Custom, Excise & Service Tax Tribunal
Mumbai vs Virtual Marketing (I) Pvt Ltd on 16 November, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEALS NO: ST/441 & 530/2010
[Arising out of Order-in-Original No: 18/STC-I/BR/10-11 dated 09/07/2010 passed by the Commissioner of Service Tax I, Mumbai.]
For approval and signature:
Honble Shri M V Ravindran, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
APPEAL NO: ST/441/2010
Commissioner of Service Tax I
Mumbai
Appellant
versus
Virtual Marketing (I) Pvt Ltd
Respondent
APPEAL NO: ST/530/2010 Hungama Digital Media Entertainment Pvt Ltd Appellant versus Commissioner of Service Tax I Mumbai Respondent Appearance:
Shri J.H. Motwani with Ms Sparsh Prasad, Advocates for assessee Shri Roopam Kapoor, Commissioner (AR) for Revenue CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 16/11/2016 Date of decision: 02/12/2016 ORDER NO: ____________________________ Per: M V Ravindran:
These appeals are directed against Order-in-Original No: 18/STC-I/BR/10-11 dated 09/07/2010 passed by the Commissioner of Service Tax I, Mumbai.
2. The issue that falls for consideration in this case is that the appellant herein, during the period April 2004 to March 2006 had not filed any returns with the department. Based on initiation of investigation, ST-3 returns for the period was filed by them. During the course of investigation, the appellant paid the service tax liability for the period. Further investigation was conducted and statements of various individuals were recorded. Based upon such statements and the facts of the case, the show cause notice dated 22/10/2008 was issued demanding service tax liability, which was collected and not paid, service tax liability on the amounts not included in the valuation in respect of event management service and whether appellant is liable for penalty and interest.
3. Appellant contested the show cause notice before the adjudicating authority. The adjudicating authority did not agree with the contentions raised and confirmed the demands and interest and also imposed penalties.
4.1 The Learned Counsel for the appellant submits that the service tax for the period 2003 to 2005-06 was not paid during the material period on account of financial crisis. It is his submission that it was never the intention of the appellant to evade payment of service tax and in fact as and when the funds were available service tax payment were made even prior to initiation of investigation. It is his further submission that some amount was paid by the appellant prior to initiation of investigation and balance service tax liability of ` 1.17 crores could not be paid prior to investigation but was discharged before the issuance of the show cause notice. He would submit that they have also discharged interest liability on such service tax demand. He would submit that they are contesting the demand only on the calculation of demand as such as there was an error for the months December 2004 to January 2005 as to the tax liability. It is his submission that if this calculation error is considered service tax liability actually comes to ` 1.61 crores approximately which matches the revised returns filed by them.
4.2. As regards non-payment of service tax on the amounts reimbursed through debit notes, he would submit that the said demand has been wrongly raised. He draws our attention to the various debit notes raised by them and submits that it was for the reimbursement of food consumed by the appellants employees at the site, delivery of the documents, actual courier expenses, photocopying cost at actual, actual expenses for development of photographs, use of conveyance, etc. It is his submission that the law is now settled by the judgment of the Honble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt Ltd v. Union of India 2013 (29) STR 9 (Del.) wherein the Honble High Court has held that expenditure or costs incurred by the service provider in the course of providing the taxable service can never be considered as part of gross amount charged by the service provider for the service provided and reimbursement of expenditure for air travel, hotel stay, etc. may also lead to double taxation. He would submits that this view has been followed b the Tribunal in the case of Kirloskar Pneumatic Co. Ltd. v. Commissioner of Central Excise, Pune III 2015 (38) STR 1198 (tri. Mumbai) and Link Intime India Pvt Ltd v. Commissioner of Central Excise. Thane I 2015 (38) STR 705 (Tri.-Mumbai).
4.3. As regards the service tax paid on management consultancy for the services rendered for Apsara I and Apsara II cine awards, the said amount is already included in the service tax paid prior to the initiation of the investigation, on the amount of ` 1.61 crores approximately. It is his submission that the adjudicating authority has not taken into consideration the revised return for determination of the service tax liability. He would submit that the adjudicating authority has not considered the revised returns only on the ground that the same were filed beyond the prescribed time under Rule 7B of the Rules. He would submit that this Tribunal in the case of Ceolric Services v. Commissioner of Central Excise, Bangalore 2011 (23) STR 369 took a view, considering the provisions of Rule 7C of the Rules, that revised return cannot be ignored simply on the ground that the same has been filed after a period provided under Rule 7B of the Rules.
