Custom, Excise & Service Tax Tribunal
M/S. Gac Shipping (India) Pvt. Ltd vs Commissioner Of Central Excise & ... on 31 October, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeals (s) Involved: ST/216 & 217/2008 (Arising out of judgment of Honble High Court of Kerala dated 26th March 2012 in C.E. Appeal No.17 of 2010 against Tribunals Final Order No.848/2009 dated 29.6.2009.) (Originally arising out of (i) Order-in-Original No.2/2008/ST (De novo proceedings) & (ii) Order-in-Original No.2/2008/ST (De novo proceedings) both dated 29.2.2008 passed by the Commissioner of Central Excise, Customs and Service Tax, Cochin.) M/s. GAC Shipping (India) Pvt. Ltd. GAC House, Subramanian Road, Willingdon Island Cochin 682 003. Appellant(s) versus Commissioner of Central Excise & Customs, Central Revenue Building, I.S. Press Road, Cochin 682 018. Respondent(s)
Appearance:
Shri Joseph Kodianthara, Sr. Advocate For the Appellant Shri Mohammed Yousuf, AR For the Respondent Date of Hearing: 21/10/2016 Date of Decision: 31/10/2016 CORAM:
Mr. Mohammed Yousuf, AR For the Respondent HON'BLE SHRI S.S. GARG, JUDICIAL MEMBER HON'BLE SHRI V. PADMANABHAN, TECHNICAL MEMBER Date of Hearing: 30/09/2016 Final Order No. _21056-21057/ 2016 Per : V. PADMANABHAN The present two appeals are directed against the Order-in-Original dated 29.2.2008 passed by the Commissioner of Customs, Cochin, in which demands raised under two show-cause notices were finalised. The first show-cause notice covered the demands for service tax for the periods 2000-2001 to 2004-2005 (Appeal No.ST/216/2008) and the second show-cause notice covers the period 2005-06 (Appeal No.ST/217/2008). These two appeals are being disposed of in the present de novo proceedings before the Tribunal as per directions of the Honble High Court of Kerala vide their Order dated 26.3.2012. The Honble High Court while remanding the matter to the Tribunal gave directions has follows:
6. After hearing both sides, we are unable to sustain the order of the Tribunal because an open remand leaving all issues open for decision in fresh adjudication means that the said order is not adverse to any of the parties in appeal. Therefore, it is not proper or fair on the part of the Tribunal to have treated any matter as concluded in their earlier order which was an open remand on all issues.
7. So far as the merit of the case is concerned also, we are equally dissatisfied with the orders of the Tribunal because the Tribunal just vacated the orders stating that the adjudication order itself contains inconsistent findings. The Tribunals approach itself is not correct because the respondent assessee is engaged in two lines of business both are taxable services under the Finance Act as stated above. Therefore, essentially it is a matter of considering as to which are the activities or charges levied that do not constitute consideration for taxable service and only such of the items calls for elimination. When detailed adjudication order is challenged before the Tribunal wherein every receipt and expenditure are considered in assessment, it was the duty of the Tribunal to consider in detail the nature of charges collected by the assessee and to see whether those are for taxable services rendered, and if so to sustain it. Similarly if any amount collected is not in the nature of consideration for taxable services, necessarily the same has to be excluded. We are of the view that the Tribunal being the first appellate authority has no escape from considering the matter in detail and no shortcut method is permissible while disposing of first appeal.
In view of the findings above, we allow both the Central Excise Appeals by vacating the orders of the Tribunal and restore the appeals back to the files of the Tribunal with direction to them to repost the appeals, hear the matter on all issues raised as if those are first appeals filed for the first time and decide the matter without being influenced by their findings in the first round of appeals, which at the maximum amounts to observations or restatement of the arguments of the parties. The Tribunal should address all the issues raised against fresh adjudication orders issued after remand. There will be direction to the Tribunal to hear and dispose of the appeals within a period of three months from the date of receipt of a copy of this judgment. The appellant is free to produce whatever is the evidence or records required and is also free to collect information from other collectorates and furnish the same so that there is no duplicity of assessment for the same service under 2 collectorates.
