Custom, Excise & Service Tax Tribunal
Vibgyor Info Pvt Ltd vs Ce & Cgst Lucknow on 9 August, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.71226 of 2018
(Arising out of Order-in-Original No.LKO/EXCUS/000/COM/ST/006/2016-17
dated 22.09.2016 of the Commissioner, Central Excise & Service Tax,
Lucknow)
M/s Vibgyor Info Pvt. Ltd., .....Appellant
(1st Floor, B-Block[ Rohit Bhawan,
Sapru Marg, Hazaratganj, Lucknow)
VERSUS
Commissioner of Central Goods &
Service Tax, Lucknow ....Respondent
(7A, Ashok Marg, Lucknow-226001)
APPEARANCE:
Shri Prakhar Shukla, Advocate for the Appellant
Shri Santosh Kumar, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70711/2024
DATE OF HEARING : 09 August, 2024
DATE OF DECISION : 09 August, 2024
SANJIV SRIVASTAVA:
This appeal is directed against Order-In-Original
No.LKO/EXCUS/000/COM/ ST/006/2016-17 dated 22.09.2016 of
the Commissioner, Central Excise & Service Tax, Lucknow. By
the impugned order following has been held:
"ORDER
1. I hereby confirm the demand of Service Tax short-paid/
not-paid, totally amounting to Rs 2,78,19,836/- (Rs. Two
Crores Seventy Eight Lacs Ninteen Thousand Eight
Hundred and Thirty Six only) under Section 73(1) of the
Finance Act, 1994 alongwith appropriate rates of interest
Service Tax Appeal No.71226 of 2018
2
uhder Section 75 of the Act ibid. 1 order appropriation of
Rs.10,00,000/- deposited by the parts vide Challan
No.00120 dated 04.11.2014 towards the confirmed dues I
also impose a penalty of Rs. 1,44,57,836/- /- (Rs. One
crore forty four lacs fifty seven thousand eight hundred
and thirty six only) under Section 78 of the Finance Act.
1994 for syppressing the value of taxable services from
the department, If the assessee pays the confirmed dues
(i.e.Service Tax, interest thereupon and the penalty)
within thirty days from the date of communication of this
order, the amount of penalty liable to be paid shall be 25%
of the Service short paid and confirmed in this order.
2. I also confirm the interest in respect of late depositing of
Service Tax totally amounting to Rs. 9,87,819/- (as
detailed in Annexure-1 of the show cause notice) under
section 75 of the Finance Act, 1994. [Needless to mention
that this interest amount is separate from the interest
in respect of Service Tax short-paid/ non-paid]
3. I order recovery of late fee for non filing of ST-3 returns as
per Rule 7C of the Service Tax Rules subject to ceiling of
Rs. 20,000/- for each instance of delayed filing of return as
provided under Section 70 of the Finance Act, 1994
4. I impose a penalty of Rs. 10,000/- upon the assessee
under Section 77 of the Finance Act, 1994.
2.1 Appellant is engaged in providing services covered under
the categories of 'Manpower Recruitment or Supply Agency',
Supply of Tangible Goods Service' Erection commissioning &
installation services and Business Auxiliary services which are
taxable services in terms of Section 65(105)(k),(zzzzj), (zzd)
and (zzb) of the Finance Act 1994.
2.2 During course of audit/ scrutiny of the records of
appellant, it was observed that appellant had not/ short paid the
service tax on services provided by not declaring the value of
taxable services provided in their ST-3 returns.
2.3 A show cause notice dated 17.04.2015 was issued to the
appellants asking them to show cause as to why:-
Service Tax Appeal No.71226 of 2018
3
i. the Service Tax, amounting to Rs. 2,78,19,836/- (Rs.
Two Crore Seventy Eight Lacs Ninteen Thousand Eight
Hundred and Thirty Six only) should not be demanded
and recovered from them in terms of proviso to Section
73(1) of the Act for violation of Section 68 of the Act
read with Rule 6 of the Service Tax Rules'1994
ii. the interest at appropriate rate on the above amount of
Rs. 2,78,19,836/- should not be recovered from them
under Section 75 of the Act ibid.
iii. a penalty should not be imposed under the provisions of
Section 78 of the Finance Act` 1994 for their failure to
duly discharge their service tax liabilities of the facts
with intent to evade payment of service tax.
iv. a late fee should not be recovered from them for late
filing of ST-3 returns under Rule 7C of the Service Tax
Rules, 1994 read with Section 70 of the Finance Act,
1994
v. the interest amounting to Rs. 9,87,8 19/- ibid for late
depositing the service tax should not be recovered
under section 75 of the Act
vi. a penalty should not be imposed under the provisions of
Section 77(1)(a) of the Finance Act 1994 for not taking
registration under services namely, 'Supply of Tangible
Goods Service Erection commissioning & installation
Business Auxiliary services'.
2.4 The show cause notice has been adjudicated as per the
impugned order referred in para 1 above.
2.5 Aggrieved appellant have filed this appeal.
3.1 We have heard Shri Prakhar Shukla, Advocate for the
appellant and Shri Santosh Kumar Authorized Representative for
the revenue.
3.2 Arguing for the appellant learned counsel submits that:
the amount received by the appellant in case of man
power supplied to various government departments is
Service Tax Appeal No.71226 of 2018
4
inclusive of salary of workers, EPF, ESIC and Service
Charges (0.01% to 2%)
Impugned order confirms the demand by taking the value
of service provided as inclusive of all the amounts
received, ignoring the fact that the income value of the
service provided is only the service charge received by
them.
This issue is no longer res-integra and has been decided in
the following case holding that service tax is payable only
on the service charges:
o Vani Systems Pvt Ltd. [Final Order No 70267/2023
dated 28.11.2023]
o BD Customer [Service tax Appeal No 10603 of 2015,
Ahmedabad Bench]
o Mahatma Gandhi University of Medical Science and
Technology [Service Ta x Appeal No 50962 of 2020,
Delhi Bench]
o Mahanadi Coalfield Ltd. [service Tax Appeal No
75583 of 2022, Kolkata Bench]
3.3 Arguing for the revenue learned authorized representative
reiterated the findings recorded in the impugned order.
4.1 We have considered the impugned order along with the
submission made in appeal and during the course of arguments.
4.2 Impugned order records the findings as follows:
"1. Short payment of Service Tax on Man Power
Supply -Rs. 2,68,36,765/-
The party is engaged in the business of Manpower Supply
Agency. As detailed in the show cause notice, it was
observed that the party was not discharging their Service
Tax liability on gross value of service, which included salary
component of the man power supplied as well as service
charges
In this regard, the party has contended that they had taken
various government orders to supply man power. The main
source of income in this work is service charge charged on
Service Tax Appeal No.71226 of 2018
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salary payable to manpower supplied. Out of various
government departments, Vibgyor took the manpower
supply Work in State Level Nodal Agency (herein after
called as SLNA) of Uttar Pradesh where they did not agree
to pay service tax on salary portion of man power. They
agreed to pas service tax on service charge charged by the
Vibgyor even after doing various communications with
them regarding ruling of service tax laws in case of supply
of manpower and they made payment to the Vibgyor
accordingly. Even though they issue an office order for not
charging service tax on salary portion of man power
supplied by Vibgyor as well as other such service providers
The Vibgyor tax deposited service tax to the government
on the basis as it was received from SLNA; They also
contended that they earn only 5% service charge charged
on supply of man power to SLNA which was reduced to
0.40% on later years due to competition and the rate of
service tax increased from 10.30% to 12.36% during the
financial year 2009-10 to 2013-14. The party also informed
that SLNA warned them for not deducting Service Tax from
salary portion of man power from their salary and instructed
them to pay full salary to the man power which they got
from SLNA. In the circumstances, the party informed that
neither they were allowed charging service tax on salary
portion of man power nor they could deduct it from salary
portion of man power, they were unable deposit the service
tax. They also informed that some of the amount was not
received from to various government departments to whom
they supplied manpower
In this regard, I observe that before forming any opinion, it
is pertinent to examine the relevant legal provisions and
departmental clarifications regarding valuation of taxable
services
As per Rule 2(c) of the Service Tax (Determination of Value)
Rules, 2006, ""value' shall have the meaning assigned to it
Service Tax Appeal No.71226 of 2018
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in section 67". Said Section 67 of the Finance Act, 1994
reads as under:-
1. „Where service tax is chargeable on any taxable
service with reference to its value. then such value
shall,
i. In a case where the provision of service is for
consideration in money, be the gross amount
charged by the service provider for such service
provided or to be provided by him:
ii. In a case where the provision service is for
consideration not wholly or partly consisting of
money, be such amount in money as, with the
addition of S Tax charged, is equivalent to the
consideration;
iii. In a case where the provision of service is for
consideration which is not ascertainable, be the
amount as may be determined in the prescribed
manner.
2. Where the gross amount charged by the service
provider, for the service provided or to be provided is
inclusive of S. Tax payable. the value of such taxable
service shall be such amount as, with the addition of
tax payable, is equal to the gross amount charged.
3. The gross amount charged for the taxable service
shall include any amount received towards the
taxable service before, during or after provision of
such service
4. Subject to the provisions of Sub-section (1), (2) & (3)
the value shall be determined in such manner as may
be prescribed.
Further, I observe that Rule 5(1) of the Service Tax
(Determination of Value) Rules, 2006, which deals with
inclusion from value of certain expenditure or costs reads as
under:-
"1) Where any expenditure or costs are incurred by the
service provider in the course of providing taxable
Service Tax Appeal No.71226 of 2018
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service, all such expenditure or costs shall be treated as
consideration for the taxable service provided or to be
provided and shall be included in the value for the
purpose of charging service tax on the said service."
