Custom, Excise & Service Tax Tribunal
Jit Ram vs Jalandhar on 4 September, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 60221 of 2023
[Arising out of Order-in-Appeal No. LUD-EXCUS-001-APP-535-2022 dated
30.12.2022 passed by the Commissioner (Appeals), CGST, Ludhiana]
Jit Ram ......Appellant
Proprietor of J.R. & Co.,
51C, Preet Nagar, Kapurthala,
Punjab 144601
VERSUS
Commissioner of Central Excise, Goods & ......Respondent
Service Tax, Jalandhar GST Bhawan, C R Building, Model Town, Jalandhar, Punjab 144001 APPEARANCE:
Mr. Mohit Gaba, C.A. for the Appellant Mr. Aniram Meena and Mr. Yashpal Singh, Authorized Representatives for the Respondent CORAM: HON'BLE MR. S. S. GARG, MEMBER (JUDICIAL) FINAL ORDER NO. 61032/2025 DATE OF HEARING: 28.08.2025 DATE OF DECISION: 04.09.2025 The present appeal is directed against impugned order dated 30.12.2022 passed by the Commissioner (Appeals), CGST, Ludhiana, whereby the learned Commissioner (Appeals) has rejected the appeal of the appellant by upholding the Order-in-Original.
2 ST/60221/2023
2. Briefly stated facts of the present case are that the appellant is registered with the service tax department under the category of "manpower recruitment services". It was found by the department that the appellant is not paying correct amount of service tax in the aforesaid category of services in contravention to provisions of Sections 68 & 70 of the Finance Act, 1994 read with Rules 6 & 7 of the Service Tax Rules, 1994. On scrutiny of information received from M/s Markfed Cattle Feed & Allied Industries, it was found that the appellant was providing two types of services to the Cattle Feed unit, first 'manpower supply service' and second 'transportation of goods by road service'. Further, it appeared that the appellant was liable to pay service tax on 'manpower supply service' as the Cattle Feed unit is registered with the Registrar of Co-operative Societies and is not a 'body corporate'. It was also gathered that both M/s J.R. & Co. and M/s Pirthi Ram & Co. were working under the appellant's PAN number. It also appeared that the appellant was liable to pay service tax on the gross receipts of manpower supply services received from the Cattle Feed unit of Markfed during the period 2012-13 and onwards. The comparative perusal of the Balance Sheets, Profit & Loss Accounts, Form 26AS and ST-3 Returns of the appellant for the relevant period revealed that the appellant had failed to discharge service tax liability correctly in the category of 'manpower supply services' and 'legal services'. It appeared in the show cause notice dated 22.11.2017 that service tax amounting to Rs.27,88,513/- was recoverable from the appellant during the period 2012-13 to 2016-17 in respect of services provided in the 3 ST/60221/2023 category of 'manpower supply services' under forward charge and 'legal services' under reverse charge mechanism by invoking the provisions of extended period as provided in Section 73(1) of the Finance Act, 1994. The Adjudicating Authority, vide the Order-in- Original dated 25.03.2019, confirmed the service tax demand of Rs.25,24,609/- and ordered recovery of the same along with interest and penalty under Section 78 of the Act. The amount of Rs.25,28,144/-, already deposited, was appropriated towards the said recovery. Aggrieved by the Order-in-Original, the appellant filed appeal before the Commissioner (Appeals) who, vide the impugned order dated 30.12.2022, has rejected their appeal and upheld the Order-in-Original. Hence, the present appeal.
3. Heard both the parties and perused the material on record.
4. The learned Consultant for the appellant submits that -the impugned order, confirming the interest on service tax demand, invocation of extended period of limitation and penalty under Section 78, is not sustainable in law and is liable to be set aside as the same has been passed without properly appreciating the facts and the law.
4.1 The learned Consultant further submits that the appellant provided manpower supply and GTA services to Markfed for the year 2012-13 but did not collect service tax on these services under a bona fide belief that Markfed was paying service tax under reverse charge as M/s Markfed is a body corporate. He further submits that subsequently, when the issue was raised by the department, the 4 ST/60221/2023 appellant discovered that Markfed is not a 'body corporate' and is only a 'co-operative society' registered under Co-operative Societies Act; the appellant approached Markfed to pay the service tax for the period in dispute. Thereafter, Markfed paid an amount of Rs.23,50,356/- as service tax for the period July 2012 to January 2015 in the month of December 2017. After receiving the said amount from Markfed, the appellant immediately deposited Rs.23,57,120/- to the government account.
4.2 The learned Consultant further submits that the appellant has deposited service tax of Rs.23,57,120/- voluntarily on 12.12.2017, within 20 days of show cause notice, and small balances on 10.12.2018 & 29.12.2018, before the adjudication. He further submits that since the appellant has deposited the service tax and is only contesting the rate of interest charged on the delayed deposit of service tax and penalty imposed by both the lower authorities under Section 78 of the Act.