2. Appellant is engaged in providing the activities of steamer agent service and custom house agent service. They have taken centralised registration for steamer agency tramp operation at Cochin and the service tax for this operation pertaining to all their branches are being remitted at Cochin. They also provide line agency services from their Mumbai and Delhi offices and service tax is being paid at Mumbai based on registration obtained at Mumbai under steamer agent services. They are not providing line agency services from Cochin. They have also taken separate service tax registration for custom house agency services for Cochin, Chennai and Mumbai. During the course of audit, it was noticed that the appellants were not paying service tax on the full value shown in the profit and loss account for the period 2001-02 to 2004-05. Show-cause notice was issued and the case was adjudicated confirming the demand for service tax for the differential amount. A subsequent show-cause notice and adjudication order was issued for the period 2005-06. The first round of appeals before the Tribunal led to remand orders wherein the Tribunal, after broadly discussing the issues, remanded the case for de novo adjudication. In the remand order, the Tribunal stated that all the issues are kept open. Based on remand orders, Commissioner, Cochin passed de novo adjudication order dated 29.2.2008 which were challenged before the Tribunal in the second round of litigation. The Tribunal in the common order dated 29.6.2009 in paragraph 11 allowed the ground of limitation raised by the assessee against the revised assessment by holding that this finding of the Tribunal has not been challenged by the Revenue. Revenue challenged this Final Order of the Tribunal before the Honble High Court of Kerala with the contention that after issuing an open remand order leaving all issues open, the Tribunal should not hold the earlier order against the Revenue. In the de novo order passed by the Commissioner, he examined all issues afresh and passed revised orders. The Revenue is also aggrieved with the Tribunal issuing orders for revised demands on the ground of limitation without going into the correctness of the determination of service tax liability on many counts.
3. The Honble High Court while remanding the matter to the Tribunal had directed the Tribunal to consider the nature of charges collected by the assessee and to determine whether those are for taxable service rendered and to determine the taxability and pass detailed orders.
4. We have heard both sides in great detail. Shri Joseph Kodianthara, Sr. Advocate appeared on behalf of the appellant and Shri Mohammed Yousuf, AR on behalf of the Revenue.
5. The learned advocates submissions are summarised below:
(i) The appellant has taken centralised registration at Cochin only for steamer agency tramp operation. They have taken registration for line agency service at Mumbai for their operations covering Mumbai and Delhi. They have also taken separate registration for CHA service in different locations. His submission is that the jurisdiction of the Commissioner, Cochin is restricted to the operations carried out at Cochin as well as for activities for which centralised registration has been taken at Cochin. In respect of services rendered other than above, the jurisdiction for demand of service tax lies with the respective Commissioners. The balance sheet and profit and loss account of the appellant is a combined one covering the operations of the appellant in all places. Accordingly he has challenged the demand for service tax by the Commissioner, Cochin on the grounds of jurisdiction to recover service tax for the entire differential income other than that accounted for in Cochin.
(ii) For the second demanding covering the period 2005-06, Commissioner has accepted their contention on jurisdiction and has restricted the demand only to the differential income pertaining to operations at Cochin.
(iii) He admitted that at the time of audit, the appellant was not in a position to immediately split or apportion the difference in the value of services to the operations in various places. However, they have subsequently got detailed charts prepared location-wise, and certified by an independent Chartered Accountant. Their submission is that even though these charts were submitted to the learned adjudicating authority, he allowed deduction only to the extent of line agency services, for which service tax liability has been discharged at Mumbai.
(iv) Further, he submitted that the total value of services received also includes receipts by way of various expenses incurred by the appellant on behalf of their customers which are reimbursed by the them. Such receipts cannot be considered as part of value of taxable services and merits exclusion as per the settled law on the subject.
