Gujarat High Court
M Ibrahim Ansari vs Additional Commmissioner on 23 January, 2020
Author: J. B. Pardiwala
Bench: J.B.Pardiwala, Bhargav D. Karia
C/SCA/3491/2019 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 3491 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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M IBRAHIM ANSARI
Versus
ADDITIONAL COMMMISSIONER & 2 other(s)
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Appearance:
MR SAURABH M PATEL(5019) for the Petitioner(s) No. 1
NOTICE SERVED(4) for the Respondent(s) No. 2,3
VIRAL K SHAH(5210) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 23/01/2020
ORAL JUDGMENT
Page 1 of 27
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C/SCA/3491/2019 JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has prayed for the following reliefs :
"A. Admit and allow this petition;
B. Issue a writ of mandamus and/or writ of certiorari, and/or any other writ, order or direction, quashing and setting aside the impugned order dated 27.09.2016 passed by respondent no.1Additional Commissioner, Central Excise, Customs and Service Tax, Bharuch, as well as any other proceedings, if any, initiated pursuant to the impugned order;
C. Pending Admission hearing and final disposal of this petition, this Hon'ble Court may be pleased to stay the execution, operation and implementation of the impugned order dated 27.09.2016 passed by respondent no.1 Additional Commissioner, Central Excise and Service Tax, Bharuch D. This Hon'ble Court may be pleased to grant ex parte ad interim relief in terms of para 9(C).
E. This Hon'ble Court may be further pleased to pass such other orders that may be just and necessary in the facts and circumstances of the case in favour of the petitioners."
2. This Court passed the following order on 10th April, 2019 :
"1. The learned advocate for the petitioner has tendered an affidavit in support of the petition by the petitioner. The same is taken on record.
2. In this petition, the petitioner challenges the orderin original dated 27.9.2016 passed by the Additional Commissioner, Central Excise, Customs and Service Tax, Bharuch. It appears that since it is not possible for the Page 2 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT petitioner to file an appeal under the relevant statutory provision before the first appellate authority, the petitioner has resorted to filing the present writ petition under Article 226 of the Constitution of India on the ground that it was not possible for him to prefer the statutory appeal within the prescribed period of limitation on account of the fact that he was suffering from various serious ailments.
3. In view of the above, Issue Notice to the respondents returnable on 12th June, 2019, to consider the question of maintainability of the writ petition under Article 226 of the Constitution of India."
3. The short facts of the case are that the petitioner who is stated to be an illiterate person is carrying the activities of "manpower supplies" to various companies including companies located in the Special Economic Zone ("SEZ" for short) area.
4. The petitioner was issued a show cause notice dated 20th October, 2015 by the respondent no.1 - Additional Commissioner, Central Excise, Customs and Service Tax, Bharuch Commissionerate demanding the service tax to the tune of Rs. 31,84,804/ in respect of the taxable amount received by the petitioner in consideration of his services rendered to his clients during the period between 20102011 to 20142015. Pursuant to such notice, statement of the petitioner was recorded under section 14 of the Central Excise Act, 1944 ("Act1944" for short) read with section 83 of the Finance Act, 1994 ("Act1994" for short).
5. It is the case of the petitioner that the impugned order dated 27th September, 2016 came to be passed by the Page 3 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT respondent no.1 in absence of any reply or any evidence being produced by the petitioner. It is the case of the petitioner that due to prolonged illness since 2015 and due to hospitalization during the period between 2016 to 2017, the appeal could not be filed by the petitioner within the prescribed time limit as per the relevant statutory provisions. It is the case of the petitioner that the impugned order was passed on 27th September, 2016 and there was a delay of 405 days up to 30th April, 2018 in filing the appeal.
6. It is the case of the petitioner that the petitioner received letters dated 15th February, 2018 and 15th March, 2018 from Range Superintendents confirming the payment of service tax demand. The petitioner thereafter, after getting appropriate advice from the legal consultant has approached this Court invoking writ jurisdiction under Articles 226 and 227 of the Constitution of India.
7. Learned advocate Mr. Saurabh M. Patel appearing for the petitioner submitted that the petitioner could not challenge the impugned order passed by the respondent no.1 appellate authority within the prescribed period of limitation due to the prolonged illness of the petitioner as he was confined to the hospital. It was submitted that when the petitioner came back from the hospital, it was brought to his knowledge that the letters dated 15th February, 2018 and 15th March, 2018 from the respondent no.3 were received and immediately the petitioner Page 4 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT personally contacted the Range Superintendent and obtained the copies of show cause notice dated 20th October, 2015 and the impugned order dated 27th September, 2016.
