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[Cites 18, Cited by 1]

Custom, Excise & Service Tax Tribunal

Ups Jetair Express Pvt Ltd vs Cce Mumbai - Ii on 16 November, 2018

      IN THE CUSTOMS, EXCISE & SERVICE TAX
              APPELLATE TRIBUNAL
              WEST ZONAL BENCH AT MUMBAI
                      COURT No. I

                   APPEAL No. ST/85793/2014

(Arising out of Order-in-Original No. 5/ST/RN/CMR/MII/13-14
dated 29.11.2013 passed by Commissioner of Central Excise,
Mumbai-II)



UPS Jetair Express Pvt. Ltd.                       Appellant

Vs.
Commissioner of Central Excise, Mumbai-II          Respondent

Appearance:
Shri V.S. Nankani, Sr. Advocate, with Shri Prithviraj Choudhary,
Advocate and Shri Parag Chavan, C.A., for appellant
Shri K.M. Mondal, Spl. Counsel, for respondent

CORAM:
Hon'ble Dr. D.M. Misra, Member (Judicial)
Hon'ble Mr. Sanjiv Srivastava, Member (Technical)


                    Date of Hearing: 28.6.2018
                   Date of Decision: 16.11.2018


                 ORDER No. A/87929/2018


Per: Sanjiv Srivastava

      The appeal is directed against the order of

Commissioner       Central     Excise    Mumbai     -II   dated

29.11.2013 holding as follows:

"57. a)       I confirm the demand of Service Tax (including

education cess and higher education cess) under SCN F

No V/ST/HQ/AE/E/145/12 dated 23.10.2012 to the

extent of Rs 67, 89,17,207/- (Rupees Sixty Seven Crores

Eighty Nine Lakhs Seventeen Thousand Two Hundred
                               2                     ST/85793/2014




and Seven Only) under "Courier Service" as defined

under Sec 65 (105) (f) read with Sec 65 (33) of the

Finance Act, 1994 during the Financial Year 2008-09 to

2011-12, and order for recovery of the same from M/s

UPS Jetair Express Pvt. Ltd., under the proviso to

subsection (1) of section 73 of the Finance Act, 1994 read

with section 68 of the Act and Rule 6 of the Service Tax

Rules, 1994 as amended.

b)      Interest on the amount of demand determined at

'(a)' at the appropriate rate should be paid by M/s UPS

Jetair Express Pvt. Ltd., under Section 75 of the Act;

c)      I impose Penalty of Rs 67, 89,17,207/- (Rupees

Sixty    Seven   Crores   Eighty   Nine   Lakhs   Seventeen

Thousand Two Hundred and Seven Only) under Section

78 of the Act on M/s UPS Jetair Express Pvt. Ltd.

d)      I impose Penalty of Rs 5000/- (Rupees Five

Thousand Only) under Section 77 of the Finance Act,

1994 as amended.

e)      Since penalty is imposed under Section 78 as

above, I do not impose separate penalty under section 76

of the Finance Act, 1994.

f)      The remaining demand of Rs 309,61,15,563/- (Rs

377,50,32,770/- - Rs 67,89,17,207/-) raised in SCN F No

V/ST/HQ/AE/E/145/12 dated 23.10.2012 is dropped."

2.1     Appellants are engaged in rendering services

falling under "Courier Service", as defined under Section
                             3                    ST/85793/2014




65 (105) (f) read with Section 65 (33) of Chapter V of the

Finance Act, 1994 and "Intellectual Property Services" as

defined under Section 65 (105) (zzr) read with Section

65 (55a) and Section 65 (55b) of Chapter V of the

Finance Act, 1994.

2.2   For export consignments they have appointed

contractor i.e. M/s Transmodal, etc., to pick up the

consignment from the door steps of consignor and

deliver the same to their hubs. After segregating and

consolidating the consignments and the documents,

they hand it over to M/s UPS Worldwide Forwarding

Inc, a foreign Company who undertakes the delivery of

consignments    right   from    picking   up   the   export

consignments at International Airports for delivering the

same to the foreign consignee at its doorsteps across the

world, with the help of a local UPS Courier Companies.

For this appellants pay an agreed sum as consideration

to M/s UPS Worldwide Forwarding Inc. In respect of

such export consignments, there are two modes of

payment available, i.e. payment by the consignor

(freight paid) and payment by the consignee (freight

collect). In respect of the "Freight Paid" consignments

appellants discharge the service tax liability and in

respect of the "freight collect" consignments they claim

exemption from payment of service tax, treating the

services provided under "Export of Service Rules, 2005".
                             4                        ST/85793/2014




2.3   In respect of import consignments M/s UPS

Worldwide    Forwarding   Inc,   handover      the      import

consignments to the Appellant at the International

Airport, in India. The Appellants with the help of other

courier companies deliver the said import consignments

to the Indian consignee. In this case also there are two

modes of payment available i.e. payment by the foreign

consignor (freight paid) and payment by the Indian

consignee (freight collect). In respect of the "freight

collect" consignments Appellants pay the Service Tax

due, and remits the amount collected from the Indian

Consignee M/s UPS Worldwide Forwarding Inc. In

respect of the "freight paid" consignments M/s UPS

Worldwide Forwarding Inc pays consideration to the

assessee in foreign currency for the services rendered by

the assessee in India. In respect of such consignments

they claim exemption under "Export of Service Rules,

2005"   on   such   consideration   received    in     foreign

exchange.

2.4   Since appellant have deliberately failed to pay

Service Tax in relation in respect of taxable service of

"Courier Services" provided by them, as well as received

by them as import of service on the gross value within

the prescribed time and also disclose the details of such

services provided and received by them in their ST-3

return, a show cause notice invoking extended period of
                             5                    ST/85793/2014




limitation as per proviso to Section 73(1) of Finance Act,

1994 demanding service tax as follows:


S Reason           for Taxable Value      Service Tax
No Demand

1     Import         of 1855,32,64,268    204,38,33,700
      Service in case
      where       UPS
      World
      Forwarding Inc
      has     rendered
      service        to
      assessee partly
      in India as well
      as         partly
      outside India

2     Export        of 148,01,93,210      16,36,35,552
      service in case
      of import     of
      consignments
      where assessee
      has rendered its
      service in India
      only.

3     Export          of 1430,51,57,299   156,75,63,518
      Service in case
      export          of
      consignments,
      where assessee
      has rendered its
      services in India
      for       foreign
      companies.

4     Total            3433,86,14,777 377,50,32,770


2.5    Commissioner has adjudicated the case as per

order referred in para 1 above. Aggrieved by the order,

appellants have preferred this appeal before Tribunal.