CBEC's letter under F.No. B1/6/2005 - TRU dated
27.07.2005 comes up more expressively and with more
lucid wordings on this point. Said letter of CBEC, while
clarifying the "Man Power Recruitment Service at point no.
22.4 there of states that:-
"22.4 Service tax is to be charged on the full amount of
consideration for the supply of manpower, whether full-time
or part-lime. The value includes recovery of staff costs from
the recipient e.g. salary and other contributions. Even if the
arrangement does not involve the recipient paying these
staff costs to the supplier (because the salary is paid
directly to the individual or the contributions are paid to the
respective authority) these amounts are still part of the
consideration and hence form part of the gross amount."
In light of the provisions of Section 67 of Finance Act, 1994
and Rule 2 & 5 of Service Tax (Determination of Value)
Rules, 2006 and in light of unequivocal clarification of the
CBEC. The gross value of taxable services charged by the
service provider is liable to payment of Service Tax.
In light of the legal position discussed above, I am unable to
accept party's pleas that they were not receiving the Service
Tax from' their clients and as such they were not
discharging their service Tax liability on gross amount of
taxable service. Accordingly, observe that as summarised
in Chart-A-4 of the show cause notice, the total taxable
value for service in this regard comes to Rs.
37,80,30,800/- on which the Service Tax payable comes to
Rs. 4,58,29.927/- against which the party has paid Service
Tax totally amounting to Rs. 1,89,93,1 62/- only, thus they
have short paid an amount of Rs. 2,68,36.765/- in respect
of Manpower Supply Agency Service Further, I observe that
the party did not declare the correct value of services in
Service Tax Appeal No.71226 of 2018
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their ST-3 returns. Thus they have willfully suppressed the
facts from the department with intent to evade Service tax
and mis-declared the value of services provided in their ST-
3 returns during the period during 2009-10 (October' 2009
to March`2010) to 2013-14 on which Service Tax is
legitimately due to the government exchequer. These facts
came to the knowledge of the department only when audit
of the party was conducted by the departmental officers,
therefore, extended period of time is clearly invokable in
the instant case
Accordingly, I confirm the short paid Service 'Tax amounting
to Rs. 2,68,36,765/- u/s 73(1) of the Finance Act, 1994
alongwith interest u/s 75 of the Finance Act, 1994
2 Non-payment of Service Tax on 'Renting of
Tangible Goods':
On scrutiny of the Profit & Loss account of the party and
invoices issued by the party, it was revealed that the party
was also engaged in providing service of Renting of Tangible
Goods during the Financial ears 2009-10 to 2013-14. The
computation of Service Tax not paid by the party on
services provided under Renting of Tangible Goods is
summarized in Chart B-4 of the show cause notice. In their
defence reply, the party did not contest on this issue and
simply chose to mention that the demand of Service Tax on
this count amounting to Rs. 8,11,762/- has to be adjusted
against Challan No. 00434 dated 18.04.2016 amounting to
Rs. 10 lacs
From the show cause notice and party's reply, it is clear that
the party had provided taxable services under the category
of „Renting of Tangible Goods Services' during the period
2009-10 (October 2009 to March'2010) to 2013-14 of
taxable value amounting to Rs. 78,76,403/- The Service
Tax payable on the services comes to Rs, 8,11,762/- In this
case also, I find that the extended period is invokable
because of suppression of facts by the party, which could
not be revealed unless the audit was done by the
Service Tax Appeal No.71226 of 2018
9
departmental officers. As such, I order confirmation of
demand of Service Tax amounting to Rs. 8,11,762/- under
Section 73(1) of Finance Act, 1994 alongwith interest u/s
75 ibid.
3. Service Tax short paid/ not paid on other
miscellaneous services
During the course of audit, scrutiny of records revealed that
the party has also provided service of Erection
commissioning & installation services, Business Auxiliary
services. The computation of Service Tax short /not paid by
the party on above mentioned services is elaborated in
Chart-C of the show cause notice, which is summarized as
under for the sake of easy reference:-
SI. Name of Financial Year Value of S. Tax S. Tax S. Tax
No. Service Taxable Payable Paid short
Service Paid/
Not
Paid
1 Networking & 2009-10 333720 34373 0 34373
Installation (October"
(Erection 2009 to
commissioning March`2010)
& installation
services')
2 Commission 2009-10 33156 3415 0 3415
(Business (October'
Auxiliary 2009 to
services) March`2010)
3 Servicing 2012-13 30892 3818 0 3818
Charge
4 Painting 2012-13 150000 18540 0 18540
5 Fabrication & 2012-13 899387 111163 0 111163
Installation
6 Fabrication & 2013-14 1043393 128963 128963 0
Installation
TOTAL - 2490548 300272 128963 171309
In their defence reply, the party did not contest demand of
Service Tax on the following
1. Networking & Installation Rs. 34,373/-
2. Commission Rs. 3,415/-
3. Servicing Charge Rs. 3,818/-
4. Painting Rs. 18,540/-
Service Tax Appeal No.71226 of 2018
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Regarding all these four issues, the party simply chose to
mention that the demand of Service Tax on these counts
have to be adjusted against Challan No. 00434 dated
18.04.2016 amounting to Rs. 10 lacs. However, regarding
the amount of Rs. 1,11,163/- demanded in respect of
fabrication & installation (SI. No. 5 of the above chart), the
party contested that during the financial year 2012-13,
service tax was charged for manpower supply for fabrication
work amounting to Rs. 1,11,163/- but the same was
wrongly taken in the books as fabrication work instead of
manpower supply for fabrication work and the same was
deposited under the head "Supply of Manpower".
From the above, I find that the party has not contested the
demand of Service Tax on first 4 Issues as shown in the
above table. Regarding extending benefit of adjustment of
Rs 1,11,163/- paid by the party under the head 'Supply of
Manpower' in place of head 'Fabrication & Installation
cannot extend benefit of adjustment because it was paid in
wrong head. Moreover, the total amount of Service Tax paid
under the head supply of manpower' has already been
adjusted against the total Service Tax liability of the party
under that heading and the party cannot be given the
benefit of same amount twice.
Accordingly, I hold that the party have provided different
services mentioned in Chart-C of the show cause notice
during the period 2009-10 (October' 2009 to March‟2010) to
2013-14 of taxable value amounting to Rs. 24,90,548/-
The Service Tax payable on the services comes to Rs.
3,00,272/-. Out of Rs. 3,00,272/- the party has deposited /
Paid Service tax to the tune of Rs 1,28,963/- I confirm the
demand of short paid Service Tax amounting to Rs.
1,71,309/- u/s 73(1) of Finance Act, 1994 (invoking
extended period on ground of suppression of facts from the
department) alongwith interest u/s 75 ibid
Interest on delayed payment of Service Tax:
Service Tax Appeal No.71226 of 2018
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During scrutiny of records by the audit team, it was
revealed that the party have not deposited the Service Tax
on due dates as stipulated under Rule 6 of the Service Tax
Rules, 1994. The interest accrued on such late payment of
Service Tax comes to Rs. 9,87,819/- as shown in
Annexure-l of the show cause notice.
In this regard, the party has contended that the Service Tax
was deposited by Vibgyor as and when it was received by it
from the various government departments. All the
departments always made delayed payment. Sometimes
they give payment even with delay of 4 to 8 months. The
service tax involvement in the invoice was larger than the
service charge charged by Vibgyor which was not possible
at Vibgyor end and this created the situation of late
payment of service tax.
In this regard, I observe that as per the relevant Section 75
of the Finance Act, 1994, every person, liable to pay the
tax in accordance with the provisions of section 68 or rules
made thereunder who fails to credit the tax or any part
thereof to the account of the Central Government within
the period prescribed, shall pay simple interest for the
period by which such crediting of the tax or any part
thereof is delayed. These provisions do not provide any
mechanism or exception for providing liberty of late
payment in case the party receive late payments. The law is
very much clear about the point that the service provider
has to deposit the due Service Tax on due dates or to pay
the interest on delayed payment. Though I can understand
their logistic compulsions but as I find no provision in
service tax laws to exonerate delayed payment of Service
Tax than due dates for whatever reasons. find myself
unable to extend any relief to the party on this count. I
Accordingly 1 confirm the interest amounting to Rs.
9,87,819/- under section 75 of Finance Act, 1994 for late
depositing of Service Tax.
5. Imposition of penalties :
Service Tax Appeal No.71226 of 2018
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From the foregoing discussions & findings on different issues, it
is very much clear that the party is a big service provider and is
well conversant with the Service Tax Rules & Regulations Still
they chose to act in utter disregard to various provisions of the
Finance Act, 1994 & Service Tax Rules. I observe that they
knew that the Service Tax is payable on gross value of taxable
activity, which is clear from their own admission that they were
corresponding with the Government departments to reimburse
the Service tax but they safely chose to carry on with payment
of lesser tax just to capture the work by hook or crook. To me,
this is a deliberate act of defiance of law which attracts
appropriate penalty as per law From the foregoing discussions &
findings, it is evident that the total amount of Service Tax to the
tune of Rs. 2,78,19,836/- (As per Chart A-4 + Chart B-4 + Chart
C of the show cause notice) Payable by the party during the
period 2009-10 (October 2009 to March'2010) to 2013-14
remain unpaid/ short paid in violation of the provisions of
Section 68 of the Finance Act, 1994 read with Rule of Service
Tax Rules 1994.I hold' that the party has rendered themselves
liable for penal action under Section 78 of the Finance Act'1994.