7.1) Learned advocate Mr. Patel relied upon the decision of Full Bench of this Court in case of Panoli Intermediates (India) Pvt ltd v/s. Union of India reported in 2015(2) GLR 1395, wherein this Court has held that the writ petition under Article 226 of the Constitution of India can be preferred challenging the order passed by the original adjudicating authority in following three circumstances :
"(3) On the third question, the answer is in affirmative, but with the clarification that A) The petition under Article 226 of the Constitution can be preferred for challenging the order passed by the original adjudicating authority in following circumstances that A.1) The authority has passed the order without jurisdiction and by assuming jurisdiction which there exist none, or A.2) Has exercised the power in excess of the jurisdiction and by overstepping or crossing the limits of jurisdiction, or A.3) Has acted in flagrant disregard to law or rules or procedure or acted in violation of principles of natural justice where no procedure is specified.
B) Resultantly, there is failure of justice or it has Page 5 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT resulted into gross injustice.
We may also sum up by saying that the power is there even in aforesaid circumstances, but the exercise is discretionary which will be governed solely by the dictates of the judicial conscience enriched by judicial experience and practical wisdom of the judge."
7.2) It was therefore, submitted that as the respondent no.1 has exercised the power by passing the impugned order in excess of jurisdiction and by overstepping the limits of jurisdiction, the present writ application is maintainable.
7.3) On merits, Mr. Patel would submit that the respondent no.1 did not consider the legal provision of service tax that the petitioner was not liable to pay service tax as he had provided services to SEZ client in SEZ area and as such the services provided by the petitioner was exempted from payment of the service tax. It was further submitted that the liability of the petitioner to pay the service tax was only 25% of the taxable value of the services for the period from 1st July, 2012 to 31st March, 2015 and with effect from 1st April, 2015, it was 0%.
7.4) Learned advocate Mr. Patel submitted that by the impugned order, the respondent no.1 has demanded 100% service tax under the taxable service of "Manpower Recruitment & Supply Agency's Services" from the petitioner and on the services provided to clients located in SEZ area which were exempted from service tax under Page 6 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT notification no.4/2004ST dated 31st March, 2004. He referred to section 26 of the Special Economic Zone Act 2005 ("SEZ Act" for short) to contend that the service tax liability of the petitioner was incorrectly calculated and confirmed by the respondent no.1.
7.5) Learned advocate for the petitioner also relied upon the documents showing the medical treatment taken by the petitioner filed along with the additional affidavit by the petitioner to point out that the petitioner was undergoing various medical tests and was detected with infection in lungs where septic formation was found and thereafter, the petitioner was under medical supervision in the hospital from 4th July, 2016 to 12th July, 2016 and the petitioner was advised to take further treatment. It was submitted that because of the lung infection, kidneys and liver of the petitioner were severely affected and it was difficult for the petitioner to work and he had to take complete rest and due to ill health of the petitioner in the year 20162017, the petitioner could not attend his regular work and because of such facts, the petitioner could not challenge the impugned order before the appellate authority and has preferred this petition.
8. On the other hand, learned advocate Mr. Viral Shah appearing for the respondent vehemently opposed the petition and submitted that the petitioner has not stated true and correct facts. He relied upon the averments made in the affidavit in reply filed on behalf of respondent nos. 1 Page 7 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT to 3, by Commissioner of Central Goods and Service Tax and Central Excise VadodaraII. According to Mr. Shah the petitioner was engaged in providing taxable services under the category of "Manpower Recruitment and Supply Agency" as defined under section 65(68) of the Act1994 with effect from 7th July, 1997 and thereafter, the said service was renamed as "Manpower Recruitment and Supply Agency Service" as defined under section 65(105)(k) of the Act1994 with effect from 16th June, 2005. The petitioner was registered for payment of the service tax but did not deposit the service tax properly and on receipt of such information, an inquiry was initiated by the competent authority. Mr. Shah referred to and relied upon the statement of the petitioner recorded on 14th October, 2015 under section 14 of the Act1944 as made applicable to the service tax matters vide section 83 of the Act 1994 by the Superintendent of Central Excise and Service Tax, Bharuch Commissionerate, wherein the petitioner has stated and admitted that he was liable to pay the service tax on the man power supply services and he had issued the bills with service tax against the services provided to various companies situated at Dahej except to the companies which were situated or to whom services were provided were situated in SEZ Dahej. It was also admitted by the petitioner in the statement that he had charged service tax on 25% of the service amount of value of the services rendered by him for the man power supply and he had not filed returns in Form ST3 nor paid any amount of service tax to the Government because of the weak Page 8 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT financial condition, inspite of the fact that he was committing an offence under the service tax law and he was ready to pay the outstanding service tax to the Government at the earliest.
