Custom, Excise & Service Tax Tribunal
Interjewel Pvt. Ltd vs Commissioner Of Service Tax Mumbai on 30 April, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal Nos. ST/88511, 89893, 89907,88970,89973, 90161/2014-MUM, (Arising out of Order-in-Original No. 91/03/V/2014/COMMR/ANS/ST dated 11.4.2014, passed by the Commissioner of Central Excise, Mumbai-V, OIO No. 45/STC-I/SKS/14-15 dt.09.09.2014, OIO No. 52/STC-I/SKS/14-15 dated 11.09.2014, OIO No. 019 to 20/STC-I/SKS/14-15 dt. 02.06.2014, OIO No. 46 to 48/STC-I/SKS/14-15 dated 09.09.2014, OIO No. 55/STC-I/SKS/14-15 dt. 07.10.2014 passed by the Commissioner of Service Tax, Mumbai-I, ) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. P.S.Pruthi, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Interjewel Pvt. Ltd.
B. Vijay Kumar & Co.
Vishinda Diamonds
Rosy Blue (I) Pvt. Ltd.
KGK Diamonds (I) Pvt. Ltd.
K.P.Sanghvi & Sons
:
Appellant
VS
Commissioner of Service Tax Mumbai
:
Respondent
Appearance
Shri A. Shirazi, Advocate for Appellant
Shri V.K. Singh, Spl. Counsel for respondent
CORAM:
Mr. M.V. Ravindran, Member (Judicial)
Mr. P.S.Pruthi, Member (Technical)
Date of hearing : 30/04/2015
Date of pronouncement : /2015
ORDER NO.
Per : M.V. Ravindran
This bunch of appeals are disposed of by a common order as the facts and in the issue is same.
2. The following appeals are disposed of :
Sr. No. Name of the appellant Appeal No. SCN dt.
Period involved
1.
Interjewel Pvt. Ltd.
ST/88511/2014-MUM 20.9.2011 18.4.2006 to 14.5.2008
2. B. Vijay Kumar & Co.
ST/89893/2014-MUM 20.9.2011 18.4.2006 to 31.3.2011
3. Vishinda Diamonds ST/89907/2014-MUM 19.9.2011 18.4.2010 to September 2010
4. Rosy Blue (I) Pvt. Ltd.
ST/88970/2014-MUM 17.10.2011 & 20.9.2012 18.4.2006 to 31.3.2012
5. KGK Diamonds (I) Pvt. Ltd.
ST/89973/2014-MUM 26.8.2011, 20.3.2012 & 22.10.2012 18.6.2006 to 31.3.2012
6. K.P.Sanghvi & Sons ST/90161/2014-MUM 28.3.2011 & 13.10.2011 June 2006 to March 2011 The above appeals are filed against the various impugned orders which have confirmed the demand of the service tax liability, interest thereof and imposed penalties on a finding that the appellants have not discharged the service tax liability on amounts remitted by them to the persons situated abroad on receiving services from them. All the appellants have been issued show cause notices invoking the provisions of Section 66A of the Finance Act, 1994 wherein provision was made for levy of service tax on the service recipient for the services rendered by a person situated abroad.
3. The relevant facts that arise in all these appeals are the appellants are engaged in the business of manufacturing & sale of cut diamonds and polished diamonds. The rough diamonds are imported from M/s. DTC, U.K., who are pioneers in diamond market. M/s. DTC ensures, the appellants herein, that diamonds are not conflict/blood diamonds, have Kimberely Process Certification and the sale is done through M/s. Bonas & Co. Ltd. London, who acts as a broker between the appellants herein and M/s. DTC. The appellants pay commission to the broker in foreign exchange. The said foreign exchange is remitted through the banking channels. After completing the investigation in all these appeals, show cause notices of various dates as hereinabove indicated, were issued. The appellants contested the show cause notices before the adjudicating authority on merits as well as on limitation. The adjudicating authority did not agree with the contention raised by the appellants and after following the due process of law confirmed the demands raised along with interest and imposed penalties.
4. Ld. Counsel appearing on behalf of all the appellants would take us through the records of the case. After taking us through the show cause notices and the impugned orders, he would submit that the demands which have been confirmed by invoking the extended period are liable to be set aside as the appellant herein had filed a Writ Petition No.2482 of 2006 on 8th September, 2006 before the Honble High Court of Bombay challenging the constitutional validity of levy of service tax on services rendered and received from outside India. It is his submission that the said writ petition has been admitted by the Honble High Court on 29th March, 2007 and it is still pending. He would also submit that in response to the said writ petition which was served upon the office of the Commissioner through the standing counsel, an affidavit was filed by the department on 29.11.2006 contesting the claims made by the appellants in the writ petition. It is his submission that the revenue authorities were aware of the pendency of the writ petition and the issue involved which was constitutional validity of the provisions of Section 66A of the Finance Act, 1994, hence the extended period invoked in all these cases is incorrect and the impugned orders to that extent needs to be set aside on this point itself. On merits it is the submission that the constitutional validity of Section 66A is challenged by the appellants in the writ petition before the Honble Bombay High Court is still pending, hence the service tax liability on merits also does not arise. He would submit that since all the appellants were before the Honble High Court in writ petition, they had entertained the bona fide belief that they are not liable to pay the service tax till the outcome of the writ petition filed by them. Hence, imposition of penalties on the appellants is un called for and needs to be set aside. It is his further submission that view of the appellants claim of Revenue Neutrality, as few of the appellants are discharging the service tax liability on various other connected services and if they pay the service tax under reverse charge mechanism , they are eligible to avail Cenvat credit and on this ground itself, the demands needs to be set aside.
