Custom, Excise & Service Tax Tribunal
Delhi Transport Corporation vs C.S.T., New Delhi on 25 April, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
West Block No.2, R.K.Puram, New Delhi
COURT-I
Date of hearing/decision: 25.4.2014
Service Tax Appeal Nos.174, 175 and 176 of 2010
Arising out of the order in original No.23-25/JM/2009 dated 1.10.2009 passed by the Commissioner of Service Tax(Adjudication), New Delhi.
For Approval and Signature:
Honble Mr. Justice G. Raghuram, President
Honble Mr. Manmohan Singh, Technical Member
1
Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
Delhi Transport Corporation .. Appellant
Vs.
C.S.T., New Delhi . Respondent
Appearance:
Present Ms. Awnish Ahlawat, Advocate for the appellant Present Shri Amresh Jain, A.R. for respondent/Revenue Coram: Honble Mr. Justice G. Raghuram, President Honble Mr. Manmohan Singh, Technical Member Final Order No. 51825 51827/2014 Per Justice G. Raghuram:
Heard Ld. Ms. Awnish Ahlawat for the appellant and the ld. Authorised Representative for the respondent/Revenue. The three appeals are preferred by the assessee, against a common adjudication order dated 1.10.09, passed by the Commissioner (Adjudication), Service Tax, New Delhi, pursuant to three show cause notices dated 14.1.2008, 9.7.2008 and 1.8.2008, covering the gross period 1.5.06 to 31.3.08.
2. On the admitted factual scenario, the appellant claimed to be an instrumentality of the Delhi State the Delhi Transport Corporation which provided the taxable sale of space or time for advertisement service to several advertising agencies but failed to obtain registration, file returns or remit service tax on the consideration received for rendition of the taxable service.
3. The Anti-Evasion Branch, on the basis of investigations discovered that the appellant had provided the taxable service by providing space for advertisements on its buses, bus queue shelters, time keeping booths and other properties. Letters and reminders were issued to the appellant to provide relevant information and the transactional documents. Show cause notices were eventually issued during January 2006 to August 2008, covering different periods.
4. In response to the show cause notices, the appellant contended that agreements entered with the advertisers contained a specific clause that the liability to tax, including service tax would be borne by the recipient of the service/the other party to the agreement; there arose disputes between the appellant and recipients of the service, some of which are subject matter of arbitration proceedings; that advertisers had not reimbursed the appellant for the service tax component; that the appellant is pursuing with the Central Government for grant of exemption from tax. These contentions were rejected and the adjudication order confirmed a cumulative demand of Rs.7,19,01,910/-, apart from interest under Section 75 and penalties under Sections 77 and 78 of the Finance Act, 1994 (the Act); the penalty under Section 78 being equivalent to the service tax demand.
5. Ld. Counsel for the appellant does not contest the conclusion on the classification of the service nor impeaches the quantum of service tax confirmed. The singular contention urged before the adjudicating authority was that since under agreements with advertisers, the reciprocal obligation of the parties covenanted that the recipient of the service would be liable for tax, the appellant was under a bona fide belief that the liability to remit service tax stood transferred to the recipient qua the agreements; that this was a bona fide belief which caused the failure to file returns and remit service tax. Therefore, it is contended , the extended period of limitation invoked while issuing the first show cause notice dated 4.1.08 is unjustified and for the same reasons, penalty under Section 78 of the Act should not have been imposed, by exercising discretion under Section 80 of the Act.
6. A bona fide belief is a belief entertained by a reasonable person. The appellant is a public authority and an instrumentality of the State and should have taken care to ascertain whether it was liable to tax in terms of the provisions of the Act. There is neither alleged, asserted nor established that there is any ambiguity in the provisions of the Act, which might justify a belief that the appellant/service provider,was not liable to service tax. It is axiomatic that no person can harbour a bona fide belief that a legislated liability could be excluded or transferred by a contract. The appellant was clearly and exclusively liable to service tax on rendition of the taxable service of sale of space or time for advertisement. This liability involved the non-derogable obligation to obtain registration, file periodical ST -3 returns and remit service tax on the consideration received during the period covered by such ST-3 returns. These were the core and essential obligations the appellant should have complied with. We therefore find no basis for the claim that the appellant harboured a bona fide belief.
