Customs, Excise and Gold Tribunal - Delhi
Commissioner Of Central Excise vs Mangalam Cement Ltd. on 30 May, 2007
Equivalent citations: 2007[7]S.T.R.673, [2007]10STT203
ORDER
R.K. Abichandani, J. (President)
1. These two appeals are filed by the Revenue against the common order made by the Commissioner (Appeals) by which he set aside the orders-in-original confirming service tax demand in one case (Service Tax Appeal No. 2/23 of 2005) of Rs. 60,26,508/- under Section 73(2) of the Finance Act, 1994, imposing penalty of Rs. 48,700/- under Section 76 and ordering interest amount of Rs. 8,84,287/- under Section 75 of the Finance Act, 1994, and in the other case (Service Tax Appeal No. 224 of 2005) confirming service tax of Rs. 24,23,911/- under Section 73(2) of the Finance said Act, imposing penalty of Rs. 48,700/- under Section 76 of the Act and ordering payment of interest of Rs. 3,83,608/- under Section 75 of the Act.
2. The respondents are engaged in the manufacture of cement and were having registration for the purpose of service tax. The respondents received goods transport operators' services during the period 16.11.1997 to 2.6.1998. According to the Revenue, since the respondents were liable to pay service tax under the amended provisions of the proviso to Section 68(1) read with Section 71A of the Act, they were required to file return in form ST-3B along with copy of challan of payment of tax in form TR-6. The return was required to be filed for the services received during the period from 16.11.1997 to 2.6.1998 in the prescribed form ST-3B on or before 13.11.2003. The respondents, however, submitted ST-3B return on 27.11.2003 for the services received during the said period without any payment of service tax and therefore, without the returns accompanying copy of TR-6 challan. The Revenue therefore, requested the assessees to pay service tax pointing out that Hon'ble the Supreme Court had rejected their application for stay/recovery of service tax on the GTO services received by them. The appellants deposited a part of the amount in these two cases, of Rs. 15 lacs and Rs. 5 lacs, respectively on 13.2.2004. They contended before the Revenue that, they had challenged the constitutional validity of Sections 116 and 117 of the Finance Act, 2000 and Section 158 of the Finance Act, 2003 as well as Section 71A of the Finance Act, 1994, therefore, the matter was subjudice. The Hon'ble the Supreme Court by its decision rendered on 17.3.2005 in Gujarat Ambuja Cement Ltd. v. Union of India, and Ors. cognate matters, , dismissed the writ petitions including the petition filed by the present respondents and extended the time from the order dated 17.11.2003 by two weeks. The respondents-assessees thereafter paid up the remaining dues of service tax. Thus, the entire service tax payable by the respondents was paid by them on 15.12.1997, 13.2.2004 and 15.3.2005, about which fact there was no dispute.
3. The respondents-assessees had contended in their reply to the show cause notice that since the matter was pending before the Supreme Court on the question of challenge against the validating provisions of Sections 116 and 117 of the Finance Act, 2000, Section 158 of the Finance Act, 2003 and Section 71A of the Act, no amount was recoverable from them. It was also contended that no interest could be recovered because the Supreme Court had extended the time by two weeks from 14.11.2003 to enable the assessees to file their returns. It was also contended by the respondents that as per Section 71A and Rule 7A, returns were required to be filed by them on or before 13.11.2003 and Hon'ble the Supreme Court had extended the time by order dated 17.11.2003 for filing the return by two weeks which they had filed on 27.11.2003, which was within the time extended by the Supreme Court.
4. It will be seen from the order-in-original that the respondents had submitted that their reply dated 20.5.2004, may be treated as reply to the show cause notice. All these contentions have been reproduced in the order-in-original. We emphasize this fact because now the ambit of the defence is being widened much beyond the scope of the reply given by the assessees.
5. The adjudicating authority duly considered the defence contentions raised by the respondents and noted that the respondents' own writ petition which was tagged along with the petition of Gujarat Ambuja Cement Ltd. was dismissed by Hon'ble the Supreme Court. The writ petitioners were required to pay the service tax by the time extended by Hon'ble the Supreme Court as per the direction issued in Gujarat Ambuja Cement Ltd. (supra). In this context, the adjudicating authority held that the assessees, even after the order of Hon'ble the Supreme Court on 17.11.2003, did not deposit the service tax within two weeks from 17.11.2003. The adjudicating authority, therefore, held that since the writ petitions of the present assessees were also dismissed by the Supreme court, there was no confusion of taxability of service tax on the recipients of GTO services. As noted above, after the decision of Hon'ble the Supreme Court dismissing the petitions of the present respondents, the remaining amounts of the tax were paid up on 13.2.2004 and 15.3.2005. The adjudicating authority, therefore, imposed a lenient penalty, of the minimum prescribed under Section 76 of the Act. Since the returns in prescribed form ST-3B were filed by the assessees on 27.11.2003, which was within the time limit extended by Hon'ble the Supreme Court by its order dated 17.11.2003, no penalty was imposed under Section 77 of the Act.