However, I find that w.e.f. the Financial year 2011-12, the
benefit of reduced penalty of 50% is available. if the Service Tax
liability is worked out on the basis of party's own specified
records, In this case, the audit team has worked out the Service
Tax liability on the basis of party's Balance Sheets and Profit &
Loss Account etc. As such, I observe that the benefit of reduced
penalty is available to the party. I observe that the demand of
Service Tax during different years has been worked out in the
Charts A-4. B-4 and C of the show cause notice and the financial
year wise Service Tax short paid/ not paid is as under:-
F.Y. CHART A- CHART CHART C Total Penalty
4 B-4 Imposed u/s
78
2009- 253913 347296 34373 3415 638997
10
2010- 305836 148062 456898
11
Service Tax short paid / not paid upto F.Y. 2010-1I 1095895 1095895
2011- 2646673 235376 2882049
12
2012- 8542264 44877 3818 18540 111163 8720662
13
Service Tax Appeal No.71226 of 2018
13
2013- 15085079 36152 15121231
14
Service Tax short paid / not paid from F.Y. 2011-12 26723942 13361941
onwards
Total penalty imposed u/s 78 14457836
Accordingly, I impose a penalty of Rs. 1,44,57,836/- upon the
party us 78 of Finance Act. 1994, though 1-give the party an
option to pay |reduced amount of penalty per Section 78 of as
Finance Act, 1994, as applicable from time to. time, if they
honour the time limits of thirty days as brescribed under said
Section 78 of Finance Act, 1994 for payment of confirmed dues
including $ervice Tax, interest thereupon and the penalty. I also
observe that the party have also not shown the correct value of
different services provided to different parties in their ST.3
returns. thus they have coniravened the provision fegarding
correct self assessment of Service Tax under Section 70 of Act
and Rule and also will fully suppressed the fucts from the
department with inlent to evade Service tax and mis- declared
the value of services provided in their ST-3 returns during the
period during 2009-10 (October' 2009 to March'2010) to 2013-
14. Thus the shon paid amount of Service Tax is rightly
iecoverable from them. under proviso to Section 73(1) of the
Finance Act'1994. as the party willfully suppressed the material
facts from the department with ar intent to evade payment of .
Service Tax and these facts came to the knowledge of the
department only when Audit of the party was conducted 'by the
departmental officers, therefore. extended period cf time is
clearly invokable in the instant case.
The party has also violated Section 70 of the Finance Act, 1994
read with Rule 7 of the Service Tax Rules, 1994 for not filing of
ST-3 returns to the department within stipulated time for which
they are liable to deposit/ pay the late fee under Rule 7C of
Service Tax Rules, 1994 read with Section 70 of the Finance Act,
1994. The details of late submitted ST-3 returns are as under:
Period Due date of Date of filing by Delayed by
filing party days
Oct-11 to March 25.04.2012 22.05.2012 27
12
Service Tax Appeal No.71226 of 2018
14
April 12 to June 25.11.2012 20.01.2013 56
12
July 12 to Sep 12 30.04.2013 26.06.2013 57
Oct 12 to March 10.09.2013 27.01.2015 504
13
April 13 to Sept 25.10.2013 26.01.2015 458
13
Oct 13 to March 25.04.2014 26.01.2015 276
14
I find the party guilty of late filing of returns, for which no
explanation has been offered by the party. In the
circumstances, I order recovery of late fee for non filing of
ST-3 returns as per Rule 7C of the Service Tax Rules
subject to ceiling of Rs. 20,000/- for each instance of
delayed filing of return as provided under Section 70 of the
Finance Act, 1994.
During the scrutiny of records and ST-2 provided by the
Party, it also came to notice that the party has provided
services namely 'Supply of Tangible Goods Service',
'Erection commissioning & installation services` and
'Business Auxiliary services` without taking Service Tax
Registration for these services. In this regard the party has
contested that- these services were provided occasionally
by them and not on regular basis as business activity. This
is why the registration was not taken. The party has
requested to provide immunity from payment of penalty
under Section 69 as well as Section 77(1)(a). I do not find
these reasons as plausible explanation for not taking
registration and accordingly, hold that they are liable to be
penalized u/s 77. However, I find that - the party is not
actually an unregistered concern. In this case, they
registered for their main were activity but failed to get
other services endorsed on the registration certificate. As
for these activities, I have already imposed penalties u/s 78
for nonpayment of Service Tax, I am of the opinion that a
penalty of Rs. 10,000/- u/s 77 for non registration would
meet ends of justice and accordingly I order the same"
Service Tax Appeal No.71226 of 2018
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4.3 We have considered the issue of taxation of Man Power
Supply Services, in case of Vani Systems Pvt Ltd. [Final Order
No 70267/2023 dated 28.11.2023] and have held as follows:
4.5 "The appellant gets only a part amount towards the
service charges and fixed amount towards the
wages/remuneration which for the manpower provided. In
case of these amounts received by the appellant towards
wages/remuneration are in terms of these agreements
payable to the concern person who have been provided by
the appellant to the concern Government Department.
These are in nature of reimbursable expenses and could not
have levied to service tax in terms of decision of Hon‟ble
Supreme Court in case of Intercontinental Consultants And
Technocrats Pvt. Ltd [2018 (10) G.S.T.L. 401 (S.C.)]
wherein following has been held:-
"24. In this hue, the expression „such‟ occurring in
Section 67 of the Act assumes importance. In other
words, valuation of taxable services for charging service
tax, the authorities are to find what is the gross amount
charged for providing „such‟ taxable services. As a
fortiori, any other amount which is calculated not for
providing such taxable service cannot a part of that
valuation as that amount is not calculated for providing
such „taxable service‟. That according to us is the plain
meaning which is to be attached to Section 67
(unamended, i.e., prior to May 1, 2006) or after its
amendment, with effect from, May 1, 2006. Once this
interpretation is to be given to Section 67, it hardly
needs to be emphasised that Rule 5 of the Rules went
much beyond the mandate of Section 67. We,
therefore, find that High Court was right in interpreting
Sections 66 and 67 to say that in the valuation of
taxable service, the value of taxable service shall be the
gross amount charged by the service provider „for such
service‟ and the valuation of tax service cannot be
anything more or less than the consideration paid as
quid pro qua for rendering such a service.
Service Tax Appeal No.71226 of 2018
16
25. This position did not change even in the amended
Section 67 which was inserted on May 1, 2006. Sub-
section (4) of Section 67 empowers the rule making
authority to lay down the manner in which value of
taxable service is to be determined. However, Section
67(4) is expressly made subject to the provisions of
sub-section (1). Mandate of sub-section (1) of Section
67 is manifest, as noted above, viz., the service tax is
to be paid only on the services actually provided by the
service provider.
26. It is trite that rules cannot go beyond the statute.
In Babaji Kondaji Garad, this rule was enunciated in the
following manner :
"Now if there is any conflict between a statute and the
subordinate legislation, it does not require elaborate
reasoning to firmly state that the statute prevails over
subordinate legislation and the byelaw, if not in
conformity with the statute in order to give effect to the
statutory provision the Rule or bye-law has to be
ignored. The statutory provision has precedence and
must be complied with."
27. The aforesaid principle is reiterated in Chenniappa
Mudaliar holding that a rule which comes in conflict with
the main enactment has to give way to the provisions of
the Act.
28. It is also well established principle that Rules are
framed for achieving the purpose behind the provisions
of the Act, as held in Taj Mahal Hotel :
"the Rules were meant only for the purpose of carrying
out the provisions of the Act and they could not take
away what was conferred by the Act or whittle down its
effect."
29. In the present case, the aforesaid view gets
strengthened from the manner in which the Legislature
itself acted. Realising that Section 67, dealing with
Service Tax Appeal No.71226 of 2018
17
valuation of taxable services, does not include
reimbursable expenses for providing such service, the
Legislature amended by Finance Act, 2015 with effect
from May 14, 2015, whereby Clause (a) which deals
with „consideration‟ is suitably amended to include
reimbursable expenditure or cost incurred by the
service provider and charged, in the course of providing
or agreeing to provide a taxable service. Thus, only with
effect from May 14, 2015, by virtue of provisions of
Section 67 itself, such reimbursable expenditure or cost
would also form part of valuation of taxable services for
charging service tax. Though, it was not argued by the
Learned Counsel for the Department that Section 67 is
a declaratory provision, nor could it be argued so, as we
find that this is a substantive change brought about
with the amendment to Section 67 and, therefore, has
to be prospective in nature. On this aspect of the
matter, we may usefully refer to the Constitution Bench
judgment in the case of Commissioner of Income Tax
(Central)-I, New Delhi v. Vatika Township Private
Limited [(2015) 1 SCC 1] wherein it was observed as
under :
"27. A legislation, be it a statutory Act or a statutory
rule or a statutory notification, may physically consists
of words printed on papers. However, conceptually it is
a great deal more than an ordinary prose. There is a
special peculiarity in the mode of verbal communication
by a legislation. A legislation is not just a series of
statements, such as one finds in a work of fiction/non-
fiction or even in a judgment of a court of law. There is
a technique required to draft a legislation as well as to
understand a legislation. Former technique is known as
legislative drafting and latter one is to be found in the
various principles of "interpretation of statutes". Vis-a-
vis ordinary prose, a legislation differs in its
provenance, layout and features as also in the
Service Tax Appeal No.71226 of 2018
18
implication as to its meaning that arise by presumptions
as to the intent of the maker thereof.
28. Of the various rules guiding how a legislation has
to be interpreted, one established rule is that unless a
contrary intention appears, a legislation is presumed
not to be intended to have a retrospective operation.
