Custom, Excise & Service Tax Tribunal
Sree Annapoorna Hospitality Services ... vs Coimbatore on 16 April, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Service Tax Appeal No. 41860 of 2015
(Arising out of Order-in-Original Sl. No.26/ 2014-Commr dated 26.12.2014
passed by Commissioner of Central Excise, Customs and Service Tax,
Coimbatore)
M/s. Sree Annapoorna Hospitality Services Pvt Ltd ..Appellant
6/1256 Avinashi Road,
Peelamedu, Coimbatore-641001.
Versus
The Commissioner of Customs, CE & ST ...Respondent
6/7, A.T.D Street, Race Course Coimbatore-641018.
APPEARANCE :
Shri K. Bindusaran, Consultant for the Appellant Smt. O.M. Reena, Authorised Representative for the Respondent CORAM :
HON'BLE MR. M. AJIT KUMAR, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V. MEMBER (JUDICIAL) FINAL ORDER No.40442/2025 DATE OF HEARING: 06.03.2025 DATE OF DECISION:16.04.2025 Per AJAYAN T.V.
"M/s. Sree Annapoorna Hospitality Services", the appellant herein, has challenged the impugned Order-in-Original Sl. No.26/ 2014-Commr dated 26.12.2014 of the adjudicating authority denying the appellant the benefit of Notification No.12/2003-ST claimed and demanding differential service tax of Rs.63,79,561/- towards the differential service tax payable for the period April 2008 to March 2 2012 along with interest at applicable rates and imposing equivalent penalty.
2. Briefly stated, facts are that the appellant is registered with the Department for provision of "Outdoor Catering Service" (ODC) and are filing the requisite returns. The officers of the Department upon scrutiny of the appellant's documents noticed that the appellant provided ODC to several institutional customers as per agreements that required the appellant to provide such services to the employees/staff of these institutional customers at their canteen/premises at agreed upon rates. It was further noticed that in the bills raised by the appellant in respect of these services provided to the institutional customers, the bill amount was divided into cost of materials and cost of services. The consideration under 'cost of services' alone was assessed to service tax. On further examination, it was noticed that the 'cost of materials' were the costs of ingredients like rice, flour, grams, oil, sugar, vegetables that were used in the preparation of food items/beverages/snacks and the appellant had treated these as "sale" and sought to exclude its value in terms of notification No. 12/2003-ST dated 20.06.2003. It was also noticed that in respect of customers other than these institutional customers, the appellant was claiming the conditional exemption under Notification No.1/2006-ST dated 01.03.2006, which exempted service tax as in excess of service tax calculated on a value equivalent to 50% of the total consideration.
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3. The Department was of the view that the ingredients used in the preparation of food items/beverages/snacks could not be considered as "sale" under the Tamil Nadu Value Added Tax, 2006 and that consequently the appellant was not eligible for the benefit of notification No.12/2003-ST. Therefore, the Department was of the opinion that the cost of ingredients in the taxable value of the ODC services rendered by the appellant to these institutional customers the appellant ought to be included in the taxable value of such services and since the appellant was not availing the benefit of the Cenvat Credit Scheme, in terms of Notification No.1/2006-ST ibid, the appellant ought to have paid service tax on 50% of such taxable value. Having not done so, it appeared to the Department that the appellant has short paid service tax.
4. Therefore, a notice dated 20.09.2013 was issued to the appellant invoking the extended period under proviso to Section 73(1) alleging the above and also alleging that the exclusion of 'cost of ingredients or materials' was not declared to the Department. It was further alleged that the appellant have willfully misstated in the invoices that the ingredients were sold so as to wrongfully claim exemption under notification No.12/2003-ST and evade service tax, though no such sale appeared to have taken place. The Notice demanded differential service tax of Rs.63,79,561/- payable for the period April 2008 to March 2012 along with interest at applicable rates and proposing imposition of penalties. After due 4 process of law, the adjudicating authority, by the impugned OIO, confirmed the demands made in the Notice as aforementioned. Aggrieved by the same, the appellant preferred this appeal and is thus before this Tribunal.
5. The Ld. Consultant Shri. K. Bindusaran appeared and argued for the appellant. He submitted that the show cause notice is compelling the appellant to avail Notification No.1/2006 whereas the appellant was not barred from availing the notification 12/2003 also. He would submit that the SCN itself conceded to the breakup of the invoiced value separately for goods and materials and services as well as conceded that the appellant was not availing cenvat credit, thus indicating that the appellant had fulfilled the requirements to avail the Notification 12/2003. He further submits that the appellant had paid the requisite VAT on the goods/raw materials used for preparing the food and to render the said service and such payment has not been disputed in these proceedings. In fact, he contends, the proof is available through each invoice raised on the clients, which were examined by the audit officers and which indicate separately the value of services and the value of materials/goods used as well as the respective service tax and VAT separately. It is his submission that they are able to clearly differentiate between the cost of the goods and the cost of the services and further the clients also sought invoicing in this divisible manner and this has also been averred in their reply to SCN. He also submitted that the extended period of limitation is 5 not invokable as neither any evidence of willful misstatement with intent to evade payment of tax is forthcoming in the notice issued, nor does the notice allege willful misstatement or suppression of facts with intent to evade payment of duty. Thus, the onus of substantiating the invocation of extended period has not been discharged by the Department. He further submits that from the ST-3 returns filed it can be seen that the appellant has adopted either of the said two notifications in question and not once did the Range Officer question the same. Further, even the officers who conducted the audit on 26-11-08 for the period April 05 to October 08, prior to the present audit, found fault with such availment. Thus, the whole demand is barred by limitation being beyond the normal period.
6. Smt. O.M. Reena, Ld. Authorised Representative, reiterates the findings of the appellate authority. She emphasizes that the adjudicating authority has found the contract to be a composite one where the consideration is also composite indicating that there was no intention of the parties to apportion the consideration between the cost of service and the cost of ingredients and thus any split up of cost that may be indicated in the bill will be a notional division only. It is her submission that the adjudicating authority has correctly relied on Sayaji Hotels Ltd, 2011 (24) STR 177 as the Tribunal had underlined the limited role of the deeming fiction under Article 366(29A) of the Constitution of India for the purpose of levy of sales tax and held that it cannot be extended 6 to notification No.12/2003-ST for service tax assessments. It is her submission that the demand has been made after extending the benefit of Notification 1/2006-ST, as had been claimed by the appellant in respect of other customers, and hence the adjudicating authority has rightly upheld the demand.
7. We have heard the rival submissions and carefully perused the records and the case laws submitted as relied upon.
9. The issues that arise for determination are:
A. Whether for the relevant period, the demand made on the appellant denying the benefit of Notification No.12/2003 dated 20.06.2003 claimed in respect of the Outdoor Catering Services rendered by the appellant in respect of some of its customers, is tenable.
B. Whether the invoking of extended period of limitation is tenable.
10. The issues are addressed in seriatim.
A. WHETHER FOR THE RELEVANT PERIOD, THE DEMAND MADE ON THE APPELLANT DENYING THE BENEFIT OF NOTIFICATION NO.12/2003 DATED 20.06.2003 CLAIMED IN RESPECT OF THE OUTDOOR CATERING SERVICES RENDERED BY THE APPELLANT IN RESPECT OF SOME OF ITS CUSTOMERS, IS TENABLE.
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11. During the relevant period, the relevant definitions of the Finance Act, 1994, under Section 65 stipulated as under:
(24) "caterer" means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements for any purpose of occasion;
(76a) "outdoor caterer" means a caterer engaged in providing services in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services.
(105) "taxable service" means any service provided or to be provided, (zzt) to any person, by an outdoor caterer;
12. We have perused both the notifications that arise for consideration. Notification 12/2003-ST dated 20-06-2003 is as under:
Valuation (Service Tax) -- Goods and materials sold by service provider to recipient of service-- Value thereof, exempted In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts so much of the value of all the taxable services, as is equal to the value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under section (66) of the said Act, subject to condition that there is documentary proof specifically indicating the value of the said goods and materials.
2. This notification shall come into force on the 1st day of July, 2003. 8
[Notification No. 12/2003-S.T., dated 20-6-2003]
13. The Notification 01/2006-ST dated 01-03-2006, with the relevant portion as applicable in this context extracted, is as under:
" Effective rate of Service tax for specified services -- Percentage of abatements In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (3) of the Table below and specified in the relevant sub-clauses of clause (105) of section 65 of the Finance Act, specified in the corresponding entry in column (2) of the said Table, from so much of the service tax leviable thereon under section 66 of the said Finance Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (5) of the said Table, of the gross amount charged by such service provider for providing the said taxable service, subject to the relevant conditions specified in the corresponding entry in column (4) of the Table aforesaid:
Sub-clause of Description of Conditions Percentage S. clause (105) of taxable No. Section 65 service Catering. This exemption 50 8 (zzt) shall apply in cases where, -
(i) the outdoor
caterer also
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provides food; and
(ii) the invoice, bill
or challan issued
indicates that it is
inclusive of
charges for supply
of food
Provided that this notification shall not apply in cases where, -
(i) the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has been taken under the provisions of the CENVAT Credit Rules, 2004; or
(ii) the service provider has availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003 [G.S.R. 503 (E), dated the 20th June, 2003].
Explanation. - For the purposes of this notification, the expression "food" means a substantial and satisfying meal and the expression "catering service" shall be construed accordingly.
[Notification No. 1/2006-S.T., dated 1-3-2006] (emphasis supplied)
14. We note that the Notification No.1/2006 dated 01-03-2006, which is a conditional notification, stipulates as one of the conditions that the said notification shall not apply "in cases where" the service provider has availed the benefit under the notification of the Government of India in the Ministry of Finance 10 (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003.
15. This stipulation, to our mind, makes it clear that if the service provider has availed the notification No.12/2003-ST, then the notification 1/2006-ST will not apply in such cases. The application of the notification 1/2006-ST is sought to be excluded "in cases"
and the said notification No.1/2006-ST does not prohibit the availment of the said notification if the service provider limits such availment to cases other than when notification No.1/2006 has been availed. We have also not been shown any provision in law that mandates that if a specific notification is issued, then it would be to the exclusion of the assessee availing the benefit of any other notification that is also available to the assessee. If the notification itself does not stipulate an explicit bar stating that the benefit under the notification is available only if it is availed to the exclusion of availing benefit under any other notification, we would be reluctant to read in any such implied prohibition, so as to deny the appellant herein the benefit of the notification 12/2003-ST claimed. It is also seen that this Tribunal has in a catena of decisions taken a view that there is no bar in availing benefit under more than one notification unless it is barred categorically. Decisions in CCE Hyderabad v Premier Mushroom Farms, 2005 (190) ELT 511 (Tri-Bang), Hindustan Lever Ltd v Collector of C.Ex, 1989 (40) ELT 288 (Tri), Collector of 11 Customs, Madras v Bharat Heavy Electricals Ltd, Madras, 1987(31) ELT 534 (Tri), refer in this regard.
16. Coming to the nature of the outdoor catering services rendered by the appellant, it is seen that the Hon'ble Apex Court in its decision in Bharat Sanchar Nigam Ltd v Union of India, 2006 (2) STR 161 (SC), after examining Article 366(29A) had this to say with respect to catering contracts. Relevant portions are as under:
" 40. All the clauses of Article 366(29A) serve to bring transactions where one or more of the essential ingredients of a sale as defined in the Sale of Goods Act, 1930 are absent, within the ambit of purchase and sales for the purposes of levy of sales tax. To this extent only is the principle enunciated in Gannon Dunkerly limited. The amendment especially allows specific composite contracts viz. works contracts [Clause
(b)], hire purchase contracts [Clause (c)], catering contracts [Clause (e)] by legal fiction to be divisible contracts where the sale element could be isolated and be subjected to sales tax." (emphasis supplied) Thereafter, in para 42 the Apex Court held as under:
"42. Of all the different kinds of composite transactions the drafters of the 46th Amendment chose three specific situations, a works contract, a hire purchase contract and a catering contract to bring within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time.... (emphasis supplied) 12
17. Thus, it is evident that catering contract which involves service and sale at the same time is one such composite transaction that has been brought within the fiction of a deemed sale by virtue of Article 366(29A) so as to be exigible to sales tax. Further, a coordinate bench of this Tribunal had considered the case of an assessee engaged in providing outdoor catering service, and its entitlement to the benefit of Notification 12/2003-ST, in its decision in Sky Gourmet Pvt Ltd v CST, Bangalore, 2009 (14) STR 777 (Tri-Bang), dated 30-09-2009, wherein it has been held as under:
" 4. On a very careful consideration of the issue, we find that the appellants are registered under the category of 'Outdoor Catering Services'. Though in their appeal, they made a point that they would not be liable to service tax under the category of 'Outdoor Catering Services', when the argument was before this Bench that approach had been given up and they were mainly urging the point that they would be entitled for benefit of exemption Notification No. 12/2003-S.T. It is seen that the appellants had already discharged service tax liability on the gross receipt excluding the cost of the food, beverages, etc. This is not in dispute. As regards the legal position with regard to the exclusion of the cost of food and beverages, we have to go first to the Constitutional amendment, the 46th amendment of Constitution of India wherein Article 366(29A) was introduced. The said Article is reproduced herein below :
"(29A) "tax on the sale or purchase of goods" includes - 13
(a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration.
(b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract.
(c) a tax on the delivery of goods on hire-purchase or any system of payment of instalments.
(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.
(e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.
(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply of service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made."
It is very clear from the Article 366(29A)(f) that a tax on the supply of goods being food or any article for human consumption where such supply of service, is for cash, deferred payment and other valuable services and that supply of any goods shall be deemed to be a sale. We also noted that the decision of the Hon'ble Supreme Court in the case of 14 BSNL v. Union of India (supra). It is very clear that Article 366(29A) specifically provides a legal fiction in respect of catering contracts where the contracts can be divisible into two components, i.e. service portion and sale of goods portion. As far as the sale of goods portion is concerned, it is very clear that VAT or sale tax has already been discharged by the appellants. Once the sale tax has already been discharged by them, they cannot be asked to pay service tax on the same value. This is very clear from several decisions of the Tribunal.