(v) He also pleaded that they have received certain incomes pertaining to activities not covered under service tax as also foreign income for which no service tax liability arises. He prayed for exclusion of all such income which has been quantified and certified by the independent CA.
(vi) Lastly he submitted that the initial show-cause notice covering the period 2000-01 to 2004-05, which has been issued on 22.10.2005, is hit by limitation. The demands have been raised by invoking the proviso to Section 73 with the allegations of suppression. However, they have included all receipts properly in their balance sheet and profit and loss account which was available for the Revenue for scrutiny. Under the circumstances no allegation of suppression can be made against them. He also added that the Tribunal in the first round of litigation vide Final Order No.1210/2007 dated 25.10.2007 had in fact accepted their plea of limitation. Accordingly he submitted that the demand should be restricted to normal time limit under Section 73.
(vii) With reference to the demand for the period 2005-06, he submitted that similar exclusion of value of service as pleaded above should be extended.
6. The submission of the learned AR are summarised below.
(i) He submitted copies of the original application made by the appellant for grant of registration as early as 1997 and the Certificate of Registration and argued that the appellant has been granted centralised registration for the service of steamer agent for the entire country. Accordingly, he submitted that Commissioner, Cochin had the jurisdiction to raise demands for service tax for the entire operations of the appellant all over the country. He further submitted that the ground of jurisdiction has not been raised before the lower authorities and hence should be disallowed.
(ii) With reference to the expenses claimed as reimbursable, his argument was that such claims are required to be substantiated with documents and are allowable only after due verification. It is his submission that the assessee has failed to do so as is seen from the Order-in-Original dated 25.10.2007 as recorded in paragraph 4.1.
7. Assessee has pleaded that substantial part of the demand will be hit by limitation. The show-cause notice for the period 2000-01 to 2004-05 has been issued on 22.10.2005 by invoking the extended period of time limit under Section 73 of the Finance Act, 1994. The dispute as arisen has a result of the audit undertaken by the department of the assessees books of accounts. We find that the entire demand made in the show-cause notice is based on the details found in the books of accounts maintained by the assessee. On perusal of the show-cause notice, we find that no specific grounds have been made regarding how the assessee has indulged in suppression with intent to evade payment of service tax. The entire case has arisen on account of the fact that the assessees operations are complex and in different parts of the country and could not readily furnish the split up of location-wise. To compound matters, they have centralised registrations in more than one place for some services and at the same time having individual registrations in many other places. In this background, we are of the view that there is no justification to say that the assessee has suppressed facts with intent to evade payment of service tax. Consequently, the demand for service tax will have to be limited within the normal period of limitation available under Section 73.
7.1 The assessee has submitted charts certified by the independent Chartered Accountants detailing the income of various branches. The income arising outside Cochin jurisdiction will need to be deducted from the income booked under profit and loss account. In addition, the exempted foreign income as well as income for which no service tax is liable such as sale of assets, etc., will need to be deducted. In addition, reimbursement receipts by the assessee from its customers for expenses incurred on their behalf also cannot form part of taxable value. We find that though such charts certified by independent Chartered Accountant had been submitted before the adjudicating authority, he has deducted only the income pertaining to line agency services at Delhi and Mumbai.
7.2 In the facts and circumstances of the present case, the case have to be remanded back to the original adjudicating authority to re-determine the service tax due within the normal period of limitation after deducting the claims made by the assessee and outlined above. Even for the period of 2005-06 (Appeal No.ST/217/2008) the demand needs to be reworked by allowing deductions as above. We make it clear that for purposes of allowing said deductions, the details as duly certified by independent Chartered Accountant may be made use of. Since the issue has undergone several rounds of litigation, we direct that this exercise may be completed within a period of three months from the date of receipt of this order. The assessee is also directed to cooperate and satisfy the department authorities regarding the quantum of deductions
8. In line with the above discussions, the appeals are disposed of by way of remand.
(Order was pronounced in Open Court on 31/10/2016.) V. PADMANABHAN TECHNICAL MEMBER S.S. GARG JUDICIAL MEMBER rv 1