Custom, Excise & Service Tax Tribunal
M/S. Turret Industrial Security ... vs Coms,C.Ex - Jsr on 22 October, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Service Tax Appeal No.217 of 2010
(Arising out of Order-in-Original No.06/S.Tax/Denovo/Commr./2010 dated 16 March
2010 passed by Commissioner of Central Excise & Service Tax, Jamshedpur.)
M/s. Turret Industrial Security Pvt.Ltd.
(Pushpanjali, 43/A Inner Circle Road,
Contractors Area, Jamshedpur.)
...Appellant
VERSUS
Commissioner of Central Excise & Service Tax, Jamshedpur
.....Respondent
(143, New Baradwari, Sakchi, Jamshedpur-831001.) APPEARANCE Shri Rajeev Agarwal, C.A. for the Appellant (s) Shri H.S. Abedin, Authorized Representative for the Respondent (s) CORAM: HON'BLE SHRI P.K.CHOUDHARY, MEMBER(JUDICIAL) HON'BLE SHRI BIJAY KUMAR, MEMBER(TECHNICAL) FINAL ORDER NO. 76385/2019 DATE OF HEARING : 6 August 2019 DATE OF DECISION : 22 October 2019 P.K.CHOUDHARY :
The instant appeal has been filed by M/s. Turret Industrial Security Pvt Ltd against Order-in-Original dated 16.03.2010 whereby the Ld. Commissioner, Central Excise, Ranchi, has confirmed demand 2 Service Tax Appeal No.217 of 2010 of service tax of Rs. 87,54,969/- for the period 16.10.1998 to 31.03.2004 alongwith penalty under Section 76 & 78 of the Finance Act, 1994, and applicable interest under Section 75 of the said Act.
2. Briefly stated the facts of the case are that the appellant is a security agency engaged in providing security services. Service tax on "security services" was first introduced on 16.10.1998. The levy of service tax was new and there was lack of awareness regarding the compliances to be followed by the service providers. The appellant obtained registration with the authorities on 11.02.1999 belatedly, and started discharging service tax on own ascertainment basis. There were existing service contracts entered well before the date of introduction of service tax in respect of which clients were not reimbursing the service tax amount. The fact regarding non- payment of service tax by clients was duly informed by the assessee to the Superintendent vide letter dated 07.02.2000 wherein it was stated that the levy of service tax was new and therefore there had been delay in obtaining registration and making other compliances. It was also stated in the said letter that they were depositing service tax which was being reimbursed by the clients and in cases, where the tax amount could not be collected, the same was not being deposited. The appellant wrote another letter dated 14.06.2001 informing that despite repeated reminders, the clients were not reimbursing the service tax amount and accordingly, they were not depositing the tax amount which could not be collected. The appellant also requested that in case the department desired any documents for verification purpose, the same may be called for. The service tax half yearly returns in Form ST-3 filed by the appellant for the impugned period have been duly verified by the Superintendent and wherever there has been delay in tax payment, applicable interest was paid on the direction of the Range Superintendent. Necessary endorsements for said verification by the Superintendent have been duly made in the ST-3 periodical returns.
3Service Tax Appeal No.217 of 2010 An Audit was carried out of the records of the appellant wherein the difference between the figures appearing in Profit & Loss A/c and the Service Tax Returns was pointed out. Based on the said Audit, Show Cause Notice dated 17.01.2005 was issued by the Learned Assistant Commissioner proposing demand of service tax of Rs. 1,01,18,128/- together with interest u/s 75 and penalties u/s 76 and
78. It is the case of the appellant that demand could not be raised based on the Profit & Loss Account which is prepared on the accrual/mercantile basis. They also submitted that wherever the tax amount was reimbursed by the clients the same was deposited and that there was ignorance of law and there was no suppression on their part. Vide adjudication order dated 11.08.2006, the demand as proposed in the SCN was confirmed along with interest and penalties were imposed. In the appeal bearing no. ST-48/2006 before the Tribunal against the aforesaid order dated 11.08.2006, the Tribunal vide Final Order dated 26.10.2007 remanded the matter back to the Ld. Commissioner with the direction that value of taxable service was required to be calculated on receipt basis. It was also directed that the authority will decide the matter afresh including the issues pertaining to applicability of extended period of limitation and imposition of penalty.