5. Ld. Special Counsel appointed by the Revenue would take us through the records again and submit that the appellants were directed to produce various records for ascertaining the correct tax liability. He would submit that none of the appellants responded positively to the summons issued and were always claiming that writ petition filed by them challenging the constitutional validity is still pending. It is his submission that after the date of payment of commission to the foreign entity was provided, the Revenue issued the show cause notices hence there was delay from the appellants end for which there cannot be a claim of limitation. He would submit that on merits, the issue is now settled by the judgment of the Honble High Court of Bombay in the case of Indian National Ship Owners Association Vs. Union of India 2009 (13) STR 235 (Bom.) which has been upheld by the Supreme Court. It is his further submission that the claim of the appellant that the issue is hit by limitation is also incorrect as this Tribunal in the case of I.C. Financial Analysts of India Vs. C.C. & C.E., Hyderabad-II 2013 (30) S.T.R. 273 (Tri.-Bang.) in paragraph No. 20 & 21 has held that failure to disclose relevant facts and material during disputed period are clearly covered under the suppression of facts with intent to evade tax. Hence, the claim of bona fide belief does not arise. He would also rely upon the view taken by the Tribunal in the case of Commissioner of C.Ex. Chandigarh Vs. Baba Asia Ltd. 2011 (267) E.L.T. 115 (Tri.-Del.).
6. We have considered the submissions made at length by both sides and perused the records.
7. On perusal of the records, we find, as stated by both sides, the issue is of liability to discharge service tax on amounts which have been remitted by the appellants to foreign entities for the commission on the import of rough diamonds.
8. On merits, we find that though the writ petition filed by the appellant is pending before the Honble High Court of Bombay, the issue of liability to pay service tax under reverse charge mechanism, as per the provisions of Section 66A of the Finance Act, 1994, is now settled by the Apex Court, holding that the service tax liability would arise under the reverse charge mechanism w.e.f. 18.4.2006. Accordingly, in view of the law being settled, we hold that on merits, the appellants appeal do not succeed.
9. At the same time, we find that all the appellants have been taking a consistent plea before the adjudicating authority that they were under a bona fide belief that the writ petition which has been filed by them has been admitted and is still pending, hence they need not discharge any service tax liability. On perusal of the records, we find that factually appellants had filed writ petition on 8.9.2006 and it was admitted by the Honble High Court on 29.3.2007. We find that the department was represented by the standing counsel before the Honble High Court and departments Affidavit was filed on 29.9.2006, which admitted the contentions that the appellants were engaged in importing of rough diamonds and have paid commission to the brokers through whom they procured diamonds from DTC. If the department was aware of writ petition filed by the appellants and have filed an affidavit in September 2006, nothing prevented them from issuing protective demand notices in order to safeguard the Revenue. As has been already reproduced hereinabove, we find that bulk of the show cause notices were issued by the Revenue department in 2011 invoking the periods as indicated against the details of individual appellants. In our view, the demand of the service tax liability by invoking the extended period in all these cases will not survive as Revenue was well aware of the activity of the appellant of remitting the payments to the broker as commission through proper banking channels, which has been mentioned in writ petition before the Honble High Court. In our considered view, the Revenue department having filed an affidavit before the Honble High Court in response to the writ petition filed by the appellant, invocation of extended period seems to be not inconsonance of the law, and it has to be held that the Revenue authorities were aware of the fact that the appellant have remitted money to the broker situated abroad as commission. We are of the considered view, that appellants could have entertained a bona fide belief that the constitutional validity having been challenged by them in the writ petition and the same being pending before the Honble High Court, they need not pay any service tax on the amount that is remitted to the brokers. This can be bona fide belief of the appellants, accordingly, the demand which has been confirmed against all the appellants by invoking the extended period of limitation are liable to be set aside and we do so to that extent the appeals are allowed. At the same time, the demands which are within the period of limitation from the date of issuance to the show cause notice needs to be upheld with interest and we do so, to that extent appeals are rejected.
10. This takes us to the issue of penalties imposed on the appellants under various provisions of the Finance Act, 1994. We find that the appellant need not be visited by penalties under the various Sections of the Finance Act inasmuch, they could have entertained the bona fide belief as to that their writ petition and may be decided in their favour. Invoking the provisions of Section 80 of the Finance Act, 1994, we find that the appellants have made out justifiable reason for setting aside the penalties imposed on them. Invoking the said provisions of Section 80 of the Act, we set aside the penalties imposed on all the appellants herein to that extent the appeals are allowed.
11. All the appeals are disposed of as indicated hereinabove.
(Pronounced in court on 2015)
(P.S.Pruthi)
Member (Technical)
(M.V. Ravindran)
Member (Judicial)
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