6. Before the Appellate Commissioner the assessees contended that the adjudicating authority did not consider the contention that the demand was time barred and hit by the ruling of Hon'ble the Supreme Court in the case of Laghu Udyog Bharati, . It was also urged that the Deputy Commissioner had committed an error in deciding the case on the basis of the decision of Hon'ble the Supreme Court in the writ petitions of Gujarat Ambuja Cement Ltd. and the present assessees. It was also submitted that the show cause notices invoking the extended period were not sustainable under the provisions of Section 73, as it stood prior to the amendment in the Finance Act, 2003 and also under the provisions as amended by the Finance Act, 2003. The respondents relied upon the decision of the Tribunal in L.H. Sugar Factories Ltd. v. Commissioner of Central Excise, Meerut-II, , for urging that the liability under Section 73 covered the cases of the assessees who were liable to file their returns under Section 70 and that, therefore, the present assessees were not liable to pay tax. It was also urged that even newly enacted Section 73, which came into force from 10.9.2004, was to be taken into consideration, since it was applicable on the date of issuance of the present show cause notices, then also, no show cause notice could have been issued under Section 73 for the contravention of provisions of Section 71A, because the demand was time barred. It was their contention that the "relevant date" was the due date of filing of the returns under Section 70 and that in the present case, "relevant date" cannot be from the due date of filing of return as prescribed under Section 71A, because the return prescribed under Section 71A was not a periodic return, but a "one time" return. Since the return under Section 71A was not a periodic return, counting of relevant date from the due date of such return was not legally permissible.
7. The learned Commissioner (Appeals) took the view that Hon'ble the Supreme Court in its decision in Gujarat Ambuja Cement Ltd. (supra), rendered on 17.3.2005, had held that legislature was competent to remove infirmities retrospectively and make any imposition of tax declared invalid, as valid, and that the reasoning of the adjudicating authority was not correct because in the said petitions, the Hon'ble the Supreme Court held that the legislature was competent to remove the infirmities retrospectively which was the only issue decided in that judgment and not the issue of validity of the show cause notices dated 26.4.2004 and 4.11.2004 issued by the department. It was held that the show cause notices were issued on 26.4.2004 and in the show cause notices dated 4.11.2004 issued in lieu of the earlier show cause notices all the contents were the same except as regards the changes made in Section 73. The Commissioner (Appeals) accepted the plea of the respondents that under Section 73, there was a mention of Sub-section (1) of Section 70, which stipulated that, "it is a person responsible for collecting the service tax, who is to furnish the return". It was observed that under the rules, the person who was receiving the services could not be made responsible for filing the return and paying the tax in view of the decision of the Supreme Court in Laghu Udyog Bharati (supra). It was held that, no show cause notice could have been issued against the present respondents under Section 73 as it stood prior to the amendment made by the Finance Act, 2003. It was also held that subsequent amendments made by the Finance Act, 2003 with retrospective effect in Sections 68, 71A and 73, covered only the cases of those asssessees who were liable to file return under Section 70 and that the class of persons who fell under Section 71A were not covered under the net of Section 73. It was, therefore, held that the show cause notices issued to the assessees invoking the provisions of Section 71A was not correct and that the show cause notices were beyond the provisions of Section 73. It was held that the extended period could not be invoked under Section 73 as the assessees were not liable to file return under Section 70. The Commissioner (Appeals) agreed with the plea of the assessees that the case of L.H. Sugar Factories Ltd. (supra) decided by the Tribunal was squarely applicable in the present case. It was noted that the decision was affirmed by the Supreme Court as per the report in 2005 (187) ELT 5 (SC). The demand was, therefore, set-aside.