In the remand proceedings, the service tax amount was re- calculated to arrive at Rs. 87,54,969/- for the impugned period which was calculated on cum-tax basis since the clients did not reimburse the service tax amount. In so far as the issue of limitation is concerned, the Ld. Commissioner observed that the plea of appellant that they had informed the department regarding non-payment of tax which was not reimbursed by clients would not come to their rescue. He also observed that in the service tax returns, the appellant was required to show the value of taxable service billed and the value realised which was not done and therefore there was suppression on the part of the appellant to evade payment of tax and accordingly, the 4 Service Tax Appeal No.217 of 2010 Ld. Commissioner held that extended period of limitation was righty applicable. Based on the aforesaid observation, the Ld. Commissioner vide De-novo Order dated 16.03.2010 confirmed the demand of service tax of Rs. 87,54,969/- alongwith interest u/s 75 and imposed penalty u/s 76 & 78 of the Act.
3. Sri Rajeev Agarwal, CA, appeared for the appellant and Sri H S Abedin, Ld. Asst. Commissioner, (DR) appeared for the Revenue.
4.0 The Ld. CA fairly submitted that the appellant is not disputing the applicability of service tax on security services rendered by them. It is his only submission that the very Show Cause Notice dated 17.01.2005 issued for the extended period of limitation is legally not sustainable and hence the entire proceeding is liable to be set aside. To substantiate his contentions he made the following submissions:-
4.1 That the appellant had the understanding that only the service tax component which was paid by the service recipient needs to be deposited and wherever the tax amount could not be collected, the same was not to be deposited. This understanding was categorically informed by the appellant vide letters dated 07.02.2000 and 14.06.2001 which are on record and not in dispute in the impugned order. He also relied on following decisions of the Tribunal wherein it has been held that extended period of limitation could not be invoked in cases where the assessee has duly informed in writing about the practice followed and their understanding about the tax position:-
Purna Plastics Industries vs. CCE, Calcutta 1999 (112) ELT 523 (Tri- Kol) ITW India Ltd. vs. CC, Hyderabad 2008 (222) ELT 257 (Tri-Bang), upheld by the Hon'ble Andhra Pradesh High Court, as reported on CCE vs. ITW India Ltd 2011 (268) ELT 311 (AP) Modipon Fibre Co. vs. CCE Meerut 2001 (135) ELT 1420 (Tri-Del) upheld by the Hon'ble Supreme Court as reported in 2007 (218) ELT 8 (SC).5
Service Tax Appeal No.217 of 2010 American Quality Assessors (I) Pvt Ltd. vs. Asst Comm (ST), Hyderabad 2009 (16) STR 413 (Tri-Bang.) SIMS Friction Products vs. CCE, New Delhi 2007 (220) ELT 95 (Tri-Del) DCB Bank Ltd. vs. Commissioner of Service Tax, Mumbai-I 2019 (21) G.S.T.L. 798 (Tri. - Mumbai) Grand Ashok vs. Commissioner of Central Excise, Banglore 2019 (365) E.L.T. 828 (Tri. - Bang.) 4.2 That the observations made by the Ld. Commissioner in sustaining the imposition of the extended period of limitation only on the basis that there was a mistake in filling up of the relevant columns of the ST-3 returns does not have any material implication when the fact regarding the practice followed by appellant for deposit of collected amount of tax was duly intimated to the department which stands unrebutted. He further contended that since the very levy of service tax was a new concept, it is very likely that the filling up of relevant columns in ST-3 returns would not be with utmost perfection as would be desired so as to allege wilful wrong submission of information. He relied on the decision of the Hon'ble Supreme Court in Price Waterhouse Coopers (P) Ltd vs. Commissioner of Income Tax [2012] 25 taxmann.com 400 (SC) wherein it has been held human error committed in filling the return columns of the return format could not be said to be for reasons of willful suppression.