8.1) Mr. Shah therefore, submitted that the petitioner has not complied with the provisions of the Service Tax and therefore, the petition is liable to be dismissed only on this count.
8.2) With regard to the contention raised on behalf of the petitioner that the services provided by the petitioner to unit falling in SEZ is exempt, the learned advocate for the respondent submitted that such exemption is subject to the conditions laid down under the notification no. 17/2011 dated 1st March, 2011 which was replaced by notification no. 12/2013 dated 1st July, 2013. Notification no. 17/2011 dated 1st March, 2011 provides that the SEZ unit or the developer has to provide a copy of authorization issued by the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise of provider of service and only on the basis of such authorization, the service provider is required to provide the specified services to the SEZ unit or the developer without payment of the service tax.
8.3) It was pointed out that during the investigation, it was found that the petitioner has not submitted any documentary evidence or authorization received from SEZ Page 9 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT unit for the services provided in SEZ and therefore, the petitioner was not entitled to exemption from payment of the service tax. It was also pointed out that the petitioner did not file any statutory returns claiming the exemption from payment of service tax during the period from 2012 to 2015.
8.4) Learned advocate Mr. Shah invited the attention of the Court to the fact that the petitioner did not respond to any of the show cause notices issued by the competent authority and thereafter order in original dated 27th September, 2016 was passed by raising demand amounting to Rs. 31,84,804/ together with penalty and interest under the provisions of the Act1944.
8.5) With regard to service of show cause notice and subsequent opportunity given to the petitioner, learned advocate Mr. Shah relied upon the following averments made in the affidavit in reply which are not controverted by the petitioner :
"15. Further, it is to submit that the Show Cause Notice was issued to the Petitioner and the same was duly acknowledged by himself on 20.10.2015 and as per para 16 of the Notice. the Petitioner was specifically requested to show cause within 30 days of receipt of the notice and if no cause is shown or if they do not appear before the Adjudicating Authority, when case is posted for hearing, the case would be liable to be adjudicated, exparte, on the basis of evidences available on records without any further communication to them. The Petitioner had not submitted any defence reply in response to the Show Cause Notice dated 20.10.2015. The Adjudicating Authority has initiated the adjudication proceeding after five months by way of personal hearing on 28/29/30.3.2016, 25/26/27.04.2016 Page 10 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT and 25./26.07.2016 and the Petitioner has not responded or present before the Adjudicating Authority for the personal hearing. Therefore, the Adjudicating Authority has decided the issue on the basis of the records available before/with him.
16. Further, as per the Medical Certificate issued by Dr. A.D. Chauhan and Aanvi Endoscopy and Surgery Centre. Bharuch, medical treatment for illness has started from 29.01.2016. In other words, that the Petitioner was not hospitalised or not undergoing any treatment prior to the period of 29.01.2016. As per the Show Cause Notice, the Petitioner was supposed to fnle the defence reply during this period. It clearly shows that Petitioner's indifference to follow the procedures laid down by the Law of the land. Irrespective of the facts that he had obtained Service Tax registration and provided taxable supplies to various customers and issued taxable bills which shows taxable value and service tax amount and also collected service tax from their customers/clients and kept the tax amount in his pocket to enrich himself at the cost of the Govt. revenue. Further, the Petitioner had not filed ST3 returns within the stipulated time period as required under Rule 7 of the Service Tax Rules, 1994 during the period of April 2010 to March 2015. Now, the Jurisdictional Range Officer has initiated recovery proceedings of confirmed arrears, the Petitioner has filed the present petition to escape from the payment of Service Tax. Therefore, it appears that submissions of the Petitioner have no face value and legality and the same may be rejected abinitio."
In view of the above undisputed facts, it was submitted that the petition is liable to be dismissed.
8.6) Learned advocate Mr. Shah further pointed out that the adjudicating authority has levied the service tax only on 25% of the service taxable value during the period from July 2012 to March, 2015. It was therefore, submitted that the contention of the petitioner that 100% service taxable Page 11 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT value was subject to levy from 2012 to 2015 is not true and correct. Attention was invited to the show cause notice dated 20th October, 2015 issued by respondent authority wherein calculation for service tax is made at the rate of 3.09% i.e. 25% of the service tax rate of 12.36% prevailing at the relevant time.