3.1    Shri V S Nankani, Sr Advocate, appeared on

behalf of the Appellant and Shri K M Mondal Special

Counsel appeared for the revenue.
                                   6                          ST/85793/2014




3.2    Arguing for the appellant learned Sr Counsel

submitted:

 i.    That for the person to be classified as "Courier

       agency" as defined in section 65(33), the service

       provider must satisfy following conditions:-

          a. It   must     be   engaged       in    door     to    door

             transportation of time sensitive documents/

             goods;

          b. For such door to door transportation, the

             service     provider     can    utilize,    directly     or

             indirectly, the services of another person to

             carry the documents/ goods.

ii.    The word "engaged in" means that the service

       provider must have privity of contract with the

       person     who    agrees       to    pay    the     freight     in

       consideration of service provider's undertaking to

       fulfill all the three legs involved in transportation

       from one door to another. Thus privity of contract

       with the recipient and the payment of freight is

       twin test which must be satisfied, for the services

       to qualify as 'courier service'.

iii.   The definition, therefore, presupposes that person

       who is engaged in the door to door transportation

       is different from the person whose services utilized

       to carry/ transport the documents. There is no

       limitation on the number of intermediate persons

       whose services are utilized to carry/ transport the
                                       7                          ST/85793/2014




        documents by the person who is engaged in the

        door to door transportation.

iv.     The       phrase        "engaged          in   door      to    door

        transportation" refers to, covers and means the

        person who undertakes contractual obligation or

        responsibility to perform all the "three legs" of the

        service of the services- pick up, transportation and

        delivery and in consideration collects or receive

        freight.

 v.     Any person who performs only one of these legs

        three functions renders either the service of

        transportation or business support.

vi.     The scheme of operations in the case of appellant

        can be depicted as per the chart below:



                                           Indi        Outside India
                                           a
      UPS India (A)                        UPS Airline (B)                   UPS Foreign Entity
                                                                                    (C)


       Deliver        Pick
       y              Up

           Receives Foreign
           Exchange from                                                         Client (Y)
           UPS Airline but
           no contract with X
           or Y

              4th Case: Service tax Paid
              on entire freight amount
              (No demand) Delivers
              parcel & Collects Freight
              from (X)




Client (X):
(A) contracts with (X) and
collects freight from (X).
Service Tax paid on entire
freight amount.
(A) Forwards the Shipment
outside India.
                                  8                         ST/85793/2014




    vii.   Three type of transactions which are the subject

           matter of the present appeal are as indicated in

           the table below:


Type of Party's to Demand            Catego    Categor     Reason for      Amou
Contrac Contract on                  ry   of   y           nonpayment      nt in
t       for Door                     Service   claimed     of   Service    Rs
        to Door                      for       by          Tax             Crore
        delivery                     deman     Appella
                                     d         nt

Export     UPS        Service by Courie        Transpo     Exemption     45.65
Prepaid    India      UPS        r             rt     of   from
           and        World      Service       Goods       payment of
           Indian     wide    to               by Air      service tax
           Consigno   UPS India                            on transport
           r                                               of     export
                                                           cargo

Import     UPS        Last mile Courie         Busines
                                                Export      of 12.29
Prepaid    Foreign    delivery    r            sservice    as
           Entity     Service     Service      Support
                                                service
           and        provided                 Service
                                                recipient
           Foreign    by     UPS                located
           Consigno   India    to               outside
           r          UPS                       India     and
                      worldwide                 consideratio
                                                n received in
Export     UPS      First mile Courie Busines foreign          9.95
Freight    Foreign  Pickup      r       s       currency
Collect    Entity   Service     Service Support
           and      provided            Service
           Foreign  by    UPS
           Consigno India    to
           r        UPS
                    worldwide

Import     UPS      No Demand
Freight    India
Collect    and
           Indian
           Consigne
           e

   viii.   Thus it is evident that where so ever appellants

           have entered into contract to provide services of

           door to door delivery they have paid the service tax
                                9                          ST/85793/2014




      on entire amount of freight collected. (Case of

      Export Prepaid and Import Collect)

ix.   Only the person who is engaged in providing the

      door to door delivery of goods/ documents can be

      levied to service tax under the category of Courier

      Agent. In the case of export prepaid they being the

      courier agent have paid the service tax on the

      entire freight collected by them. In this case the

      input    services    received   by     them    cannot        be

      classified as Courier Agent, as the service provider

      i.e.    UPS    Air   renders     the      service    of     Air

      transportation, which at the relevant time was

      exempt from payment of service tax. Hence

      demand of Rs 45.65 Crore made by classifying the

      services under category of Courier Agent is not

      sustainable.

x.    Even if the service provided by UPS Air is held to

      be courier agent service, no part of service is

      rendered in India. The fact that the parcels are

      screened in India before loading into aircraft as

      per the circular of Director General Civil Aviation

      will not imply that UPS Air is performing part of

      services in India. For this reason the demand on

      reverse charge basis from the Appellant on the

      input    services     provided       by     UPS      Air      is

      unsustainable.
                                         10                              ST/85793/2014




 xi.    In other two cases namely Import Prepaid and

        Export Collect appellant is performing the part of

        service. In case of Import Prepaid, appellants

        collect the consignment from the airport in India

        and delivers to consignee and in case of export

        collect appellant picks up the consignment from

        the consignor in India and delivers to the Airport

        in India.

xii.    In these two transactions, they do not receive any

        consideration from the consignor or consignee in

        India. They receive consideration for performing

        this service from UPS Air. Therefore the services

        provided by the appellant cannot be classified as

        courier service.

xiii.   Appellants while providing the services of delivery

        and   pick        up     uses        the    services      of    a    local

        transporter        "Transmodal"              in   this     case.       The

        services provided by "Transmodal" are not being

        classified as courier agency, even when the nature

        of services provided by Transmodal and UPS Air

        are   similar       in    nature,           except       that       former

        transports by road and later by Air.

xiv.    Demand       is    barred        by        limitation.    Audit        was

        conducted by the department in February 2010 for

        the period 2005-09, when they had vide letter

        dated 8th February 2010 submitted all financials

        and details of transaction undertaken by them.
                              11                   ST/85793/2014




       The facts were completely in the knowledge of

       department as is evident from Final Audit Report

       dated 10th May 2010, wherein audit has recorded

       that Appellants were maintaining separate records

       for exports though the same was not reflected in

       the ST-3 returns and took no objection.

xv.    He also relied on decision of Ahmedabad bench in

       case of M/s Jet Airways (India) Ltd [2008-TIOL-

       979-CESTAT-AHM] and Bombay High Court in

       case of Mahindra & Mahindra [2018 (11) GSTL

       126 (BOM)] and various circulars in his support.

3.3    Arguing on the behalf of revenue learned special

counsel submitted:-

 i.    Entire   activities   are   performed     by    three

       participants namely UPS Jet Air, UPS Worldwide

       and UPS Foreign Entity, who are entities of the

       Courier Agency. From the definition of "Courier

       Agency" it is quite evident that a courier agent can

       utilize the services of any other person directly or

       indirectly to carry such time sensitive documents,

       goods or articles. It is not material whether the

       whole activity is performed by one person or three

       persons as above. This will not change the

       essential character of the service.

 ii.   In case of Vijayanand Roadlines [2006 (1) STR 113

       (T)] it was held that door to door transportation

       cannot be given restricted meaning. Even the
                                     12                        ST/85793/2014




       customer can come to the courier agent's office.

       This decision has been upheld in [2006 (4) STR J

       115 (SC)]

iii.   Courier Service has essentially three components

       namely      pickup,     transportation           and   delivery.

       Courier Service is not fully performed till the

       delivery of goods/ documents to the consignee.

       Transportation is essentially a part of the courier

       service.

iv.    UPS Jetair has utilized the transport services

       provided      by    UPS        Worldwide         as    per     the

       International Transportation Services Agreement

       dated 30/10/2010. This does not imply that UPS

       Worldwide has provided "Transport of Goods by air

       Service"

 v.    Courier Service is a composite service of which

       transportation is an essential part. Thus is an

       input service for providing the Courier Service and

       has essential character of Courier Service. By

       application      of Section        65A(2)(b),     and Boards

       Circular No 344/4/2006-TRU dated 28.02.2006

       and   334/1/2008-TRU              dated     29.02.2008,        the

       classification     of   said      service   is    to   be    done

       according to principal service i.e. Courier Service.

vi.    Reliance    placed      by     the   Sr     Counsel     on     the

       International Transportation Services Agreement

       dated 30/10/2010, to claim the classification of
                              13                     ST/85793/2014




       services provided by UPS Air as "Transport of

       Goods by Air Service" is not correct. From the

       preamble to the agreement it is quite evident6 that

       both UPS Worldwide and UPS Jet Air were

       engaged in the export and import or freight

       forwarding of express documents/ parcels and

       shipments. They in fact were providing "Express

       Cargo Service" which as per the circular No

       96/7/2007-ST dated 23/08/2007 is covered by

       Courier   Agency    Service.   Thus    the    services

       provided by the UPS Worldwide will also qualify as

       courier service. He relied on the decision of apex

       Court in case of Grasim Industries Ltd [2002 (141)

       ELT 593 (SC)] to argue that the definition of

       Courier Agency should be read as whole and if

       read as whole the classification of the services

       provided by UPS Worldwide will be only in the

       category of courier agency services.

vii.   In the present case UPS Jetair sub contracted a

       part of its work to UPS Worldwide who undertook

       the activity of collecting the parcel from UPS Jet

       Air at the Indian Airport, loading it in the Aircraft

       by booking space, air transport from Indian

       territory to foreign territory and delivery to the

       consignee. As per the Circular No 96/7/2007-ST

       dated 23/08/2007, sub contractor is also liable to

       pay service tax. Part of the services provided by
                                      14                         ST/85793/2014




        UPS Worldwide was provided in India and part

        outside India. UPS Worldwide is foreign company

        having no branch              office or      agent    in     India.

        Therefore UPS Jetair (appellant) was required to

        pay service tax on the gross value of such

        provision     of     service        under     reverse      charge

        mechanism in terms of Section 66A of Finance

        Act, 1994 read with rule 3(ii) of Taxation of

        Services     (Provided        from    Outside        India     and

        Received in India) Rules, 2006.

viii.   In case of import, appellants collect the parcel

        from Indian airport and deliver the same to

        doorsteps of Indian Consignee with the help of

        another     company          like   M/s      Transmodal.       For

        providing such services, they receive consideration

        from in convertible foreign exchange from UPS

        Worldwide.

 ix.    In   case    of     export        "Freight    Collect"       basis,

        appellant's pickup the parcel from the doorstep of

        the Indian Consignor and thereafter transports

        and handover the same to UPS Worldwide at

        International Airport in India. The parcel is

        thereafter transported and delivered to the foreign

        consignee by the UPS Worldwide, who collect the

        freight from the consignee. In such cases also

        Appellants         receive        consideration       from        in

        convertible foreign exchange from UPS Worldwide.
                              15                    ST/85793/2014




 x.    Appellants have claimed exemption from payment

       of service tax in both the above cases, claiming the

       services provided to be export of service. As per

       Rule 3(1) (ii) of the Export of Services Rules, 2005,

       to claim such exemption, services are required to

       be performed in India as well as outside India.

       Since none part of service is provided outside

       India the exemption claimed is not available to

       them.

xi.    Party has vide their letter dated 15.11.2013,

       themselves given the taxable value of services

       provided by them. The demand of service tax has

       been worked out on the basis of the said value of

       taxable services provided by them. Hence there is

       no error in quantification of the demand.

xii.   The claim of appellant, that after the audit

       conducted in February 2010, all facts were

       brought to the knowledge of department, hence

       invoking extended period of limitation is not

       correct, cannot be justified because the audit was

       limited mainly to wrong availment of CENVAT

       Credit. Appellants had never disclosed the nature

       of transactions between themselves and UPS

       Worldwide/ UPS Foreign Entity. Also they did not

       disclose the gross value of taxable courier services

       provided and received by them in ST-3 returns.

       Thus relying on the decisions of in case of Star
                                 16                    ST/85793/2014




      India Pvt Ltd [2015 (38) STR 884 (T)], Tigrania

      Metal & Steel Industries [2001 (132) ELT 103 (T)]

      & Steel Industries Kerala Ltd. [2005 (188) ELT 33

      (T)] the invoking extended period is justified in the

      present case.

4.0   We have considered the submissions made by

both the sides. The issue is in respect of determining

the scope of the courier agency services as defined by

Section 65(33) the Finance Act, 1994. For ease of

reference the said definitions are reproduced below:

""Courier agency" means any person engaged in the door
to door transportation of time sensitive documents, goods
or articles utilizing the services of a person, either directly
or indirectly, to carry or accompany such documents
goods or articles.

Taxable service has been defined by Section 65 (105) (f)

of the Finance Act, 1994 as follows:

"Taxable Service" means any service provided or to be
provided to any person by a courier agency in relation to
door to door transportation of time sensitive documents,
goods or articles."


5.0   From the reading of the said definition, it is quite

evident, that courier agency refers to any person, who

undertakes door to door transportation of time sensitive

documents,      goods      or        articles,   by   carrying/

accompanying the said time sensitive documents, goods

or article, either directly (by himself) or indirectly

(through another person). The definition itself provides
                               17                     ST/85793/2014




that the person could have carried the said documents,

goods or article himself for delivery to consignee or

could handover to some other person to accompany the

said time sensitive documents, goods or article, for

delivery. Another notable aspect of the definition is the

absence of words "consignor" and "consignee" from the

said definition. In absence of the said words in the

definition, it is immaterial whether the consignment

being carried is handed over by the consignor for

delivery to the consignee, or by any other person. The

essence is that the person should be providing the

service of transportation of time sensitive documents,

goods or article, by accompanying the said                 time

sensitive documents, goods or article, either himself or

by employing the service of any other person. Thus if

one courier agency books the consignment and hand

over the same to another courier agency for further

delivery, then both the persons are providing the courier

agency service. In case of Vijayanand Roadlines [2006

(1) STR 113 (T-Bang)] it was held as follows:

"5. In so far as the claim of the appellants for
abatement of duty paid in respect of the customers
having come and delivered the documents to their door
and their contention that the same is not covered by the
definition of Courier Service, is rejected. The definition of
'courier service' in Para 27 of the Act read as follows:

"Courier agency" means a commercial concern engaged
in   the   door-to-door   transportation   of   time-sensitive
documents, goods or articles utilizing the services of a
                              18                     ST/85793/2014




person, either directly or indirectly, to carry or accompany
such documents, goods or articles".

The violation to the definition cannot be made in a
manner so as to interpret in a way that would make the
definition otiose and redundant. The activity of the
appellant transporting time-sensitive documents, goods
or articles utilizing the services of a person either directly
or indirectly to carry or accompany such documents,
goods or articles is not denied. The appellants' only
contention is that they are not going to the door of the
customer and want to restrict the term 'door-to-door'
transportation to mean that it excludes the cases where
the customer comes to their door. Such an interpretation
is not possible. When the services of a person is utilized
either directly or indirectly inasmuch as the customer
goes to the courier agent's office and delivers his
documents, goods or articles, it is also required to be
considered as covered under the definition of "Courier
Agency". The findings given by the Commissioner
(Appeals) on this point is reproduced herein below:

"Courier Agencies undertake the service of transportation
of goods and documents from one place to another where
time sensitivity and ensuring delivery at the door is the
prime criteria. Only in respect of very big customers, the
courier agencies collect the documents from the premises
of the customers and deliver to the consignees. They do
not collect the documents at the door of every consigner. I
cannot think of any acceptable reason for exempting
services where the consigners go to the office of the
courier to deposit the documents from the ambit of
Service Tax. Such a distinction in courier services is very
much repugnant to common sense. In my view even if the
consigner goes to the office of the courier for depositing
the documents, the same should be considered door-to-
door delivery. I also do not find any difference in tariff
                                 19                      ST/85793/2014




rates on account of the fact that the documents and
goods are not collected from the premises of the consigner
and delivered in the premises of the consignees.
Therefore,       door-to-door   transportation     should        be
interpreted to include the cases where consigners and
consignees go to the courier office for depositing the
documents and taking delivery of the same."


This decision of Tribunal has been upheld by the Apex

Court as reported in [2006 (4) STR J115 (SC)]. The crux

of the said decision is that the phrase "door to door" do

not restrict the scope of definition of the "Courier

Agency" to the activity of person picking up the time

sensitive documents and goods from the doorstep of

consignor for delivery to the doorstep of consignee. The

said phrase as used in the definition is to be read vis a

vis the person providing the Courier Agency service.

6.1    In view of the above, we examine the terms of

"International Transportation Services Agreement" dated

30/10/2010-

"UPS    Jetair    Express Pvt Ltd      (referred   to    as     the
'Contractor") a company organized and existing under
Companies Act of 1956 (the "Act") and having its
registered office at Comtrade Centre, Cambatta Building.
J Tata Road Mumbai -400020 India, and,

UPS worldwide Forwarding INC (referred to as "UPS") a
corporation organized under the laws of State of
Delaware, United State of America, and having its
principle place of business at No 55 Glentake Parkway N
E Atlanta, Georgia 30328, United State of America.
                              20                     ST/85793/2014




The Contractor and UPS are collectively referred to as
"Parties"

Witnesseth

The Contractor was incorporated pursuant to a Joint
Venture Agreement dated October 30, 2000 (the "JVA")
between UPS International Forwarding Inc and Jetair Ltd
to engage in the export and import of freight forwarding
of express documents/ parcels and shipments:

UPS desires that the Contractor, as an independent
contractor, perform services required by UPS in the
transportation of small packages, in the territory (which
shall mean the territory of the Union of India, hereinafter
referred to as the "territory") and the Contractor is willing
to do so; and

The Contractor desires that UPS, a worldwide freight
forwarder, perform services required by the Contractor in
the transportation of small packages throughout the
world, outside India and UPS is willing to do so.

IN CONSIDERATION OF THE ABOVE, the Parties agree:

1A.   Capitalized terms not defined in this Agreement
shall have the meaning as defined in the JVA.

1.0   Obligations of UPS
      1.1    UPS shall perform services for the Contractor
             in the   transportation of    small packages
             throughout the world. Guidelines for these
             services are set forth in the "ISPS Shipment
             Manual", the "IOPS Manual" and the "UPS
             Service Guide" (as amended from time to
             time), copies of which UPS shall provide the
             Contractor.
      1.2    For services rendered by the Contractor, UPS
             shall pay for the compensation in accordance
             with the attached Exhibit B. The Contractor
             shall provide the pertinent invoices for the
                                21                         ST/85793/2014




            said services every week, within seven (7)
            days after the end of the week when the
            packages are tendered to the Contractor. UPS
            shall forward payments to the Contractor
            within thirty (30) days from the receipt of
            proper invoices and supporting documents.
      1.3   UPS shall be li9able for all admitted claims
            for loss or damage to shipments and will hold
            Contractor harmless except if the loss or
            damage to the shipments was due to the
            Contractor's   gross     negligence       or     willful
            conduct. However, the Contractor shall be
            liable for all claims for loss or damage to
            shipments due to their gross negligence and
            willful conduct.
2.0   Obligations of the Contractor
      2.1   The Contractor shall perform services for UPS
            in the transportation of small packages in the
            Service Area. Guidelines for these services
            are set forth in the "ISPS Shipment Manual",
            the "IOPS Manual" and the "UPS Service
            Guide" (as amended from time to time), copies
            of which UPS shall provide the Contractor.
      2.2   The    Contractor       shall        calculate        the
            dimensional    weight        of    the   package        in
            accordance with the procedure set forth in the
            attached   Exhibit      C.    To     ensure      proper
            processing, the Contractor shall specify the
            dimensional weight on the waybill prior to
            export of each consignment. UPS shall audit
            shipments for dimensional weight to ensure
            the   Contractor's      compliance        with        the
            procedure set forth in attached Exhibit C.
            Should there be any discrepancy between the
            actual dimensional weight and that specified
            in the waybill, the Contractor shall be held
                                 22                      ST/85793/2014




             responsible for said discrepancy.            In this
             regard, the Contractor shall be charged for
             the discrepancy within thirty (30) days based
             on the net settlement invoice. In addition, UPS
             shall also charge the Contractor a surcharge
             of five U.S. dollars (U.S. $ 5.00) as processing
             fee for each shipment discrepancy.
      2.3    For services rendered by UPS, the Contractor
             shall pay for the compensation in accordance
             with the attached Exhibit B. UPS shall provide
             the pertinent net settlement invoices every
             week, within seven (7) days after the end of
             the week when the packages are tendered to
             UPS. The Contractor shall forward payments
             to the UPS within thirty (30) days from the
             receipt of proper invoices and supporting
             documents from UPS.
      2.4    .....
      2.5    ...."


6.2   From the above clauses of the agreement it is

evident that both, the Appellants and UPS Worldwide

are engaged in the export and import of freight

forwarding     of   express     documents/       parcels       and

shipments. Further the territory and scope of operations

of both are well defined by the agreement. As per the

agreement, appellants are rendering services only within

the territory of India and no part of such service is

rendered     outside   India.        This   agreement     is     an

instrument by which UPS Worldwide has bifurcated its

operation of undertaking door to door delivery of time

sensitive documents and goods into various parts. They
                             23                    ST/85793/2014




undertake door to door delivery of the time sensitive

documents and goods, through various entities created

with specific territorial jurisdiction. Appellant in the

scheme of things provide the services in the territory of

India. Appellant as such would not be in position to

undertake the delivery or pickup of consignments from

the foreign territory. Thus they deliver the time sensitive

documents and goods to UPS Worldwide for getting

them, deliver to the consignee located in foreign

territory, through UPS Foreign entity. Similarly UPS

Worldwide delivers the time sensitive documents and

goods picked up from foreign territory to the appellant

at the international airport for delivery of the same

within the territory of India. Even the chart submitted

by the Appellant Counsel during argument and with the

written submissions (refer para 3 above) establishes the

same.

6.3   Further to understand the scheme of operations

during the course of hearing the Counsel for Appellant's

was asked to sample documents for the various cases of

shipment. These sample documents are reproduced

below:
 24   ST/85793/2014
 25   ST/85793/2014
 26   ST/85793/2014
 27   ST/85793/2014
 28   ST/85793/2014
                           29                   ST/85793/2014




6.3   From the perusal of the said documents, following

can be concluded-

a.    Export Pre Paid Sample

      i.   Document for the transportation of the

           parcel is generated online and the Shipper is
                             30                   ST/85793/2014




            required to acknowledge the agreement with

            UPS.

     ii.    After   generation   of the said    document,

            Appellants get the parcel picked up from the

            premises of the consignor for delivery to the

            UPS, at International Airport.

     iii.   On the Airway bill, appellant is indicated as

            shipper instead of the consignor.

Thus from the documents prepared also it is quite

evident that for the carriage of the said parcel, UPS

Worldwide has acted as courier agency for carriage of

the said parcel from the international Airport in India

for delivery to the consignee.

b.   Import Pre Paid Sample

     i.     Document for the transportation of the

            parcel is generated online and the Shipper is

            required to acknowledge the agreement with

            UPS.

     ii.    UPS foreign entity picks up the shipment

            from the premises of consignor for delivery to

            airlines arranged by UPS WWF for delivery to

            International Airport in India.

     iii.   Appellants inform the consignee on receipt of

            cargo arrival notice, and pick up the parcel

            from the International Airport for delivery to

            the consignee after billing him for delivery
                             31                   ST/85793/2014




           order fees for release of the said consignment

           and payment of requisite taxes.

In this case appellants have provided the courier agency

service to UPS Worldwide for delivery of the said

consignment from the International Airport to premises

of consignee. They have as per the agreement provided

the complete service within India only and not even a

part of service has been provided outside India. For the

services provided by the appellant they have received

consideration from the UPS Worldwide in convertible

foreign exchange.

c.   Export Freight Collect:

     i.    Appellants   arranges    for   collection    and

           delivery of parcel to UPS Worldwide in the

           same manner as Export Prepaid case.

     ii.   Once the shipment is delivered, UPS Foreign

           entity bills the consignee.

     In this case appellants have provided the courier

     agency service to UPS Worldwide for picking up of

     the said consignment from the premises of Indian

     exporter for delivery to International Airport. They

     have as per the agreement provided the complete

     service within India only and not even a part of

     service has been provided outside India. For the

     services provided by the appellant they have
                              32                    ST/85793/2014




        received consideration from the UPS Worldwide in

        convertible foreign exchange.

6.5     From the facts as stated above it is quite evident

that in case of Export pre-paid UPS Worldwide has

provided Courier Agency Service to Appellants, and in

case of Import Prepaid and Export Freight Collect,

appellants have provided Courier Agency Services to

UPS Worldwide.

6.6     In the agreement, by the use of phrase "in the

export and import of freight forwarding of express

documents/ parcels and shipments" it is quite evident

that both appellant and UPS Worldwide are engaged in

providing "Express Cargo Service". The service as

provided by UPS Worldwide to Appellant will be covered

by Express Cargo Service as has been clarified by the

Circular No 96/7/2007-ST dated 23.08.2007. The

relevant extracts of the said circular are reproduced

below:

Query        Some transporters undertake door- to-door
transportation of goods or articles and they have made
special arrangements for speedy transportation and
timely delivery of such goods or articles. Such services
are known as 'Express Cargo Service' with assurance of
timely delivery.

Whether such 'Express cargo service' is covered under
courier agency service [section 65(105)(f)]?

Reply        The    nature   of   service      provided     by
'Express Cargo Service' provider falls within the
scope and definition of the courier agency. Hence,
                                  33                         ST/85793/2014




the said service is liable to service tax under
courier agency service [section 65(105)(f)].


6.7     In view of discussions as above we are of the view

that in case of Export Pre-paid, where the consignments

are booked by the Appellant for delivery in for territory

appellants receive the services from UPS Worldwide for

picking up the said consignments from International

Airport for delivery in foreign territory. Since Appellants

have received the services from UPS Worldwide and the

origin of the said services is within India, service tax

required to be paid by UPS Worldwide is to be paid by

the Appellant on reverse charge mechanism as provided

for in Section 66A of Finance Act, 1994 read with rule

3(ii) of Taxation of Services (Provided from Outside India

and Received in India) Rules, 2006. For ease of

reference the said provisions are reproduced below:

Section 66A of the Finance Act, 1994

66A. (1) Where any service specified in clause (105) of
section 65 is,--

  (a)       provided or to be provided by a person who
            has established a business or has a fixed
            establishment    from      which   the        service     is
            provided   or   to    be   provided      or     has     his
            permanent address or usual place of residence,
            in a country other than India, and
  (b)       received by a person (hereinafter referred to as
            the recipient) who has his place of business,
            fixed establishment, permanent address or
            usual place of residence, in India,
                                34                      ST/85793/2014




such service shall, for the purposes of this section, be the
taxable service, and such taxable service shall be treated
as if the recipient had himself provided the service in
India, and accordingly all the provisions of this Chapter
shall apply:

Provided that where the recipient of the service is an
individual and such service received by him is otherwise
than for the purpose of use in any business or commerce,
the provisions of this sub-section shall not apply:

Provided further that where the provider of the service
has his business establishment both in that country and
elsewhere, the country, where the establishment of the
provider of service directly concerned with the provision
of service is located, shall be treated as the country from
which the service is provided or to be provided.

(2) Where a person is carrying on a business through a
permanent establishment in India and through another
permanent establishment in a country other than India,
such permanent establishments shall be treated as
separate persons for the purposes of this section.

Explanation 1.--A person carrying on a business through
a branch or agency in any country shall be treated as
having a business establishment in that country.

Explanation 2.--Usual place of residence, in relation to a
body corporate, means the place where it is incorporated
or otherwise legally constituted.

Taxation of Services (Provided from Outside India
and Received in India) Rules, 2006

3. Taxable services provided from outside India and
received in India.- Subject to section 66A of the Act, the
taxable services provided from outside India and received
in India shall, in relation to taxable services-

   (i) specified in sub-clauses (d), (p), (q), (v), (zzq), (zzza),
      (zzzb), (zzzc), (zzzh), (zzzr), (zzzy), (zzzz) and (zzzza)
                                    35                          ST/85793/2014




      of clause (105) of section 65 of the Act, be such
      services as are provided or to be provided in
      relation to an immovable property situated in India;

   (a) (ii) specified in sub-clauses (a), (f), (h),(i), (j), (l), (m),
       (n), (o), (s), (t), (u), (w), (x), (y), (z), (zb), (zc), (zi), (zj),
       (zn), (zo), (zq), (zr), (zt), (zu), (zv), (zw), (zza), (zzc),
       (zzd), (zzf), (zzg), (zzh), (zzi), (zzl), (zzm), (zzn), (zzo),
       (zzp), (zzs), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd),
       (zzze), (zzzf), and (zzzp) of clause (105) of section
       65 of the Act, be such services as are performed in
       India:

Provided that where such taxable service is partly
performed in India, it shall be treated as performed
in India and the value of such taxable service shall
be determined under section 67 of the Act and the
rules made thereunder;

(iii) specified in clause (105) of section 65 of the Act, but
excluding-

   (a) sub-clauses (zzzo) and (zzzv);

   (b) those specified in clause (i) of this rule except when
       the provision of taxable services specified in
       clauses (d), (zzzc), and (zzzr) does not relate to
       immovable property; and

   (c) those specified in clause (ii) of this rule, be such
       services as are received by a recipient located in
       India for use in relation to business or commerce.


6.8   It is quite evident from the agreement that entire

services provided by the appellant to UPS Worldwide for

picking up the consignments in case of Export Freight

Collect and for delivery in the case of Import pre paid

have been provided in India. Since these services are

provided in India, they are liable to service tax.
                                     36                           ST/85793/2014




Appellants have claimed exemption treating the services

provided as Export of Service as the payment was

received in convertible foreign exchange. To treat a

particular transaction or provision of service as export

of service, during the relevant period, reference is to be

made to Export of Service Rules, 2005. Rule 3 of the

said rules, relevant for making such determination is

reproduced below:

"3.     Export of taxable service.- (1) The export of taxable
service shall, in relation to taxable services,-

          i.   ........;
         ii.   in relation to taxable services specified in sub-
               clauses (a), (f), (h), (i), (j), (l), (m), (n), (o), (s), (t),
               (u), (w), (x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo),
               (zq), (zr), (zt), (zu), (zv), (zw), (zza), (zzc), (zzd),
               (zzf), (zzg), (zzh), (zzi), (zzj), (zzl), (zzm), (zzn),
               (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx) and
               (zzy) of clause (105) of section 65 of the Act,
               be    provision      of    such      services      as     are
               performed outside India:
        Provided that if such a taxable service is partly
        performed outside India, it shall be considered to
        have been performed outside India;
        ....

(2) The provisions of any taxable service specified in sub-rule (1) shall be treated as export of service when following conditions are satisfied namely:-

.......
(b) Payment for such service is received by the service provider in convertible foreign exchange.

Explanation.- For the purposes of this rule "India" includes the designated areas in the Continental Shelf 37 ST/85793/2014 and Exclusive Economic Zone of India as declared by the notifications of the Government of India in the Ministry of External Affairs Nos. S.O.429(E), dated the 18th July, 1986 and S.O.643(E), dated the 19th September 1996." Thus for taxable service specified in Rule 3(1)(ii) before provision of service can be treated as export of service, two conditions are mandatorily required to be fulfilled namely, some part of the service needs to be necessarily be provided outside India and the payment against provisioning of such service is received in convertible foreign exchange. In the present case as per the agreement between appellant and UPS Worldwide, the appellant is performing entire services, within India and no part of the service is provided outside India. Admittedly the services provided by the appellant are courier agency service defined under Section 65(105)(f), and specified by the Rule 3(1)(ii). Thus in view of the fact the no component of service has been provided by the appellant outside India, the services provided by them to UPS Worldwide cannot be termed as export of services, even if the payment against them are received in convertible foreign exchange. Thus exemption claimed by the appellant against provision of these services, by treating them as export of service is not admissible.