4.3 That the Superintendent, on being satisfied, after having verified the return and records under Section 71 of the Act as was applicable during the impugned period, found no escapement of tax and never raised any objection nor referred the matter to the jurisdictional Asst. Comm / Dy Commissioner, as was required under the said provision when there was short payment of tax. Accordingly, he submitted that when the scrutiny of the returns was undertaken and the facts were known, invoking the extended period of limitation in the impugned SCN and sustaining the same by the Ld. Commissioner is bad in law.
6Service Tax Appeal No.217 of 2010 4.4 That though the said understanding of the appellant was not in consonance with the legal provisions, at best it can be said that there was ignorance on the part of the assessee appellant more so when the tax on security service was newly introduced. He relied on the Tribunal's decision in Sterlite Telelink Ltd. vs. CCE Vapi 2014 (312) ELT 353 (Tri-Ahm) to state that though ignorance of law cannot be pleaded as a valid ground,yet it is not sufficient to prove willful suppression for justifying extended period of limitation.
4.5 To further his arguments on time bar, he also submitted that the entire proceedings have been initiated in the impugned SCN on the basis of Balance Sheet of the appellant Company which the authorities compared with the service tax returns to find the difference in figures. He submitted that the Range Superintendent should have verified the same in terms of Section 71 of the Act to find out if there was any short payment of tax. He also submitted that the demand raised merely on the basis of Balance Sheet cannot allege fraud or suppression inasmuch as the Balance Sheet is a public document. He relied on the following decisions:
Hindalco Industries Ltd. vs. CCE, Allahabad 2003 (161) ELT 346 (Tri-Del) Kirloskar Oil Engines Ltd vs. CCE, Nasik 2004 (178) ELT 998 (Tri-Mum) 4.6 The Ld. CA also raised a legal issue that where the extended period of limitation has been invoked by the Department under Section 73 and the same is not upheld, no demand can alternatively be imposed for normal period of limitation as there was no provision in Section 73 to enforce part of demand for normal period of limitation of six months. He submitted that it is only w.e.f. 10.05.2013 (vide amendment made in Finance Act, 2013), sub- section (2A) was inserted in Section 73 to provide that demand could be enforced to the extent covered for normal period, when the SCN is issued by invoking extended period of limitation and the appellate authority holds that 7 Service Tax Appeal No.217 of 2010 there is no fraud or suppression. He relied on the decision of Hon'ble High Court of Chhattisgarh in the case of Engineers India Technical Services v. Commr. C.Ex & ST, Raipur 2017 (6) G.S.T.L. 259 (Chhattisgarh) in this regard. He also submitted that the issue already stands settled by the Hon'ble Supreme Court in CCE Jaipur vs. Alcobex Metals 2003 (153) ELT 241 (SC) wherein it was observed that the notice cannot be treated to be valid for shorter period of limitation when the notice was issued for invoking extended period of limitation.
He also referred to the Hon'ble Calcutta High Court's decision in Infinity Infotech Parks Ltd vs. UOI 2014 (36) STR 37 (Cal), wherein the Hon'ble High Court relying on the above Apex Court's decision, observed that the notice issued for extended period of limitation cannot be treated as having been issued for normal period of limitation when the elements of fraud or suppression is found to be absent. He accordingly argued that the demand in the instant case cannot be raised for the normal period i.e. October 2003 to March 2004 and the entire demand of service tax with interest and penalty was liable to be set aside.
5. Sri Abedin, the Ld. DR, reiterated the findings made by the Ld. Commissioner in the impugned order. He submitted that since the appellant is not contesting the levy of service tax, they cannot be absolved from the demand merely because they choose to write letters to the Department. He also submitted that since they have not disclosed the total amount of invoices raised in the periodical returns, they suppressed the value of taxable services. He accordingly submitted that the appellant cannot be given relief on the ground of time bar and hence, their appeal is liable to be dismissed.
6. Heard both sides and perused the appeal records.
8Service Tax Appeal No.217 of 2010
7. We find that the issue for consideration before us, in this second round of litigation, is whether the appellant has wilfully suppressed information so as to justify invocation of extended period of limitation.
