Road,
Navrangpura, Ahmedabad.
5.
Ground floor; Harmony complex, Alkapuri, Vadodara.
He stated that the first premises is where the Head Office of their company is located,
wherein the entire controlling work is carried out and from all other premises, the work of
tele-calling of their products to the prospective customers is carried out.
4.4
He further stated that their client base varies from time to time, as some of the clients
avail services for a short period of time, while some others avail services for a longer time
period. In their computer server, they have data base stored from January-2008. He
furnished a DVD, consisting of M/s-excel file, showing the entire details of all the
customers, who were registered with them, and it included all the clients, who have
continued or discontinued, till date.
4.5
He further stated that their company is not registered with Service Tax department, as
they were under impression that the services provided by their company were not taxable
services.
5.
Further Statement of Shri Darshan Vijaykumar Shah, age 26, Director of, M/s
Vimal Stock Pvt Ltd. and also the Proprietor of M/s Vimal Stocks was recorded on 01-122010. He agreed with the statement given on 24-09-2010. He also agreed with the indirect
income of Rs 7,17,600/- for the Year 2006-07, Rs 1,10,77,002.00 for the Year 2007-08, Rs
3,22,86,488/- for the Year 2008-09 and Rs 33,51,,993/- for the Year 2009-10 submitted and
produced by him in respect of M/s Vimal Stocks and put his dated signature on the
statement. He also agreed with the indirect income of Rs 2,93,93,297/- for the Year 200809 and Rs 7,10,41,916/- for the Year 2009-10 submitted and produced by him in respect of
M/s Vimal Stocks Pvt. Ltd. and put his dated signature on the statement. He further stated
that their firm is neither registered with the service tax department nor have they paid tax as
they considered their income as non taxable income. He further agreed that in the Year
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2008-09 M/s Vimal Stocks has made a payment of Rs. 34,13,139/- as consultancy fees and
Rs 90,00,000/- as service charges to M/s Vimal Stocks Ltd as these are internal transaction
between the two firms. He could not provide any detail of Rs 4,61,357/- shown as other
income in the Year 2008-09. He stated that M/s Vimal Stocks was incorporated in 2006 and
M/s Vimal Stocks Pvt Ltd in the year 2008.
6.
The "Banking and Other financial Services " under Section 65(12) of the
Finance Act, 1994 means, the following services provided by a banking company or a
financial institution including a non-banking financial company or any other body corporate
or commercial concern, namely :(i)
financial leasing services including equipment leasing, and hire-purchase by a
body corporate;
(ii)
credit card services;
(iii) merchant banking services;
(iv) securities and foreign exchange (forex) broking;
(v)
asset management including portfolio management, all forms of fund
management, pension fund management, custodial depository and trust services,
but does not include cash management;
(vi) advisory and other auxiliary financial services including investment and
portfolio research and advice, advice on mergers and acquisition and advice
on corporate restructuring and strategy; and
(vii) provision and transfer of information and data processing;
(viii) Other financial services, namely, lending; issue of pay order, demand draft,
cheque, letter of credit and bill of exchange; providing bank guarantee, overdraft
facility, bill discounting facility, safe deposit locker, safe vaults, operation of
bank accounts;
6.1
The taxable service under section 65(105) (zm) of the Finance Act, 1994
means service provided to to a customer, by a banking company or a financial institution including a nonbanking financial company, or any other body corporate or commercial concern, in
relation to banking and other financial services;
6.2
Further, the scope of “Banking and Other financial Services” was expanded
with effect from 10.09.2004 with the inclusion of lending services. CBEC circular no.
80/10/04 dated 17.09.2004 provided the following clarification“19.1 The existing taxable service i.e., ''banking and other financial services'', has
been expanded both in terms of its coverage and the types of service providers.
Financial services would now also include specified financial services, namely,
lending, issue of pay order, demand draft, cheque, letter of credit, bill of
exchange, providing a bank guarantee, overdraft facility, bill discounting, safe
deposit lockers, or safe vaults and operation of bank accounts. The interest
amount would, however, remain excluded from the purview of service tax. In
addition to banking company, financial institution including a non-banking
financing company, body corporate and any other commercial concern providing
financial services will also be covered.”
7.
The Statement of Shri Darshan Vijay Kumar Shah, Proprietor of M/s Vimal
Stocks, Ahmedabad revealed that:
a.
M/s Vimal Stocks was incorporated in the Year 2006 and had been engaged
in the business of providing Stock Market related tips and advice, based on the
Technical Analysis of the stocks of various companies, which are traded in the
Stock Markets i.e. Bombay Stock Exchange and National Stock Exchange of
India Ltd.
b.
As part of the business, they carried out Research analysis of different
stocks, on the basis of their performance in Stock Markets and on the basis of
the said analysis, they provided stock related tips and advice to their
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c.
d.
e.
f.
g.
h.
customers. The tips/advice, which were provided by them were categorized
into five categories.
1. Delivery
2. Intraday
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Intraday Jackpot
4. F&O
5. Nifty Vimal
They had a website, in the name of www.vimalcorporate.com, which
demonstrated the details of the above-mentioned categories of services and
also gave the estimated income, which could be generated by purchase/sale of
the stock/stocks, they recommend, in the time limit given, to trade that
stock/stocks. For the tips/advisory services provided by them as per the 5
above- mentioned categories, they charge different monthly charges, the
details of which were also given in their website itself.
the customers/clients, who wished to avail the above-mentioned services were
required to pay the charges as given in the website in the Banks accounts
displayed in his website only.
In the above-mentioned website, the said assessee provided the facility of
registration for the customers, who wished to avail the facility of getting stock
related tips/advice. The customers were registered as their firms clients only
when they paid the charges in Bank accounts mentioned in his website, or
alternatively, if it was not possible, in cheque/cash.
The above-mentioned business was started in the firm named M/s Vimal
Stocks. However, they started one company in the name of M/s Vimal Stocks
Ltd., in 2008, which had been converted into a Private Limited company in
2010 and the said business has been slowly transferred to the said company.
Till 2009-10, both the companies were doing the business, however, at
present, most of the business has been transferred to M/s Vimal Stock Pvt.