7.1 Now coming to the issue of limitation. Counsel for appellant has vehemently argued stating that audit of 38 ST/85793/2014 their records for the period 2005 to 2009 was undertaken on 8th February 2010. During the course of audit all the facts and financials were disclosed to the audit officers hence department is not justified in invoking extended period of limitation as provided by proviso to Section 73(1) for making the demands. On the contrary learned Special Counsel appearing on behalf of revenue submitted that audit was limited to CENVAT account. Further appellants had not disclosed the relevant facts to the department on their ST-3 return. Thus by not disclosing the relevant details in the ST-3 returns appellants have willfully suppressed the material facts and hence extended period of limitation has been rightly invoked for making the demand. 7.2 From the facts as available on record and admitted by the appellants it is quite evident that appellants had not disclosed the amount of the payment received by them against the services provided by them to UPS Worldwide in respect of which they claimed exemption treating them to be export of services, in their ST-3 returns. Further they had never disclosed the amounts in respect of which they were required to discharge the service tax liability on reverse charge basis. The agreement between the appellant and UPS Worldwide was also not disclosed to the revenue. Since appellants were required to disclose these details in their ST-3 returns and have not disclosed the same they 39 ST/85793/2014 have knowingly suppressed the relevant information from revenue. In similar situation, in case of Star India Pvt Ltd. [2015 (38) S.T.R. 884 (Tri. - Mumbai)] following has been held:-

"5.15 The next issue for consideration is the time-bar aspect. The contention of the appellant since is that they were only required to declare the consideration received in the ST-3 return and in the case of foreign advertisers the consideration was paid directly to Star Hong Kong, there cannot be any misdeclaration on their part. This contention is obviously wrong. In the ST-3 return, there was a column wherein the appellant was required to declare the amount charged to the service recipient, apart from the amount received. As per the agreement, dated 1- 4-1999, SIPL was appointed as non-exclusive independent representative in the territory of India to solicit television advertising for the channels, namely, Channel V, Star World, Star Plus, Star News, Star Movies and such other channels as may be added in future and to collect and remit advertisement charges. The responsibility also included delivery of the invoices to the advertisers on a timely basis. Thus the appellant obviously knew the amount charged for the broadcasting services. Section 70 of the Finance Act, 1994, mandated that - "Every person liable to pay the Service Tax shall himself assess the tax due on the services provided by him and shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency as may be prescribed." Thus the appellant was operating under self-assessment procedure during the impugned period. The appellant has failed to declare in the said return the complete particulars with regard to the services rendered to the foreign advertisers. Therefore, the ratio of the decision of

40 ST/85793/2014 the Hon'ble Apex Court in the case of Madras Petrochem Ltd. (supra) relied upon by Revenue would squarely apply. In the said decision, the Hon'ble Apex Court had held as follows:-

"14. The proposition of law as laid down is not in dispute. We find in the present case as aforesaid, a clear finding was recorded that the petitioner was aware and was obliged to file RG 1 Register, gate passes and also of clearances in the RT 12 returns by disclosing the particulars which was not done in the present case. The finding recorded in this case, especially in the background that this was a case of self-removal procedure in which there is obligation cast on the assessee to make proper and correct declaration and entries in the production register RG 1. Further finding was that it was not by inadvertence. There could be no other inference if it was not by inadvertence, then deliberate, then it is not in the realm of inaction of the assessee but with the objective of a gain, which in other words would be conscious withholding of the information. Thus unhesitantly we conclude, on the facts of this case, proviso to Section 11 would be applicable, hence, show cause notice is held to be within time."

Applying the above ratio to the facts of the case before us, the invocation of extended period of time to confirm the tax demand cannot be faulted at all and we hold accordingly. The Hon'ble High Court of Gujarat in Salasar Dyeing & Printing Mills (P) Ltd. v. C.C.E. & C., Surat-I - 2013 (290) E.L.T. 322 (Guj.) has held that -

"15. Upon reading the relevant provisions contained in Section 11A of the Act, it becomes clear that in case of duty which has not been levied or paid, or has been

41 ST/85793/2014 short-levied or short-paid or erroneously refunded by reason of fraud, collusion, wilful misstatement, suppression of facts, etc., period of service of notice on the person chargeable with such duty would be five years instead of one year provided in normal circumstances. Nowhere does this provision refer to the period of service of notice after fraud, collusion, wilful misstatement or suppression, etc., comes to the knowledge of the Department. In simple terms, the Department could recover unpaid duty up to a period of five years anterior to the date of service of notice when the case falls under proviso to sub-section (1) and such omission is on account of fraud, collusion, wilful misstatement, etc."

Thus in our considered view, the invocation of extended period of time for confirmation of demand is fully justified and we hold accordingly."

7.3 Similarly In case of Steel Industries Kerala [2005 (188) ELT 33 (T)] it has been held that-

"3.We find that in the case of Maruti Udyog Ltd. v. CCE, New Delhi, 2001 (134) E.L.T. 269, the Tribunal has upheld the invocation of the extended period of limitation when the assessees did not declare waste and scrap of iron and steel and aluminum and availment of credit thereon either in their classification list or MODVAT declaration or in the statutory records. The Tribunal held that the theory of universal knowledge cannot be attributed to the department in the absence of any declaration. In the light of this decision, we agree with the learned DR that the demand could not have been held to be barred by limitation and accordingly set aside the finding of the Commissioner (Appeals)."

42 ST/85793/2014 7.4 In case of Pasupati Spinning and Weaving Mills [2015 (318) ELT 623 (SC)], Hon'ble Apex Court has held as follows:

"...........Equally, we do not think that there is any ground for interference on the extended period of limitation being applicable inasmuch as CESTAT is again correct in saying that as the declaration and RT-12 returns being vital documents submitted by the respondent (appellant herein) did not mention the vital word "hanks", they suppressed a material fact which, to their knowledge, would not bring their sewing thread within the exemption Notification. For all these reasons, we find no merit in these appeals. The appeals are, accordingly, dismissed, without any order as to costs."