8.7) With regard to contention of exemption from payment of service tax provided by the petitioner to the SEZ unit, it was submitted that the exemption from payment of service tax is granted subject to certain conditions prior to 2011 and prior to 2011 notification no. 9/2009 dated 3rd March, 2009 was in force and accordingly exemption from payment of service tax to the developer of units of SEZ was provided by way of refund of service tax paid on specified services received for the authorized operation of SEZ and the developer of SEZ unit has to file refund claim to the jurisdictional authority. It was therefore, submitted that during the period from March 2009 to February 2011, the service provider of the SEZ unit and developer of SEZ has to claim refund of the service tax paid on the service of authorised service provider of SEZ. Learned advocate however, submitted that the petitioner did not deposit the service tax with the Government and therefore, the contention of the petitioner with regard to exemption of the service tax contrary to the various notifications cannot be accepted.
8.8) Mr. Shah further relied upon the decision of the Page 12 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT
Supreme Court in case of Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal reported in 2010 (260) ELT 3 (SC) wherein the Apex Court has held as under :
"22. The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave (1996) 2 SCR 253, held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption."
8.9) Relying upon the aforesaid decision, it was submitted that the adjudicating authority has rightly confirmed the service tax liability on the petitioner after following all the procedures laid down under the Act1994, whereas on the Page 13 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT other hand the petitioner has failed to comply with the procedure and inspite of collecting the service tax amount from the customers and client did not deposit the same in the Government account. In such circumstances, it was prayed that the petition is required to be rejected.
9. Having heard the learned advocates for the respective parties and having gone through the materials on record, it emerges from the record that the petitioner was registered under section 69 pursuant to the Act1994 for providing "Man Power Recruitment and Supply Agency Services". However the petitioner did not file the return in Form ST3 and did not deposit the service tax collected by him from his clients. It was also found by the adjudicating authority on scrutiny of the documents submitted and verified during investigation that the petitioner did not correctly declare his total service amount and purposefully concealed the income from service provided by him. The petitioner also did not furnish service invoice party wise ledge or balance sheet during the investigation and therefore, the adjudicating authority was required to rely upon only tax statement under section 203AA of the Income Tax Act, 1961 i.e. Form 26AS for the period under investigation to find out the actual taxable amount out of the total service income of the petitioner.
10. The petitioner has admitted in the statement recorded under section 14 of the Act 1944 as applicable to service tax law that he did not account the amount of service Page 14 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT provided to various customers during the financial year 20102011 to 20142015 for his service tax liability resulting into evasion of service tax. In view of such findings of the fact available on record the adjudicating authority calculated the service tax liability amounting to Rs. 31,84,804/ by observing as under :
"DISCUSSION AND FINDINGS:
16. I have carefully gone through the details given in the show cause notice and other case records. I find that the assessee has neither replied to the show cause notice nor has appeared for the personal hearing on the stipulated dates. This shows that the assessee not interested in defending their case and hence I have no option but to decide the case on merits exparte, on the basis of evidences available on records.
17. I find that M/s Macos Enterprises is a proprietorship concern engaged in providing taxable services under the category of 'Manpower Recruitment and Supply Agency and Sh. Manager Ibrahim Ansari is the proprietor of the said concern. The said services are taxable services in terms of Section 65 (105) (k) of the Finance Act, 1994 and the assessee has obtained Service Tax Registration No ABYPA6656RST001 for the same with the registered addressee as Sanjaysinh Dolatsinh Waghela, at & Post, Dahej, Vaghra, Dahej, Bharuch, Gujarat392130 17.1 I find that Information was obtained to the effect that the assessee was providing services of 'Manpower Recruitment and Supply Agency' but was not paying Service Tax on the same. Based on above information, an enquiry was initiated by the Preventive Section, Bharuch.
During preliminary enquiry it was found that the registered address of the assessee was 'nonexisting and it was now operating from residence address ie., A24, Laxminagar, Nr. Welfare Hospital, Dahej by pass road, Bharuch, Gujarat392001 and therefore letters were Page 15 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT issued to the assessee on the new operative address to provide details of business and produce documents related to its services. However despite several summons, the assessee failed to provide any document) except Annual Tax Statements under Section 203AA of the Income Tax Act,1961 in form 26AS.