4.3 The learned Consultant further submits that the appellant raised the issue of interest before the Commissioner (Appeals), but the Commissioner (Appeals) did not consider the appellant's specific grounds that interest should have been computed under Notification 13/2016-ST which is applicable at the time of payment and not under earlier Notifications 14/2011-ST and 12/2014-ST. He further submits that the appellant is liable to pay the interest under Notification 13/2016-ST which is prevailing notification on the dates of actual payment. In this regard, he relies on the decision of 5 ST/60221/2023 Hon'ble Punjab & Haryana High Court in the case of M/s Bala Ji Manpower Services vs. UOI and Ors. in Civil Writ Petition No. 13696 of 2020 decided on 22.04.2021.
4.4 The learned Consultant further submits that invocation of extended period of limitation is not justified in the facts and circumstances of the present case as the appellant had a bona fide belief that Markfed is liable to pay the service tax under the reverse charge as a 'body corporate'; Markfed also did not inform the appellant that they are liable to pay service tax and they have also not paid the service tax to the appellant, therefore, the appellant could not deposit the same; as soon as, Markfed paid the amount of service tax to the appellant, the appellant immediately deposited the same to the government account, which shows that the appellant had a bona fide belief that he is not liable to pay the same. 4.5 The learned Consultant also submits that penalty under Section 78 also not sustainable in law as there was no mens rea on the part of the appellant.
5. On the other hand, the learned Authorized Representative for the Revenue justifies the impugned order and submits that extended period of limitation has rightly been invoked as the appellant has collected the service tax and thereafter paid the same to the government exchequer.
5.1 As regards payment of interest is concerned, the learned Authorized Representative submits that this issue has been dealt 6 ST/60221/2023 with by the Tribunal in the case of Jeevan Diesels & Electricals Ltd vs. CCE, Pondicherry - 2017 (354) ELT 150 (Tri. Chennai) wherein the Division Bench of the Tribunal has upheld the demand of interest which the asssessee was liable to pay when the demand of service tax became due, and not when the service tax was paid. He further submits that the decision of Hon'ble Punjab & Haryana High Court in M/s Bala Ji Manpower Services (supra)'s case is not applicable because, firstly the facts are entirely different and secondly, the said decision was rendered in a Writ Petition, whereas the demand of interest is governed by the statutory provision as prescribed under the Finance Act, 1994.
6. I have considered the submissions made by both the parties and perused the material on record as well as the decisions relied upon by both the parties. I find that the appellant provided the manpower supply services to Markfed and was under the bona fide belief that they are not liable to pay the service tax as Markfed is liable to pay the service tax under reverse charge being a 'body corporate' and this is the reason that they did not pay the service tax, but when the issue was raised by the department and show cause notice was issued, the appellant raised the issue with Markfed and demanded the service tax payable on manpower supply services; thereafter, Markfed paid an amount of Rs.23,50,356/- as service tax to the appellant for the period July 2012 to January 2015 in the month of December 2017, which was immediately deposited to the government account by the appellant. Further, I find that the appellant has voluntarily deposited substantial amount of service tax 7 ST/60221/2023 within 20 days of the show cause notice and small balances before the adjudication along with interest which was computed as per the Notifications 14/2011-ST and 12/2014-ST which were in force when the service tax was due.
7. Further, I find that the contention of the appellant that interest should be computed under Notification 13/2016-ST, is not tenable in law because interest is to be paid when the interest/service tax fell due as held by the Division Bench of the Tribunal in the case of Jeevan Diesels & Electricals Ltd (supra).
8. As far as the penalty under Section 78 of the Act is concerned, I find that when the appellant has not intentionally suppressed the facts with intent to evade the payment of service tax and has immediately paid the service tax along with interest after receiving the same from Markfed, which shows that the appellant had a bona fide belief, then in the facts and circumstances of the case, penalty under Section 78 is not sustainable. I also find that the Division Bench of the Tribunal in the case of Jeevan Diesels & Electricals Ltd (supra) has also dropped the penalty imposed on the assessee under Section 11AC of the Central Excise Act by holding that there is no mens rea on the part of the assessee to evade payment of duty.
9. In the light of above discussion and by following the ratio of the decision of the Division Bench of the Tribunal in the case of Jeevan Diesels & Electricals Ltd (supra), I am of the considered view that interest has rightly been charged and I uphold the same.
8 ST/60221/2023 But, as far as the penalty under Section 78 of the Act is concerned, I set aside the same.
10. In result, the appeal is partly allowed in the above terms.
(Order pronounced in the open court on 04.09.2025) (S. S. GARG) MEMBER (JUDICIAL) RA_Saifi