Ltd.
the said assessee was also involved in tele calling to the prospective
customers, wherein, they made telephonic calls elaborating the details of the
services provided by them and offered free trails of their services. Such an
activity was carried out by them to explore new customers .
they had earned income of Rs 7,17,600/- for the Year 2006-07, Rs
1,10,77,002.00 for the Year 2007-08, Rs 3,22,86,488/- for the Year 2008-09
and Rs 33,51,,993/- for the Year 2009-10. This income receipt was from
Service charges, Technical consultancy charges availed by their client i.e
providing service facility of stock market related tips /advice which clearly fell
under the category "Banking and Other financial Services" .
8.
As per Section 67 of the Finance Act, 1994, gross amount charged and
recovered is the taxable value and the service provider was liable to pay service tax on the
same. M/s Vimal Stocks., Ahmedabad, was recovering fees for providing the services from
the client, who had to pay the fee charges, from the available service scheme selected by
the client. Therefore, the amount of fees ‘Advisory fees’ ( as per the Scheme Selected)
recovered by M/s Vimal Stocks, Ahmedabad for the period from 01-04-2006 to 30-092010, were to be considered as ‘consideration’ [gross value of service charged] for
providing taxable service under the category of ‘“Banking and Other Financial Services”
and service tax on such ‘fee Charges’ was to be recovered at the rate prescribed under
section 66 of the Finance Act, 1994.
9.
During the course of inquiry and recording of statement, Shri Darshan Vijay
Kumar Shah, Proprietor of M/s Vimal Stocks, Ahmedabad had furnished the net amount
received from 01-04-2006 to 30-09-2010 as detailed in worksheet marked as Annexure-A to
the show cause notice. As per the said worksheet, service tax amounting to Rs. 57,92,817/(Service Tax of Rs. 56,24,930/-, Education Cess of Rs. 1,12,499/- and S. Higher Education
Cess of Rs. 55,388/-) for the period from 01-04-2006 to 30-09-2010, was not paid by the
said assessee under the category of “Banking and Other financial Services” and the same
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was required to be demanded and recoverable from M/s Vimal Stocks, Ahmedabad, in
terms of section 73 of the Finance Act, 1994.
10.
M/s Vimal Stocks, Ahmedabad, had failed to pay service tax for the period
from 01-04-2006 to 30-09-2010 as per the provisions of section 67, at the rate prescribed in
section 66 of the Act, and accordingly contravened the provisions of Rule 6 of the Service
Tax Rules. 1994. They had also not got themselves registered with service tax department
for providing services under the Category "Banking and Other Financial Services" and
thereby violated the provisions of Section 69 of the Act read with Rule 4 of the Service Tax
Rules, 1994.
11.
It appeared that M/s Vimal Stocks have contravened the provisions of Section 68 of
the Act read with Rule 6 of the Service Tax Rules. 1994, Section 69 of the Act read with
Rule 4 of the Service Tax Rules, 1994 and Section 70 of the Act read with Rule 7 of the
Service Tax Rules, 1994.
12.
All the said acts of M/s Vimal Stocks, Ahmedabad and contraventions of various
provisions discussed above were liable for penal action under Section 76 and 78 of the
Finance Act, 1994.
13.
M/s Vimal Stocks, Ahmedabad, had not declared the taxable services provided by
them for the period from 01-04-2006 till the initiation of the inquiry. They had not charged
and not paid the service tax payable during the said period and not filed any service tax
return with the department with regard to the said taxable service. After initiation of the
inquiry also, they were not considering their services as taxable service under the category
of "Banking and Other Financial Services
14. All these acts of M/s Vimal Stocks, Ahmedabad, made it clear that they had not paid
Service Tax and Education Cess by way of willful suppression of facts and in contravention
to various provisions of the Finance Act, 1994 and rules made there under relating to levy
and collection of Service Tax with an intent to evade payment of Service Tax. Service Tax
was therefore, recoverable from them by invoking extended period of five years as per first
proviso to sub-section (1) of Section 73 of the Finance Act, 1994. In the similar manner
Education Cess as per Section 95 of the Finance (No. 2) Act, 2004 and Secondary and
Higher Secondary Cess as per clause 136 and 140 of the Finance Act, 2007 were also
recoverable.
15. In light of the facts discussed in the foregoing paras, it appeared that M/s Vimal
Stocks, Ahmedabad, had not paid service tax, which was leviable from them. Therefore,
Service Tax not paid by them was recoverable from them under Section 73 of the Finance
Act, 1994 by invoking the extended period of five years. Further, interest on delayed
payment of service tax as per section 75 also appeared chargeable and recoverable from
them. They were also liable for penal action under Section 76 and 78 of the Finance Act,
1994.
16.
In view of the above, a show cause notice bearing No.DGCEI/AZU/36165/2010-11 dated 21.12.2010 was issued to M/s Vimal Stock to show cause to the
Commissioner of Service Tax, Ahmedabad having his office at Central Excise Bhavan,
Near Panjara Pole, Opp: Polytechnic, Ambawadi, Ahmedabad as to why:
(i)
(ii)
The services of providing Advisory Services to their client should not be
appropriately classified under the category of taxable service "Banking and Other
Financial Services” as defined under Section 65(105)(zzzzj) of the Finance Act,
1994.
Service Tax amounting to Rs. 57,92,817/-(Service Tax of Rs. 56,24,930/-,
Education Cess of Rs. 1,12,499/- and S. Higher Education Cess of Rs. 55,388/-)
not paid by them for the period from 01-04-2006 to 30-09-2010, as detailed in
Annexure 'A' to the show cause notice, should not be demanded and recovered
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(iii)
(iv)
(v)
from them under section 73 of the Finance Act, 1994 by invoking extended
period of five years as per proviso to sub section (1) of said section 73 towards
rendering of "Banking and Other Financial Services”
Interest at appropriate rate for delayed payment of Service Tax, should not be
demanded, and recovered from them under Section 75 of the Finance Act, 1994;
Penalty should not be imposed upon them under Section 77 of the Finance Act,
1994 for failure to take registration with Service Tax Department as discussed
hereinabove.
Penalty should not be imposed upon them under Sections 76 & 78 of the Finance
Act, 1994, for contraventions mentioned in the foregoing paras.
DEFENCE REPLY FILED BY THE ASSESSEE :17
M/s Vimal Stock vide their letter dated 25.05.2011 submitted their reply to the
show cause notice. They have vide their defence reply inter alia submitted as follows:They are engaged in the business of providing tips/information related to the shares of
various companies which are traded at the National Stock Exchange and the Bombay Stock
Exchange. They have an in-house research team which does research of the companies,
which were listed on the stock exchanges, on the basis of their performance in Stock
Market. On the basis of the technical and fundamental analysis and research done by the
team they send SMS to their clients. The SMS contain details of name of company and the
price movement that they expect in the price of the shares of the respective company.
The packages offered by them were listed as under :DELIVERY
Features
10 – 12 Calls in a month will be provided
85-92% Success Ratio.
Calls during Market Hours
Long Term and Short Term calls are available.
Charges
Months
Rs.
1 Months
Rs.3,300/3 Months
Rs.8,800/6 Months
Rs.16,500/12 Months
Rs.30,800/INTRADAY
Features
Client will receive 1-2 calls in a Day.
80-91% Success Ratio.
Calls during Trading Hours only.
Calls will be provided depend on the market trends.
Calls will be provided on via sms on mobile and on messenger.
Charges
Months
Rs.
1 Months
Rs.6,600/3 Months
Rs. 17,600/6 Months
Rs. 33,000/12 Months
Rs. 60,500/-
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INTRADAY JACKPOT
Features
Client will receive 1-2 calls in a Day.
91-95% Success Ratio.
Get Calls on a mobile during Market Hours.
Most Calls are from ‘A’ group companies and big valued scripts.
Calls will be provided on via sms on mobile and on messenger
Calls depend on the market trends.
Charges
Months
1 Months
3 Months
6 Months
12 Months
Rs.
Rs.13,200/Rs. 35,200/Rs. 66,000/Rs. 1,21,000/F&O
Features
Client will receive 1-2 calls in a Day.
2 Low Risk & High Returns Call.
80-90% Success Ratio.
Short Sell Calls are also Provided.
High Risk high returns BTST Call.
Calls depend on the market trends.
Calls will be provided on via sms on mobile and on messenger
Charges
Months
Rs.
1 Months
Rs.16,500/3 Months
Rs. 44,000/6 Months
Rs. 82,500/12 Months
Rs. 1,22,200/Note: For Online tips on Messenger Extra Rs.2,000/- will be charged
NIFTY VIMAL
Features
Client will receive 3-4 calls in a Day.
Calls depend on the market trends.
2 Low Risk & High Returns Call.
80-90% Success Ratio.
Short Sell Calls will also be provided.
Calls will be provided on via sms on mobile and on messenger.
Charges
Months
Rs.
1 Months
3 Months
6 Months
12 Months
Rs. 16,500/Rs. 44,000/Rs. 82,500/Rs. 1,22,200/-
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 they denied each and every allegation contained in the show cause notice and
submitted that show cause notice was incorrect on facts and in law as well and
therefore, the same needs to be dropped forthwith.
 The services provided by them were not covered under the definition of “Banking
and other financial Services” which existed as on 1.5.2006, 1.6.2007, 16.5.2008.
They were not a banking Company or a Financial Institution or a Non -Banking
Financial company and hence were not covered by the definition of “Banking and
other Financial Services”. In this regard they submitted that the term “Banking
and other Financial Services” meant the services provided by Banking Company
or a Financial Institution including a Non-Banking Financial company or any
other Body Corporate or commercial concern. Further, the term “or any other
Body Corporate or commercial concern” as appearing in section 65(12) of the
Finance Act, 1994 had to be read ejusdem generis with the preceding words
namely banking company or a financial institution including a Non-Banking
Financial company, In other words, a body corporate or commercial concern
which is in the nature of banking or Financial Institution including a Non banking
financial institution will only be covered under taxable head of “Banking and
other financial services”. In this regard they relied on the following decisions and
circulars:
- Siddheshwari Cotton Mills Ltd v/s Union of India 1989 ( 39) ELT
498(SC)
- M/s Homa engineering works V/s CCE 2006 (1) S.T.R.19( TRI- Mumbai)
- Circular No. B/D-11/1/2000 TRU dated 09.07.2001 of Central Board of
Excise and Customs
- CBEC Circular No. 83/1/06- ST dated 04.07.2006
 The activities covered under sub clause (i) to (ix) of section 65(12) were those
which were normally undertaken by a bank. Services such as leasing, merchant
banking, purchase and sale of foreign currency , asset management , corporate
restructuring , issue of pay-orders , cheques, letter of credit, drafts , over draft
facility, bill discounting facility, are all in the nature of those services which were
provided by a bank.
 Section 65(12) seeks to define “Banking and other financial services”. Clause (a)
refers to services provided by a Banking Company, a financial institution, a non
banking financial company or any other body corporate or commercial concern.
As evident, the expression “a non-banking financial company” or “any other body
corporate or commercial concern” would refer to a non banking financial
company and a non banking financial body corporate. Thus, any other corporate
will also mean financial body corporate. Even here, the essence was that it should
be a financial body corporate, though a non banking one. The clause (a) also
essentially deals with and emphasis on financial aspect of the whole definition.
 Clause 65(12)(a)(i) referred to financial leasing including equipment leasing and
hire –purchase by a body corporate . It is a purely financial services. Even hirepurchase was a financial service. Clause (12) (a) of Section 65 refers to credit
card services. It is also undoubtedly a financial service. Merchant banking as is
evident from the Delhi Merchant Bankers Rules, 1992 is also out and out a
financial service. In principle, it deals with the issue management for companies
and acting as major consultants and advisors to issue management. Securities and
Foreign Exchange Broking is also a financial service. Asset management,
portfolio management, fund management, pension fund management, custodial
services and depository services are also financial services only. Section
65(12)(a)(vi) expressly refers to advisory and other auxiliary financial service
including investment and portfolio research and advice on mergers and
acquisitions and advice on corporate restructuring and strategy. These are also
essentially financial services. They submitted that what was practically dealt with
by Section 65(12)(a) were financial services.
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 The principal of Noscitur A Sociis would also apply in their case in as much as
the basic character of advisory and the other auxiliary financial services referred
to under Section 65(12)(a)(vi) related to financial service. They submitted that
the advisory and the other auxiliary financial services shall take colour from
investment research and advice on mergers and acquisitions and advise on
corporate restructuring and strategy. Thus the advisory and other financial service
should be with respect to advise on mergers acquisition or corporate restructuring.
In support of their contention they have relied upon the following judgements and
circulars:
- Rainbow Steels Ltd Vs .CST,(1981) 2 SCC 141
- Ahmedabad (P) Primary Teachers’ Assn v. Administrative officer (2004)
1 SCC 755
- decision of the Hon’ble SC in the case of Reserve Bank of India v.