17.2 A Statement of Sh. Manager Ibrahim Ansari (Proprietor: M/s Macos Enterprises] was recorded on 14.10.2015 under Section 14 of the Central Excise Act, 1944 as made applicable to service Tax matters vide Section 83 of the Finance Act, 1994 by the Superintendent of Central Excise & Service Tax, Bharuch in which he, interaiia, stated that he had provided manpower supply services to many companies situated in Dahej, vi2., M/s Hindaico Industries, M/s Videocon, M/s Samsung Engg. Co. Ltd., M/s IVCRL Ltd.,M/s Essar Projects and M/s Afcon Infra etc., during the period 201011 to 201415 and he had issued bills with Service tax against the services provided to all these firms except to ones which were situated or provided services in SEZ, Dahej. He confirmed that he had issued service bills to all his clients and received payment against the same. On being asked he further stated that he was not in position to produce the said bills as they were making only one copy of the bill which were deposited in the clients office. He further stated that the amounts of services provided by them could be gathered from the Form 26AS of the Income tax department according to which his total Service Income from April 2010 to March 2015 was as under:
Year Service Amount
as per 26AS
201011 11470499
201112 15802307
201213 12679383
201314 3199570
201415 2534689
Total 4,56,86,448/
He further stated that the above mentioned received Page 16 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT amount against services also included services of manpower supply in some units at SEZ, Dahej area or Contractors providing services in units of SEZ, Dahej and hence no service tax was being charged in service invoices of such Units as (1) M/s Samsun Engg. Co. Ltd. (2) M/s IVRCL Ltd. (3) M/s Femas Construction and (4) M/s Afcon Infra. Ltd. He stated that all thesefirms were working in OPAL area of ONGC and he had been given subcontract of 'manpower supply service and he had neither charged any Service tax in the invoices issued to these firms nor these firms had given any Service tax to them. He further stated that after June 2012 they had always charged Service tax on 25% of the service amount and had received payment accordingly. He further confirmed that they had neither filed any ST3 return against their services nor had paid any amount of service tax to Government. He stated that the default was due to their poor financial condition although he was aware that doing so was an offence in view of Service tax law. He further accepted his offence and showed his readiness to pay the outstanding tax to the Govt. as soon as possible.
17.3 I find that the only submitted and available during investigation were the Annual Tax Statements under section 203AA of the Income Tax Act, 1961 ie, FORM 26AS Scrutiny of the same revealed that the assessee had provided services to M/s. Hindalco Industries Ltd., M/s Samsung Engg. Co. Ltd., M/s IVRCL Ltd., M/s Fernas Construction Ind. Pvt. Ltd., M/s Essar projects Ltd M/s VRS Construction India Pvt. Ltd. and M/s. Afcons lnfrastructure Ltd.
17.4 I find that the assessee had not filed any ST3 returns nor had produced copies of the Balance Sheets or Service invoices during the investigation. Therefore, the only source to know the actual service amount is the income appearing in Annual Tax Statements under Section 203AA of the Income tax, 1961 in Form 26AS. I further find that in his statement dtd.14.10.2015, Shri Manager Ibrahim Ansari [Proprietor M/s Macos Enterprises] has deposed that some clients M/s Samsun Engg. Co. Ltd., M/s IVRCL Ltd., M/s Fernas Construction and M/s Afcon Infa. Ltd. were working in the Special Economic Zone Page 17 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT (SEZ), Dahej and he has provided services as subcontractor to them and therefore no service tax was payable on the services provided to them. In this respect I find that all the above firms are contractors based at somewhere else and no evidence was produced by the assessee, during investigations or afterwards to show that the assessee has provided the said services to the above contracts in a unit falling in SEZ area. Further I find that exemption to the Services provided in a unit falling in a SEZ are governed by Notification No. 12/2013 Service Tax, dtd. 01.07.2013 which provides as under :
"2. The exemption shall be provided by way of refund of service tax paid on the specified service received by the SEZ Unit or the Developer and used for the authorized operations :
Provided that where the specified services received by the SEZ unit or the developer are used exclusively for the authorised operations, the person liable to pay service tax has the option not to pay the service tax ab initio subject to the conditions and procedure as stated below.
3. This exemption shall be given effect to in the following manner :
(I) The SEZ Unit or the Developer shall get an approval by the Approval Committee of the list of the services as are required for the authorised operations (referred to as the specified services elsewhere in the notification) on which the SEZ unit or developer wish to claim exemption from service tax.