5. Learned Departmental Representative, on the other hand, would submit that appellant collected the service tax component from their clients and did not pay to the government. Hence the demands are rightly confirmed. It is his submission that facing financial hardship does not mean that they should collect the service tax and not deposit with the Government of India. It his submission that the taxes were collected as per the returns filed by them and hence they cannot now turn around and say that the revised returns to be considered. He would submit that the revised returns have been filed beyond the period as prescribed in the provisions of Rule 7C of the Service Tax Rules. He would submit that the appellant is habituated in not discharging the service tax liability as for the earlier period of 2002-04 they discharged the service tax liability after the investigations were initiated. Considering this fact the Tribunal in the appellants own case in appeal No. ST/146/2008 by final order No. A/89999/16/STB dated 04/05/2016 set aside the penalty by invoking the provisions of Section 80 of the Finance Act, 1994. Hence the same provisions cannot be invoked again. As regards the service tax liability on the out-of pocket expenses, it is to be noted that the reimbursements of the expenses means the service recipient is having obligation, legally or contractually, to pay certain amount to third party and the said amounts are paid by the service provider on behalf of the service recipient, the question of reimbursing the expenses arises, while in the case in hand the amounts paid by the appellant for logistics, food, etc. to their own employees cannot be considered as reimbursement of expenses as it has not been proved that these expenses are contractual one.
6. We have considered the submissions made by both the sides and perused the records.
7. It is not in dispute that for the period of 2004-06, the appellant had collected the service tax component from their customers and not deposited the same with the Government of India. It is the submission of the Learned Counsel that after initiation of the investigation, before issuing show cause notice they have paid the service tax liability which arises after making the adjustment which, in their view is available to them, along with interest. We find that this argument of the Learned Counsel needs to be deprecated. The appellant having collected service tax from their customers was duty bound to deposit the same with the Government of India. Having not done so, they have erred on the wrong side of law. We also find strong force in the contentions raised by the Learned Authorised Representative that the appellant herein is repeating this infraction in not depositing the amount collected as service tax from their customers with the Government of India as can be ascertained from the fact that, for the earlier period, i.e. for the period 2002-04, an identical issue came up before the bench and the bench by an order dated 02/09/2016 took a lenient view and set aside the penalties imposed. In the case in hand, we are afraid that we cannot do so for the simple reason that, for the subsequent period, the appellant should have been more diligent in depositing the service tax liability collected by them from their clients, having undergone identical investigation from the department. In view of the above we do not find any merits in the arguments put forth by the Learned Counsel that the service tax liability having been discharged, penalties should be set aside.
8. We find that, on this issue another argument was put forth by the Learned Counsel that there is an error in the calculation of the tax liability. He sought to draw our attention to the revised returns filed by them and submit that if the error was considered, no service tax will remain to be paid by the appellant. We do not find any merits in the argument put forth by the Learned Counsel for the simple reason that, when confronted with investigation they filed service tax returns and which according to them was correct. But subsequently, after a period of almost two years, they cannot revise the returns stating that they have committed an error in the earlier returns. In the facts and circumstances of this case we hold that the view expressed by the bench in the case of Ceolric Services (supra) may not apply. Hence we reject the contentions raised by the Learned Counsel on this point.
9. As regards the service tax liability on the amount received as reimbursements for the food of the employees, while conducting the event management, transportation charges, we find from the debit notes that these amounts are collected at actual and there is no markup. The agreements which was produced before us indicate reimbursement of the amounts at actual for the food and other expenses incurred by the appellant for conducting the event management. In our considered view, the issue now stands squarely covered by the decision of the Honble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. (supra). Accordingly, we set aside the demand of service tax liability along with interest thereof and the amount of penalty imposed on them on this issue. The appeal on this point is allowed accordingly.
10. The appeals are disposed off as indicated herein above.
(Pronounced in Court on 02/12/2016) (C J Mathew) Member (Technical) (M V Ravindran) Member (Judicial) */as 9 2