The idea behind the rule is that a current law should
govern current activities. Law passed today cannot
apply to the events of the past. If we do something
today, we do it keeping in view the law of today and in
force and not tomorrow‟s backward adjustment of it.
Our belief in the nature of the law is founded on the
bedrock that every human being is entitled to arrange
his affairs by relying on the existing law and should not
find that his plans have been retrospectively upset. This
principle of law is known as lex prospicit non respicit :
law looks forward not backward. As was observed in
Phillips v. Eyre [(1870) LR 6 QB 1] , a retrospective
legislation is contrary to the general principle that
legislation by which the conduct of mankind is to be
regulated when introduced for the first time to deal with
future acts ought not to change the character of past
transactions carried on upon the faith of the then
existing law.
29. The obvious basis of the principle against
retrospectivity is the principle of "fairness", which must
be the basis of every legal rule as was observed in
L'Office Cherifien des Phosphates v. Yamashita-
Shinnihon Steamship Co. Ltd. Thus, legislations which
modified accrued rights or which impose obligations or
impose new duties or attach a new disability have to be
treated as prospective unless the legislative intent is
clearly to give the enactment a retrospective effect;
unless the legislation is for purpose of supplying an
obvious omission in a former legislation or to explain a
former legislation. We need not note the cornucopia of
Service Tax Appeal No.71226 of 2018
19
case law available on the subject because aforesaid
legal position clearly emerges from the various
decisions and this legal position was conceded by the
counsel for the parties. In any case, we shall refer to
few judgments containing this dicta, a little later."
30. As a result, we do not find any merit in any of
those appeals which are accordingly dismissed."
In the present case entire period of demand is before the
amendments made in Section 67 of the Finance Act, 1994
by the Finance Act, 2015 as a consequence of Hon‟ble Delhi
High Court decision on the matter reported at [2013 (29)
S.T.R. 9 (Del.)]. On this ground alone by applying the
principles laid down in the above judgment of Hon‟ble Apex
Court we find no merits in the impugned order.
4.6 Notification No.30/2012-ST dated 20th June, 2012
as amended by Notification No.7/2015 dated 1st March,
2015 clearly provides as under:-
Sl Description of Services Percentage of Percentage of
No. Service Tax Service Tax
payable by the payable by the
person providing person receiving
Service. Service
In respect of services 25% 75%
provided or agreed to be
provided by way of
supply of manpower for
any purpose
In terms of the above notification appellant was
required to pay service tax only of 25% of the value of
service tax leviable on the taxable value of the services
provided and 75% was required to be collected from the
recipient of the service under reverse charge
mechanism. There is nothing on record to show that
any demands have been made from the service
recepients.
4.7 Further, we find that the Tribunal has in the case of
Dhariwal Industries Ltd. Final Order No. A/12248/2023
dated 11.10.2023 wherein it has been held as follows:-
Service Tax Appeal No.71226 of 2018
20
"4.2 In view of the above judgments it has been
settled that once the service provider discharged the
service tax where the service recipient is liable to pay
the service tax, demand of service tax on the same
service from the service recipient shall not sustain on
the ground that the particular service which already
suffered the service tax cannot be suffer the service
tax twice on the same service. Accordingly, the
service tax paid by the transport agency in the facts
of the present case is the payment of service tax and
not deposit. Therefore, no demand can be raised
from the appellant, for the same reason once the
amount paid by the transport agency being service
tax amount, the appellant is eligible for cenvat
credit.
5. Accordingly, on both the count the impugned
order is not sustainable. Hence, the same is set
aside. Appeal is allowed."
Tribunal in the case of Mahatma Gandhi University of
Medical Sciences dated 08.09.2021 held as follows:- "
"Appellant has admitted his liability of paying Service
Tax for receiving manpower recruitment and supply
agency service to the extent of 75% on the gross
value of service received under reverse charge
mechanism. There is no dispute about the discharge
of the liability to the said extend by the appellant.
There is also no dispute that this liability was in
terms of the Notification No.30/2012 dated
20.06.2012 which stands amended vide Notification
No.7/2015 -ST dated 01.03.2015 requiring such
service recipient to pay tax on 100% value of service
received. There is also no dispute about the fact that
the period in dispute is exactly from the date of
coming into affect of said amendment i.e.
01.04.2015 till the end of the said Financial Year i.e.
March, 2016 unawareness of the Service Tax Appeal
No.70511 of 2019 23 appellant to such a sudden
Service Tax Appeal No.71226 of 2018
21
change to be implemented in so proximity of time of
its coming into effect cannot be ruled out.
Consequently, I am of the opinion that nonpayment
by the appellant for the said period is merely due to
his bonafide belief of his liability to the extent of
paying the service tax at 75% of the service value.
Once there is no apparent malafide on part of the
appellant and in view of the aforesaid bonafide belief
of the appellant, fastening the allegations as that of
concealment fraud and suppression are held to be
highly unjustified.
7. Hon‟ble Supreme Court in the case of Pushpam
Pharmaceuticals Co. Vs. Collector of Central Excise,
Bombay reported in 1995 (78) ELT 401 (S.C.) has
held that word and phrase as that of "suppression of
facts" as used in proviso to section 11A (1) of Central
Excise Act, 1944 are to be interpreted strictly
because of its use with the strong words like fraud
collusion or willful default. It has been held that mere
omission to disclose a correct information is not a
suppression of fact unless it was deliberate to escape
from paymen5t of duty. The Hon‟ble Apex Court in
another decision n the case of Continental
Foundation Jt. Venture vs. CCE, Chandigarh reported
in 2007 (216) ELT 177 (SC) has held that when the
Revenue invokes the extended period of limitation
under Section 11A, the burden is cast upon it to
prove the suppression of fact as far as fraud and
collusion are concerned, it is evident that intent to
evade duty is built into these very words so far as
misstatement or suppression or facts are concerned,
they are clearly qualified by the word "willful"
preceding the words "misstatement or suppression of
facts" which means with intent to evade duty. The
next set of words "contravention of any of the
provisions of this Act or Rules" are again qualified by
the immediately following words" with intent to
Service Tax Appeal No.71226 of 2018
22
evade payment of duty". Therefore, there cannot be
suppression or misstatement of fact which is not
willful.
8. In the present case, the above observations
are sufficient for me to hold that the alleged non-
payment cannot be called as willful or intentional act
of the appellant to evade the payment of duty.
Otherwise also, there is no denial on part of the
Department that the balance service tax on 25%
value of the service has already been paid by the
service provider. The Department, thus, has received
100% tax amount on the impugned transaction.
Confirming such liability again under the pretext of
the amendment of the applicable Notification will be
nothing but will amount to receiving tax twice for the
same transaction. Without going into the other
merits of the status of appellant as to whether it is a
business entity or a body Corporate or a charitable
trust, the above discussion makes it clear that the
appellants liabilities stands already discharged. The
demand should not have been confirmed.
Commissioner (Appeals) in para 7.4 has
acknowledged that the Journal Vouchers, cash memo
bill, salary details of housekeeping having reference
of the amount of Rs.63,072/- against service tax
were very much available. The demand confirmed in
the present case is of said Rs.63,072/- only. The
findings of Commissioner (Appeals) that there is no
documentary evidence to prove the payment of
service tax twice in support of appellants contention
is therefore, not at all sustainable. Accordingly, the
findings are liable to set aside. Above all, the
Department was not entitled to invoke the extended
period of limitation for no willful suppression on part
of appellant that too with intent to not to pay duty
(full duty already stands paid). Show Cause Notice of
the year 2018 alleging recovery for the period 2015-
Service Tax Appeal No.71226 of 2018
23
16 is definitely beyond the normal period of one
year. The Show Cause Notice is therefore held being
barred by time. The demand for the normal period is
also not sustainable in view of above discussion.
9. In view of entire above findings, the order
under challenge is hereby ordered to be set aside.
Appeal consequently stands allowed."
4.8 In the case of Security Guards Board For
Greater Bom. & Thane Dist.[2017 (51) S.T.R. 51 (Tri. -
Mumbai)] following has been observed:
4.1 Further, under section 6 of the Maharashtra
Private Security Guards (Regulation of Employment &
Welfare) Act, 1981, following has been provided :-
6. Constitution of Board. - ... ......Clause 31 of the
Maharashtra Private Security Guards (Regulation of
Employment & Welfare) Scheme, 2002 provides as
follows :-
"31. Disbursement of wages and other allowances
to registered Security Guards of the Board. - The
wage and other allowances payable to the
registered Security Guards of the Board every
month by the registered principal employer shall
be remitted by the registered principal employers
by cheque to Secretary, of the Board, within such
time after the end of the month, as may be
specified by the Board. The Secretary thereupon
shall arrange to disburse the wages and other
dues, if any to the registered Security Guards of
the Board on specified days every month subject
to deductions, if any, recoverable from them under
the Scheme; Provided that the Board may, if it
thinks fit, and subject to such conditions as may
be laid down by it, allow a registered principal
employer to pay directly to the Security Guards
the wages and other allowances after making such
deductions as may be authorized and recoverable
from them under the Scheme, within such time
Service Tax Appeal No.71226 of 2018
24
and in such manner as may be specified by the
Board."
From the above clause, it is apparent that the wages
and allowances are collected by the Board as an
Agency for Service Tax Appeal No.70511 of 2019 26
payment to the concerned persons/authorities.
Therefore, the wages and allowances are excludible
from the value of service tax. Thus, the taxable value
for the purpose of levy needs to exclude these
charges. The demand is modified to that extent."