7. Ld. Counsel for the appellant would rely on the judgment of the Supreme Court in Rashtriya Ispat Nigam Limited vs. Dewan Chand Ram Saran (RINL) (2012) 5 Supreme Court Cases 306 for the contention that since the appellant had entered into agreements with third parties on terms that the liability to service tax arisen on the transactions covered by such agreements shall be borne by the other parties to the agreement; the liability to remit service tax stood legitimately transferred to the other parties to the agreements. Rashtriya Ispat Nigam Limited is a decision arising out of arbitration proceeding between the appellant therein and a contractor. The appellant RINL deducted service tax component from bills of its contractor who handled transportation of goods, @ 5% of the value, towards service tax. These deductions were disputed by the contractor and led arbitration proceedings. The High Court held in favour of the contractor and against RINL. Allowing the appeal by RINL, the Supreme Court observed that the statutory provisions concerning services are relevant only as between RINL and the Revenue authority; such provisions could be of no relevance to determine the rights and liabilities between RINL and the respondent contractor qua the terms as agreed in the contract between the parties; the law does not prohibit RINL from entering into an agreement with the respondent - handling contractor that the burden of any tax arising out of obligations of the respondent under the contract would be borne by the respondent/contractor. In the context of the facts and the litigative contours falling for consideration before it, the Supreme Court had observed that transferring of the burden of liability to tax to a contractor was not prohibited and qua the terms of the agreement between the parties, the contractor was liable to bear the burden. This judgment is neither on the factual context in which it is rendered nor on the express or implied rationes falling therefrom, an authority for the proposition that the appellants tax burden shifted to the advertisers under the private agreement and the appellant was therefore immune to tax.
8. Ld. Counsel for the appellant would also advert to orders passed by the Delhi High Court in OMP Nos.465 and 466/2005, being applications presumably filed by two advertisers, namely M/s International Avenues and Anr. And M/s Shivaai Industries (P) Ltd. seeking injunctive relief under Section 9 of the Arbitration and Conciliation Act, 1996. The Order of the High Court dated 20.2.2007 directs the petitioner to provide security for the specified amount by way of post dated cheques while recording the statement of petitioners counsel that in case service tax is due and payable on the contract, that liability shall be of the petitioner (advertisers) and the petitioner would indemnify DTC (the appellant herein) in that behalf. The final order of the High Court dated 18.1.2008 also records that in the event service tax liability is imposed, such liability shall be on the contractor, in terms of the agreement.
9. In our considered view, these orders do not transfer the substantive and legislatively mandated liability to service tax from the appellant who is the service provider to the advertisers, who are the service recipients. The liability of advertisers bear the burden of service tax, in terms of agreement between the parties, is the conclusion of the High Court. The decision cannot be interpreted or understood as shifting the liability or inherence of service tax, under the provisions of the Act, on the service recipient. It is a well settled position that legislation is not rejected or amended by private agreement.
10. There are no merits. The appeals fail and are accordingly dismissed.
11. In the facts of the case and in view of contentions on behalf of appellant, we clarify that if the appellant produces before the respondent/jurisdictional Commissioner evidence in support of the claim to have remitted service tax for having provided the taxable services of sale of space or time for advertisement and for the period 1.5.2006 to 31.3.2008, covered by these proceedings, the jurisdictional Commissioner shall give credit for any such tax established to have remitted. Subject to this observation, the entirety of the liability of the appellant to service tax, interest and penalties as assessed, is confirmed. No costs however.
(Justice G. Raghuram) President (Manmohan Singh) Technical Member scd/ 1