The Tribunal vide Final Order dated 26.10.2007 directed the adjudicating authority to compute the service tax liability by extending cum-tax benefit where the service tax amount has not been realised by appellant and also to decide the issue on limitation. The Ld. Commissioner in de-novo adjudication vide the impugned order has reduced the service tax liability from Rs. 1,01,18,128/- to Rs. 87,54,969/- by extending the cum-tax benefit on being satisfied that the tax amount has not been realised by the appellant.
Thus, it can be concluded that the impugned SCN was issued by solely placing reliance on the figures as appearing in the audited financial statements of the appellant.
Be that so, as it may, we also find that the appellant had duly informed the department vide their letters dated 07.02.2000 and 14.06.2001, which are on record and have not been disputed by the Ld. Commissioner in his impugned order, that they were not depositing the tax amount in cases where the clients are not reimbursing the tax amount. We find that in identical cases, where duty could not be paid by the assessee which was well within the knowledge of the department, this Tribunal has held that allegation of wilful suppression could not be levelled against the assessee. The Tribunal in the case of Purna Plastics Industries vs. CCE, Calcutta (Supra) has observed as follows:-
"5.We have carefully considered the submissions of both sides. We findthat the appellants have a strong case on the point of limitation. They have written a letter in the year, 1986 to the Department disclosing the activity of manufacture of plastic moulded items and this act of the appellants reflects upon the bona fides of the appellants. Having brought the fact of manufacture to the notice of their 9 Service Tax Appeal No.217 of 2010 jurisdictional Central Excise Superintendent, it was now the duty of the Revenue to answer to the said query of the appellants and put them on the proper track.If the Department was entertaining any doubt about the value and clearances by the appellants so as to bring them in the Excise Net, nothing prevented the Superintendent, to whom the said letter was addressed, to seek further clarification as regards the value and clearances from the appellants. As having not done this, the Department cannot now invoke the extended period of limitation. The said letter dated 20-3-1986 is a very elaborate letter disclosing all the activities undertaken by the appellants and it cannot be said that there was any mala fide intention on the part of the appellants herein, to suppress the activity of manufacture..."
The Tribunal in ITW India Ltd. vs. CC, Hyderabad (Supra) observed that :-
"7.After this intimation, having known the process adopted by the appellant in respect of the goods described in the communication, it was open for the Department to question the classification suggested by the appellant and take suitable steps against the appellants on the ground that as per the Chapter Note, the activity indicated in the communication amounted to manufacture. The material placed in the communication was sufficient to alert the Revenue on the aspect, whether the activity should be treated as 'manufacture' and necessary action initiated as required by Section 11A of the Act. It transpires from the record that, the Deputy Commissioner had made an order on 3-2-1998 (41/98), on the basis of the said letter dated 28-7-1992, in respect of one of the items covered thereunder and held that, there was no suppression of facts in the case as the assessee has already brought the matter to the notice of the jurisdictional Asstt. Commissioner under the said letter. If under the same communication, the Revenue considered that there was no suppression of facts in respect of one of the items, namely, 8A RED, it does not stand to reason as to why a different stance should be adopted by the Revenue for the said two products in respect of which the intimation was clearly given as to the nature of the activity, namely, re-packing bulk goods into smaller packs and labelling them with their own brand name. The communication was addressed to the Asstt. Collector of Central Excise, 10 Service Tax Appeal No.217 of 2010 who, at the relevant time, was the proper officer. The Revenue cannot dis-own such communication as was sought to be done during the arguments by the learned Departmental Representative by pointing out that, the "Collector" was the authority mentioned in Rule 43. The submission ignores the scheme of delegation of powers contemplated by Rule 5 of the Central Excise Rules, 1944, and the nature of the powers delegated to the Asstt. Collector at the relevant time.
8.For the foregoing reasons there was no warrant for invoking the extended period for issuing the show cause notice dated 29-3-2000 and the show cause notice is therefore time barred. The impugned order is, therefore, set-aside to the extent that it holds that the show cause notice was not time-barred. The appeal is accordingly allowed."
The Hon'ble Andhra Pradesh High Court has concurred with the above views of the Tribunal which has been reported in 2011 (268) ELT 311 (AP).