4.9 In case of M.P. Security Force [2020 (43) G.S.T.L.
253 (Tri. - Del.)], Delhi Bench has observed as follows:
"11.We, accordingly, hold that the appellant is
entitled for the abatement towards the payment
made on account of contribution towards ESI, EPF
and PF and also towards wages and salaries while
computing the assessable value in terms of Section
67 of the Act for the payment of service tax."
4.10 In the case of Gurubani Security Pvt. Ltd. [2021
(51) G.S.T.L. 404 (Tri. - Del.)] Delhi bench observed as
follows:
"10. It is on record that the appellant has provided
the services of manpower supply and security agency
to various educational institutes and has been
collected service tax during the relevant period i.e.
from 2009 to Feb., 2014. The appellant has agreed
to the fact that they have not deposited the service
tax collected from the educational institute which
was not required to be collected in terms of the
exemption notification mentioned above. As far as
the contribution made towards EPF, ESI and salary,
the same stand settled in favour of the appellant in
view of the decision of Hon‟ble High Court of
Allahabad and Tribunal‟s decision in case of Security
Guards Board for Greater Bombay and Thane District
v. Commissioner of Central Excise, Thane - 2017
Service Tax Appeal No.71226 of 2018
25
(51) S.T.R. 51 (Tri. - Mumbai). The relevant portion
of the two judgments is extracted as under :
"9. In view of above, the contributions made
towards EPF and ESI are not liable to be included
for the computation of gross amount under Section
67(1) of the Act. We also find that the similar issue
had been come up for consideration before this
Tribunal in case of Young Brothers Transporters
and Contractors v. CCE, Meerut-I - 2017 (6)
G.S.T.L. 513 (Tri. - Del.), wherein it is held that
employer contribution towards PF, EPF, ESI into
Central Govt. account is not required to be
included for the purpose of a computation of gross
amount for discharge of service tax liability.
Paragraph 6 of the order which is relevant is
reproduced as under :
"6. The Employees Provident Fund &
Miscellaneous Provisions Act, 1952 and the
Employees State Insurance Act, 1948 created
the liability upon the principal employer to
contribute to the respective funds, an amount
equal to employees contribution. Thus, in
compliance of the said provisions, the service
receiver M/s. HNGIL had contributed to such
funds, the amount towards the workmen
deployed by the appellant. The fact is not under
dispute that such contributed amount was never
given by such service receiver to the appellant.
Thus, the gross value for the computation of
service tax liability in the hands of the appellant
will not take into consideration the amount of
contribution made by the service receiver M/s.
HNGIL directly into the respective heads of
account. Therefore, in our considered view,
service tax demand cannot be confirmed on the
employer‟s contributed amount towards P.F.,
E.P.F. and E.S.I."
Service Tax Appeal No.71226 of 2018
26
In this order the decision of Hon‟ble Tribunal in case
of Neerv Jaisawal was also considered, which is
referred in the impugned order and held to be
inapplicable. In this regard, we also find that the
Hon‟ble Allahabad High Court in the case of Security
Services v. Union of India, 16 (399) in Civil Writ
Petition No. 437 of 1998 held that the respondent
shall be entitled to charge service tax on the gross
except after giving the abatement in respect of
statutory levy and the tax is and if the same as the
direct relation with the services rendered by the
client and charged specifically in the bill.
10. As far as the abatement towards deduction of
wages and salaries paid to the personal employees
by the appellant is concerned, the same is covered
by the decision of Mumbai Bench of this Tribunal in
case of Security Guards for Greater Bom. & Thane
Dist. v. CCE, Thane-II - 2017 (51) S.T.R. 51 (Tri. -
Mum.), wherein it is held that wages and allowance
including salary and administrative charge collected
from its client is excludible from the gross value of
taxable service in terms of Section 67 of the Act. The
relevant paragraph of order is reproduced
hereinafter:
"4.1 ....."
Following the same, we are of the view that the
demand confirmed by the impugned order is
required to be requantified after giving abatement
towards the salary and wages and the contribution
made towards EPF and ESI. We also find in this
case the appellant is collected service tax which
was not required to be collected by him which is
unconditionally exempted in terms of Notification
No. 25/2012. In the circumstances, we find that
the entire amount of the duty of service tax
collected is required to be deposited with service
tax department which appears to have been done
Service Tax Appeal No.71226 of 2018
27
in terms of the submissions made on behalf of the
appellant. Regarding the imposition of penalty, we
find that the same is settled in favour of appellant
by the decision of Hon‟ble Punjab & Haryana High
Court in the case of Ajay Kumar Gupta (supra). We
also find that the decision of Hon‟ble Delhi High
Court in case of Intercontinental Consultants
(supra) has held that for arriving at the gross
amount to be charged under Section 67 of the Act,
only such amount is required to be included which
is attributable towards the services rendered by
the appellant, any other element, which is
reimbursable in nature, is not required to be
included for the purpose of computation of
assessable value under Section 67 of the Act, as
this decision has been upheld by the Supreme
Court, we are of the view that the various
statutory deduction the payment made towards
salary and wages are, therefore, required to be
deducted from the total amount charged by the
appellant from the service recipient for the
rendition of the service. Thus, the charges
attributable to the service element can only to be
considered in the gross amount charged. It is,
therefore, held that the demand, as confirmed in
the impugned order, is required to be re-worked
out in view of the findings as indicated above. We
also hold that in the given circumstances that
there is no justification of imposition of penalty on
the appellant"
4.11 Following the ratio of the above judgments this
demand cannot be sustained and the impugned order is
set aside."
4.4 In view of the above decision in case of Vani Systems,
which is applicable on all fours to the facts of present case we do
not find any merits in the impugned order to the extent it relates
to the demand of Service Tax on, Manpower Supply Agency
Service Tax Appeal No.71226 of 2018
28
Services and set aside the same along with the demand for
interest and penalties imposed on this account.
4.5 By the impugned order demands have been confirmed
against the appellant on various other services. The appellant
have not disputed the said either before the adjudicating
authority or before us. Nothing has been stated in respect of
these demands either at the time of hearing or in the written
submissions filed by the appellant on 09.08.2024 at the time of
hearing of the appeal. On the contrary we note that the
appellant had admitted these demands in their written response
dated 14.09.2016 to the show cause notice. Following table from
the said reply to show casue notice is reproduced below:
S Nature of Department Service Tax Action taken by Company
No Service Liability
Manpower SLNA and 26836765.00 Not given by SLNA, 75% value of
1
Supply WDT service tax paid by UPL and 25%
paid by Vibgyor under reverse
charge mechanism
Renting of Lucknow 811762.00 To be adjusted against challan No
3
CCTV Mahotsav 00434 dated 18.04.2016
Camera amounting to Rs 10 lakh
Networking Miscellaneous 34373.00 To be adjusted against challan No
5
and private 00434 dated 18.04.2016
installation parties amounting to Rs 10 lakh
Commission 3415.00 To be adjusted against challan No
6
00434 dated 18.04.2016
amounting to Rs 10 lakh
Servicing 3818.00 To be adjusted against challan No
7
Charge 00434 dated 18.04.2016
amounting to Rs 10 lakh
Painting 18540.00 To be adjusted against challan No
7
00434 dated 18.04.2016
amounting to Rs 10 lakh
Fabrication 111163.00 Already paid under the head "man
8
and power supply"
Installation
Total 27819836.00
4.6 As the appellant have admitted the demands made against
them in respect of the services/ activities undertaken by them
other than the man power supply services, form the stage of
show cause notice and have deposited the same by the challan
dated 00434 dated 18.04.2016, we are not inclined to interfere
Service Tax Appeal No.71226 of 2018
29
with the demand made on this account along with the interest
as per Section 75 of the Finance Act, 1994. We also uphold the
penalties imposed in respect of the these demand confirmed
against the appellant in terms of Section 78 of the Finance Act,
1994.
4.7 Demand has also been made in respect of the interest due
on account of delay in payment of the admitted service tax
liability as per ST-3 returns. Late filing fees/ penalty has been
imposed of late filing of ST-3 returns. There is also no challenge
to these amounts which are in nature of strict liabilities and are
not related to short/ nonpayment of service tax as has been held
by Hon‟ble Supreme Court in case of Gujarat Tarvancore Agency
[1989 (42) E.L.T. 350 (S.C.)]. Relying on this decision and after
considering all the available decisions on the issue, Hon‟ble
Gujarat High Court has in case of Synergy Fertichem Pvt. Ltd.
[2020 (33) G.S.T.L. 513 (Guj.)] held as follows:
"110. And held that in view of the definition it was not
possible to hold that the said provisions were not applicable
in case of exempted establishments for the reason that
some more provisions, legal or penal, were also made
applicable to exempted establishments with a view make to
penal provisions more stringent with a view to check the
growth of arrears.