Peerless General Finance and Investment Co. Ltd. Reported at (1987) 1
SCC 424.
- The decision of the constitution bench in the case of Godfrey Philips India
Ltd. & Anr Vs. State Of UP [2005] 39 STC 537(S.C)
- South Gujarat roofing Tiles Manufacturers Assn. v. State of Gujarat 28).
- State of U.P. v. Raja Anand Brahma Shah30.

They were not covered by the services listed at Section 65(12).
65(12) (a) (vi) read as under
The clause
(12) “Banking and other financial service” means –
(vi) Advisory and other auxiliary financial services including investment and
portfolio research and advice, advice on mergers and acquisitions and advice
on corporate restructuring and strategy;
The term advice or advisory had not been defined in the finance Act
Black’s Law Dictionary (7th edition) has defined the word ‘advice’ as under:
“Advice 1. Guidance offered by one person, esp. a lawyer, to another. SEE
ADVICE OF COUNSE 2.Notice of the drawing of a draft for goods or
services. “
Advice means “to given an opinion or counsel or recommend a plan of course
of action, also to give notice to encourage, inform or acquaint”
They were merely providing information. They were not giving any
advice to their customers. They were doing research and giving information to
their customers on the basis of their research. They were not guiding to
suggesting any course of action to their customers which was an essential
ingredient to make their action/activities an advice. They were not guiding the
customers as to what quantity of shares they could buy, when they could buy,
when could they sell the shares, etc. They submitted that the prices of share
changes constantly at the NSE and the BSE and knowing when to buy and
when to sell was most important, knowing the course of action was most
important.
 They neither provided any broking or portfolio service nor had any detail of the
shares held by their customers. They were only giving the information and doing
nothing beyond that. Thus the question of providing any investment and portfolio
research service did not arise.
 They were not engaged in any of the activities such as leasing services, credit
card services, asset management, forex broking, stated at section 65(12).Thus
they submitted that their activity was not covered by section 65(12)
17.1
They have vide their defence reply further submitted that even if they were
liable to pay any service tax on the amount received from their service receivers, the amount
received by them had to be treated as inclusive of the amount of service tax payable. In
support of this they relied on
11
-
-
the Larger Bench decision in the case of Sri Chakra Tyres reported in
1999(108) ELT 361. The said decision of the Larger Bench has been affirmed
by the Hon’ble Supreme court as the departmental appeal has been dismissed
vide Order dated 26th Feb. 2002 reported in 2002 (142) ELT A279 (SC).
CCE v. Maruti Udyog Limited reported in 2002 (49) RLT 1 (SC),
Trade Notice No. 20/2002 dated 23.5.2002 of Delhi –II Commissionerate
Explanation No.2 in section 67 of the Act by virtue of the Finance Act; 2004.
Rajmahal Hotel v CCE 2006 (4) STR 370 (Tri-Del)
Gem Star Enterprises (P) Ltd. V. CCE 2007(7) STR 342 (Tri-Bang.)
Panther Detective Services v. CCE 2006 (4) STR 116 (Tri.-Del.)
P Jani & Co. vc CST,Ahmedabad 2010 (20) STR 701
Commr. Of c. ex. &Cus., Patna vs Advantage Media Consultant 2008 (10)
S.T.R. 449(Tri-Kolkata) affirmed by SC reported at 2009 (14) S.T.R. J49
(S.C.)
17.2
As regards the issue of suppression of fact, they submitted that the allegation
of the department that they had suppressed the facts about their activities from the
Department, with an intention to evade payment of service tax, was incorrect. Hence, the
extended period of limitation cannot be invoked in the present case and the entire demand
was time barred. They had never suppressed any fact relating to the activities carried on by
them with an intention to evade payment of service tax. They were under the bona fide
belief that activities were not taxable under any of the service heads and specifically
“Banking and Other Financial Services based on the reasons mentioned above. In this
regard they submitted that the allegation that there was suppression and non disclosure of
information was completely baseless. They had always cooperated with the Department in
their proceedings and had always provided the details asked for by the Department. They
had provided all the details of payments received and activities undertaken by them. Thus,
they did not suppress any material information from the Department with an intention to
evade payment of service tax. Therefore, they had no intention to evade payment of service
tax. Any contravention by them had been solely on account of their bona fide belief that the
transaction in question did not attract service tax. The contravention if any was not with the
intention to willfully evade payment of service tax. Reliance was placed on the judgment of
Hon’ble Supreme Court in the case of Pushpam Pharmaceuticals Company v CCE reported
at 1995 (78) ELT 401(SC)
17.3
The issues raised in the SCN involves interpretation of complex provisions of
the service tax law. Therefore, in such a situation, the invocation of extended period of
limitation was not justified. They relied on the following judgments in support of the
contention that suppression cannot be alleged when the matter involves interpretation of
legal provisions:
(i)
Ispat industries Ltd. v. CCE 2006(199) ELT 509 (Trimum)
(ii)
NIRC Ltd. v. CCE 2007(209)ELT 22(Tri.-Del.)
(iii) Chemicals & Fibres of India Ltd. v. CCE 1983(33) ELT 551 (Tri.)
(iv) Singh Brothers v. CCE, Indore -2009-TIOL-189-CESTAT-DEL
(v) Homa Engineering Works V. Commissioner Of C.Ex., Mumbai –
2007 (7-STR 546(Tri- Mum)
17.4
With regard to imposition of Penalty they submitted that they were under a
bonafide that the services provided by them were not liable to service tax and cannot be
subject to service tax under “Banking and Other Financial Service” and had no intention to
evade payment of service tax. They had no intention to suppress any information from the
department or evade payment of service tax. Hence, no penalty can be imposed on them. In
support of the above view, reliance was placed on the following decisions :
i.
Hindustan Steel Ltd. v The State of Orissa reported in AIR 1970 (SC) 253.
ii.
Kellner Pharmaceuticals Ltd. v CCE, reported in 1985 (20) ELT 80.
iii.
Ispat Industries Ltd v CCE 2006(199)ELT 509(Tri.Mum)
iv.
Secretary, Town Hall Committee v CCE 2007(8)str 170 (Tri. Bang)
12
v.
vi.
vii.
viii.
ix.