7.5 Hon'ble Supreme Court has in case of Madras Petrochem {1999 (108) ELT 611 (SC)] held as follows:

"9.The contention for the revenue is that under the self removal procedure, the primary obligation of an assessee is to make proper declarations and entries in the production Register RG 1, the gate passes and RT 12 returns unlike in the Physical Control System where the Excise Inspector present in the factory has to duty of completing the assessment on the spot. We find that the Tribunal has considered the contention of both the parties and came to the conclusion as under:
"It was incumbent on the appellants to file necessary classification lists in respect of the T.O. and white oil, the enter the production figures in the RG 1 Register, to effect clearances under gate passes and to disclose the particulars of clearances in the RT 12 returns. These submissions were not controverted by the appellants 43 ST/85793/2014 before us. The suppression of material particulars in respect of the production and clearance of T.O. for consumption outside the factory and white oil for consumption within the factory could not, in the facts and circumstances of the case, be said to be through inadvertence."

10.So, we have no hesitation to hold on facts of this case in view of finding recorded by the statutory authorities concurrently, that proviso to Section 11A would be attracted, as it stood at the material time and the demand was, therefore, within time as recorded above. This finding has been recorded consistently by all the authorities below and we do not find any error to interfere with the same.

11.Then, learned Counsel for the appellant referred to the following decisions of this Court regarding interpretation of Section 11 of the Act. In the case of Lubri-Chem Industries Ltd. v. Collector of Central Excise, Bombay [1994 (73) E.L.T. 257 (S.C.) = 1994 (2) Supp. III 258], this Court while interpreting proviso to Section 11A held that extension of limitation period beyond six months up to five years for making a demand for excise duty, there has to be conscious or deliberate withholding of information by assessee and mere inaction is not enough. The relevant portion relied is read as under:

"........under the proviso to Section 11A of the Central Excises and Salt Act (earlier Rule 10 of the Rules made under the said Act), it has to be established that the excise duty had not been levied or paid or short levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or the Rules with intent to evade payment. Something more positive than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of 44 ST/85793/2014 information when the assessee knew otherwise was required before the assessee could be saddled with any liability beyond the period of six months.""

12.Learned Counsel further referred to the decision of this Court in the case of Collector of Central Excise, Hyderabad v. M/s. Chemphar Drugs & Liniments, Hyderabad [1989 (40) E.L.T. 276 (S.C.) = 1989 (2) SCC 127], which has also been referred in the aforesaid decision.

13.Another submission is with reference to the decision in the case of J.K. Cotton Spinning & Weaving Mills Ltd. v. Collector of Central Excise [1998 (99) E.L.T. 8 (S.C.) = 1998 (3) SCC 540] that this proviso should be strictly construed. It was held that the proviso to Section 11A of Central Excises and Salt Act permitting the extension time should not be stretched more than the elasticity supplied in the section itself. So, the eventuality envisaged in Section 11A for further lengthening of the limitation period must be strictly construed.

14. The proposition of law as laid down is not in dispute. We find in the present case as aforesaid, a clear finding was recorded that the petitioner was aware and was obliged to file RG 1 Register, gate passes and also of clearances in the RT 12 returns by disclosing the particulars which was not done in the present case. The finding recorded in this case, especially in the background that this was a case of self removal procedure in which there is obligation cast on the assessee to make proper and correct declaration and entries in the production register RG 1. Further finding was that it was not by inadvertence. There could be no other inference if it was not by inadvertence, then deliberate, then it is not in the realm of inaction of the assessee but with the objective of a gain, which in other words would be conscious withholding of the information.

45 ST/85793/2014 Thus unhesitantly we conclude, on the facts of this case, proviso to Section 11 would be applicable, hence, show cause notice is held to be within time."

7.6 Thus when the appellants have not disclosed the required information in their ST-3 returns following the ratio of the above mentioned decisions we are of the view that extended period of limitation has been correctly invoked for demanding the service tax. 8.0 The demand as per the order of the Commissioner has been quantified on the basis of the information furnished by the Appellants vide their letter dated 15.11.2013. Since demand has been quantified as per the information submitted by the Appellants themselves the same cannot be disputed at this stage. 9.1 Since the charge of suppression with intent to evade payment of tax has been upheld by us, the penalty under Section 78 is justified and upheld. Hon'ble Supreme Court has in case of Vandana Arts Print Pvt Ltd. [2017 (50) S.T.R. 91 (S.C.)] held that-

"4. A neat submission that has been made by Mr. K. Radhakrishnan, learned senior counsel appearing for the appellant, is that in terms of Section 11AC of the Central Excise Act (hereinafter referred to as 'Act'), the penalty has to be equal to the duty so determined.
5. Section 11AC of the Act reads as under :-
"11AC. Penalty for short-levy or non-levy of duty in certain cases. - Where any duty of excise has not been levied or paid or has been short-levied or short-paid or 46 ST/85793/2014 erroneously refunded by reasons of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined :
Provided that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, for the purposes of this section, the duty as reduced or increased, as the case may be, shall be taken into account."

6. On the basis of the aforesaid language in the Section, the submission of Mr. Radhakrishnan is meritorious. Thus, while the penalty as demanded in respect of one Show Cause Notice had been quashed, the Tribunal could not reduce it for an amount lesser than the duty which has been upheld. The duty in respect of two demands comes to Rs. 40,44,720/-. Therefore, going by the provisions of Section 11AC of the Act, the penalty should also have been Rs. 40,44,720/- and not Rs. 20 lakhs."

9.2 In case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] Hon'ble Apex Court has held that once it is found that ingredients for invocation of section 11AC exist then tribunal do not have any jurisdiction to reduce the quantum of penalty. The relevant excerpts are reproduced below:

"23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the 47 ST/85793/2014 existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides."

9.3 Since in the present case we have found that ingredients for invoking provisions of Section 78 exist we uphold the penalties imposed under that section. 9.4 Also the penalties under Section 77, for non filing of proper returns and submission of complete information are upheld 10.1 Demand for interest under Section 75 of Finance Act, 1994 is also upheld in view of the Apex Court decision in case of Kerala State Electricity Board [2008 (9) STR 3 (SC)] "16. Submissions of Mr. Iyer that the payment of interest was the statutory liability of the service provider must be considered in the aforementioned context. If Appellant itself was liable for payment of tax, it was also liable for payment of statutory interest thereupon, if the same had not been deposited within the time stipulated by the statute. The liability to pay tax was not on the foreign company. Only on default on the part of the appellant the interest was leviable. Appellant was clearly liable therefor. In other words, the liability being that of the appellant, it must accept the liability of payment of interest leviable thereupon in terms of statute occasioned by the breach on its part to deposit the amount of tax within the prescribed time."

48 ST/85793/2014 11.0 In view of the above we do not find any merit in the appeal and dismiss the same.



         (Pronounced in court on 16.11.2018)




(Dr. D.M. Misra)                      (Sanjiv Srivastava)
Member (Judicial)                     Member (Technical)


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