111. In Director of Enforcement v. MCTM Corporation Pvt.
Ltd and Ors., AIR 1996 SC 1100, the Hon‟ble Supreme
Court considered as issue as to whether ingredients of mens
rea was necessary in case of a person who is found violating
the provisions of the Foreign Exchange Regulations Act,
1947. The Court observed as under :-
"Mens rea" is a state of mind. Under the criminal law, mens
rea is considered as the „guilty intention‟ and unless it is
found that the „accused‟ had the guilty intention to commit
the „crime‟, he cannot be held „guilty‟ of committing the
crime. An „offence‟ under Criminal Procedure Code and the
General Clauses Act, 1897 is defined as „any act or
omission„ made punishable by any law for the time being in
Service Tax Appeal No.71226 of 2018
30
force.‟ The proceedings under Section 23(1)(a) FERA, 1947
are „adjudicatory‟ in nature and character and are not
„criminal proceedings.‟ The officers of the Enforcement
Directorate and other administrative authorities are
expressly empowered by the Act to „adjudicate‟ only. Indeed
they have to act „judicially‟ and follow the rules of natural
justice to the extent applicable but, they are not „Judges‟ of
the „Criminal Courts‟ trying an „accused‟ for commission of
an offence, as understood in the general context. They
perform quasi-judicial functions and do not act a „Courts‟
but only as „administrators‟ and „adjudicators.‟ In the
proceedings before them, they do not try „an accused‟ for
commission of „any crime‟ (not merely an offence) but
determine the liability of the contravenor for the breach of
his „obligations‟ imposed under the Act. They imposed
„penalty‟ for the breach of the „Civil obligations‟ laid down
under the Act and not impose any „sentence‟ for the
commission of an offence. The expression „penalty‟ is a word
of wide significance. Sometime, it means recovery of an
amount as a penal measure even in civil proceedings. An
exaction which is not compensator in character is also
termed as „penalty‟. When penalty is imposed by an
adjudicating officer, it is done so in „adjudicatory
proceedings;‟ and not by way of fine as a result of
„prosecution‟ of an „accused‟ for commission of an „accused‟
for commission of an „offence‟ in a criminal Court.
Therefore, merely because penalty clause exists in Section
23(1)(a), the nature of the proceedings under the Section is
not changed from „adjudicator‟ to „criminal‟ prosecution. An
order made by an adjudicating authority under the Act is
not that of conviction but of determination of the breach of
the civil obligation by the offender..... A penalty imposed for
a tax delinquency is a civil obligation, remedial and coercive
in its nature, and is for different from the penalty for a
crime or a fine of forfeiture provided as punishment for the
violation of criminal laws. We are in agreement with the
aforesaid view and in our opinion, what applies to „tax
Service Tax Appeal No.71226 of 2018
31
delinquency‟ equally holds good for the „blameworthy‟
conduct for contravention of the provisions of FERA, 1947.
We, therefore, hold that mens rea (as understood in
criminal law) is not an essential ingredient for holding a
delinquent liable to pay penalty under Section 23(1) of
FERA, 1947 for contravention of the provisions of Section 10
of FERA, 1947 and that penalty is attracted under Section
23(1)(a) as soon as contravention of the statutory
obligation contemplated by Section 10(1)(a) is established.
The High Court apparently fell in error in treating the
„blameworthy conduct‟ under the Act as equivalent to the
commission of a „criminal offence‟, overlooking the position
that the „blameworthy conduct‟ in the adjudicatory
proceedings is established by proof only of the breach of a
Civil obligation under the Act, for which the defaulter is
obliged to make amends by payment of the penalty imposed
under Section 23(1)(a) of the Act irrespective of the fact
whether he committed the breach with or without any guilty
intention. Our answer to the first question formulated by us
above is, therefore in the negative."
112. In Commissioner of Sales Tax v. Rama and Sons,
General Merchant, Ballia, 1999 UPTC 25, the Allahabad High
Court observed as under : -
"The principle of mens rea comes from English Criminal Law
from times when the law was not codified. It was said that
actus non facit reum nisi mens sit rea (the intent and act
must both concur to constitute the crime). But this principle
has lost much of its significance owing to greater precision
of modern statutes. The nature of intent or the ingredients
of offences are now clearly stated in the statutes and
nothing further is required to establish as offence then what
the statute specified. We have words like „voluntarily‟,
„intentionally‟, „negligetly‟, „knowingly‟, „fraudulently‟,
„dishonestly‟, „rashly‟, „omits‟, „without lawful authority‟ etc.,
„omits‟, „without lawful authority‟ etc., used in various
sections of the Indian Penal Code defining various offence.
Proof of the State of mind or of the conduct of the person as
Service Tax Appeal No.71226 of 2018
32
indicated by the aforesaid word establishes the offence and
no further guilty intent or mens rea need be proved. In fact
there are many acts which are offences and do not require
proof any mens rea or guilty intention, for example
possession of illicit fire arm."
113. A Full Bench of Andhra Pradesh High Court, in
Additional Commissioner, Income Tax v. Durga Pandari Nath
Tulijayya & Co., 1977 Tax LR 258, observed as under :-
"The doctrine of mens rea is of common law origin
developed by Judge-made law. It has no place in the
Legislator‟s law. It has no place in the Legislator‟s law where
offences are defined with sufficient accuracy...... Mens rea is
an essential ingredient of an offence. However, it is a rule of
construction. If there is a conflict between the common law
and the statutory law, it has always been held that it is a
sound rule to construe a statute in conformity with the
common law. But it cannot be postulated that statute
cannot alter the course of the common law. The Parliament,
in exercise of its constitutional powers makes statutes and
in exercise of those powers it can affirm, alter or take away
the common law altogether. Therefore, if it is plain from the
statute that it intends to alter the course of the common
law, then the plaint meaning should be accepted. The
existence of mens rea as an essential ingredient of an
offence has to be made out by the construction of the
statute."
114. While deciding the said case, the Full Court placed
reliance upon a judgment by Wright, J. in Sherras v. De
Ruten, 1985-1 QB 918, wherein it was observed as under :-
"There is a presumption that mens rea, an evil intention or
a knowledge of the wrongfulness of the act, is an essential
ingredient in every offence, but that presumption is liable to
be displaced either by the words of the statute creating the
offence or by the subject matter with which it deals, and
both must be considered..... In order to find out whether
mens rea i.e. a guilty mind is an ingredient or not, reference
has to be made to the language of the enactment, the
Service Tax Appeal No.71226 of 2018
33
object and subject matter of the statute and the nature and
character of the Act [***] sought to be punished."
115. The Hon‟ble Supreme Court in Gujarat Travancore
Agency v. Commissioner of Income Tax, AIR 1989 SC 1971
= 1989 (42) E.L.T. 350 (S.C.), wherein the Court
considered the provision of Section 271(1)(a) of the
Income-tax Act and held that the element of mens rea is
not involved because the penalty imposed in civil matters is
always of a civil nature and it is misnomer to treat such
proceedings as quasi-criminal merely because penalty is
imposed, and observed as under :-
"In most cases of criminal liability, the intention of
Legislature is that penalty should serve as a deterrent. The
creation of an offence by the statute proceeds with a
presumption that society suffers injury by the act or
omission of defaulter and that a deterrent sentence must be
imposed to discourage the repetition of the offence. In a
case of proceedings under Section 271(1)(a). However, it
seems that the intention of the legislature is to emphasis
the fact of loss of revenue and to provide a remedy for such
loss, although, no doubt, an element of coercion is present
in the penalty. In this connection, the term in which penalty
falls to be measured, is significant. Unless there is
something in the nature of statute indication the need to
establish the element of mens rea, it is generally sufficient
to prove that a default in complying with the statute has
occurred. In our opinion, there is nothing in Section
271(1)(a) which requires that mens rea must be proved
before penalty can be levied under that provisions. ......
Accordingly, we hold that the element of mens rea was not
required to be proved in the proceedings taken by the
Income Tax Officer under Section 271(1)(a) of the Income-
tax Act against the assessee."
116. A Constitution Bench of the Hon‟ble Supreme Court in
Jain Bros, and Ors. v. The Union of India and Ors., AIR 1970
SC 778, while examining a case of imposing the penalty
under the Income-tax Act, held that penalty was merely an
Service Tax Appeal No.71226 of 2018
34
additional tax being a civil liability under the Tax Statute,
and observed as under :-
"Although penalty has been regarded as an additional tax in
a certain sense and for certain purpose, it is not possible to
hold that penalty proceedings are judicial and essentially a
continuation of the proceedings relating to assessment
where a return has been filed."
117. In Commissioner of Income Tax v. Kalyan Das
Rastogi, 1993 (Suppl) 1 SCC 663, the Hon'ble
Supreme Court placed reliance upon, approved and
followed the judgment in Gujarat-Travancore Agency
(supra) and reiterated the same view.
118. In Commissioner of Income Tax, Gujarat v. I.M.
Patel & Co., 1993 (Suppl) (1) SCC 621, the Hon'ble
Supreme Court considered a large number of its
earlier judgments, including Gujarat Travancore
Agency (supra) and Kalyan Das Rastogi (supra) and
categorically held that in a tax liability, the plea of
mens rea cannot be taken.
119. In Income Tax Commissioner, Andhra Pradesh,
Hyderabad v. Bhikaji Dadabhai & Co, AIR 1961 SC 1265,
the Apex Court held that penalty is an additional tax
imposed upon a person in view of his dishonesty or
contumacious conduct.
120. In Corpus Juris Secundum, 85 580, it has been
stated as under :-
"A penalty imposed for a tax delinquency is a civil
obligation, remedial and coercive in its nature, and is far
different from the penalty for a crime of a fine or forfeiture
provided as punishment for the violation of criminal or penal
laws."
121. In M/s. Hindustan Steel Ltd. v. The State of Orissa,
AIR 1970 SC 253 = 1978 (2) E.L.T. (J159) (S.C.), the
Hon‟ble Supreme Court considered the provisions of the
Orissa Sales Tax Act, 1947, particularly the provisions
relating to imposition of penalty imposed for default in
Service Tax Appeal No.71226 of 2018
35
registering as a dealer under Section 9(1) read with Section
25(1)(a) of the said Act, and held as under :-
"But the liability to pay penalty does not arise merely upon
proof of default in registering as a dealer. An Order
imposing penalty for failure to carry out a statutory
obligation is the result of a quasi-criminal proceedings, and
penalty will not ordinarily be imposed unless the party
obliged either acted deliberately in defiance of law or was
guilty of conduct contumacious or dishonest, or acted in
contumacious or dishonest, or acted in conscious disregard
of its obligation. Penalty will not also be imposed merely
because it is lawful to do so. Whether penalty should be
imposed for failure to perform a statutory obligation is a
matter of discretion of the authority to be exercised
judicially and on a consideration of all the relevant
circumstances. Even if a minimum penalty is prescribed, the
authority competent to impose the penalty will be justified
in refusing to impose penalty, when there is a technical or
venial breach of the provisions of the Act or where the
breach flows from a bona fide belief that the offender is not
liable to act in the manner prescribed by the statute. Those
in charge of the affairs of the Company in failing to register
the Company as a dealer acted in the honest and genuine
belief that the Company was not a dealer. Granting that
they erred, no case for imposing penalty was made out."