CCE v Sikar Ex serviceman Welfare Co op. Society Ltd 2006(4) STR 213
(Tri.Del)
Haldia Petrochemicals Ltd v CCE 2006 (197) elt 97 (Tri. Del)
Siyaram Silk Mills Ltd v CCE 2006 (195)ELT 284 (Tri.Mumbai)
Fibre Foils Ltd v CCE 2005 (190) ELT 352 (Tri. Mumbai)
ITEL Industries P. Ltd v CCE 2004 (163) ELT 219 (Tri. Bang)
17.5
Penalty under section 78 of the act can be imposed only for reasons identical
to those required for invoking extended period of limitation however, as their was no
suppression penalty under section 78 of the act cannot be imposed.
17.6
Penalties under section 76 and 78 were mutually exclusive. Section 78 was
applicable if the non-payment of service tax was due to reasons specified therein with an
intention to evade payment of service tax. Section 76 was applicable in case other than those
covered under section 78 of the Act. Reliance was placed on the following cases:
(i)
The Financers v. CCE, Jaipur – 2007(8) STR 7 (Tri.Del)
(ii)
Commissioner of Central Excise, Ludhiana v. Pannu Property Dealer –2009(14)
S.T.R. 687 (Tri.- Del.)
(iii)
COMMISSIONOR OF C. EX., CHANDIGARH Vs CITY MOTORS, 2010(19)
S.T.R. 486 (P & H)
(iv) CCEC, Chandigarh Vs M/s Cool Tech. Corporation (Service Tax Appeal No 47
of 2010) (P & H)
(v)
C C E, Commissionerate Vs M/s FIRST FLIGHT COURIER LTD STA NO.48 of
2010 (P & H)
17.7
In the present case, there was bonafide belief on their part that their activities
were not subject to service tax and does not amount to taxable services. Therefore, there
was reasonable cause for failure, if any, on their part to pay service tax and to file service
tax return. Hence, in terms of section 80 of the act, penalties cannot be imposed under
section 76, 77 and 78 of the act. In this regards, reliance was placed on the following
judgments:
(i)
ETA Engineering Ltd. vs CCE, Chennai, 2004(174) ELT 19 (Tri.LB)
(ii)
Flyingman Air Courier P. Ltd vs CCE 2004 (170) elt 417 (Tri.Del)
(iii) Star Neon Singh vs CCE, Chandigarh, 2002 (141)ELT 770 (Tri.Del)
(iv) Avian Overseas P. Ltd vs Commissioner of Central Excise, BBSR – Final Order
No.A-103/kol/09 DATED 06.03.2009.
17.8
They prayed that the proceedings initiated in the above SCN may kindly be
dropped and an opportunity for a personal hearing be granted before a final decision was
taken in the matter.
PERSONAL HEARING:
18.
A personal hearing was granted on 27.12.2011. Shri Darshan V. Shah C.E.O.
appeared for personal hearing. He explained the issue and reiterated the reply already filed
in this case.
DISCUSSION AND FINDINGS :19.
I have carefully gone through the subject show cause notice, case records available
with this office, the submissions made by the said assessee vide their letter dated
25.5.2011 and the submissions made at the time of Personal hearing.
20.
I find that the basic issue to be decided in the present case is, whether providing of
tips/information related to the shares of various companies which are traded at the Stock
13
Exchanges to it’s clients by charging fees is a taxable service under the taxable category of
“Banking and other Financial Services” defined under Section 65(105)(zm) of the Finance
Act, 1994.
20.1 As per Section 65 (12) of the Finance Act, 1994 as amended, “ Banking and other
Financial Service” means:
(a)
the following services provided by a banking company or a financial institution including a
non-banking financial company or any other body corporate or [commercial concern]*, namely :—
(i)
financial leasing services including equipment leasing and hire-purchase;
Explanation.—For the purposes of this item, “financial leasing” means a lease
transaction where—
(i) contract for lease is entered into between parties for leasing of a specific asset;
(ii) such contract is for use and occupation of the asset by the lessee;
(iii)the lease payment is calculated so as to cover the full cost of the asset together with
the interest charges; and
(iv) the lessee is entitled to own, or has the option to own, the asset at the end of the lease
period after making the lease payment;
(ii)
Omitted
(iii) merchant banking services;
(iv)
securities and foreign exchange (forex) broking, and purchase or sale of foreign
currency, including money changing;
(v)
asset management including portfolio management, all forms of fund management,
pension fund management, custodial, depository and trust services ,
(vi)
advisory and other auxiliary financial services including investment and portfolio
research and advice, advice on mergers and acquisitions and advice on corporate
restructuring and strategy;
(vii) provision and transfer of information and data processing; and
(viii) banker to an issue services; and
(ix)
other financial services, namely, lending, issue of pay order, demand draft, cheque,
letter of credit and bill of exchange, transfer of money including telegraphic transfer,
mail transfer and electronic transfer, providing bank guarantee, overdraft facility,
bill discounting facility, safe deposit locker, safe vaults, operation of bank
accounts;”;
(b)
foreign exchange broking and purchase or sale of foreign currency including money
changing provided by a foreign exchange broker or and authorised dealer in foreign exchange or an
authorised money changer, other than those covered under sub-clause (a);
Explanation. – For the purposes of this clause, it is hereby declared that “purchase or sale of foreign
currency, including money changing” includes purchase or sale of foreign currency, whether or not
the consideration for such purchase or sale, as the case may be, is specified separately;
20.2 I find that it is the first contention of the said assessee that they are not covered under
the definition of “Banking and other Financial Services” defined under Section 65 (12) of
the Finance Act, 1994 as they are not a banking company or a financial institution or a non
banking financial company and the term “any other body corporate or commercial concern”
has to be read “ejusdem generis” which means “of the same kind or nature”.
20.3 I find that the services listed under clause (i) to (ix) of the definition under Section 65
(12) of the Finance Act, 1994 would be called as “Banking and other Financial Services”
when provided by either of the following:
i)
a Banking company,
ii)
a financial institution including a non-banking financial company,
iii)
a body corporate or
iv)
a commercial concern
20.4 On plain reading of the above definition, I find that there should be no question of
applying the principle of “ejusdem generis” in the case before me as the said assessee is a
14
“proprietary firm” which explicitly falls under the category of a “commercial concern”.