8. We also note that the very levy of service tax on security service was a new subject in the year 1998. The said service was made taxable only w.e.f. 16.10.1998 i.e. the very date from which the impugned demand has been made. The submission of the appellant that the error in filing of ST-3 returns is based upon a certain understanding of the appellant and hence the same should not be the only basis of alleging suppression of facts, more so, when the same was communicated and made known to the Department, is reasonable and not devoid of merit.
In view of the facts and circumstances of the case, we are unable to agree with the contention of the Revenue that in absence of disclosure in returns regarding the total billings, the assessee has willfully suppressed, particularly in view of the fact that the assessee has duly communicated to the Department about their understanding regarding the tax liability.
In the course of hearing, the Ld. DR for the Revenue contended that the letters dated 07.02.2001 and 14.06.2011 claimed to be 11 Service Tax Appeal No.217 of 2010 written by the appellant were not received by the Department. The Ld. DR submitted a copy of letter dated 24.08.2012 signed by Addl. Commissioner, Jamshedpur and addressed to Addl. Commissioner, CESTAT, Kolkata, wherein it is stated that the authenticity of the above referred letters are not verifiable. We find that the said issue is purely a factual issue and being raised for the first time in this appeal. We are unable to accept the said pleadings for the reason that the Ld. Commissioner,in the discussions and findings part of the impugned de- novo adjudication order, has not disowned the communications made vide letters dated 07.02.2001 and 14.06.2011. Had there been doubt regarding the authenticity of the said letters of the assessee, which is not disowned by Ld. Commissioner in the order, the Department being an 'aggrieved person' could have preferred an appeal which has not been done. In any case, the Addl. Commissioner's letter dated 24.08.2012, issued after more than 2 years of the issue of impugned order dated 16.03.2010, is a communication from an Officer below the rank of Commissioner cannot be entertained at this stage, since not disowned by the Ld. Commissioner himself. In any case, the very fact that the Ld. Commissioner on being satisfied that tax amount could not be recovered by appellants from its clients, he reduced the tax demand. Further, the very applicability of tax on security service being a new subject, the conduct of assessee could not be doubted.
Thus, we hold that the Department cannot allege suppression on the part of the assessee to justify invocation of extended period of limitation.
9. With regard to the further contention made by the appellant that the SCN dated 17.01.2005 cannot be converted for raising demand for shorter period of limitation (i.e. normal period) when the extended period of limitation is found not to be invokable in absence of willful suppression or fraud, we note that amendment was made vide the 12 Service Tax Appeal No.217 of 2010 Finance Act, 2013 whereby the following sub-section (2A) was inserted to Section 73:-
"(2A) Where any appellate authority or tribunal or court concludes that the notice issued under the proviso to sub-section (1) is not sustainable for the reason that the charge of,--
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or the rules made thereunder with intent to evade payment of service tax, has not been established against the person chargeable with the service tax, to whom the notice was issued, the Central Excise Officer shall determine the service tax payable by such person for the period of eighteen months, as if the notice was issued for the offences for which limitation of eighteen months applies under sub-section (1).";
10. Taking note of the above amendment, the Hon'ble Chhattisgarh High Court in Engineers India Technical Services (Supra), observed that the amendment in Section 73 by way of insertion of sub section (2A) is introduced only w.e.f. 10.05.2013 long after the period in dispute involved in the said case could not help the case of department. Only implication that can be derived is that the show cause notice issued for extended period could not be converted into notice for demand of service tax for shorter / normal period of limitation. The relevant portion of the High Court decision is as below-
"...5. Insofar as the period from 1-6-2007 to 31-3-2008 is concerned, the matter revolves around the proper application of Section 73 of the Finance Act, 1994. That provision opens up by prescribing a period of 18 months to carry out the process which is authorised thereby. This is part of the fundamental contents of sub-section (1) of Section 73 of the Finance Act, 1994. A survey of the different components of Section 73(1) would clearly show that action could follow within the limit of time prescribed under that sub-section only on the existence of the 13 Service Tax Appeal No.217 of 2010 vitiating elements which are enumerated therein. No such ground has been found by the authorities below and the power to invoke Section 73 has not been done within the time prescribed in sub-section (1) thereof which was the only provision which governed the parties at that relevant point of time i.e. to say till the end of the financial year 2007-2008. In this view of the matter, the appellant is entitled to succeed on this ground as well.