8. The learned authorized representative for the department submitted that, the liability of the assessees as the recipients of GTO services during the period from 16.11.1997 to 2.6.1998 survived because of the validating provisions. He submitted that the ratio of the decision of the Supreme Court in Laghu Udyog Bharati, reported in 1992 (112) ELT 365 (SC) as followed by the Tribunal in L.H. Sugar Factories Ltd., reported in, was no more applicable after the validating provisions and introduction of the provisions of Section 71A of the Act. He submitted that the show cause notices were given within one year from the relevant date and therefore, they were not time barred. He pointed out that, on the date of the show cause notices the amended provisions of Section 73 were applicable and therefore, the "relevant date" was required to be computed under Section 73(6). He also pointed out that in the case of the respondents-assessees, which was decided along with the writ petition of Gujarat Ambuja Cement Ltd., the Hon'ble the Supreme Court had extended the time limit for paying the service tax pursuant to which the respondents had paid up the service tax on their writ petitions being dismissed along with the writ petitions filed by Gujarat Ambuja Cement Ltd. He also pointed out that even the respondents-assessees had categorically stated that the last date of filing of returns was upto two weeks after 14.11.2003 and that the returns were filed by them on 27.11.2003 before the expiry of the extended period. He argued that the returns in the prescribed Form ST-3B read with Rule 7A were required to accompany challan in TR Form 6 to show that the tax was paid. He, therefore, submitted that the provisions of Section 71A read with Rule 7A clearly indicated the date when the tax was to be paid. Since the revised show cause notices were issued on 4.11.2004, they were within the period of one year from the relevant date and, therefore, the demands were not time barred. He relied upon the decision of the Supreme Court in Gujarat Ambuja Cement Ltd., , pointing out from para 44 thereof that, even the petitions of the present respondents (writ petitions 466 and 467 of 2000) were dismissed. He further relied upon the decision of this Tribunal in J&K Industries Ltd. v. CCE Indore, reported in 2006(3) STR 14, more particularly on paragraphs 8 and 9 of the judgment and the decision in Indian Farmers Fertilizer Co-op. Ltd. v. CCE, Bareilly, reported in 2007(5) STR 281, more particularly on paragraph 18 thereof. He submitted that the respondent-assessees who were admittedly the recipients of the service were liable to pay the tax by virtue of the proviso added to Section 68(1) of the Act by the Finance Act, 2003 with effect from 16.11.1997. He submitted that by the Finance Act, Section 71A was also inserted with effect from 16.11.1997. However, substantial amendments relevant to the present case were made in Section 73 by the Finance Act of 2004. This is why the show cause notices had to be revised to bring them in tune with the amended Section 73, which did not refer either to Section 70 or Section 71. He finally submitted that since the tax was already paid up, there would never arise any question of refund of tax, because the liability that survived under the validating provisions has never been disputed in view of the decision in Supreme Court in Gujarat Ambuja Cement Ltd. (supra).
9. The learned authorized representative for the respondents-assessees in his elaborate and lengthy arguments argued that the ratio of the decision of Hon'ble the Supreme Court in Gujarat Ambuja Cement Ltd. (supra) was inapplicable in the present case because in that group of writ petitions including that of respondents-assessees, the challenge against the constitutionality of the provisions of Sections 116 and 117 of the Finance Act, 2000 was in issue. He submitted that merely because the constitutionality validating of the provisions was upheld, it cannot be inferred that the service tax could be recovered from the respondents-assessees on the basis of the liability arising by virtue of the validating provisions which were upheld by the Supreme Court. He submitted that Section 71A did not deal with tax liability and that the payment of service tax was required to be made under Rule 6 of the said Rules, which was applicable to cases where periodic returns were to be filed. It also did not provide for date of payment of service tax, nor did Rule 7A provide for date of payment of service tax. He, therefore, submitted that the date of payment of service tax should be taken to be as provided in Rule 6 of the said Rules, as it stood during the relevant period. He also submitted that return in Form ST-3B was not a periodic return and that the relevant date of payment of sales tax was 25th of the month immediately following the calendar month in which the value of taxable service is received, as per Rule 6 and, therefore, the demands were time barred. He further argued that no recovery could be made from the receiver even though he may be liable by virtue of the validating law. He submitted that only the actions and proceedings initiated before the amendment of Finance Act, 2000 may be proceeded with and no fresh proceedings can be initiated under the validating provisions because, Section 117 protected and validated any action taken prior to the commencement of Finance Act, 2000, by taking into consideration the amendments, which were made by Section 116. He submitted that the opening part of Section 116 of the Finance Act, 2000, which amended Sections 65, 66 and 67, indicated that the provisions were applicable "during the period commencing on or before 16.11.1997 and ending with 16.10.1998" which showed that they should be read only during that period and not thereafter. Similar arguments were made in the context of Section 158 of the Finance Act, 2003. He relied upon the decision in L.H. Sugar Factories Ltd. of the Supreme Court rendered on 27.7.2005, submitting that it should be followed in preference to the decision of the Supreme Court in Gujarat Ambuja Cement Ltd. (supra). According to him "latter was better". He submitted that there was no machinery provision to recover service tax after the amendment was made by the Finance Act, 2000. He argued that the decision of the Tribunal in L.H. Sugar, which was later affirmed by the Supreme Court, was followed in other cases by the Tribunal including the cases where the show cause notices were issued after the amendment of the Finance Act, 2003. He relied upon the following decisions in support of his submissions:
(a) Boving Forceress Ltd. v. CCE Chennai, reported in [(2002) ELT 389 (SC)]
(b) Benani Cement (P) Ltd. v. CCE, Jaipur, reported in [2007] 6 STT 155 (New Delhi-CESTAT)
(c) STI Products India Ltd. v. CCE, Service Tax Division, Bangalore, reported in [2007] 6 STT 2 (Bang.-CESTAT)
(d) L.H. Sugar Factory Limited v. Commissioner of Central Excise, Meerut,
(e) Commissioner of Central Excise, Meerut-II v. L.H. Sugar Factories Ltd., reported in 2005 (187) ELT 5 (SC)
(f) Commissioner of Central Excise, Chennai v. EID Parry Confectionery Ltd.,
(g) BPL Engineering Ltd. v. Commissioner of Service Tax, Bangalore, reported in 2006 (3) STR 747
10. The relevant provisions of Sections 68(1), 71A and 73 as amended by the Finance Act, 2004, with effect from 10.9.2004 read as under:
68. Payment of service tax:
(1) Every person providing taxable service to any person shall pay service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed.