They have relied on the CBEC circular No. 83/1/06-ST dated 4.7.2006 for applying the
principle of “ejusdem generis”. I find that the said circular was issued to clarify that the
services provided by Department of Posts are not chargeable to service tax under the
category of banking and financial services as Department of Posts is not similar to a bank or
a financial institution and hence it does not fall within the category of any other similar
service provider. I find that from 1.6.2007 the words “any other person” were substituted by
the words “commercial concern” in the definition of “Banking and other Financial Services”
under Section 65 (12) of the Finance Act, 1994 as well as under Section 65 (105)(zm) of the
Finance Act, 1994. The above circular was issued on 4.7.2006 when the definitions under
the said two sections had the words “any other person” and therefore in the said circular it
was clarified that the expression “any other person” appearing in Section 65 (105)(zm) is to
be read ejusdem generis with the preceeding words. I find that the expression “any other
person” was wide enough which necessitated the application of the principle of “ejusdem
generis” but the expression “commercial concern” is more specific and leaves no scope for
application of the principle of “ejusdem generis”. There is no denying the fact that the said
assessee is a business concern providing services against receipt of some fees which are
taxable under the Act and therefore is a “commercial concern” to be included in the above
said definitions.
20.5 I further observe that “ejusdem generis (eh-youse-dem generous) adj. Latin for "of
the same kind," is used to interpret loosely written statutes. Where a law lists specific
classes of persons or things and then refers to them in general, the general statements only
apply to the same kind of persons or things specifically listed. Example: if a law refers to
automobiles, trucks, tractors, motorcycles and other motor-powered vehicles, "vehicles"
would not include airplanes, since the list was of land-based transportation”. I find that the
above definitions mention specific classes of service providers and does not refers to them
in general. Therefore, there is no application of the principle of “ejusdem generis”.
20.6 The said assessee has also relied on the judgments of Siddheshwari Cotton Mills Ltd
v/s Union of India 1989(39) ELT 498(SC) and M/s Homa Engineering works v/s CCE,
Mumbai 2007(7) STR 546 (Tri.Mumbai) wrongly referred as 2006 (1) S.T.R.19( TRIMumbai), for application of the principle of “ejusdem generis”. I find that in the first cited
judgment there was a question of whether the process of calendaring was includible in the
expression ‘any other process’ referred to in Section 2(f)(v) of CESA, 1944 whereas, in the
second cited case the activity of ship repair was not specifically mentioned in Section 42(e)
of the Major Port Trust Act and Revenue has sought to bring the same under the clause “or
any other services in respect of vessels”. The facts of this case being different, the ratio of
the relied upon judgments cannot be applied in the case before me.
20.7 The said assessee’s reliance on the CBEC Instruction Letter F. No.B11/1/2001-TRU,
dated 9.7.2001 is also misplaced as the said instruction was issued prior to 1.6.2007 when
the definition of “Banking and other Financial Services” under Section 65 (12) of the
Finance Act, 1994 as well as under Section 65 (105)(zm) of the Finance Act, 1994
contained the expression “any other person” which were substituted by the words
“commercial concern” w.e.f 1.6.2007. Therefore, it was clarified in the said instruction that
individuals, proprietorship or partnership firms will not come under the service tax net as
“Body Corporate” means a private limited, public limited or a Government Company which
should be either a Banking company or a financial institution or a non-banking financial
company to come under the tax net.
20.8 Second contention of the said assessee is that the activities covered under clause (i)
to (ix) of the definition of “Banking and other Financial Services” defined under Section 65
(12) of the Finance Act, 1994 are in the nature of financial services normally undertaken by
the bank and since they are not engaged in providing any financial services, they do not get
covered under Section 65 (12)(a)(vi) of the Finance Act, 1994 which refers to the ‘advisory
and other auxiliary financial services’.
15
20.9 The details of the various Services provided by the said assessee which have been
taken from their site http://www.vimalstocks.com/ are as follows:
 Providing strong recommendations in the Indian stock market from technical analysis
based tips providing team which uses various studies like Day and Swing Trading,
Fibonacci, Candlesticks, our own Trading Signals, Gann and Elliot Theories, Moving
Averages, Momentum Oscillators, Sentiment and volume indicators, Trend reversal
patters. Technical Analysis is the study of market action, primarily through the use of
charts, for the purpose of forecasting future trends. It is an art of identifying trend
changes at an early stage and to maintain an investment posture until the weight of
evidence indicates that trend has reversed. Technical Analysis is the science of
recording, in geographical form, the actual history of trading in a certain stock or in
the averages and then deducing from that pictured history the probable future trend.
The basic assumptions underlying a technical analysis are
- Market Value is determined solely by interaction of demand and supply.
- Demand and Supply are governed by numerous factors, both rational and
irrational.
- Ignoring minor fluctuations in the market, stock prices tend to move in trends
which persist for an appreciable length of time.
- Changes in trend are caused by shifts in demand and supply.
- Shift in demand and supply, no matter they occur can be detected sooner or
later in charts of market action.
- Some chart patterns tend to repeat themselves.
 Providing multitude of product to suit all kind of players in Indian stock market
namely Intraday, F&O, Jackpot calls, Delivery, Nifty which aids traders to trade in
specified stocks through SMS and messenger.
20.10 The said assessee depending on the type and duration of services to be provided by
them to their clients, fixed different rates for every plan offered by them. I find that one of
the features of these plans offered by the said assessee was “Success Ratio”. I find that it is
also the submission of the said assessee that on the basis of the technical and fundamental
analysis done by their in-house research team, they provide tips/information to their clients.
I find that such tips/information backed up by a “Success Ratio” on the matters of
investment in shares listed at stock- exchanges is nothing but advice/consultancy.
20.11 I find that the said assessee even though does not undertake any business of
sale/purchase of shares, but their role is advisory in nature and the service of providing
tips/information related to shares of various companies which are traded on the stockexchanges is basically in the nature of advice/consultancy and squarely gets covered under
Section 65 (12)(a)(vi) of the Finance Act, 1994. The said sub-clause is inclusive in nature
and any service which is advisory or auxiliary financial service is taxable under the said
sub-clause.
20.12 I have already discussed above that the principle of “ejusdem generis” has no
application in the present case and therefore, I do not find it necessary to repeat the same.