6. Since reference was made during submissions to sub-section (2A) of Section 73 of the Finance Act, 1994, we may note that what is attempted to be resurrected through that provision is what could have loss otherwise to the Revenue if action proceeded under Section 73(1) would fail before the Appellate Authority or Tribunal or Court on a ground that the notice issued under sub-section (1) is not sustainable for the reason that the different vitiating elements enumerated therein are not established.
7. The provisions contained in sub-section (2A) of Section 73 of the Finance Act, 1994 was introduced only w.e.f. 10-5-2013 on the insertion of that provision as per the Finance Act, 2013. That was long after the relevant period for the case in hand. Therefore, sub-section (2A) of Section 73 of the Finance Act, 1994 is of no consequence to the case in hand."
The above decision of Chhattisgarh High Court was in respect of the appeal filed by assessee against Tribunal's Final Order as reported in 2014 (34) STR 358 (Tri-Del), wherein the period in dispute was 2005-06 to 2007-08 for which Show Cause Notice was issued on 10.12.2008. The Hon'ble High Court in the aforesaid decision also set aside the demand for the period June 2007 to March 2008 covering the normal period of limitation.
11. We also find that the issue has already been settled by the Hon'ble Supreme Court in Alcobex Metals (Supra) as relied by the appellant wherein the Apex Court held as below:-
"6. Admittedly, the impugned notice was issued by the Deputy Collector, Central Excise invoking the proviso to Section 11A for the 14 Service Tax Appeal No.217 of 2010 extended period which postulates satisfaction of the Collector on the question of fraud, collusion or wilful mis-statement or suppression of fact or contravention of any provisions of the Act and the Rules made thereunder for invoking a larger period of five years, i.e., from March 1, 1981 to December 5, 1985. It follows that such a notice could have been issued only by the Collector, Central Excise as such the impugned notice issued by the Deputy Collector is wholly without jurisdiction. This is the view taken by a Bench of two learned Judges of this Court in Collector of Central Excise v. Oil and Natural Gas Commission [1998 (103) E.L.T. 3]. This position is not seriously disputed by the learned senior counsel.
7. The contention that the impugned notice be treated as valid in regard to shorter period of six months is devoid of merit. Once the notice is issued under the proviso for the larger period, it cannot be treated as notice under main Section 11A for shorter period of six months. To enable this Court to ascertain the content of the impugned notice issued to find out whether it is severable as contended by the learned Counsel, time was granted to the Revenue to produce a copy thereof. In spite of the fact that a period of about eleven months has elapsed from the last date of hearing, a copy of the notice has not been produced. A perusal of the order of the Collector shows that he recorded the finding of suppression of fact. Even for shorter period notice based on the grounds contained in the proviso could be issued only by the Collector, therefore, the contention to treat the show cause notice for shorter period of six months cannot be accepted. This point was considered by a throe-Judge Bench of this Court in the case of Collector of Central Excise, New Delhi v. M/s. Frick India Limited in Civil Appeal Nos. 4421-4422 of 2000 on December 14, 2000 wherein the judgment in Oil and Natural Gas Commission (supra) was confirmed and central instructions of August 1987 were also referred to."
12. In view of the above factual matrix and the statutory legal provisions as applicable during the period from 16.10.1998 to 15 Service Tax Appeal No.217 of 2010 31.03.2004 involved in this case and the discussions made here-in- above, we are of the view that the impugned Show Cause Notice dated 17.01.2005 could not be legally issued and therefore, the demand of service tax, interest and penalty cannot sustain.
The appeal is therefore allowed with consequential relief as per law.
(Order pronounced in the open court on 22 October 2019.) SD/ (P.K.CHOUDHARY) MEMBER (JUDICIAL) SD/ (BIJAY KUMAR) MEMBER (TECHNICAL) sm