Provided that-
xxx xxx xxx xxx xxx
(ii) in relation to services provided by goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage for the period commencing on and from the 16th day of November, 1997 and ending with 2nd day of June, 1998, shall be deemed always to have been a person liable to pay service tax, for such services provided to him, to the credit of the Central Government.
71A. Filing of return by certain customers:
Notwithstanding anything contained in the provisions of Sections 69 and 70, the provisions thereof shall not apply to a person referred to in the proviso to Sub-section (1) of Section 68 for the filing of return in respect of service tax for the respective period and service specified therein and such person shall furnish return to the Central Excise Officer within six months from the day on which the Finance Bill, 2003 receives the assent of the President in the prescribed manner on the basis of the self assessment of the service tax and the provisions of Section 71 shall apply accordingly.
(emphasis added).
73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded:
(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.
xxx xxx xxx xxx xxx
11. The provisions of Rule 6 and Rule 7A of the Service Tax Rules, 1994 read as under:
6. Payment of service tax:
(1) The service tax on the value of taxable services received during any calendar month shall be paid to the credit of the Central Government by the 25th of the month immediately following the said calendar month.
Provided further that where the assessee is an individual or proprietary firm or partnership firm, the service tax on the value of taxable services received during any quarter shall be paid to the credit of the Central Government by the 25th of the month immediately following the said quarter.
(2) The assessee shall deposit the service tax liable to be paid by him with the bank designated by the Central Board of Excise and Customs for this purpose in Form TR-6 or in any other manner prescribed by the Central Board of Excise and Customs.
xxx xxx xxx xxx 7A. Returns in case of taxable service provided by goods transport operators and clearing and forwarding agents:
Notwithstanding anything contained in Rule 7, an assessee, in case of service provided by-
(a) goods transport operator for the period commencing on and from the 16th day of November, 1997 to 2nd day of June, 1998; and
(b) clearing and forwarding agents for the period commencing on and from the 16th day of July, 1997 to 16th day of October, 1998, shall furnish a return within a period of six months from the 13th day of may, 2003, in Form ST-3B along with copy of Form TR-6 in triplicate, failing which the interest and penal consequences as provided in the Act shall follow.
12. Relevant Form ST-3B in which returns of service tax for the period in question were to be filed required the mode of payment, challan Nos. and date of challans to be mentioned. The amount of service tax payable was also required to be mentioned against item No. 7. A declaration in the self-assessment memorandum included in the said Form to the effect that the particulars were in accordance with the records and books maintained and were correctly stated, was to be made and it was also to be stated that the assessee had assessed and paid the service tax correctly in terms of the provisions of the Act and the Rules made thereunder. The contents of the said form clearly indicate that it required the tax to be paid with particulars of challans of payments to be shown therein. This form indicates that it was prescribed for a specific situation arising by virtue of the validating provisions that necessitated insertion of Rule 7A for filing of the returns by the recipient of services provided by goods transport operators for the specific period from 16th day of November 1997 to 2nd day of June 1998. The returns were to be furnished within a period of six months from 13.5.2003 in the said form, "along with copy of TR-6 in triplicate", which is a challan showing payment of tax. If the return was filed within the time prescribed, no interest or penalty was to be paid. Rule 7A was inserted in the context of Section 71A, which was inserted on or before 16.7.1997. The said provision of Section 71A reproduced hereinabove, inter-alia, provided that any person referred to in the proviso to Sub-section (1) of Section 68 shall furnish return within six months from the date on which the Finance Bill, 2003 received the assent of the President, in the prescribed manner on the basis of the self assessment of the service tax and provisions of Section 71 shall apply accordingly. The provisions of Section 71A and Rule 7A were necessitated because the liability arising due to the validating provisions, which were upheld by the Apex Court, required making of special provisions of fixing a date for filing of the returns and payment of the tax dues. Such returns required to be filed by virtue of the validating provisions, which made the liability survive in respect of the period in question, could not have obviously been filed periodically, as contemplated by Section 70. Section 70 was not applicable to such special contingency and the provision applied to the normal situation, which required that the person liable to pay service tax shall himself assess and