122. Following the aforesaid provisions, while interpreting
the provisions of the Madhya Pradesh General Sales Tax
Act, 1959, the Hon‟ble Supreme Court, in the Cement
Marketing Co. of India Ltd. v. The Asstt. Commissioner of
Sales Tax, Indora and Ors., AIR 1980 SC 346 = 1980 (6)
E.L.T. 295 (S.C.), held that imposition of penalty is penal in
character and unless the filing of an inaccurate return is
accompanied by a guilty mind, the Section cannot be
invoked for imposing penalty. If the contrary view is taken,
the result would be that even if the assessee raises a bona
fide contention that a particular item is not liable to be
included in the taxable turnover, he would have to show it
Service Tax Appeal No.71226 of 2018
36
as forming part of the taxable turnover in his return and pay
tax upon it on pain of being held liable for penalty in case
his contention is ultimately found by the Court to be not
acceptable.
123. In Om Prakash Sheo Prakash and Ors. etc. v. Union
of India Anr., AIR 1984 SC 1194, the Hon‟ble Supreme
Court considered the provisions of the Amending Sales Tax
Act, made applicable retrospectively imposing the penalty
also, and examined its validity on the touch-stone of
provisions of Article 19(1)(f) & (g) and Article 21 of the
Constitution of India, as Article 20 of the Constitution
guarantees the protection in respect of conviction for the
offence under any law for the time being in force unless the
other conditions provided therein are complied with. The
Hon‟ble Apex Court considered a large number of its earlier
judgments, including the meaning and definition of
"penalty" and reached the conclusion that "a penalty
imposed by the Sales Tax Authority is only a civil liability,
though penal in nature, and it can be imposed provided the
default committed by the dealer is established at an inquiry
after giving the dealer concerned an opportunity of being
heard. Moreso, the degree of remissness involved in the
default is a relevant factor to be taken into account while
levying penalty. As the Act provides both the minimum and
the maximum amount of penalty leviable and it is corelated
to the amount of tax which would have have been avoided if
the turnover returned by such dealer had been accepted as
correct. The order levying penalty is quasi-judicial in
character and involves exercise of judicial discretion.
124. A Constitution Bench of the Hon‟ble Supreme Court,
in Khemka and Co. (Agencies) Pvt. Ltd. v. State of
Maharashtra, AIR 1975 SC 1549, considered the provisions
of the Central Sales Tax Act, 1956 in a case of default in
payment of tax in respect of Central Act within the
prescribed time, and held as under : -
"Penalty is not merely sanction. It is not merely adjunct to
assessment. It is not merely consequential to assessment.
Service Tax Appeal No.71226 of 2018
37
It is not merely machinery. Penalty is in addition to tax and
is a liability under the Act."
125. The Constitution Bench of the Supreme Court in
Maqbool Hussain v. State of Bombay, AIR 1953 SC 325 =
1983 (13) E.L.T. 1284 (S.C.), considering the nature of
proceedings under the Sea Customs Act and FERA, 1947,
dealing with the principle and scope underlying in Article
20(2) of the Constitution of India, held as under : -
"The Sea Custom Authorities were not a judicial tribunal and
the adjudging of confiscation, increased rate of duty or
penalty under the provisions of the Sea Customs Act did not
constitute a judgment or order of a Court of judicial tribunal
necessary for the purpose of supporting a plea of double
jeopardy."
126. A Seven Judges Bench of the Hon‟ble Supreme Court,
in R.S. Joshi etc. v. Ajit Mills Ltd. and Anr. etc., AIR 1977
SC 2279, considered the scope of mens rea while
interpreting the provisions of Bombay Sales Tax Act, 1959,
and also considered various facets of the expression
„penalty‟. The Court observed as under :-
"There was a contention that the expression „forfeiture‟ did
not denote a penalty. Thus, perhaps, may have to be
decided in the specific setting of a statute. But speaking
generally, and having in mind the object of Section 37 read
with Section 46, we are inclined to the view that forfeiture
has a punitive impact. Black‟s legal Dictionary states that „to
forfeit‟ is „to lose, or lose the right to, by some error, fault,
offence or crime, „to incur a penalty.‟ „Forfeiture‟, as
judically annotted, is „a punishment annexed by law to some
illegal act or negligence......‟, something imposed as a
punishment for an offence of delinquency. The word, in this
sense, is frequently associated with the word "penalty."
According to Black‟s Legal Dictionary, „the terms „fine‟,
„forfeiture‟ and „penalty‟ are often used loosely, and even
confusedly, but when a discrimination is made, the word
„penalty‟ is found to be generic in its character, including
both fine and forfeiture. A „fine‟ is a pecuniary penalty, and
Service Tax Appeal No.71226 of 2018
38
is commonly (perhaps always) to be collected by suit in
some form. A „forfeiture‟ is a penalty by which one loses his
rights and interest in his property.
......The word „forfeiture‟ must bear the same meaning of a
penalty for breach of a prohibitory direction. The fact that
there is arithmetical identity, assuming it to be so, between
the figures of the illegal collections made by the dealers and
the amounts forfeited to the State cannot create a
conceptual confusion that what is provided is not
punishment but a transference of funds. If this view be
correct, and we hold so the legislature, by inflicting the
forfeiture, does not go outside the crease when it hits out
against the dealer and deprives him, by the penalty of the
law, of the amount illegally gathered from the customers.
The Criminal Procedure Code. Customs and Excise Laws and
several other penal statutes in India have used diction,
which accepts forfeiture as a kind of penalty. When
discussing the relings of this Court we will explore whether
this true nature of „forfeiture‟ is contradicted by anything we
can find in Section 37(1), 46 or 63. Even here we may
reject the notion that a penalty or a punishment cannot be
cast in the form of an absolute or no fault liability but must
be proceeded by mens rea. The classical view that „no mens
rea, no crime‟ has long ago been eroded and several laws in
India, and abroad, especially regarding economic crimes
and departmental penalties, have created severe
punishments even where the offences have been defined to
exclude mens rea. Therefore, the contention that Section
37(1) fastens a heavy liability regardless of fault has no
force in depriving the forfeiture of the character of penalty."
127. In State of Rajasthan v. D.P. Metals, AIR 2001 SC
3076, the Hon‟ble Supreme Court considered the validity of
the provisions of Section 78(5) of the Rajasthan Sales Tax
Act, 1994, which provides for imposing the penalty if the
goods being carried in a vehicle are being found without
documents required under the Act and the Rules framed
Service Tax Appeal No.71226 of 2018
39
thereunder, or the documents are found to be false or
forged. The Court held as under :-
"Person Incharge of the goods should have all the requisite
documents relating to the title or sale of the goods, which
are being transported. Penalty under Section 78(5) is
leviable under two circumstances: firstly, if there is non-
compliance with Section 78(2)(a). i.e. not earring the
documents mentioned in that clause; and secondly, if false
or forged documents or declaration is submitted. This Sub-
section cannot relate to personal belongings which are not
meant for sale but would relate to those types of goods, in
respect of which documents referred to in Section 78(2)(a)
exist or can exist. Such submission of false or forged
documents or declaration at any check post or even
thereafter can safely be presumed to have been motivated
by desire to mislead the Authorities. Hiding the truth and
tender falsehood would per se, so existence of mens rea
even if required.
Similarly, where despite opportunity having been granted
under Section 78(5), if the requisite documents referred to
in Clause (a) of Sub-section (2) are not produced, even
though the same are existing, would clearly prove the guilty
intent. It is not possible to agree with the Learned Counsel
for respondents that the breach referred to in Section 78(5)
can be regarded as technical or venial. Once the ingredients
of Section 78(5) are established after giving a hearing and
complying with the principles of natural justice, there is no
discretion not to levy or levy lesser amount of penalty."
128. In Bengal Iron Merchant Association and Anr. v.
Commissioner, Commercial Tax and Anr., (1996) 7 SCC
537, the Hon‟ble Supreme Court examined the provisions of
Rule 89A(2) of the Bengal Sales Tax Rules, 1941, and held
that the said provisions of Rule 89A(2) of the said Rules,
1941 required that any consignment of notified goods shall
be accompanied by a declaration by the consignor or his
authorised agent in relation to the consignment or to
comply with them. The rule squarely placed an obligation
Service Tax Appeal No.71226 of 2018
40
upon the consignor/vendor to issue such a declaration and
the consignee/purchasers to carry the declaration. The
consignees were not entitled to complain that because iron
and steel were taxable only at the first point of sale, the
sellers (manufacturers) were not issuing the declaration as
contemplated by Rule 89A(2) and they were, therefore, not
in a position to produce the declaration when demanded by
the authorities, in case of failure to produce the said
declaration form, they were liable to pay the penalty, as per
the said Rules, 1941.