(II) The ab initio exemption on the specified services received by the SEZ unit or the Developer and used exclusively for the authorized operation shall be allowed subject to the following procedure and conditions namely
(a) The SEZ unit or the developer shall furnish a declaration in form A1 verified by the specified officer of SEZ along with the list of specified services in terms of condition(1)
(b) On the basis of declaration made in Form A1, an authorization shall be issued by the jurisdictional Deputy Commissioner of Central Excise, as the case may be to the SEZ unit or the developer in Form A2 Page 18 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT (C) The SEZ unit or the Developer shall provide a copy of said authorization to the provider of specified services. On the basis of the said authorization, the service provider shall provide the specified services to the SEZ unit or the Developer without payment of service tax In view of above Notification, I Find that the SEZ unit or the developer has to file a declaration in Form A1 verified by the specified officer of SEZ and on the basis of this declaration in Form A1, JDC/JAC of central excise are to issue authorization in Form A2 to the unit in SEZ or developer. I find that to claim exemption from service tax the authorization in Form AZ has to be provided by unit in SEZ or developer, to the service provider who in this case is the assessee. I find that since the assessee could not produce any authorization for their work in SEZ in form A2, therefore, the claim of the assessee that the services were provided to a client in SEZ and hence exempted, cannot be accepted. Thus I find that the service amounts of the assesse as appearing in his 26AS statements are of fully taxable service.
17.5 I find that service tax liability of the service provider was reduced by 75% (to be paid by the service recepients ) from July 2012 onwards in case of Manpower supply or recruitment agency services. Since, the party wise ledger had not been provided by the assessee, therefore, the bifurcation of taxable amounts on the basis of date of receipt of service amount as appearing in the 26AS statement was tabulated for the period April2010 to 2014 15 as per details in AnnexureA of the show cause Notice. The said details show that the assessee has not paid service tax of Rs 31,84,804/ on taxable value of Rs 4,26,78,833/ 17.6 I find that Section 65(68) of the Finance Act,1994 defines "manpower recruitment or supply agency" service as 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. Further Section 65(105)(k) of the Act ibid. defines the taxable service in respect of manpower recruitment or supply agency service as any service provided or to be Page 19 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT 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 manner. Further explanation to Section 65(105)(k) of the Act ibid declares that for the purposes of this subclause recruitment or supply of manpower includes services in relation to prerecruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted by the candidate. I find from the statement dated 14.10.2015 of Shri Ibrahim Ansari [Proprietor M/s Macos Enterprise] that they have provided manpower supply service and hence is covered in the definition of manpower recruitment or supply agency service and such services are taxable services as per above quoted provisions.
17.7 I find that from 01.07.2012, Section 65(105) of the Finance Act, 1994 has ceased to apply and instead Section 66D has been introduced which provides for a negative list (ie. Service which are not taxable). Further from 01.07.2012 as per clause (44) of Section 65B of the Finance Act,1994 'service' means any activity carried out by a person for another for consideration and includes a declared service. I find that the present services do not fall under the purview of Section 66D and hence taxable under the provisions of the Act.
17.8 I thus find that the assessee has provided taxable services of manpower recruitment or supply agency services during the relevant period and charged/collected the service tax from them but failed to deposit the same in government account. I therefore hold that service tax of Rs. 31,84,804/ (as per details given in AnneuxreA to the SCN) is required to be recovered from them under proviso to section 73(1) of the Finance Act, 1994.
17.9 So far as interest is contented, it is a settled issue that Ms automatic and every person, liable to pay service tax, shall in addition to the service tax, be liable to pay interest in accordance with the provisions of Section 75 of the Finance Act,1994. Accordingly, I hold that interest at the appropriate rate on the amount of service tax not paid/short paid i's required to be recovered from them under Section 75 of the Finance Act,1994.
Page 20 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021C/SCA/3491/2019 JUDGMENT 17.10 On limitation, I find that the assessee has provided taxable services of manpower recruitment or supply agency services during the relevant period to their client and charged/collected the service tax from them but however, failed to deposit the same in government account. They have also not filed the relevant ST3 returns with the department. They have also failed to submit the relevant documents called for during investigations. Thus they have made every possible effort to remain discreet and avoid presentation of documents to the department. It is thus evident that they have suppressed the material facts from the department with intent to evade payment of service tax of Rs 31,84,804/ (as per details given in AnnexureA to the SCN) and hence, I find that extended period of limitation has been correctly invoked in this case in terms of proviso to Section 73(1) of the Finance Act,1994.
17.11 I thus had that the assessee has contravened the provisions of Section 68 read with Section 66 and 66B of the Finance Act,1994 and Rule 6 of Service Tax Rules,1994, in as much as they failed to pay the Service tax of Rs 31,84,804/ by the due date to the Central Govt, Section 70 read with Rule 7 of the Service Tax Rules, 1994 in as much as they failed to file the half yearly returns for the taxable services provided for the period 201011 to 201415. It is evident that they have committed all the above acts of contravention by recourse to suppression of facts, willfully and purposefully, with intention to evade payment of service tax. I find that all the above acts of contravention constitute an offence of the nature as described under Section 78(1) of the Finance Act,1994. Hence I hold that they are liable for penalty under Section 78(1) of the Finance Act, 1994 17.12 On the question of penalty under Section 77 of the Finance Act, 1994, I find that penalty has been proposed under Section 77 (1)(a)&(c) of the Act ibid. I find that penalty under Section 77(1)(a) is not attracted in this case as the same pertains to non obtaining of registration and the assessee, as the para 2 of the show cause notice suggests, has obtained registration No. Page 21 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT ABYPA6656RST001. In respect of penalty under Section 77(1)(c) of the Finance Act,1994, I find that the assessee has failed to furnish information called by the Investigating officers and produce documents called by them and therefore I hold them liable for penalty under section 77(1)
(c) of the Finance Act, 1994.
17.13 Proposal has also been made in the SCN for recovery of late fee under Section 70 of the Finance Act,1994. In this respect I find that the assessee has failed to file returns as required under Section 70(1) of the Finance Act,1994 read with Rule 7 of the Service Tax Rules,1994. I thus hold them liable for late fee under Section 70(1) of the Finance Act,1994 read with Rule 7C of the Service Tax Rules,1994, separately for each returns (Total 11 during the period 201011 to 201415).
18. Having regard to above findings, I pass the following order:
ORDER
(i) I, under Section 73(2) of the Finance Act,1994, confirm the demand of service tax of Rs. 31,84,804/(Rupees Thirty one Lac Eighty four thousand Eight Hundred and four Only) against M/s Macos Enterprises [Proprietor Manager Ibrahim Ansari], presently operating from A24, Laxminagar, Nr. Welfare Hospital, Dahej, by pass road Bharuch, Gujarat 392001 and order to recover the same from them under proviso to Section 73(1) of the Finance Act, 1994.
(ii) I order to recover interest at the applicable rate from M/s Macos Enterprises [Proprietor Manager Ibrahim Ansari], presently operating from A24, Laxminagar, Nr.
Welfare Hospital, Dahej by pass road Bharuch, Gujarat 392001 on the amount of Service Taxmentioned at (i) above, under Section 75 of the Finance Act, 1994.
(iii) I impose a penalty of Rs. 31,84,804/(Rupees Thirty One Lac Eighty Four Thousand Eight Hundred and Four Only) on M/s Macos Enterprises [Proprietor Manager Ibrahim Ansari], presently operating from A24, Page 22 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT Laxminagar, Nr. Welfare Hospital, Dahej by pass road Bharuch, Gujarat 392001 under Section 78(1) of the Finance Act, 1994. If the amount determined at (i) above and the interest payable thereon is paid within thirty days of the date of receipt of this order, the amount of penalty as imposed above, shall stand reduced to 25% of the service tax determined at (I) above, subject to the condition that such reduced penalty is also paid within thirty days of the date of receipt of this order, in terms of present second
(ii) and third proviso to section 78(1) of the Finance Act, 1994.
(iv) I impose a penalty of Rs. 10,000/ (Rs. Ten Thousand only) on them under the section 77(1)(c) of the Finance Act, 1994;
(v) I do not impose any penalty on them under section 77(1)(a) of the Finance Act, 1994
(vi) I impose a late fee of Rs.20,000/ (Rs. Twenty Thousand only) for each return (total 11 returns and total late fee Rs. 2,20,000/ for the period April 10 to March 15) on them, under the section 70(1) of the Finance Act, 1994 read with Rule 7C of the Service Tax Rules, 1994
19. This order is issued without prejudice to any other action that may be taken against M/s.Macos Enterprise (Proprietor Manager Ibrahim Ansari) presently operating from A24, Laxminagar, Nr. Welfare Hospital, Dahej by pass road Bharuch, Gujarat392001 under the Finance Act, 1994 and the Rules framed thereunder or under any other law for time being in force."