furnish a return in the prescribed form and in the prescribed manner. Such returns were to be filed under Rule 7 under which every assessee was required to submit half yearly returns in ST-3 Form or ST-3A by 25th of the month by following the particular half-year. Therefore, the scheme of Section 70 read with Rule 7 read with prescribed Forms ST-3 and ST-3A was wholly inapplicable to the situation, which arose by virtue of service tax liability of the receiver of GTO services, which arose by virtue of the validating laws at the much later but with effect from 16.11.1997. The special provisions enacted under Sections 71A and Rule 7A were designed to give effect to and realize the purpose underlying the validating provisions. It can be seen from the proviso to Sub-section (1) of Section 68, which was inserted with effect from 16.7.1997, in relation to the services provided by goods transporter operator, that every person who was liable to pay the freight for the transportation of goods for the period commencing from 16th November, 1997 and ending with 2nd June, 1998, shall be deemed always to have been a person liable to pay service tax for such services provided to him, to the credit of the Central Government. This provision made the respondents-assessees liable to pay the service tax in respect of the services provided by the goods transport operators to them during the said period and the respondents-assessees having failed in their attempt to challenge the constitutionality of Section 116, which inserted the said proviso in Section 68(1) and their petition along with writ petitions of Gujarat Ambuja Cement Ltd. having been dismissed by Hon'ble the Supreme Court, they were liable to pay service tax by the time extended by Hon'ble the Supreme Court as per the directions contained in the order, which was passed in a group of petitions including that of the present respondents. The contention that the service tax was payable by the respondent-assessees on 25th of the next calendar month as contemplated by Rule 6, which should be treated as the "relevant date", is, therefore, wholly misconceived and if accepted, will make the validating provisions redundant though upheld by Hon'ble the Apex Court. Rule 6 relating to payment of service tax on the value of taxable services received during any calendar month by 25th of the month immediately following the calendar month has obvious reference to the periodic returns and payment of tax contemplated by Section 70 read with Rule 7 and the prescribed Forms ST-3 and ST-3 A. Sub-rule (5) of Rule 6 refers to Form ST-3 A, and Explanation to Sub-rule (6) of Rule 6 refers to Form TR-6. In the very scheme of things, the provisions of Rule 6 cannot apply to the specific liability arising to pay service tax on the basis of validating provisions for which special provisions were required to be made under Section 71A and Rule 7A and a special Form ST-3B was required to be prescribed. Since the date of filing of returns was specially prescribed for cases where the recipients of services of GTO for the said period were made liable, only the special provisions of Rule 7A could be applicable, which required the return to be filed and service tax paid by such assessees within the outer date of six months from 13.5.2003, and such payment was to be evidenced by furnishing TR-6 challans and indicating their particulars as well as the particulars of the tax paid in the ST-3B Form itself.
13. The reliance of the respondents-assessees on the ratio of the decision in L.H. Sugar Factory (supra), which is affirmed by Hon'ble the Supreme Court by its order reported in 2005 (187) ELT 5(SC), is wholly misconceived in view of the amendments in the law, particularly, by insertion of the proviso to Section 68(1) and Section 71A which created enforceable liability of the recipients of services from GTOs during the period from 16.11.1997 to 1.6.1998. As held in J.K. Industries Ltd. v. CCE, Indore, reported in 2006(3) STR 14 (Tri.-Del.), such assessees were bound to file returns as mandatorily required by Section 7A. In the present case, the returns were filed by the respondents as per the said machinery provisions of Section 71A read with Rule 7A, though the service tax was paid by them subsequently, having lost on their writ petitions being dismissed by Hon'ble the Supreme Court. The respondents paid up the service tax in consonance with the outcome of their petitions by the decision of Hon'ble the Supreme Court, in a group of petitions in Gujarat Ambuja Cement Ltd.(supra). The service tax liability was assessed by the respondents-assessees in their ST-3B Form and was declared to be a correct self assessment, as required by that Form. They have asserted that they had filed the ST-3B Form required to be filed under Rule 7A read with Section 71A within the time prescribed which was extended by Hon'ble the Supreme Court by fifteen days from 14.11.2003. Under Section 71A, it was provided that notwithstanding anything contained in the provisions of Sections 69 and 70, the provisions thereof shall not apply to a person referred to in the proviso to Sub-section (1) of Section 68 for the filing of return in respect of service tax for the respective period and service specified therein, and such person shall furnish return in the prescribed manner on the basis of the self assessment of the Service tax, and the provisions of Section 71 shall apply accordingly. Even in cases where returns were furnished under Section 70 they were required to be taken up for verification under Section 71. Under Section 72, which provided for best judgment assessment also, there was reference to both the returns filed under Section 70 as well as cases where any person having made a return failed to comply with the provisions of Section, as also the cases where the proper officer was not satisfied with the correctness or the completeness of the accounts of the assessee. Under Section 73(1)(a) as it existed at the relevant time, there was reference not only to return made under Section 70, but also to cases where the proper officer had reason to believe that by reason of omission or failure, on the part of the assessee, to disclose wholly or truly all material facts required for verification of the assessment under Section 71, the value of taxable service had escaped assessment or had been under-assessed, the requisite show cause notice would be issued. If action of recovery was not contemplated in accordance with Section 73, there was no sense in enacting the provisions of Section 71A. The interpretation of these provisions in the context of the decisions relied upon by the learned Counsel had come up for consideration before the Hon'ble Supreme Court in Gujarat Ambuja Cement Ltd. v. Union of India , in which Hon'ble Supreme Court held that the law must be taken as having always been as was now brought about by the Finance Act, 2000 and that the statutory foundation for the decision in Laghu Udyog Bharati was replaced and the said decision had ceased to be relevant for the purposes of construing the provisions of the Act, as amended by the Finance Act, 2000. Therefore, reliance placed on behalf of the respondents on the earlier decision of the Hon'ble Supreme Court in Laghu Udyog Bharati and the decision of the Tribunal in L.H. Sugar Factories Ltd. case in which the ratio of the Laghu Udyog Bharati was followed, is misplaced.
14. It will be noticed from the decision in L.H. Sugar Factories Ltd. (supra) that the show cause notice was issued in that case in the year 2002 and it is in that context the Tribunal concluded in para 9 that the show cause notice issued to those appellants was not sustainable because under the provisions of Section 73, as it stood on the date of issue of the show cause notice and also under the provisions as amended by Finance Act, 2003 were not sustainable. Affirmation of that decision by Hon'ble the Supreme Court by order dated 27.7.2005 cannot be construed as nullifying the effect of the ratio of the decision of the Apex Court in Gujarat Ambuja Cement Ltd., (supra), in which it was categorically held, in the context of the said provisions, that the law must be taken as having always been as is now brought about by the Finance Act, 2000, and that the statutory foundation for the decision in Laghu Udyog Bharati (which was followed in L.H. Sugar Factories Ltd. by the Tribunal) had been replaced and the decision has thereby ceased to be relevant for the purposes of construing; the amended provisions. The Hon'ble the Supreme Court in the context of the provisions of Section 71A held as under:
19. In addition, Section 71 which provides for the filing of returns was amended to provide, with retrospective effect, for the insertion of Section 71A. Under the newly inserted section, the provisions of Sections 69 and 70 do not apply to a person referred to in the proviso to Sub-section (1) of Section 68 as far as the filing of returns in respect of service tax for the period commencing from 16th July 1997 was concerned. It seeks to provide that 'such persons shall furnish return to the Central Excise Officer within six months from the day on which the Finance Bill, 2003 receives the assent of the President in the prescribed manner on the basis of the self assessment of the service tax and the provisions of Section 71 shall apply accordingly'. This period was extended by this Court by order dated 17-11-2003 for a period of two weeks with effect from the date of the order. Section 94 as originally enacted for the rule making power of the Central Government was amended to read with effect from 16th July 1997, that the Central government would also have the power to frame rules relating to the manner of furnishing returns under Section 71A.
20. There cannot be any doubt that the object of these sections is to nullify the effect of this Court's decision in Laghu Udhdyog Bharati by retrospectively amending and validating provisions held to be illegal. It is a well settled principle that validation of a tax declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal (vide Prithvi Cotton Mills Ltd. v. Broach Borough Municipality: ; Indian Aluminium Co. and Ors. v. State of Kerala K. Sankaran Nair v. Dvaki ; B. Krishna Bhat v. State of Karnataka ; N.A. Cooperative Mfg. Federation v. Union of India . As a proposition of law this cannot be and is not disputed. The question is whether by enacting Sections 116 and 117 of the Finance Act, 2000 and Section 158 of the Finance Act, 2003, the bases on which this Court struck down Rule 2(1)(d), (xii) and (xvii) of the Service Tax Rules, 1994 had been displaced or removed.
15. Relying on the decision of the ratio in Gujarat Ambuja Cement Ltd. this Tribunal in J.K. Industries Ltd. v. CCE, Indore (supra) held as under:
5. It is a settled legal position that a statutory Act may be enacted prospectively or retrospectively. The retrospective effect can be given in case of curative and validating statutes. The curative statutes by their very nature are intended to operate upon and affect past transactions having regard to the fact that they operate on conditions already existing [See, ITW Signode India Ltd. v. Collector of Central Excise reported in 2002 (158) E.L.T. 403 (S.C.)]. In the present case, as already held by the Hon'ble Supreme Court in Gujarat Ambuja Cement Ltd. (supra), the law must be taken as having always been as was brought out by Finance Act, 2000 and that the statutory foundation for the decision of the Supreme Court in Laghu Udyog Bharati has been replaced and that decision has ceased to be relevant for the purposes of construing the provisions of the Act as amended by the Finance Act, 2000 and 2003. Therefore, the reliance on behalf the appellant on the earlier decision of the Supreme Court in Laghu Udyog Bharati case (supra) and on the decision of this Tribunal in L.H. Sugar Factories Ltd. case (supra) in which relying upon, the decision in Laghu Udyog Bharati, it was held that the show cause notices issued in that case by invoking Section 73 of the goods were not maintainable, is misconceived, as their ratio will now be applicable and the matter has to be viewed in the context of the amended provisions, the constitutionality of which has been upheld by the Apex Court in Gujarat Ambuja Cement case (supra)".
6. The earlier position under which the recipient of service provided by goods transport operator could not have been liable was drastically altered by the amended provisions. By Section 116 of the Finance Act, 2000 it was provided that during the period commencing on and from 16th day of July 1997 and ending with the 16th day of October 1998, the provisions of Chapter V of Finance Act 1994 (i.e. relating to service tax) shall be deemed to have effect subject to the modifications made thereunder. Section 65 of the Finance Act, 1994 was modified by substituting Clause (6) thereof, as a result of which definition of 'assessee' was altered so as to, inter alia, include in relation to services provided by a goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage. Thus, in respect of the services provided to the appellant for the said period in question the appellant, by virtue of the said amendment, became 'assessee' who was liable for collecting the service tax under the amended definition clause.
8. The provisions of Section 71A which were inserted by the Finance Act 2003 retrospectively w.e.f. 16th July 1997 were enacted to enable such persons falling under the proviso of Sub-section (1) of Section 68 like the appellant to file the returns in respect of service tax for the said period within six months from the day on which the Finance Act, 2003 received the assent of the President in the prescribed manner, on the basis of the self-assessment of the service tax, as provided therein. It was also provided in Section 71A that the provision 71 shall apply accordingly, to such returns. Rule 7A thereupon came to be inserted by the Service Tax (Amendment) Rules, 2003 w.e.f. 14-5-2003 in which it was provided that, notwithstanding anything contained in Rule 7 which related to half yearly return, an assessee in case of service provided by goods transport operator for the period from 16th day of November 1998 to 2nd day of June, 1998 shall furnish a return within a period of six months from the 13th day of May, 2003, in Form ST-3B along with copy of Form TR-6 in triplicate, failing which the interest and penal consequences as provided in the Act shall follow. It is, therefore, clear to us that not only the past recoveries were validated by Section 117, the amendment also provided for continuance of the liability of persons falling in the proviso of Section 68(1) who were to be deemed always to have been liable to pay service tax, for such services provided, to the credit of the Central Government. In such cases there was no scope for the applicability of Section 70 of the said Act and, therefore, the special provision for filing of returns was necessarily required to be made as per Section 71A, because, they could not have filed return earlier. Validating of legislation retrospectively curing defects in a taxing statute is a well recognized course, and the appellant did not acquire any vested right from the earlier defect in the statute and cannot seek a wind fall from the legislatures' mistakes. The Parliament has enacted a valid law with retrospective effect and therefore the earlier judgments become irrelevant and the matter has to be viewed only in the context of the provisions now existing, which clearly provided for the liability of the appellant in respect of the services provided by the goods transport operators for which the appellant paid the freight and was deemed always to have been liable to pay service tax for the period in question from 16th July, 1997. The appellant was bound to file the returns as mandatorily required by Section 71A and accordingly the return was filed as per this machinery provision, with the payment of service tax as per the challan.
15.1 It was further held:
The service tax paid on the basis of self-assessment as per the statutory provision was a valid collection of tax by the government and therefore, it was in no way refundable to the appellant who was liable to pay the same under the amended provisions. The period for filing of the returns was provided in Section 71A, which was six months from the date on which the Finance Act, 2003 received the assent of the President, and the appellant filed the return within the period so prescribed. In a case which was covered by Section 71A read with Rule 7A, the date of filing of return cannot be drawn from the provisions of Section 70. In fact Section 71A clearly specified that the provision of Section 70 did not apply to persons referred to in the proviso to Sub-section (1) of Section 68 for the filing of return. It cannot, therefore, be accepted that the time limit for filing of return by the appellant should be computed on the basis of the provision of Sections 70 and 73 as from the date on which the half-yearly return could have been filed under Section 70 read with Rule 7 which were wholly inapplicable in case of the appellant when specific provision of Section 71A was made in the context of the persons like the appellant for filing of the return and period within which the return was to be furnished was also provided. The contention that the appellant was not liable to pay the service tax since the recovery would have been time barred on the basis of the deemed liability having been arisen earlier on the expiry of the relevant period in 1998, is, therefore, wholly misconceived.
16. In view of the clear ratio of the decision of the Hon'ble the Supreme Court in Gujarat Ambuja Cement Ltd. (supra), which was followed by this Tribunal in J.K. Industries Ltd. (supra), any contrary decisions simply giving directions without dealing with or showing dissent from the ratio laid down in these decisions or attempting to distinguish them, cannot be considered to be laying down any precedent on the doctrine of ratio decidendi. Mere directions, issued contrary to the settled legal position, cannot be said to be laying down any contrary ratio, so as to constitute an opposite precedent or laying down a contrary proposition. We are of the opinion that the ratio of the decision of Hon'ble the Supreme Court in Gujarat Ambuja Cement Ltd. (supra), cannot be overlooked on the spacious plea of a learned authorized representative of the respondents-assessees that "later is better". It is obvious that while affirming the decision of the Tribunal in L.H. Sugar Factories Ltd. (supra), the Hon'ble the Supreme Court was not concerned with the validating provisions which prompted the decision in Gujarat Ambuja Cement Ltd. (supra). In fact, there could be no conflict between the two decisions, which dealt with different situations, one dealing with challenge against a show cause notice in a situation prevailing before the validating law and the other dealing with the effect of the validating provisions. Therefore, even if the decision of the L.H. Sugar Factories Ltd. rendered by the Tribunal came to be affirmed later on, that is, after the decision in Gujarat Ambuja Cement Ltd., the subsequent decision was relevant only in the context of the law, as stood prior to the validating provisions, the constitutionality of which came to be upheld by the Hon'ble the Supreme Court in Gujarat Ambuja Cement Limited. For the same reason any contrary decision rendered by this Tribunal cannot be followed, because that would be defying the law laid down by the Hon'ble the Supreme Court in Gujarat Ambuja Cement Limited.
17. The contention that the notices were barred by limitation is wholly misconceived in view of the fact that the revised show cause notices were issued as per the amended provisions of Section 73 which came into force from 10.9.2004 within one year from the relevant date which was defined in Sub-section (6) of Section 73 as under:
Section 73 (6) For the purposes of this section, 'relevant date' means,-
(h) in the case of taxable service in respect which service tax has not been levied or paid or has been short-levied or short-paid-
(a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
(b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
(c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;
17.1 It will be seen from the above provisions that the show cause notice was required to be served within one year from the "relevant date" in cases where there was no fraud, collusion etc. The "relevant date" in cases where periodic return is filed and in cases where periodic return is not filed was governed by Clauses (a) and (b) of Sub-section (6) (i) of Section 73. In the present case, there is no dispute that the return which was filed as per the prescribed Form ST-3B under Rule 7A was not a periodic return, but a return which was required to be filed by the specified date, as contemplated by Section 71A read with Rule 7A. In Sub-clause (c) of Clause (i) of Section 73(6)(c) all other cases where no periodic return was involved, the date on which the service tax was to be paid was to be considered as the "relevant date". In the present case, the service tax was to be paid within six months from 13.11.2003 by filing the return in the prescribed Form ST-3B under Section 71A read with Rule 7A. The relevant date, therefore, in the present case for filing such return was 14.11.2003. Therefore, even if 14.11.2003 is considered and not 30.11.2003, which was the date extended by the Supreme Court, the show cause notices issued on 4.11.2004 were clearly within the prescribed period of one year.
18. For the foregoing reasons, the appeal of the Revenue is required to be allowed. However, since this will also result in restoring the penalty, it appears to us that, this is a fit case for invoking the provisions of Section 80 of the said Act, in view of the present respondents-assessees having pursued the matter in the writ petitions before Hon'ble the Supreme Court and having paying up the tax amount though after some time after their petitions were dismissed. We are, therefore, not inclined to restore the penalty imposed on the present respondents under Section 76 of the Act. Subject to this modification in the order-in-original, we allow the appeals of the Revenue and set-aside the impugned order of the Commissioner (Appeals) and restore the orders-in-original made against these respondents-assessees.
[Dictated and pronounced in the open Court]