129. In Kishori Lal Rakesh Kumar Mandi v. Commissioner
of Sales Tax, 1985 UPTC 211, a Division Bench of the
Allahabad High Court, while deciding a reference on
interpretation of Section 15A(a)(g) of the Uttar Pradesh
Sales Tax Act, 1948, which referred to renewal of
registration and for default, whether penalty can be
imposed without proving mens rea, expressed the view the
mens rea is not necessary for imposing penalty for default
covered by Clause (g), observing as under : -
"....though mens rea is a necessary ingredient of an offence
but the Legislature can free any provision relating to an
offence in a statute from this fetter. Clause (g) is free from
the bonodage of mens rea."
130. In Sai Electricals (P) Ltd. v. Commissioner of Sales
Tax, 1997 UPTC 721, while dealing with the provisions of
Section 4B of the U.P. Trade Tax, 1948, the Allahabad High
Court observed that mens rea is not intended by the
legislature for imposing the penalty, and held as under :-
"A penalty imposed for a tax delinquency is a civil
obligation, remedial and coercive in its nature, and is far
different from the penalty for a crime or a fine or forfeiture
provided as punishment for the violation of criminal or penal
laws."
131. In M/s. Rama and Sons, General Merchant, Ballia
(supra), the Allahabad High Court, while dealing with the
provisions of Section 10A of Central Sales Tax Act, 1956,
observed that penalty is leviable if a person being a
Service Tax Appeal No.71226 of 2018
41
registered dealer, falsely represents when purchasing any
class of goods that goods of such class are covered by his
certificate of registration, and held as under : -
"The statements made by the dealers were, therefore,
untrue but the penalty has been quashed on the ground
that there was no mens rea in making the wrong averments
in Form C."
132. The Court further came to the conclusion that the
word „falsification‟ might have slightly different
interpretation if the criminal prosecution was launched, but
it was a case of penalty, which was levied to compensate
the Revenue and to cause the delinquent to comply with the
law; therefore, mens rea was not at all attracted in the
case.
133. The Division Bench of the Madras High Court in Vijaya
Electricals v. State of Tamil Nadu, 1991 82 STC 268, while
interpreting the analogous provisions of Section 10A read
with Section 10(b) of the Act, held that mens rea need not
be established and if representation is found to be false, it is
sufficient to levy the penalty.
134. Similar view was reiterated by the Division Bench of
the Madhya Pradesh High Court in Central India Motors v.
C.L. Sharma, Assistant Commissioner of Sales Tax, Indore
Region, Indore and Anr., 1980 46 STC.
135. In State of Madhya Pradesh v. Narain Singh and Ors.,
(1983) 3 SCC 596, the Hon‟ble Supreme Court considered
as case where two trucks carrying fertilizers were
intercepted by the Madhya Pradesh Authorities under the
Essential Commodities Act and the accused did not deny the
transport of fertilizer bags or interception of its lorries or
seizure of fertilizer bags and the only defence taken therein
was than they were not aware of the contents of the
documents seized from them and they were not engaged in
exporting the fertilizer bags from Madhya Pradesh to
Maharashtra in conscious violation of provisions of the
Fertilizer Movement Control Order, 1973 read with Sections
3 and 7 of the Essential Commodities Act, 1955. The
Service Tax Appeal No.71226 of 2018
42
Hon‟ble Supreme Court, reversing the order of acquittal,
held that mens rea was not at all attracted as the provisions
of Section 7(1) of the Essential Commodities Act required to
be interpreted in true perspective and it provided that if any
person contravenes, whether knowingly, intentionally or
otherwise any order made under Section 3, he will be
punished under the F.M.C.O. The Court held that the
element of mens rea in export of fertilizer bags without a
valid permit was, therefore, not a necessary ingredient for
convicting person for contravention of the order made under
Section 3 of the F.M.C.O. if the factum of export or attempt
to export is proved by the evidence adduced. This judgment
is an authority to show that mens rea may be an essential
ingredient in a case of offence for punishing a person, but
legislature is competent to provide for punishment including
the imprisonment even in a criminal case, excluding the
scope or attraction of mens rea.
136. In C.A. Abrahim v. Income Tax Officer, AIR 1961 SC
609, the Apex Court laid down the guidelines in interpreting
the provisions of Fiscal Statutes, observing as under :-
"In interpreting a fiscal statute, the Court cannot proceed to
make good the deficiency, if there be any; the Court must
interpret the Statute as it stands and in case of doubt, in a
manner favourable to the tax-paper. But whereas in the
present case, by use of the words „capable of
comprehensive import, provision is made for imposing
liability for penalty upon tax-paper guilty of fraud, gross
negligence orm contumacious conduct, a assumption that
the words were used in a restricted sense so as to defeat
the avade object of the legislature qua and certain clauses
will not be lightly met."
137. Similar view has been reiterated in M/s. Bhikaji
Dadabhai & Co. (supra).
138. Similarly, in Commissioner of Sales Tax v. Parson
Tools & Plants, AIR 1975 SC 1039, the Apex Court observed
as under : -
Service Tax Appeal No.71226 of 2018
43
"Where the legislature clearly declares its intent in the
scheme and language of a statute, it is the duty of the Court
to give effect to the same without scanning its wisdom or
policy, and without engrafting, adding or implying anything
which is not congenial to or consistent with such expressed
intent of the law-giver; more so if the statute is a taxing
statute."
Relevant provisions of Section 22A of the Act reads as under
:-
"(3) The owner or person in charge of a vehicle, boat or
animal shall carry with him a goods vehicle record, trip
sheet or a log book, as the case may be, and (such other
documents) as may be prescribed in respect of the goods
carried in or on the vehicle, boat or animal, as the case may
be, and produce the same before any officer in charge of
check-post or barrier or any other officer as may be
empowered by the Government in that behalf. The owner or
person in charge of a vehicle, boat or animal entering the
State limits or leaving the State limits shall also give a
declaration containing such particulars as may be prescribed
of the goods carried in or on the vehicle, boat or animal, as
the case may be, before the officer in charge of the check
post or barrier or the officer empowered as aforesaid and
give one copy of the declaration to such officer, and keep
one copy with him.
(7) (a) The officer incharge of the check post or barrier or
any other officer not below the rank of an Assistant
Commercial Taxes Officer, empowered in this behalf may,
after giving the owner or person incharge of the goods
reasonable opportunity of being heard and after holding
such further enquiry as he may deem fit, impose on him for
possession of goods not covered by goods vehicle record,
any other documents prescribed under Sub-section (3) or
for submission of false declaration or documents, a penalty
equal to five times of the rate of tax notified under Section
5 of the Act, for such goods or 30% of the value of such
Service Tax Appeal No.71226 of 2018
44
goods, as may be determined by such officer whichever is
less.
Provided that where the goods are being carried without
proper documents as required by Sub-section (3) or with
any false declaration or statements and the owner or the in-
charge or the driver of the vehicle, boat or animal carrying
such goods is found in collusion for such carrying of goods,
the vehicle, boat or animal shall also be seized by the officer
empowered under Sub-section (7) and such officer, after
affording an opportunity of being heard to such owner, in-
charge or driver may impose a penalty not exceeding 30%
of the value of the goods being carried and shall release the
vehicle, boat or animal on the payment of the said penalty,
or on furnishing such security in such form as prescribed
under Clause (b) of Sub-section (7)......."
139. In Mahaveer Conductors v. Assistant Commercial
Taxes Officer, 1997 (104) STC 65, this Court has
interpreted the provisions of Section 22A(7) holding that
mens rea was a necessary ingredient, observing as under :
-
"....Any order imposing penalty for failure to carry out statutory obligation is quasi-criminal in nature. The Statute has not provided any presumption about the existence of mens rea against the defaulter, therefore, as a prosecutor, burden of proving is primarily on the Revenue. The Revenue has failed to discharge its burden inasmuch as it has merely reached a presumption of such deliberate breach......"
140. Similar view has been reiterated in Assistant Commercial Tax Officer, Flying Squade v. Voltas Ltd., 2000 (120) STC 270. While deciding the said case, reliance has been placed upon the earlier judgments in Mahaveer Conductors (supra) and Hindustan Steel Ltd. (supra).
141. A Division Bench of the Rajasthan High Court in Lalji Moolji Transport Company v. State of Rajasthan, DBCWP No. 324/2002., decided on 10-4-2002, considering the judgments of the Hon‟ble Supreme Court in R.S. Joshi and M/s. D.P. Metal (supra) etc., has taken a view that it would Service Tax Appeal No.71226 of 2018 45 not be correct to protect a tax evader saying that there was absence of mens-rea. The submission of false of forged document of declaration at the check post or even thereafter, can safely be presumed to have been motivated by desire to mislead the authorities. Thus, it is not always necessary that the doctrine of mens rea is attracted in every fiscal statute in all situations. The Court further held as under :-
"The requirement of law is meant to be strictly construed, particularly in areas of evasion of tax. We cannot lose sight of the fact that of the there are attempts to avoid statutory obligation or requirement of oblique reason. An undue indulgence and leniency in favour of the tax-evaders on technical or misplaced sympathetic grounds leads to serious consequences affecting the revenue, and as such, development and security of the State. We are not oblivious of the fact that the penalty provisions cannot be used as a revenue-yielding provision. The object to the penalty provision is to ensure compliance in the larger public interest.""
4.8 In view of the discussions as above, the impugned order is modified to the extent of setting aside the demand along with the interest under section 75 in respect of Manpower Supply Services to the extent of Rs.2,68,36,765/- the penalty imposed under Section 78 in respect of this amount is also set aside. Remaining parts of the order are upheld. 5.1 Appeal is allowed, impugned order is partially modified as indicated in para 4.8 above.
(Operative part of the order pronounced in open court) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp