Custom, Excise & Service Tax Tribunal
Software Technology Parks Of India vs Noida on 16 July, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.II
Service Tax Appeal No.74 of 2009
(Arising out of Order-in-Appeal No. No.122/CE/APPL/ NOIDA/08 dated
23/10/2008 passed by Commissioner (Appeals) Customs, Central Excise &
Service Tax, Noida)
M/s Software Technology Parks of India, .....Appellant
(Block-Iv, 2nd Floor,
Ganga Shopping Complex, Sector 29, Noida)
VERSUS
Commissioner of Customs &
Central Excise, Noida ....Respondent
(Commissionerate, Noida)
APPEARANCE:
Absent on call, for the Appellant
Shri A.K. Choudhary, Authorised Representative for the Respondent
CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
HON'BLE MR. ANGAD PRASAD, MEMBER (JUDICIAL)
FINAL ORDER NO.70505/2025
DATE OF HEARING : 16 July, 2025
DATE OF DECISION : 16 July, 2025
SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal
No.122/CE/APPL/NOIDA/08 dated 23.10.2008 the Commissioner
(Appeal) Custom and Central Excise Meerut -II (Noida). Vide the
impugned order Commissioner (Appeal) upheld the Order-in-
Original No.19-ADC/NOIDA/2007 dated 31.12.2007 holding as
follows, in respect of the demand for tax and interest and
modified the same by reducing the penalties imposed.
"ORDER
(1) I classify the services rendered by them to the party,
classifiable under the ―Leased Circuit‖ under clause
Service Tax Appeal No.74 of 2009
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(60) of Section 65 of the said Act and under
‗Erection, Commissioning and Installation‖ under
clause (39A) of Section 65 of the said Act
(2) I confirm the Service Tax amounting to Rs
31,37,505/- (Rupees thirty one lac thirty seven
thousand five hundred and five only) liable to be
recovered from the party under the provisions of
section 73 of Chapter V of the said Act read with the
provisions of Section 68 ibid;
(3) I order recovery of interest from them at the
appropriate rates and as applicable in force under
section 75 of the said Act, is payable on the amount
of the confirmed demand of Service Tax and the
Education Cess, supra, from the date on which the
said Service Tax and the Education Cess became due
and until the same is paid by them.
(4) I order the recovery of interest amounting to Rs
7000/- on account of delayed payment of Service
Tax from the party under Section 75 of the Finance
Act, 1994.
(5) I impose on the party penalty of Rs 200 (Rupees two
hundred only) per day for the period during which
the failure to pay the due amount of Service Tax
continues under Section 76 of the said Act, subject
to limit specified in the said section.
(6) I impose on the party penalty of Rs 31,37,505/-
(Rupees thirty one lac thirty seven thousand five
hundred and five only) under Section 78 of the said
Act.
(7) I order that the adjudged amount be paid forthwith.
2.1 Appellant is an autonomous society under the Department
of Information and Technology registered under Societies
Registration Act, 1860. They are registered with service tax
department a provider of ―Leased Line Services‖
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2.2 During the course of audit, it was observed that the
appellant was not paying Service Tax on Leased Circuit Services
provided by them to MTNL. The contention of the appellant for
not paying service tax in respect of the services provided by
them to MTNL to effect that the services provided by them to
MTNL were not exclusive use of MTNL, and MTNL being an
internet service provider (ISP) distributes the links to its own
subscribers, was not found acceptable and contrary to Board
Circular 46/09/2002 dated 08.08.2002.
2.3 The total amount collected for provision of these services
to MTNL during the period 16.07.2001 to 31.12.2003 was Rs
4,66,18,086/- on which service tax amounting to Rs 27,14,161/-
was payable.
2.4 Appellant were also installing antenna for providing
Internet Services and Leased Line Services in the premises of
STP unit and other units and collecting "Installation Charges".
These charges were taxable under category defined by Section
65 (28) with effect from 01.07.2003. Thus appellant has not paid
service tax amounting to Rs 4,23,344/- on the amount of Rs
52,91,800/- in respect of these services.
2.5 There was certain delay in payment of service tax due for
the month of July 2003, February 2004 and March 2004 for
which interest of Rs 7,000/- was payable.
2.6 A show cause notice dated 24.04.2007 was issued to the
appellant asking them to show cause as to why:
i) Service tax amounting to Rs 31,37,505/- should not be
demanded from them under Section 73 of the Finance
Act, 1994.
ii) Interest on above service tax amount should not be
demanded from them under Section 75 of the Finance
Act, 1994.
iii) Interest on delayed payment of Service tax amounting
to Rs 7,000/- should not be demanded from them under
Section 75 of the Finance Act, 1994
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iv) Penalty should not be imposed on M/s STPI under
Section 76 & 78 of the Finance Act, 1994 for violation of
various Sections and Rules detailed in the show cause
notice.
2.7 The show cause notice was adjudicated as per the order in
original referred in para 1, above.
2.8 Aggrieved appellant filed before the Commissioner
(Appeal) which has been dismissed as per the impugned order.
2.9 Aggrieved appellant has filed this appeal before CESTAT.
2.10 Revenue had also filed appeal which was number 98 of
2009.
2.11 The appeal was dismissed as per final order No ST/256/09
dated 21.08.2009 for want of clearance from Committee on
Disputes (COD) but was subsequently restored vide Misc Order
No ST/29/11 dated 22.02.2011.
2.12 This appeal was dismissed under Rule 20 of CESTAT
Procedure rules, 1982, for non prosecution by Final Order No
57355/2013 dated 23.08.2013 and restored back vide Misc order
No.53200-53201/2014 dated 16.09.2014.
2.13 This appeal was again dismissed under Rule 20 of CESTAT
Procedure Rules, 1982, for non prosecution by Final Order No
71733/2018 dated 02.08.2018 and restored back vide Misc order
No 70344/2018 dated 06.12.2018. While restoring the appeal
bench had observed ―The same is fixed for final disposal on
29.01.2019, a date suggested by learned Advocate. It is made
clear that no appearance on the said date would lead to disposal
of the appeal on the basis of records.‖
2.14 On 29.01.2019 bench while allowing the request for
adjournment observed ―2. However, in the interest of justice
we, by way of last chance, adjourn the matter on 12th February,
2019 and make it clear that no further adjournment would be
granted and the appellant's absence would again lead to
dismissal of appeal, without any further chance to them.‖
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2.15 The appeal was again dismissed vide Final Order No
70487/2019 dated 01.03.2019 observing ―4. In spite of such
strenuous observations made by the Bench, the same advocate
has appeared today without any authorization either from the
assessee or from the previous advocate engaged by the
appellant. In such a scenario, the presence of the advocate
cannot be recognized. We are accordingly, of the view that the
appellants are not serious in pursuing the appeal. Accordingly,
we dismiss the same again for lack of proper appearance.‖
2.16 By Misc Order No 70037/2021 dated 06.08.2021 the
appeal was again restore observing ―4. Having considered the
rival contentions and in the interest of justice this Miscellaneous
application is allowed and the appeal is being restored, subject
to payment of cost of Rs 10,000/- to be deposited within a
period of Four weeks from today in P M Cares Fund and
compliance be filed before Assistant Registrar, so that registry
will restore the appeal to its original number and fix the appeal
for final hearing. The counsel of the appellant is directed to give
proper e mail and postal address so that notices can be sent.‖
2.17 Appellant vide letter received on 31.08.2021 informed that
they have complied with the order dated 06.08.2021 and
accordingly appeal was restored to its original number.
3.1 Appellant is absent on call. The matter was adjourned after
being relisted for hearing, on 06.12.2024, 10.01.2025 and
10.03.2025 on the request of the counsel for appellant or in his
absences. Proviso to Section 35 C (1A) of the Central Excise Act,
1944 made applicable to Service tax matters by Section 83 of
the Finance Act, 1994 provides as follows:
"Provided that no such adjournment shall be granted more
than three times to a party during hearing of the appeal."
3.2 Taking note of the above proviso we are bound to dispose
of this appeal on the basis of records and after hearing the
respondents. We have heard Shri A.K. Choudhary, Authorized
Representative for the revenue.
Service Tax Appeal No.74 of 2009
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3.3 When the matter was earlier argued on 06.10.2023
counsel then appearing for the appellant (Shri Ravindra Narayan
Singh, Shri Ashok Kumar Lal & Shri Kundan Rai, Advocate)
submitted that-
The issue on merits need to be determined on the basis
Section 65 (105zd), 65 (60), 65 (104), 65 (111), 65 (29),
65 (28) and 65 (39a) of the Chapter V of the Finance Act,
1994 as were relevant at the appropriate time.
In terms of the definitions contained in the section 65
(105zd) the services provided by them can be classified,
under the category of leased circuit only if it can be shown
that the services recipient was exclusively using the said
services. In the present case the services provided by
them to MTNL were not used exclusively by MTNL but were
used to further provide the services to its consumers.
Hence the services cannot fall within the category of leased
circuits.
The installation of gadgets and modems are not within the
meaning of the words "commissioning and installation" as
defined by Section 65 (28) hence the tax liability
determined by the authorities below, cannot be upheld.
The demand is barred by limitation.
3.3 Arguing for revenue learned authorized representative re-
iterates the findings recorded in the impugned order.
4.1 We have considered the impugned order along with the
submissions made in the appeal and during the course of
arguments.
4.2 The Commissioner Appeal has in the impugned order held
as follows:-
―On going through the facts of the case I find that in the
present appeal, there are two basic issues, apart from
non-payment of certain amount of interest in respect of
delay in payment of tax for few days, which are-
Service Tax Appeal No.74 of 2009
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i) Whether the Leased circuit provided by the appellant
to MTNL during the period under dispute is a taxable
service during the relevant period and the service
tax is payable for the said activity or not?
ii) Whether the installation and commissioning of
antenna in STP units and in other units during the
relevant period were liable for payment of service
tax under the head "Commissioning and Installation
Services"?
Regarding the first issue, I find that the Leased circuit
services was brought under the Service Tax net by the
Finance Act 2001, w.e.f 16th July 2001 vide Notification No.
4/2001, dated 09/07/2001. Also, leased circuit as defined
under clause (60) of Section 65 means a dedicated link
provided between two fixed locations for exclusive use of
the subscriber and includes a speech circuit, data circuit or
a telegraph circuit. Further during the relevant time, the
definition of 'taxable service' provided by the telegraph
authority has been given under sub clause (zd) of clause
(105) of Section 65 as any service provided by the
telegraph authority in relation to a leased circuit.
In this case, leased circuit service has been provided from
the fixed locations of the appellants to the fixed locations
of MTNL, the appellants have put forth that in their case,
the leased circuit have not been used by the MTNL
exclusively as MTNL being an internet service provider
(ISP) further distributes the links to it's own subscribers
and therefore, it was outside the ambit of the definition of
Leased Circuit. I find that the contention of the appellants
regarding not using the leased circuit by MTNL exclusively
holds no force in view of the fact that the leased circuit
provided by the appellants in the premises of MTNL is a
dedicated link and cannot be shared by other
persons/subscribers of other telecom authorities but that
of MTNL only. Also, the appellants have claimed that MTNL
Service Tax Appeal No.74 of 2009
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cannot be termed as a subscriber in terms of definition of
leased circuit supra. I find that as per clause (104) of
section 65, the subscriber is defined as a person to whom
any service of leased circuit has been provided by a
telegraph authority". Though the term person has not been
defined in the context of service tax but the term "person"
has been defined in clause (42) of Section 3 of General
Clauses Act, 1897 as "person includes any company or
association or body of individual, whether incorporated or
not". Therefore a subscriber may be artificial or juristic
person or may be a natural person, when service is
provided to any person; it will fall under the service tax
net. Therefore, MTNL, in this case is covered under the
term " subscriber".
Further, I find that Rule 2(d) of the Service Tax Rules,
1994 has defined the person liable for payment of service
tax and in relation to leased circuit services, it also covers
any other person who has been granted a license by the
Central Government under the first proviso to sub-section
(1) of Section 4 of the Indian Telegraph Act, 1885.
Therefore the appellants were liable to pay service tax on
the taxable services provided to MTNL during the relevant
period.
I also find that Circular No. 9112/2007-Service Tax dated
12.0.2007 cited by the appellants relates to the exemption
on interconnection usage service between the telegraph
authorities which is applicable to the erstwhile telephone
services and not to the leased circuit services which was a
separate service at the relevant time. As the
interconnection charges for establishing a connection with
another telecom operator's infrastructure facilities is
separate for charges for using network facilities. Also the
leased circuit services are a prior requirement for providing
interconnection user services and is an input services as
also held by the Hon'ble Tribunal in the matter of CCE
Service Tax Appeal No.74 of 2009
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Jaipur V/s Data Infosys Ltd., [2006(4)STR34 (Tri Delhi).
Therefore the aforesaid circular does not apply to the
appellants' case.
In view of the above, I find no infirmity in the order of the
adjudicating authority in confirming the demand of service
tax amounting to Rs.27,14,161/-.
With regard to the other issue, i.e. taxability of installation
charges collected by the appellants for installation of
antenna and other equipments in the premises of
subscribers under the category of erstwhile installation
services under Section 65(28) of the Finance Act 1994
during the relevant time, I find that the commissioning and
installation services were brought into service tax net w.e.f
01.07.2003 .During the course of personal hearing, the
appellants had compared this to installation of phone by
MTNL where no service tax is being charged and said that
on this analogy the installation charges cannot be subject
to service tax. I do not agree with the above, as the
installation of phone is only a supportive device and the
installation charges for phones are exclusively exempted
from payment of service tax, by virtue of relevant
notification which is not so in the appellants' case, where
antenna and other devices are installed by the appellants
to enable functioning of the leased line/circuit which also
involves a lot of civil and fabrication work. Also the
appellant's plea that the installation is done by the vendors
(open -market) and they (vendors) should be charged to
Service Tax is not tenable as the vendors have done the
work on behalf of the appellants and bills for the aforesaid
services to the respective clients have been raised by the
appellants and the appellants being the service provider
are liable to pay the tax. Also, the appellant's plea that
while confirming demand for service tax on installation
services, the adjudicating authority has confirmed it under
the amended entry under "Erection, commissioning and
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installation services " under Section 65(39A) and not under
section 65(28) under category of "commissioning and
installation services" as demanded under Show cause
notice, I find that the entry Section 65(28) was substituted
by entry 65(39A) w.e.f 10/09/2004 thereby extending the
scope of services and renaming it as "Erection
Commissioning and Installation services". The issue being
materially the same, and there being no major change in
substance, I find that this conclusion arrived at by the
adjudicating authority does not vitiate the order which is
otherwise proper and correct.
However, regarding imposition of penalty by the
adjudication authority, I find the matter involves the
interpretation of law as demand is related to the initial
period when the said services were brought into service
tax net. In fact, the scope of service tax on various
services is continuously being widened and during the
initial stages of bringing a new service in service tax net,
several doubts do arise regarding service tax applicability
on the services provided. Further the appellants being an
autonomous society under the Department of Information
Technology under Ministry of Communication &
Information Technology, cannot be viewed as having
intention to evade the payment of tax by reason of fraud,
collusion, willful misstatement, suppression of facts etc and
the adjudicating authority had also not recorded any
reason or evidence against the appellants in the subject
order. I, therefore, reduce the penalty imposed u/s 75
from Rs. 31,37,505/- to Rs. 2,00,000/- and reduce the
penalty of Rs.200/-per day imposed under Section 76 to
Rs. 100/- per day, which adequately meets the ends of
justice.
Lastly, coming to the appellant's plea for demand of
interest of Rs. 7,000/- by the adjudicating authority, I find
that the interest liability has been created due to delay in
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payment of service tax for the months of July, 2003, Feb,
2004 and March, 2004 for the delay of one day, one day
and five days respectively. Whereas on perusal of the copy
of the Order in Original No. 02/Service Tax/N III/06 dated:
26.04.2006 passed by the Assistant Commissioner,
(provided by the appellants), it is noticed that the interest
liability has been confirmed due to non payment of service
tax at the applicable rates at the relevant period (8% in
place of 5%) which is clearly distinguished from the
interest liability confirmed on the delayed payment of
service tax payable from the due date. I therefore find no
merit in party's appeal on this aspect.‖
4.3 In the present case the demand as has been confirmed by
the adjudicating authority have been upheld by the
Commissioner (Appeal). While upholding the demands, the
impugned order also finds appellant liable to penalty under
Section 76 and Section 78 of the Finance Act, 1994.
Commissioner (Appeal) while upholding the penalties imposed
upon the appellant reduced the penalties imposed upon the
appellant under Section 76 and 78. Appellant file the appeal No
St/74/2009 against the impugned order challenging the demand
of service tax along with the interest and the penalties upheld by
the Commissioner (Appeal). Revenue also filed appeal against
the impugned order challenging the reduction of penalties
imposed under Section 76 & 78 by the Commissioner (Appeal).
4.4 Both these appeals were dismissed by the CESTAT on
23.08.2013 by way of two separate orders as detailed below:
A. Appeal filed by the appellant was dismissed vide Final Order
No 57355/2013 dated 23.08.2013, noting as follows:
―The appeal by the assessee is preferred against the
appellate order of the Commissioner (Appeals), Custom &
Central Excise, Noida -II dated 23.10.2008. The appellant
had preferred an appeal against the adjudication order
dated 31.12.2017 passed by the Additional Commissioenr,
Central Excise, Noida confirming service tax demand of Rs
Service Tax Appeal No.74 of 2009
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31,37,505/-; ordering recovery of interest as specified and
imposing penalties under Section 76 & 77 of the Act. On
appeal the appellate authority upheld the adjudication
order in all respects except for reduction of penalties
imposed, to the extent indicated in the order.
2. The notice of hearing of this appeal of the year 2008
and the connected appeal S T 98 of 2009 preferred by the
Revenue, was forwarded to the appellant and its
Consultant on 25.07.2013. There is however no
representation on behalf of the appellant when this appeal
is taken up for hearing. Hence, the appeal is dismissed for
non prosecution.‖
B. CESTAT Delhi Bench by Final Order No 57437/2013
dated 23.08.2013 rejected the appeal filed by revenue
against the same order in appeal. The text of the order
dismissing appeal No ST/98/2009 is reproduced below:
―This appeal is filed by Commissioner Central Excise, Noida
against the Order in Appeal No 122/CE/APPL/NOIDA/2008
dated 23.08.2008 passed by the Commissioner Central
Excise, (Appeals) Noida.
2. Brief facts of the case are that M/s Software Technology
Park of India (hereinafter referred to as Respondents) had
provided leased circuits to M/s MTNL during the period
16.07.2001 to 31.12.2003. M/s MTNL are the internet
service providers who further distribute the lines to their
own subscribers. Respondents had also installed antenna
for providing internet service and leased line service in the
premises of clients and were collecting "Installation
Charges" and were not paying service tax on the amount
realized from M/s MTNL for the aforesaid services.
Accordingly a Show Cause Notice was issued to the
Respondents demanding service tax on the taxable lease
circuit services and installation charges collected for
installation of antenna. The Show Cause Notice was
adjudicated by the Assistant Commissioner vide Order-in-
Service Tax Appeal No.74 of 2009
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Original 19 dated 31,12,2007 confirming the service tax
amounting to Rs. 31,37,505/- along with interest after
classifying the service of "Leased Circuit" under Section
65(60) and installation of the antenna under clause (39A)
of Section 65 of the Finance Act, penalties under Section
76 and 78 were imposed on the Respondents. The
Respondents filed an appeal before the Commissioner
Central Excise, (Appeals), who vide impugned order has
confirmed the service tax amount payable by the
Respondents but Commissioner (Appeal) has reduced the
penalty imposed under Section 76 and 78 from Rs. 200/-
per day to 100 per day and from Rs. 31,37,505/- to Rs.
2,00,000/- respectively. Revenue has challenged the
reduction in penalty by the Commissioner (Appeal) by
filling the present appeal.
3. Heard Ld. Shri Amraish Jain on behalf of the Revenue as
non- appeared for the respondents.
4. We find that only issue involved in the present issue is
whether the Commissioner (Appeal) was right in reducing
the penalty under Section 76 and 78 of the Finance Act.
We find the Commissioner (Appeal) has held that the issue
involved in the appeal is respect of interpretation in law in
the initial period of levy of service tax under the internet
service and he further held that the Respondent, being an
autonomous society under the Department of Information
Technology under Ministry of Communication &
Information Technology, cannot be viewed as having any
malafide intention to evade the service tax. We find that
the Commissioner (Appeal) has examined the law, facts
mentioned in the original order and held that there is
reason to reduce the penalty under 76 and 78. We do not
find any infirmity in the finding of Commissioner (Appeal)
and we uphold the same with regard to reduction in
penalty and reject the appeal filed by revenue.
5. Revenue's Appeal is rejected.‖
Service Tax Appeal No.74 of 2009
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4.5 Revenue challenged the order of tribunal before Hon'ble
Allahabad High Court. While upholding the Order of Tribunal
dismissing the appeal filed by the revenue Hon'ble Allahabad
High Court vide its order in Central Excise Appeal No. 63 of
2014, decided on 9-4-2014 reported at [2014 (36) STR 1009
(ALL)] held As follows:
―The Commissioner (Appeals), while confirming the
demand on account of Service Tax, reduced the quantum
of penalty vide order dated 23 October 2008. The
Commissioner (Appeals) held as follows :
―However, regarding imposition of penalty by the
adjudication authority, I find the matter involves the
interpretation of law as demand is related to the initial
period when the said services were brought into Service
Tax net. In fact, the scope of Service Tax on various
services is continuously being widened and during the
initial stages of bringing a new service in Service Tax net,
several doubts do arise regarding Service Tax applicability
on the services provided. Further, the appellants being an
autonomous society under the Department of Information
Technology under Ministry of Communication &
Information Technology, cannot be viewed as having
intention to evade the payment of tax by reason of fraud,
collusion, wilful mis-statement, suppression of facts etc.
and the adjudicating authority had also not recorded any
reason or evidence against the appellants in the subject
order. I therefore, reduce the penalty imposed u/s 75 from
Rs. 31,37,505/- to Rs. 2,00,000/- and reduce the penalty
of Rs. 200/- per day imposed under Section 76 to Rs.
100/- per day, which adequately meets the ends of
justice.‖
2. The Customs, Excise & Service Tax Appellate Tribunal
has dismissed the appeal filed by the Revenue. The
Tribunal, in our view has rightly not inter-fered with the
possible view which was taken by the Commissioner
Service Tax Appeal No.74 of 2009
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(Appeals). There is no perversity in the approach of the
Tribunal or, for that matter, in the order of the
Commissioner (Appeals), reducing the penalty in the
considered exercise of his jurisdiction. Hence, no
substantial question of law would arise.
3. The appeal is, accordingly, dismissed. There shall be
no order as to costs.‖
4.6 It is settled position in law that penalties under the Section
76 & 78 of the Finance Act, 1994 are imposable only for tax
delinquency and not otherwise i.e. penalties as provided under
these sections is for nonpayment/ short payment of taxes as
due. The text of Section 76 and 78 are reproduced below:
SECTION 76. Penalty for failure to pay service tax.-- Any
person liable to pay service tax in accordance with the
provisions of section 68 or the rules made thereunder, who
fails to pay such tax shall pay in addition to paying such
tax, and interest on that tax in accordance with the
provisions of section 75, a penalty which shall not be less
than one hundred rupees for every day during which such
failure continues one hundred rupees but which may
extend to two hundred rupees for every day during which
such failure continues, so, however, that the penalty under
this clause shall not exceed the amount of service tax that
he failed to pay.
SECTION 78. Where any service tax has not been levied
or paid or has been short-levied or short-paid or
erroneously refunded, by reason of-
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this
Chapter or of the rules made thereunder
with intent to evade payment of service tax,
Service Tax Appeal No.74 of 2009
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the person, liable to pay such service tax or erroneous
refund, as determined under sub-section (2) of section 73,
shall also be liable to pay a penalty, in addition to such
service tax and interest thereon, if any, payable by him,
which shall not be less than, but which shall not exceed
twice, the amount of service tax so not levied or paid or
short-levied or short-paid or erroneously refunded:-
From the above it is quite evident that penalty under
Section 76 is linked with nonpayment of service tax as was
required to be paid as per the Section 68 or the Rules
made thereunder and the minimum penalty prescribed is
Rs 100 per day of failure to pay the tax limited to the tax
not paid.
Section 78 penalty is linked to nonpayment of service tax
for the reason of fraud or collusion or willful misstatement
or suppression of facts or contravention of any of the
provisions of this Chapter or of the rules made thereunder.
Also the section provides that
The ingredients for invoking the penal provisions under Section
78, are identical to the provisions for invoking the extended
period of limitation as per Section 73 of the Finance Act, 1994.
Hon'ble Supreme Court in case of Rajasthan Spinning and
Weaving Mills [2009 (238) ELT 3 (SC)} while interpreting a
similar provision under Central Excise Act, 1994 held as follows:
―2. What are the conditions and the circumstances that
would attract the imposition of penalty under Section 11AC
of the Central Excise Act (‗The Act', hereinafter)? In the
two cases before us the Tribunal has taken the view that
there was no warrant for levy of penalty since the
assessees had deposited the balance amount of excise
duty (that was short paid at the first instance) even before
the show cause notice was issued. On the other hand, on
behalf of the Revenue, the appellants in the two appeals, it
was contended, relying upon a recent decision of this Court
in Union of India v. Dharamendra Textile Processors, 2008
Service Tax Appeal No.74 of 2009
17
(231) E.L.T. 3 (S.C.) that mere non payment or short
payment of duty (without anything else!) would inevitably
lead to imposition of penalty equal to the amount by which
duty was short paid. In our view the reason assigned by
the Tribunal to strike down the levy of penalty against the
assessees is as misconceived as the interpretation of
Dharamendra Textile is misconstrued by the Revenue. We
completely fail to see how payment of the differential duty,
whether before or after the show cause notice is issued,
can alter the liability for penalty, the conditions for which
are clearly spelled out in Section 11AC of the Act.
11. In a case of non-payment, short-payment or
erroneous refund of duty normally three issues are likely to
arise relating to (i) recovery, (ii) interest and (iii) penalty.
The three issues are dealt with under Section 11A
(Recovery of duties), Section 11AA (Interest for the period
from three months after the determination of duty payable
till the date of payment of duty), section 11AB (Interest for
the period from the first day of the month succeeding the
month in which duty was payable till the payment of duty)
and Section 11AC (Penalty for short levy or non levy of
duty).
Section 11A reads as follows :
―11A. Recovery of duties not levied or not paid or short-
levied or short-paid or erroneously refunded. - (1) When
any duty of excise has not been levied or paid or has been
short-levied or short-paid or [erroneously refunded,
whether or not such non-levy or non-payment, short-levy
or short payment or erroneous refund, as the case may be,
was on the basis of any approval, acceptance or
assessment relating to the rate of duty on or valuation of
excisable goods under any other provisions of this Act or
the rules made thereunder], a Central Excise Officer may,
within [one year] from the relevant date, serve notice on
the person chargeable with the duty which has not been
Service Tax Appeal No.74 of 2009
18
levied or paid or which has been short-levied or short-paid
or to whom the refund has erroneously been made,
requiring him to show cause why he should not pay the
amount specified in the notice;
Provided that where any duty of excise has not been levied
or paid or has been short-levied or short-paid or
erroneously refunded by reason of fraud, collusion or any
wilful mis-statement 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, by such person or his agent, the provisions of this
sub-section shall have effect, [as if] for the words [―one
year‖], the words ―five years‖ were substituted :
Explanation. - Where the service of the notice is stayed by
an order of a court, the period of such stay shall be
excluded in computing the aforesaid period of [one year]
or five years, as the case may be.
[(1A) When any duty of excise has not been levied or
paid or has been short-levied or short paid or erroneously
refunded, by reason of fraud, collusion or any wilful mis-
statement or suppression of facts, or contravention of any
of the provisions of this Act or the rules made thereunder
with intent to evade payment of duty, by such person or
his agent, to whom a notice is served under the proviso to
sub-section (1) by the Central Excise Officer, may pay duty
in full or in part as may be accepted by him, and the
interest payable thereon under Section 11AB and penalty
equal to twenty-five per cent of the duty specified in the
notice or the duty so accepted by such person within thirty
days of the receipt of the notice.]
(2) The [Central Excise Officer] shall, after considering
the representation, if any, made by the person on whom
notice is served under sub-section (1), determine the
amount of duty of excise due from such person (not being
in excess of the amount specified in the notice) and
Service Tax Appeal No.74 of 2009
19
thereupon such person shall pay the amount so
determined.
Provided that if such person has paid the duty in full
together with, interest and penalty under sub-section (1A),
the proceedings in respect of such person and other
persons to whom notice are served under sub-section (1)
shall, without prejudice to the provisions of section 9, 9A
and 9AA, be deemed to be conclusive as to the matters
stated therein :
Provided further that, if such person has paid duty in part,
interest and penalty under sub-section (1A), the Central
Excise Officers, shall determine the amount of duty or
interest not being in excess of the amount partly due from
such person.]
[(2A) Where any notice has been served on a person under
sub-section (1), the Central Excise Officer, -
(a) in case any duty of excise has not been levied or
paid or has been short-levied or short-paid or erroneously
refunded, by reason of fraud, collusion or any wilful mis-
statement or suppression of facts, or contravention of any
of the provisions of this Act or the rules made thereunder
with intent to evade payment of duty, where it is possible
to do so, shall determine the amount of such duty, within a
period of one year; and
(b) in any other case, where it is possible to do so, shall
determine the amount of duty of excise which has not
been levied or paid or has been short-levied or short-paid
or erroneously refunded, within a period of six months,
from the date of service of the notice on the person under
sub-section (1)
(2B) Where any duty of excise has not been levied or paid
or has been short-levied or short-paid or erroneously
refunded, the person, chargeable with the duty, may pay
the amount of duty [on the basis of his own ascertainment
Service Tax Appeal No.74 of 2009
20
of such duty or on the basis of duty ascertained by a
Central Excise Officer] before service of notice on him
under sub-section (1) in respect of the duty, and inform
the Central Excise Officer of such payment in writing, who,
on receipt of such information shall not serve any notice
under sub-section (1) in respect of the duty so paid :
Provided that the Central Excise Officer may determine the
amount of short payment of duty, if any, which in his
opinion has not been paid by such person and, then, the
Central Excise Officer shall proceed to recover such
amount in the manner specified in this section, and the
period of ―one year‖ referred to in sub-section (1) shall be
counted from the date of receipt of such information of
payment.
Explanation 1. - Nothing contained in this sub-section shall
apply in a case where the duty was not levied or was not
paid or was short-levied or was short-paid or was
erroneously refunded by reason of fraud, collusion or any
wilful mis-statement 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.
Explanation 2. - For the removal of doubts, it is hereby
declared that the interest under section 11AB shall be
payable on the amount paid by the person under this sub-
section and also on the amount of short-payment of duty,
if any, as may be determined by the Central Excise Officer,
but for this sub-section.
(2C) The provisions of sub-section (2B) shall not apply to
any case where the duty had become payable or ought to
have been paid before the date on which the Finance Bill,
2001 receives the assent of the President.]
(3) For the purposes of this section -
Service Tax Appeal No.74 of 2009
21
(i) ―refund‖ includes rebate of duty of excise on
excisable goods exported out of India or on excisable
materials used in the manufacture of goods which are
exported out of India;
(ii) ―relevant date‖ means, -
(a) in the case of excisable goods on which duty of
excise has not been levied or paid or has been
short-levied or short-paid -
(A) where under the rules made under this Act
a periodical return, showing particulars of
the duty paid on the excisable goods
removed during the period to which the
said return relates, is to be filed by a
manufacturer or a producer or a licensee of
a warehouse, as the case may be, the date
on which such return is so filed;
(B) where no periodical return as aforesaid is
filed, the last date on which such return is
to be filed under the said rules;
(C) in any other case, the date on which the
duty is to be paid under this Act or the
rules made thereunder;
(b) in a case where duty of excise is provisionally
assessed under this Act or the rules made
thereunder, the date of adjustment of duty after
the final assessment thereof;
(c) in the case of excisable goods on which duty of
excise has been erroneously refunded, the date
of such refund.]‖
From sub-section 1 read with its proviso it is clear that in
case the short payment, non payment, erroneous refund of
duty is unintended and not attributable to fraud, collusion
or any wilful mis-statement or suppression of facts, or
contravention of any of the provisions of the Act or of the
rules made under it with intent to evade payment of duty
Service Tax Appeal No.74 of 2009
22
then the Revenue can give notice for recovery of the duty
to the person in default within one year from the relevant
date (defined in sub-section 3). In other words, in the
absence of any element of deception or malpractice the
recovery of duty can only be for a period not exceeding
one year. But in case the non-payment etc. of duty is
intentional and by adopting any means as indicated in the
proviso then the period of notice and a priory the period
for which duty can be demanded gets extended to five
years.
...
16. The other provision with which we are concerned in this case is Section 11AC relating to penalty. It is as follows :
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 erroneously refunded by reasons of fraud, collusion or any wilful mis- statement 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 such duty as determined under sub- section (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the duty so determined :
Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso :
Service Tax Appeal No.74 of 2009 23 Provided also 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 purpose of this section, the duty as reduced or increased, as the case may be, shall be taken into account :
Provided also that in case where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five per cent of the consequential increase of penalty have also been paid within thirty days of the communication of the order by which such increase in the duty takes effect -
Explanation. - For the removal of doubts, it is hereby declared that -
(1) the provisions of this section shall also apply to cases in which the order determining the duty under sub-
section (2) of section 11A relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President;
(1) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.
17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced.
18. One cannot fail to notice that both the proviso to sub- section 1 of Section 11A and Section 11AC use the same Service Tax Appeal No.74 of 2009 24 expressions : ―....by reasons of fraud, collusion or any wilful mis-statement 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,...‖. In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under Section 11A(1) states that the escaped duty was the result of any conscious and deliberate wrong doing and in the order passed under Section 11A(2) there is a legally tenable finding to that effect then the provision of Section 11AC would also get attracted. The converse of this, equally true, is that in the absence of such an allegation in the notice the period for which the escaped duty may be reclaimed would be confined to one year and in the absence of such a finding in the order passed under Section 11A(2) there would be no application of the penalty provision in Section 11AC of the Act. On behalf of the assessees it was also submitted that Sections 11A and 11AC not only operate in different fields but the two provisions are also separated by time. The penalty provision of Section 11AC would come into play only after an order is passed under Section 11A(2) with the finding that the escaped duty was the result of deception by the assessee by adopting a means as indicated in Section 11AC.
19. From the aforesaid discussion it is clear that penalty under Section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section.‖ 4.7 It is seen that by the impugned order, Commissioner (Appeal) has upheld the demand for the service tax confirmed against the appellant and as consequence of upholding the demands for tax has upheld the imposition of penalties under Service Tax Appeal No.74 of 2009 25 Section 76 and 78 of the Finance Act, 1994, though the penalty as imposed by the adjudicating authority was reduced. The impugned order has in fact upheld the imposition of penalties under these sections, after confirming the tax short/ not paid and has also confirmed the invocation of extended period of limitation as provided by Section 73. The reduction in penalties in the impugned order was challenged by the revenue before the tribunal and tribunal after noting all the facts dismissed the appeal. For the reason that the appeal filed by the appellant was dismissed for non-prosecution, tribunal did not interfered with the order of Commissioner (Appeal) on any other account. From the facts as noted above it is quite evident that Hon'ble High Court has upheld the penalties as determined by the Commissioner (Appeal) in the impugned order and upheld by the tribunal vide the above referred order. Thus the impugned order and the order of tribunal dismissing the revenue appeal got merged with the order of Hon'ble High Court. Thus the order of Commissioner (Appeal) to this extent has acquired finality to the extent of the penalties imposed by the impugned order, and Tribunal is functus officio in the matter. CESTAT Bench cannot interfere with the order of Commissioner (Appeal) to the extent which has been upheld by the Hon'ble High Court. We have discussed above that the penalties imposed under Section 76 and 78 are not in vacuum and are linked with the demand of service tax. If in the appeals before us which is now listed before us after being restored third time tribunal concludes that demand was not maintainable, then it will be contrary to the earlier order of tribunal and Hon'ble High Court, as the same would be setting aside the penalties upheld by the impugned order and subsequent orders of the tribunal and High Court. The fact that appeal filed by the revenue against the order of tribunal dated 23.08.2013 has been never brought to the notice of the benches restoring the appeal filed by the appellant and dismissed by the tribunal for non prosecution on 23.08.2013. The order of High Court dismissing the revenue appeal is dated 09.04.2014 and the order restoring the appeal of appellant Service Tax Appeal No.74 of 2009 26 dismissed by the order on 23.08.2013 is dated 16.09.2014. It appears this fact was never placed before the bench restoring the appeal and subsequent benches which dismissed the appeal and then restored the same. In case of Dewsoft Overseas (P) Ltd. [2016 (45) S.T.R. 321 (Tri. - Del.)] when the applicant had got an ROM application adjudged in his favour by suppressing the direction given by the Hon'ble Supreme Court, tribunal observed as follows:
"9. Without commenting upon the correctness of the order passed in ROM, we are of the view that the ld. Advocate was under legal duty to bring to the notice of the Bench, at the time of disposal of ROM application, the above factual developments irrespective of the fact as to whether the Tribunal in that case would have decided or not decided the ROM application. Though we agree with the learned Advocate that filing of an appeal before the Hon'ble Supreme Court in terms of Section 35L of the Act and filing of a separate ROM application before the Tribunal under Section 35C(2) of the Act does not amount to ―forum shopping‖ or amounts to ―merger‖, but the fact remains that there was non-disclosure of the proceedings pending before the Hon'ble Supreme Court, at the time of disposal of the ROM application. It is well-settled principle that one who comes to the Court seeking justice must come with clean hands. The fraud vitiates everything and the fact of non-disclosure of the order of the Hon'ble Supreme Court has the effect of making the ROM order dated 2-8-2016 void ab initio. Though, the ld. Advocate, at the time of hearing on 3-10-2016, for the purpose of disposal of the Miscellaneous Application filed by Revenue, has agreed that the said order should have been brought to the notice of the Bench and he had, in fact, brought the said order for placing it before the Bench, but the same was not inadvertently placed. It is their contention that non-disclosure of the said fact was not a mistake on the part of the ld. Advocate inasmuch as the said order was Service Tax Appeal No.74 of 2009 27 also received by the Commissioner of Customs as also by the Departmental Representative and by the Registry of the Tribunal. The same was also available on the website of the Hon'ble Supreme Court and was not a secret document and as such it was contended that there was no intention on the part of the ld. Advocate for not bringing the said fact to the notice of the Bench.
At this stage, we may take note of the Hon'ble Supreme Court decision in the case of Meghmala & Ors. v. G. Narasimha Reddy & Ors. [(2010) 8 SCC 383] wherein the concept of fraud was considered by the Hon'ble Supreme Court. It was observed that it is settled proposition of law that where the order is obtained by making misrepresentation or playing fraud upon the competent authority, such order cannot be sustained in the eyes of law. ‖Fraud avoids all judicial acts ecclesiastical or temporal‖. Dishonesty cannot be permitted to bear the fruit and benefit to the persons who played fraud or made misrepresentation and in such circumstances, the Court should not perpetuate the fraud. Fraud is an intrinsic, collateral act, and fraud of an egregious nature would vitiate the most solemn proceedings of courts of justice, and renders the order void ab initio.
While elaborating on the issue as to what constitute a fraud, the Hon'ble Supreme Court observed that fraud and deception are synonymous. Suppression of material document has been held to be as amounting to a fraud on the Court. By applying the ratio of the above decision, it has to be held that the material fact of pendency of appeal before the Hon'ble Supreme Court and the directions of the Hon'ble Supreme Court to deposit tax amount along with interest was suppressed from the Court, the same would constitute fraud and the order obtained by concealing the said fact, cannot be allowed to be continued.
Service Tax Appeal No.74 of 2009 28
10. Intentionally or unintentionally, the fact remains that the Bench was not appraised of the said order of the Hon'ble Supreme Court. As we have already observed that non-disclosure of the relevant facts and obtaining of a favourable order by not bringing the relevant facts to the notice of the Bench abuses the due process of law and vitiates the very order so obtained. As such, we deem it fit to recall the order passed on ROM application as prayed for by Revenue and allow the Miscellaneous Application filed by them.
11. Before we part, we deal with technical objections raised by the ld. Advocate as regards filing of second application for rectification of mistake in the order passed on the ROM. We make it clear that Revenue is not finding any mistake in the order dated 2-8-2016 passed by the Tribunal on the applicant's ROM application inasmuch as it is not their contention that the order is wrong. As such, their misc. Application cannot be said to be rectification of mistake application. The same is for recalling of the order on the sole ground that the fact of the Hon'ble Supreme Court directions to deposit the amount in question was not brought to the notice of the Bench. The Hon'ble Supreme Court in the case of Indian Bank v. Satyam Fibres (India) Pvt. Ltd. [(1996) 5 SCC 550] observed that since fraud affects the solemnity, regularity and orderliness of the proceedings of the Court, it also amounts to an abuse of the process of the Court and the Court has inherent power to set aside the order obtained by practicing fraud upon the Court and that where the Court is misled by a party or the Court itself commits a mistake which prejudices a party, the Court has the inherent power to recall its order. It was further held by the Hon'ble Supreme Court in the case of Chittaranjan Das v. Durgapore Project Ltd. [99 CWN 897] that suppression of material document would amount to fraud and it is well-known that fraud vitiates all solemn acts.
Service Tax Appeal No.74 of 2009 29 In respect of judgments obtained by suppressing or not disclosing the material developments before the higher forum, the principles of res judicata also does not apply. As such, the technical objection of non-maintainability of misc. Application is not sustainable as the same is neither a rectification of mistake application nor any mistake stand pointed out by the Revenue.
In view of the fact of non-disclosure of the development at the Apex Court level, we invoke our inherent powers for recalling the said order dated 2-8-2016 and order accordingly.‖ The appeal filed against this order was dismissed by the Hon'ble Supreme Court as reported at [2017 (51) S.T.R. J186 (S.C.)] 4.8 Hon'ble Allahabad High Court has in case of Sameer Ispat [2018 (361) E.L.T. 829 (All.)] held as follows:-
―12. It is, thereafter, that M/s. Sameer Ispat filed a Misc. Application on 25 August, 2014 before the Appellate Tribunal for recalling the order dated 10 January, 2006 and for hearing the appeal on merits contending that the entire duty liability confirmed in the proceedings had been deposited. It is this application that had been rejected by the Appellate Tribunal by order dated 27 March, 2015 against which the present appeal has been filed by M/s. Sameer Ispat. The relevant portion of the order dated 27 March, 2015 passed by the Appellate Tribunal is reproduced below :
―7. We find from the available records that the order dated 8-12-2005 passed by the Hon'ble Allahabad High Court was a conditional order, according to which, hearing of appeal by the Tribunal, was subject to fulfilment of the conditions that the applicant deposits an amount of Rs. 5 lakhs and executes an indemnity bond for the entire disputed amount within one month from the date of such order. Disposal of the writ petition in above terms implies Service Tax Appeal No.74 of 2009 30 that the stay order dated 5-10-2005 of the Tribunal has merged with the order dated 8-12-2005 of the Hon'ble High Court. Doctrine of merger of order connotes that order passed by a lower authority would lose its finality and efficacy in favour of order passed by higher authority before whom such order is assailed. Even the said doctrine applies regardless, whether higher court affirms or modifies orders of lower authority. It is an admitted fact on record that the stay order of the Tribunal was modified by the Hon'ble High Court to the extent of depositing 5 lakhs, instead of 15 lakhs as directed, which the applicant did not comply, has resulted in dismissal of the writ petition. In view of the doctrine of merger, the stay order dated 5-10- 2005 and the final order dated 10-1-2006 passed by the Tribunal have lost their effectiveness, and thus, the Tribunal has no power to entertain restoration application at this stage. In context with doctrine of merger of order, the Hon'ble Allahabad High Court in the case of Kisaan Gramoudyog Sansthan v. CCE, Kanpur reported in 2015 (316) E.L.T. 406 (All.) has held that once a substantive appeal has been filed before the High Court against an order of the Tribunal on the application for waiver of pre-
deposit, the order of the Tribunal, in such a case, would merge with the order of the High Court.
8. Further, the Tribunal cannot entertain the M.A. for restoration of appeal, in view of the specific observations made by the Hon'ble High Court vide order dated 8-12- 2005, which were to the effect that if the petitioner- applicant fulfils the condition of such order, then the Tribunal shall hear and decide the appeal on merits. Since, the said order has not been complied with by the applicant in true letter and spirit, entertaining the application for restoration of appeal will be contrary to the principles of judicial discipline, which require that the orders of the higher courts should be followed unreservedly by the subordinate/lower authorities. In view of above, we agree Service Tax Appeal No.74 of 2009 31 with the submissions of the Learned A.R. for Revenue that the applicant can seek legal remedy, if any, only from the Hon'ble High Court and not from the Tribunal.‖
13. The substantial questions of law that have been framed in this appeal are as follows :
1. Whether the CESTAT was justified in rejecting the recall application by declining to recall the order dated 10-
1-2006 and to adjudicate the appeal on merits despite the appellant having deposited the entire amount of duty of Rs. 56,06,662/- in view of Section 35F of the Central Excise Act, 1944?
2. Whether the CESTAT was justified in applying the doctrine of merger on the question of pre-deposit in a discretionary jurisdiction under Article 226 of the Constitution of India de hors the law laid down in the case of Kunahayammed & Others v. State of Kerala & Ors. reported in (2000) 6 SCC 359 = 2001 (129) E.L.T. 11 (S.C.) which had been followed in the case of Kisan Gramodyog, Kanpur v. CCE, Kanpur reported in 2015 (316) E.L.T. 406 (All.)?
3. Whether the appeal under Section 35G of the Central Excise Act, 1944 could be dismissed when this Hon'ble Court had directed the Rehabilitation Committee to decide the rehabilitation package of the appellant, which rehabilitation package was pending consideration as per the notification dated 13-11-1995 & 9-6-2004 wherein the Customs & Excise Department was participating in the proceeding?
14. Sri Rakesh Ranjan Agarwal, Learned Senior Counsel for M/s. Sameer Ispat assisted by Sri Suyash Agarwal has submitted that once M/s. Sameer Ispat had deposited the entire amount, the application filed by it for recalling the order dated 10 January, 2006 and for hearing the appeal on merits was liable to be allowed by the Appellate Tribunal. In support of this contention, Learned Senior Service Tax Appeal No.74 of 2009 32 Counsel has placed reliance upon the judgments of the Supreme Court in Kisaan Gramodyog Sansthan & Ors. v. Commissioner of Central Excise, Kanpur - (2015) 10 SCC 629 = 2015 (319) E.L.T. 370 (S.C.) = 2017 (50) S.T.R. 103 (S.C.), Alpha Detergents Pvt. Ltd. v. Commissioner of Central Excise - 2006 (204) E.L.T. 521 (S.C.), M/s. Inventa Electronics (P) Ltd. v. Commissioner of Central Excise & Customs, Pune - Special Leave Petition No.16935 of 2002, decided on 13 April 2004 [2004 (168) E.L.T. A121 (S.C.)] as also the judgment of the Bombay High Court in Venus Electronics & Control Pvt. Ltd. v. Commissioner of Customs, Kandla - 2006 (198) E.L.T. 547 (Mumbai).
15. Learned Counsel for the respondents has, however, contended that no substantial question of law arises for consideration in this appeal. It is his submission that the Appellate Tribunal has for good and cogent reasons rejected the application filed by M/s. Sameer Ispat for recalling the order dated 10 January, 2006.
We have considered the submissions advanced by Learned Counsel for the parties.
16. It is not in dispute that the appeal filed by M/s. Sameer Ispat under Section 35F of the Act was dismissed for non-compliance of the directions for deposit of the amount. Section 35F of the Act provides that the person desirous of appealing against the order imposing duty or penalty has to deposit with the Adjudicating Authority the duty demanded or the penalty imposed. However, where in any particular case, the Appellate Tribunal is of the opinion that the deposit of duty demanded or the penalty levied would cause undue hardship to such person, the Appellate Tribunal may dispense with such deposit subject to such conditions as it may deem fit to impose to safeguard the interests of the revenue.
17. In the present case, the Appellate Tribunal had directed M/s. Sameer Ispat to deposit the amount within Service Tax Appeal No.74 of 2009 33 eight weeks but this direction was modified by the High Court in Writ-Tax No. 1615 of 2005 by directing that it may deposit Rs. 5 lacs within one month. This direction was also not complied with as a result of which the Appellate Tribunal dismissed the Appeal on 10 January, 2006. The application filed by M/s. Sameer Ispat before the High Court for modification of its order was rejected on 21 April, 2006 and the application filed for recall of that order was also rejected on 12 November, 2009. Even the application filed by M/s. Sameer Ispat to recall of the order dated 10 January, 2006 was rejected by order dated 3 January, 2012. M/s. Sameer Ispat then deposited Rs. 5 lacs and filed a restoration application which was also rejected by order dated 29 February, 2012. The time extension application filed by M/s. Sameer Ispat in Writ Tax No. 1615 of 2005 was also rejected by a Division Bench of this Court. Subsequently, Writ Tax No. 289 of 2014 filed by M/s. Sameer Ispat seeking direction to the Appellate Tribunal to dispose of the appeal on merits since the deposit of Rs. 5 lacs has been made, was also dismissed by a detailed order.
18. It is thereafter that M/s. Sameer Ispat filed a Misc. Application on 25 August, 2014 before the Appellate Tribunal for recalling the order dated 10 January, 2006 contending that the entire duty liability confirmed in the proceedings had been deposited. This application was rejected by the Appellate Tribunal by a detailed order on 27 March, 2015.
19. It is not possible to accept the submission of Learned Senior Counsel for the appellant that the order dismissing the appeal should be recalled and the appeal should be heard on merits since M/s. Sameer Ispat has now deposited the entire amount of duty. The order passed by the Division Bench on 5 May, 2014 dismissing Writ Tax No. 289 of 2014 filed by M/s. Sameer Ispat has attained Service Tax Appeal No.74 of 2009 34 finality. If the appeal could not be heard after the deposit of amount of Rs. 5 lacs, there is no good reason as to why it should be heard after deposit of certain additional amount. Once, the appeal had been dismissed, M/s. Sameer Ispat had to deposit the amount of duty imposed and the penalty imposed.‖ This decision has been affirmed by the Hon'ble Apex Court as reported at [2018 (361) E.L.T. A228 (S.C.)].
4.9 The doctrine of merger is a common law doctrine that is rooted in the idea of maintenance of the decorum of hierarchy of courts and tribunals, the doctrine is based on the simple reasoning that there cannot be, at the same time, more than one operative order governing the same subject matter. Hon'ble Karnataka High Court has in case of Kothari Industrial Corporation Ltd., [ILR 1998 Karnataka 1510] held as follows:
―9.2 What is doctrine of merger ? It is the fusion or absorption of a lesser right with a greater right; or merger of the order of an inferior Tribunal or authority with the order of a superior Tribunal or authority; or merger of the decree of a lower Court with the decree of the appellate Court or order of a revisional Court. It often becomes a nagging point of dispute relating to limitation and execution.
9.3 The scope of doctrine of merger was considered by the Supreme Court in CIT vs. Amritlal Bhogilal & Co. . The Supreme Court held :
"There can be no doubt that, if an appeal is provided against an order passed by a Tribunal, the decision of the appellate authority is the operative decision in law. If the appellate authority modifies or reverses the decision of the Tribunal, it is obvious that it is the appellate decision that is effective and can be enforced. In law, the position would be just the same even if the appellate decision merely confirms the decision of the Tribunal. As a result of the confirmation or affirmation of the decision of the Tribunal Service Tax Appeal No.74 of 2009 35 by the appellate authority, the original decision merges in the appellate decision and it is the appellate decision alone which subsists and is operative and capable of enforcement".
9.4 When a civil Court decides a matter, the facts and reasons and grounds for the decision are contained in the 'judgment' and the formal expression of the adjudication conclusively determining the rights of parties in regard to the matters in controversy in the Suit, that is, the actual decision is contained in the 'Decree'. In England, the word 'judgment' is used to denote both the reasons and the decree. In regard to the orders of authorities and Tribunals, there is no such bifurcation regarding the reasons and decision. The facts and reasons are contained in the preamble to the order and the decision is contained in the operative portion of the order. When there is a decree or order by the appellate or revisional Court or authority, what merges with such decree or order, is the decree or the order of the lower Court or authority and not the reasons for the decision.
The doctrine was further examined in Gojer Bros. vs. Ratan Lal . The Supreme Court held thus :
"The juristic justification of the doctrine of merger may be sought in the principle that there cannot be, at one and the same time more than one operative order governing the same subject-matter. Therefore, the judgment of an inferior Court, if subjected to an examination by the superior Court, ceases to have existence in the eye of law and is treated as being superseded by the judgment of the superior Court. In other words, the judgment of the inferior Court loses its identity by its merger with the judgment of the superior Court ... The fundamental reasons of the rule that where there has been an appeal, the decree to be executed is the decree of the appellate Court is that in such cases, the decree of the trial Court is Service Tax Appeal No.74 of 2009 36 merged in the decree of the appellate Court. In course of time, this concept which was originally restricted to appellate decrees on the ground that an appeal is a continuation of suit, came to be gradually extended to other proceedings like revisions and even to proceedings before quasi-judicial and executive authorities".
9.5 Thus where the subject-matter of the order of a lower authority is the same as the subject-matter of the order of the appellate or revisional authority, the order of the lower authority cannot remain to stand simultaneously with the order of the higher authority on the very same subject- matter. In such an event, the order of the lower authority gets merged with the order of the higher authority, so that there is only one order holding the field. But if the order of the lower authority related to several distinct matters and the appeal or revision is filed only in regard to one or few of the matters, there cannot be a merger of the entire order of the lower authority with the order of the appellate/revisional authority. In that event, subject to any statutory provisions, what will merge in the order of the appellate or revisional authority is not the entire order of the lower authority, but only that part of the order which related to the subject-matter of the appeal or revision. This is recognised by the Supreme Court in the following passage in State of Madras vs. Madurai Mills Co. Ltd. :
"But the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior Tribunal and the other by a superior Tribunal, passed in an appeal or revision, there is a fusion or merger of two orders irrespective of the subject-matter of the appellate or revisional order and the scope of the appeal or revision contemplated by the particular statute. In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of Service Tax Appeal No.74 of 2009 37 the statutory provisions conferring the appellate or revisional jurisdiction".
9.6 The above principle is best illustrated by the facts of the cases in Amritlal Bhogilal & Madurai Mills (supra) considered by the Supreme Court. In Amritlal Bhogilal's case, the ITO had made a composite order granting registration of the firm and making an assessment on the basis of registration. The assessee challenged the composite order, insofar as the assessment was concerned. The order of registration was not the subject- matter of appeal before the appellate authority. The High Court held that the order of the ITO granting registration to the assessee must be deemed to have merged in the appellate order and therefore the revisional power of the CIT cannot be exercised in respect of it. The Supreme Court reversed the said view holding that the order of the ITO granting registration cannot be deemed to have merged in the order of the CIT(A) in an appeal taken against the composite order of the ITO, in regard to the assessment, as the question of registration was not before the appellate authority.
9.7 In Madurai Mill's case (supra), the facts were : The assessing authority (Dy. CTO) had passed an order of assessment for 1950-51, determining the net turnover at Rs. 15,44,09,109. The assessee filed an appeal aggrieved by the inclusion of two items in the turnover relating to commission and sale proceeds of empty drums. The appeal was allowed in regard to first item and rejected in regard to second item. Thereafter, the assessing authority issued a revised assessment on 28th November, 1952. Thereafter, the assessee preferred a revision contending that it should not have been assessed to tax on Rs. 6,57,971 collected by it by way of tax. The assessee did not raise any other objection regarding the order of assessment dt. 28th November, 1952. The revisional Service Tax Appeal No.74 of 2009 38 authority (Dy. Commr. of Commercial Taxes) dismissed the revision petition by order dt. 21st August, 1954. On 4th August, 1958, the Board of Revenue issued a notice to the assessee proposing to revise the assessment of the assessing authority by including in the net turnover, Rs. 7,74,62,706 representing the value of cotton purchased by the assessee from outside the State of Madras, on the ground that it was wrongly excluded in the computation of the turnover. The assessee objected to the proposed revision inter alia on the ground that the period of limitation prescribed, namely, four years, should be computed from 28th November, 1952 and if so done, proceedings initiated by the Board of Revenue was barred by time. The Board however including the said turnover relating to cotton purchased from outside the State, by order dt. 25th August, 1958 held that the order of assessment dt. 28th November, 1952 having merged in the order dt. 21st August, 1954 passed by the Dy. Commr. of Commercial Taxes in Revision, the four years period should be reckoned from 21st August, 1954 and therefore the proceedings were not barred. On appeal, the High Court set aside the Order of the Board on the ground that it was barred by limitation. That was affirmed by the Supreme Court in an appeal by the State, holding as follows :
"In the circumstances of the present case, it cannot be said that there was a merger of the order of assessment made by the Dy. CTO dt. 28th November, 1952, with the order of the Dy. Commr. of Commercial Taxes dt. 26th August, 1954 (21st August, 1954 ?) because, the question of exemption of the value of yarn purchased from outside the State of Madras, was not the subject-matter of revision before the Dy. Commr. of Commercial Taxes. The only point that was urged before the Dy. Commr. of Commercial Taxes was that a sum of Rs. 6,57,971 collected by the respondent by way of tax should not be Service Tax Appeal No.74 of 2009 39 included in the taxable turnover. This was the only point raised before the Dy. Commr. of Commercial Taxes and was rejected by him in the revision proceedings. On the contrary, the question before the Board of Revenue was whether the Dy. CTO, Madurai was right in excluding from the net taxable turnover of the respondent, the sum of Rs. 7,74,62,706 which was the value of cotton purchased by the respondent from outside the State of Madras. We are, therefore, of the opinion that the doctrine of merger cannot be invoked in the circumstances of the present case".
10. There is however, a well-recognised exception to the principle that when an appeal is restricted to a part of the order of the lower authority, the merger will only be to that extent and the remaining portion of the order of lower authority will not merge in the appellate order. Where the statute confers plenary jurisdiction on the appellate authority, that is power to examine the entire subject- matter of the order of the lower authority, even where the appellant restricts the appeal to a part of the order of the lower authority, the entire order of the lower authority will merge with the order of the appellate authority. This is because, it is the subject-matter of the appeal and not the subject-matter of the order of the appellate authority that determines the extent of merger. When the statute gives plenary jurisdiction to the appellate authority, irrespective of whether the appellate authority chooses to exercise such plenary jurisdiction or not, as the subject-matter of the appeal for the consideration of the appellate authority, is the entire order of the lower authority, the merger will be of the entire order of the lower authority.
10.1 The Supreme Court explained the difference between a Court of appeal under the CPC and an appellate authority functioning under a statute (IT Act) providing for plenary Service Tax Appeal No.74 of 2009 40 jurisdiction thus, in CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (Kar) : TC 7R.590.
"It would be wholly erroneous to compare the powers of the AAC with the powers possessed by a Court of appeal, under the CPC. The AAC is not an ordinary Court of appeal. It is impossible to talk of a Court of appeal when only one party to the original decision is entitled to appeal and not the other party, and in view of this peculiar position, the statute has conferred very wide powers upon the AAC once an appeal is preferred to him by the assessee. It is necessary also to emphasise that the statute provides that once an assessment comes before the AAC, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee; his competence ranges over the whole assessment and it is open to him to correct the ITO not only with regard to a matter raised by the assessee but also with regard to a matter which has been considered by the ITO and determined in the course of the assessment".
10.2 This Court has consistently taken the view that the entire order of the lower authority will merge in the appellate order, where under the statute, the appellate authority is given plenary jurisdiction over the entire order, irrespective of the appeal being restricted to only a part of the order of the lower authority or the appellate authority dealing with and deciding only a few matters from out of the subject- matter of the order of the assessing authority [See Addl. CIT vs. Vijayalakshmi Lorry Service (1986) 157 ITR 327 (Ker) : TC 57R.428 and CIT vs. Hindustan Aeronautics Ltd. ]. The High Courts of Allahabad, Patna and Madhya Pradesh have also subscribed to the said view in J.K. Synthetics Ltd. vs. Addl. CIT ; CIT vs. Rameshwar Das Pannalal 34 STC 296 and CIT vs. Mandsaur Electric Supply Co. Ltd.. However, the Service Tax Appeal No.74 of 2009 41 High Courts of Bombay, Calcutta, Madras, Gujarat and Punjab & Haryana have subscribed to the view that the merger will be only in regard to such matters dealt with by the appellate authority and parts of the assessment order which were left untouched by the appellate authority, will not merge in the appellate order in CIT vs. Sakseria Cotton Mills Ltd. (1980) 124 ITR 570 (Bom) : TC 53R.582, Singho Mica Mining Co. Ltd. vs. CIT , Puthuthottam Estates Ltd. vs. State of Tamil Nadu ; Karsandas Bhagwandas Patel vs. G. V. Shah, ITO and New Diwan Oil Mills vs. CIT .‖ 4.10 In the case of A.V. Papayya Sastry [(2007) 4 SCC 221] Hon'ble Supreme Court observed:
―38. ... All orders passed by the courts/authorities below, therefore, merge in the judgment of this Court and after such judgment, it is not open to any party to the judgment to approach any court or authority to review, recall or reconsider the order.‖ 4.11 In the case before us as have been earlier discussed the issue of penalty under Section 76 and 78 of the Finance Act, 1994 cannot be delinked from the issue of the demand of service tax under Section 73 (2) ibid. In fact imposition of penalty under these sections is sequel of the determination and confirmation of the demand under Section 73 (2). Thus if the tribunal has vide order dated 23.08.2013 upheld the penalties imposed under these section by the impugned order after dismissing the appeal filed by the appellant for non-prosecution and this order has been upheld by the Hon'ble High Court then tribunal cannot rehear the issue on the demand of service tax as it has become functus officio in the matter.
4.12 It is settled principle in law, that no person should be allowed to take advantage of his own wrong doings. In the case of Eureka Forbes Limited [(2010) 6 SCC 193] Hon'ble Supreme Court observed as follows:
"37. Maxim Nullus commodum capere potest de injuria sua propria has a clear mandate of law that, a person who by Service Tax Appeal No.74 of 2009 42 manipulation of a process frustrates the legal rights of others, should not be permitted to take advantage of his wrong or manipulations...."
4.13 In case of Municipal Committee Katra & Ors. Vs Ashwani Kumar [Order dated May 09, 2024 in Civil Appeal No(S). 14970- 71 OF 2017], Hon'ble Supreme Court observed:
18. The situation at hand is squarely covered by the latin maxim ‗nullus commodum capere potest de injuria sua propria', which means that no man can take advantage of his own wrong. This principle was applied by this Court in the case of Union of India v. Maj. Gen. Madan Lal Yadav [(1996) 4 SCC 127] observing as below: -
―28. ...In this behalf, the maxim nullus commodum capere potest de injuria sua propria -- meaning no man can take advantage of his own wrong -- squarely stands in the way of avoidance by the respondent and he is estopped to plead bar of limitation contained in Section 123(2). In Broom's Legal Maxim (10th Edn.) at p. 191 it is stated:
―... it is a maxim of law, recognised and established, that no man shall take advantage of his own wrong; and this maxim, which is based on elementary principles, is fully recognised in courts of law and of equity, and, indeed, admits of illustration from every branch of legal procedure.‖ The reasonableness of the rule being manifest, we proceed at once to show its application by reference to decided cases. It was noted therein that a man shall not take advantage of his own wrong to gain the favourable interpretation of the law. In support thereof, the author has placed reliance on another maxim frustra legis auxilium invocat quaerit qui in legem committit. He relies on Perry v. Fitzhowe [(1846) 8 QB 757 : 15 LJ QB 239] . At p. 192, it is stated that if a man be bound to appear on a certain day, and before that day the obligee puts him in prison, the bond is void. At p. 193, it is Service Tax Appeal No.74 of 2009 43 stated that ―it is moreover a sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned‖. At p. 195, it is further stated that ―a wrong doer ought not to be permitted to make a profit out of his own wrong‖. At p. 199 it is observed that ―the rule applies to the extent of undoing the advantage gained where that can be done and not to the extent of taking away a right previously possessed‖.
19. It is beyond cavil of doubt that no one can be permitted to take undue and unfair advantage of his own wrong to gain favourable interpretation of law. It is a sound principle that he who prevents a thing from being done shall not avail himself of the nonperformance he has occasioned. To put it differently, ‗a wrong doer ought not to be permitted to make profit out of his own wrong'. The conduct of the respondent-writ petitioner is fully covered by the aforesaid proposition.‖ 4.14 The appellant abstained from the hearing on 23.08.2013, and led to the passing of the Final Orders No 57355 and 57437/2013 dated 23.08.2013 against the impugned order. The Final Order 57437/2013 has been upheld by the Hon'ble High Court. As both the orders are against the common impugned order, and the issues are intertwined, we are not in position to reconsider the appeals of the appellant on merit after being restored third time as that goes against the principal of finality of the issues in the taxation matter and the decision of Hon'ble High Court against the order of tribunal, which is in respect of the same impugned order.
4.15 We also do not find much merits in the submissions made by the appellant to the effect that appellant was not providing any leased circuit services to M/s MTNL was not covered by the definition as per section 65 (105) (zd) of Finance Act, 1994 for the reason that the services provided by the appellant were not exclusively for the use of the recipient i.e. MTNL. We do not find Service Tax Appeal No.74 of 2009 44 much any merits in the said argument simply for the reason that the services provided by the appellant were the input services used exclusively by the MTNL for providing its output services to its subscribers/ client. The subscribers of the MTNL were not the recipient of the services provided by the appellant and the use of the services provided by the appellant to MTNL was exclusively used by the MTNL. The decisions relied upon by the appellant do not support the case of the appellant. In the case of Fascel Ltd.
[2007 (7) S.T.R. 29 (Tri. - Ahmd.)] the issue was in respect of interconnect usage charges (IUC) and in the case of Power Grid Corporation of India [2011 (24) STR 307 (T-Del)] followed the earlier decision to the extent it was in relation to the IUC between two telecom authorities. However this decision upheld the demand made in respect of the services provided by one telecom authority to recipients other than telecom authority. Our view is supported by the decision in the case of Data Infosys Ltd. [2006 (4) S.T.R. 34 (Tri. - Del.)] were in following has been held:
"4. Ld. Advocate appearing on behalf of the respondent submits that input service which they are utilising, may be considered as a leased circuit but without such input service, they could not provide any out put service. He relies upon the definition given in the Service Tax Credit Rules, 2002. Further it is his submission that the clarification issued by the Deptt. dt. 13-7-2001 also points to the fact that they are eligible for availing input service tax credit.
5. Considered the submissions made by both the sides and perused the records. I find that the question involved in this case is in a very narrow compass. The question involved in this case is whether as per sub-rule (2) of Rule 3 of Service Tax Credit Rules, the respondents are eligible for availment of input stage credit or not. In order to appreciate the said rule it to be noted that the said rule during the relevant period was as under:
Service Tax Appeal No.74 of 2009 45 ―For the purposes of these rules, two services shall be deemed to be falling in the same category of taxable service, if the input service and output service fall in the same sub-clause of clause 90 of Section 65 of the. Act.‖ From the above reproduced rule, the intention of the Govt. was to grant the credit of the input service to the out put service only with the condition that it will fall under the same clause 90 of Section 65 of Finance Act, 1994.
6. At the same time it has to be noticed that the definition in the said rules in respect of input service is mentioned as :
‗―Input service‖ means any taxable service received and consumed by a service provider in relation to rendering of output service.'
7. From the above reading of the definition as well as the sub-rule (2) of Rule 3 of the Service Tax Credit Rules, to my mind, the intention of the Govt. was to grant the benefit of the input stage service tax paid by the person availing such services. This is borne out from the fact that the definition of the input service is very clear and it says that taxable service received and consumed by a service provider in relation to rendering of output service. In this case the respondent herein are providing the service that of a internet service provider to the various customers. The respondent has to rely upon the leased line which is given to them by BSNL. Without such leased line, the output service cannot be rendered by the respondent. When the definition itself categorically grants the credit of the service tax paid by the respondent on the input services, to give a narrow meaning to the sub-rule (2) of the Service Tax Credit Rules would deprive the respondent of the benefit of the Service Tax Credit on the input services. To my mind the interpretation sought to be relied upon by the Deptt. in this case would defeat that the intention of the Govt. to provide input stage credit of Service Tax to the service provider.‖ Service Tax Appeal No.74 of 2009 46 4.16 The second issue in the appeal is in respect of "installation or commissioning". From the impugned order it is evident that these services are in relation to installation of antenna etc., for providing leased circuit services to the subscriber. The appellant has challenged the impugned order by stating that they are not the installation agency as they got the work of installation and commissioning done through outside vendors. The submissions made by the appellant have been aptly dealt in the orders of lower authority. We find that appellant had been collecting the installation and commissioning charges for the installation of antenna etc. from their service recipients. The demand has been based on the charges recovered by them towards the installation and commissioning by the appellants. It is settled law that service tax is transaction based tax and the nature of transaction determines the leviability to the tax. There cannot be any denial of the fact that appellant had been providing the installation and commissioning services to its clients, for the reason that these services were provided by them through outside vendors. The services of the vendor were input services for the appellant to provide installation and commissioning services to its clients.
4.17 For the reasons stated in earlier part of the order we do not find any merits in the submissions made by the appellant on the ground of limitation.
4.18 Thus we do not find any merits in this appeal.
5.1 Appeal is dismissed.
(Operative part of the order pronounced in open court) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Service Tax Appeal No.74 of 2009 47 akp