11. With regard to the contention raised by the petitioner about his illness, it appears on perusal of the medical papers filed along with the additional affidavit that the petitioner was not that much sick during the year 2014 2017 and he could have taken appropriate action through some assistance as notices issued by respondent were duly served upon the petitioner. In such circumstances, only conclusion which can be arrived at is that the petitioner Page 23 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT was negligent and was not vigilant to take appropriate action to challenge the impugned order.
12. Reliance placed by the learned advocate for the petitioner on the Full Bench decision in case of Panoli Intermediates (India) Pvt ltd (supra) in support of his contention that the writ petition is maintainable, is also not tenable in law because the impugned order cannot be said to be passed in excess of jurisdiction or by crossing the limits of jurisdiction by the adjudicating authority. The Full Bench while considering the question no.3 raised before it that when if statutory remedy or appeal under section 35 is barred by the law of limitation whether in a writ petition under Article 226 of the Constitution of India, the order passed by the original adjudicating authority could be challenged on merits or not, has answered it in affirmative as under :
"(3) On the third question, the answer is in affirmative, but with the clarification that A) The petition under Article 226 of the Constitution can be preferred for challenging the order passed by the original adjudicating authority in following circumstances that A.1) The authority has passed the order without jurisdiction and by assuming jurisdiction which there exist none, or A.2) Has exercised the power in excess of the jurisdiction and by overstepping or crossing the limits of jurisdiction, or Page 24 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT A.3) Has acted in flagrant disregard to law or rules or procedure or acted in violation of principles of natural justice where no procedure is specified.
B) Resultantly, there is failure of justice or it has resulted into gross injustice.
We may also sum up by saying that the power is there even in aforesaid circumstances, but the exercise is discretionary which will be governed solely by the dictates of the judicial conscience enriched by judicial experience and practical wisdom of the judge."
13. In view of the above dictum of law in order to see that the present petition can be entertained or not, it has to fall in criteria prescribed in paragraph 3(A) for which rider is also provided that exercise of jurisdiction under Article 226 of the Constitution of India is discretionary which will be governed solely by the dictates of judicial conscience enriched by judicial experience and practical wisdom of the Judge.
14. In view of the facts available on record, we are of the opinion that the writ petition is not maintainable in view of stipulations made by Full Bench and even on merits, the petitioner having not complied with the provisions of the Service Tax Act at any point of time, is not entitled to claim any relief. We may refer to the decision of Supreme Court in case of Continental Foundation Joint Venture Holding, Nathpa, HP v. Commissioner of Central Excise, ChandigarhI reported in (2007) 10 Supreme Court Cases 337, wherein the Apex Court while dealing Page 25 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT with the expression "suppression" used in proviso to section 11A(1) of the Act1944 and with regard to fraud and collusion has observed as under :
"12. The expression "suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or "collusion" and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11 A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.
13. Factual position goes to show the Revenue relied on the circular dated 23.5.1997 and dated 19.12.1997. The circular dated 6.1.1998 is the one on which appellant places reliance. Undisputedly, CEGAT in Continental Foundation Joint Venture case (supra) was held to be not correct in a subsequent larger Bench judgment. It is, therefore, clear that there was scope for entertaining doubt about the view to be taken. The Tribunal apparently has not considered these aspects correctly. Contrary to the factual position, the CEGAT has held that no plea was taken about there being no intention to evade payment of duty as the same was to be reimbursed by the buyer. In fact such a plea was clearly taken. The factual scenario clearly goes to show that there was scope for entertaining doubt, and taking a particular stand which rules out application of Section 11A of the Act.
14. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word 'wilful', preceding the words "misstatement or suppression of facts" which means with intent to evade duty. The next set of words 'contravention of any of the provisions of this Act Page 26 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021 C/SCA/3491/2019 JUDGMENT or Rules' are again qualified by the immediately following words 'with intent to evade payment of duty.' Therefore, there cannot be suppression or misstatement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Misstatement of fact must be wilful."
15. In facts of the case, as the petitioner has failed to file return of income and failed to deposit the service tax collected by it there was clear intention to evade the tax on behalf of the petitioner.
16. In view of the foregoing reasons, the petition fail and is accordingly dismissed. Notice is discharged. No order as to costs.
(J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 27 of 27 Downloaded on : Thu Feb 11 02:43:35 IST 2021