The said assessee has also requested for application of the principle of “noscitur a sociis”
which in ‘Latin’ means a rule of interpretation that states that the meaning of unclear
language in a contract or other legal document should be construed in light of the language
surrounding it. I further find that it is rule of language used by the courts to help interpret
legislation, under which questionable meaning of a doubtful word can be derived from its
association with other words. In the case before me, this principle has no applicability as
there are four types of service providers specifically mentioned in Section 65 (12) of the
Finance Act, 1994 and no generic term has been used. Further, the services provided by the
said assessee clearly fall under Section 65 (12)(a)(vi) of the Finance Act, 1994 and there is
nothing unclear, questionable or doubtful about the wordings or the language of the
definition which may necessitate interpretation on the basis of the surrounding words.
20.13 Now, I look into the said assesseee’s contention that in case service tax is to be
levied, it should be levied on cum tax value of the services and not on the entire value.
16
Contesting the value taken for the purpose of Service tax it is submitted by the said assessee
that the Show Cause Notice is bad in law in as much as it has not considered and extended
the benefit of cum tax value. In this regard they placed reliance on the following
judgments:(1) Maruti Udyog Limited reported in 2002 (141) ELT 3 (SC).
(2) Sri Chakra Tyres reported in 1999(108) ELT 361
(3) Rajmahal Hotel V/s CCE reported in 2006(4) STR 370(Tri.-Del)
(4) Gemstar Enterprises Pvt Ltd V/s CCE reported in 2007(7) STR 342.
(5) Panther Detective Services V/s. CCE reported in 2006(4) STR 116(Tri.-Del)
(6) P. Jani & Co. v/s CST, Ahmedabad 2010(20) STR 701
(7)
Commr. of C.Ex & Cus. Patna v/s Advantage Media Consultant 2008(14)
STR 449 (Tri.Kolkata) affirmed by SC reported at 2009(14) STR J49(SC)
20.14
I observe that in the case before me the said assessee is liable to pay service
tax on the amount collected by them from their clients under the taxable category of
“Banking and other Financial Service” as defined in Section 65(105)(zm) of the Finance
Act, 1994 read with Section 65(12) of the Finance Act, 1994. It was the assessee’s belief
that no service tax was leviable on such amounts received by them, therefore, they could not
have included the service tax in the gross amount received by them from their various
clients. I also find that there is no evidence on record to show that the said assessee issued
any invoices specifically indicating that the gross amount charged included the amount of
service tax. Therefore, the ratio of case laws relied upon by the said assessee can not be
applied in the case before me.
20.15
I place reliance on the judgment of M/s Shakti Motors reported at 2008(12)
STR 710(Tri. Ahmd.) wherein, it has been observed as under:
“I am unable to agree with the advocate that the amount realized has to be treated as
cum-tax value in view of the provision of Section 67(2) of Finance Act, 1994, which
is reproduced below for ready reference:“Section 67(2). Where the gross amount charged by a service provider, for the
service provided or to be provided is inclusive of service tax payable, the value of
such taxable service shall be such amount as, with the addition of tax payable, is
equal to the gross amount charged”.
In terms of the above provision if the invoice does not specifically say that the gross
amount charged includes service tax, it cannot be treated as cum-service tax price.
Therefore, in the absence of any evidence to show that invoices had indeed been
prepared in this manner, cun-tax value benefit cannot be extended.”
20.16 Accordingly, I find that claim made by the said assessee in this regard is not correct
and hold that benefit of Cum-Tax value is not allowable to the assessee.
20.17 In view of the above discussions, I hold that the services of providing advisory
services related to investment of shares listed at various stock exchanges to the clients by
the said assessee are appropriately classifiable under the taxable category of “Banking and
other Financial Service” as defined in Section 65(105)(zm) of the Finance Act, 1994 read
with Section 65(12) of the Finance Act, 1994. Accordingly, I find that service tax of Rs.
57,92,817/- on the income of Rs 7,17,600/- for the Year 2006-07, Rs 1,10,77,002.00 for the
Year 2007-08, Rs 3,22,86,488/- for the Year 2008-09 and Rs 33,51,,993/- for the Year
2009-10 earned and collected by the said assessee is recoverable from them under proviso to
Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.
21.
I observe that so far as ‘suppression of facts’ is concerned, the phrase implies that
withholding of information is suppression of facts. P. Ramanatha Aiyar’s Concise Law
17
Dictionary [1997 Edition Reprint 2003 – page 822] defines the phrase lucidly and
accurately as – Where there is an obligation to speak, a failure to speak will constitute the
“suppression of fact” but where there is no obligation to speak, silence cannot be termed
“suppression”. It is manifestly clear from this that intention to evade payment of duty is
implied in the suppression of facts. Since the said assessee was liable to self assess the
liability to pay service tax, they had an obligation to furnish the correct and complete
information and the value of services whether taxable or otherwise.
21.1 It is needless to recapitulate that the present show cause notice has arisen out of the
investigation conducted by the DGCEI, Ahmedabad Zonal unit. Had they not taken up
investigations in the case, the evasion of service tax under the category of “Banking and
other Financial Service”would have remained unnoticed. Therefore, this is a case of
improper assessment amounting to deliberate non-declaration and suppression of vital
information with a willful intention to evade payment of service tax. Accordingly, the
invoking of extended period under proviso to Section 73(1) of the Act in the case before me
is fully justified.
21.2 I find that in the present system of self-assessment, documents like invoices and
other transaction details are not supplied to the Department. Moreover, the said assessee did
not furnish the required details of receipt of the amount received by them from their clients
for providing advisory services related to shares listed at various stock exchanges either by
filing ST-3 returns and showing it as taxable value or in any other way to the Department.
Since, they even did not consult the Department in case of any doubt, the intention will have
to be believed as that of evasion. Once the details are not submitted to the Department, misdeclaration or suppression is rightly invoked. I, therefore, conclude that the element of
suppression with intent to evade payment of service tax is conspicuous by the peculiar facts
and circumstances of the case as discussed above and, therefore, the extended period of
limitation under Section 73(1) of the Finance Act, 1994 is rightly invokable for recovery of
service tax demanded in the impugned show cause notice. In view of the above discussion
and findings, the ratio of cases relied upon by the said assessee can not be applied in the
case before me.
22.
the Act.
I now take up the issue of imposition of penalty under section 76, 77 and 78 of
23.
In view of the above findings, I hold that the said assessee has suppressed the
facts with intention to evade payment of service tax. Thus penalty under Section 78 is
mandatorily imposable as has been held by the Apex court in the case of Dharmendra
Textile Mills Ltd-2008 (231) ELT 3 (SC) and Rajasthan Spinning & Weaving Mills Ltd2009 (238) ELT 3 (SC). Therefore, penalty is imposable on the said assesee under Section
78 of the Finance Act, 1994. In view of the above discussion the ratio of the judgments
relied upon by the said assessee can not be applied in this case.
23.1
As regards the issue of imposition of penalty under Section 76 of the Finance
Act, 1994, I observe that penalty under Section 76 and 78 of the Finance Act, 1994 are
mutually exclusive w.e.f. 10.05.2008 and once penalty under Section 78 is imposed, no
penalty under Section 76 can be imposed in terms of the proviso inserted in Section 78 w.e.f
10.5.2008 in this regard. Therefore, no penalty under Section 76 is imposable for the period
from 10.5.2008 onwards. In the case before me, the demand of service tax under the
category of “Banking and other Financial Service” is for the period from 1.4.2006 to
30.9.2010 therefore, I hold that penalty under Section 76 of the said Act is not imposable
on the said assessee for the period from 10.5.2008 onwards. However, for the period upto
9.5.2008, as the said assessee has not paid service tax within the stipulated time period as
prescribed under Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax
Rules, 1994, I hold them liable to penalty under Section 76 of the Finance Act, 1994.
23.2
As regards imposition of penalty under Section 77 of the Finance Act, 1994, I
observe that as discussed above the said assessee was liable to pay service tax under the
18
taxable service category of “Banking and other Financial Service” as provider of service,
but they failed to obtain registration as required under Section 69 of the Finance Act, 1994
read with Rule 4 of the Service Tax Rules, 1994. The said assessee had provided the
services under the above said category prior to obtaining the service tax registration in the
said category. They have also failed to file the ST-3 returns in due time as required under
Section 70 read with Rule 7 of the Service Tax Rules, 1994. The said contraventions have
made the said assessee liable to penalty under Section 77(1) (a) of the Finance Act, 1994.
23.3
As regards their contention for invoking Section 80 of the Finance Act, 1994
for waiver of penalty, I find that the said assessee has not produced any reasonable cause for
the failure to pay service tax except that it was their bonafide belief that service tax was not
payable by them and it was an interpretational issue. I have already discussed the issue of
classification and taxability under the category of “Banking and other Financial Service”. I
observe that if the said assessee had any doubt with regard to the classification or taxability,
of the services provided by them, then they should have approached the service tax
authorities for clarification of doubt to ascertain the classification and taxability of the
service provided by them. Therefore, I consider it appropriate to hold the said assessee
liable to penalty under Section 76, 77 and 78 of the Finance Act, 1994. In view of the above
discussion and findings, the ratio of cases relied upon by the said assessee can not be
applied in the case before me.
24.
In view of the foregoing discussion, I pass the following order:
ORDER
(i)
I order to classify the services of providing advisory services to the clients by the
said assessee under the taxable category of “Banking and other Financial Service”
as defined in Section 65(105)(zm) of the Finance Act, 1994 read with Section
65(12) of the Finance Act, 1994;
(ii)
I confirm the demand of service tax of Rs. 57,92,817/- (Rupees Fifty Seven lakh
ninety two thousand eight hundred and seventeen only ), (Service tax of Rs.
56,24,930/-, Education Cess of Rs. 1,12,499/- and Secondary and Higher
Education Cess of Rs. 55,388/- ) for the period from 1.4.2006 to 30.9.2010, as
detailed in Annexure-A to the show cause notice under the category of “Banking
and other Financial Service” under Section 73(2) of the Finance Act, 1994 and
order to recover the same from the said assessee under proviso to Section 73(1) of
the Finance Act, 1994;
(iii)
I order to recover interest on the above confirmed demand of Rs. 57,92,817/(Rupees Fifty Seven lakh ninety two thousand eight hundred and seventeen only
), at the prescribed rate from the said assessee under Section 75 of the Finance
Act, 1994;
(iv)
I impose penalty of Rs.200/- (Rupees Two hundred only) per day for the period
during which failure to pay the tax continued, upon the said assessee under
Section 76 of the Finance Act, 1994, for the period upto 17.4.2006;
I impose penalty of Rs.200/- (Rupees Two hundred only) per day for the period
during which failure to pay the tax continued, or at the rate of 2% of such tax, per
month, whichever is higher, starting with the first day i.e. 18.4.2006 after the due
date till the date of actual payment of the outstanding amount of service tax upon
the said assessee under Section 76 of the Finance Act, 1994, for the period from
18.4.2006 to 9.5.2008;
provided that the amount of penalty payable in terms of this section shall not
exceed the service tax payable by the said assessee for the period from 1.4.2006
to 9.5.2008;
(v)
I impose penalty of Rs. 57,92,817/- (Rupees Fifty Seven lakh ninety two
19
thousand eight hundred and seventeen only ), on the said assessee under section
78 of the Finance Act, 1994. In the event of the said assessee opting to pay the
amount of service tax along with all other dues as confirmed and ordered to be
recovered, within thirty days from the date of communication of this order, the
amount of penalty liable to be paid by them under Section 78 of the Finance Act,
1994 shall be 25% of the said amount. However, the benefit of reduced penalty
shall be available only if the amount of penalty is also paid within the period of
thirty days from the communication of this order, otherwise full penalty shall be
paid as imposed in the above order;
(vi)
I impose penalty under Section 77(1)(a) on the said assessee who shall be liable
to pay a penalty which may extend to five thousand rupees or two hundred rupees
for every day during which such failure continues, whichever is higher, starting
with the first day after the due date, till the date of actual compliance as required
under Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax
Rules, 1994.
-SD/- 31.1.2012
( A.K.Gupta )
Commissioner,
Service Tax,
Ahmedabad
BY R.P.A.D.
F. No. STC/4-130/DGCEI-O&A/10-11
Date: 31-01-2012
To
M/s. Vimal Stocks,
2nd Floor, 201, Parth Milan Avenue,
Opp. Forever Jewellers, Near Hotel Nest,
Off. C.G. Road, Navrangpura,
Ahmedabad.
Copy to:
1.
2.
3.
4.
The Chief Commissioner, Central Excise and Service Tax,
Ahmedabad Zone, Ahmedabad.
The Deputy/Assistant Commissioner, Service Tax, Division-III,
Ahmedabad.
The Superintendent of Service Tax, Range-XIII, Division-III,
Ahmedabad.
Guard File.