5. Further, the benefit of Notification No. 12/2003-S.T. is available to all the services. There is an exclusion of the value of the goods sold during their rendering of service. In this lease, it is very clear in view of the separate invoices raised that the food/beverages supplied have been separately paid for. There is documentary evidence for the cost of such goods sold during their rendering of service. In view of the Article 366(29A) read with provisions of the Karnataka VAT Act, 2005. It is very clear that in this 'Outdoor Catering Service', the food supplied should be treated as 'sale of goods' and for the sale of goods, VAT has already been paid. Therefore this cannot be charged to the service tax in view of the ratio of the Supreme Court's decision in M/s. BSNL case. Further the benefit of Notification No. 12/2003-S.T. is squarely applicable in this case and the Commissioner has simply brushed aside. We are also in agreement that the appellant's contention that when two notifications are available, it is the appellant always has an option to choose a more beneficial Notification. There is no reason why the benefit of Notification No. 12/2003 is not available to the appellants. In these circumstances, we do not 15 find much merit in the impugned order and the same is set aside. The appellant is not liable to pay the differential duty. Hence all the penalties are set aside. Thus we allow the appeal with consequential relief. Hence the appeal and the cross-objection are disposed of in the above manner." (emphasis supplied)
18. It is noticed that prior to the said decision in Sky Gourmet Pvt, the Coordinate Bench of this Tribunal at Bangalore had taken a similar view in its decision in LSG Sky Chefs (India) Pvt Ltd v Commissioner of S.T. Bangalore, 2009 (15) STR 545 (Tri- Bang) on 16-01-2009. This decision was thereafter followed in a decision reported as LSG Sky Chefs (India) Pvt Ltd v Commissioner of S.T. Bangalore, 2009 (18) STR 37 (Tri- Bang) on 11-08-2009. Aggrieved by the latter decision, the Revenue preferred an appeal before the Honourable High Court of Karnataka, which came to be decided on 20-04-2011 by the Karnataka High Court in Commissioner of S.T. Bangalore v LSG Sky Chef India Pvt Ltd, 2017 (49) STR 286 (Kar). The relevant portions of this High Court decision are reproduced below:
4. The assessee contended that they are eligible for exemption under Notification No. 12/2003, dated 20-6-2003 in respect of the value of food and beverages served to the Airlines on payment of VAT. That in a transaction of sale of food, the element of service in connection with catering was only to the extent of handling and loading of food and beverages on the aircraft. Hence they had paid service tax to that extent. The assessing authority came to the conclusion that in terms of Section 67 of the Act the assessees are liable to pay service 16 tax on the gross amount realised from the various Airlines on account of outdoor catering service provided by them. That Section 67 clearly prescribes that the value of taxable service shall be the gross amount charged by the service provider. Further the exemption claimed by the assessee under Notification No. 12/2003, dated 20-6-2003 is legally unsustainable. Accordingly, the assessing authority confirmed the demand of a sum of Rs. 56,32,167/- along with interest and penalty. Aggrieved by the same, the assessee preferred an appeal to the Tribunal. The Tribunal held that the assessee is entitled to the benefit of Notification No. 12/2003. That there is inclusion of value of goods sold by the assessee and in view of the separate invoices raised for the food and beverages having been supplied and having been paid for separately, the food supplied should be treated as sale of goods and hence no service tax can be levied to that extent. By relying on the Judgment of the Hon'ble Supreme Court in the case of BSNL v. Union of India reported in 2006 (2) S.T.R. 161 (S.C.) the benefit of Notification No. 12/2003 was held applicable to the assessee. Accordingly, the appeal was allowed. The imposition of penalty was set aside and consequential reliefs were granted. Hence, the present appeals by the revenue.
5. Therefore it is clear that the question that arises for consideration in this appeal is as to whether the assessee are liable to pay service tax for the services rendered by him as outdoor caterer.
6. The identical question with regard to the liability of the assessee towards service tax so far as service rendered by 17 them with regard to the outdoor catering is concerned, came up for consideration before the Division Bench of this Court in Writ Appeal Nos. 671 to 726/2011 which were disposed off by the order dated 18-4-2011. By a detailed consideration and relying on various Supreme Court Judgments, the Division Bench of this Court came to the conclusion that the outdoor catering contract is a contract for service by virtue of sub-
clause (f) of clause 29(a) of Article 366 of the Constitution of India which has to be treated as composite contract and the State Legislature is competent to levy the sales tax on the sale aspect only namely, the value of the food articles.
7. The Division Bench held that outdoor catering consists of goods namely, the articles of food etc., which would constitute sale. Hence, the value of the food articles are liable for sales tax which the State Government is liable to impose. The other part of outdoor catering is the service rendered by the assessee in bringing the food articles to a place designated by the client. The service so rendered by the assessee, which also includes the cost of transporting the food articles constitutes service. Therefore, to this extent alone, the assessee is liable for service tax and not for the entire cost received from the Airlines. Hence, there has to be a bifurcation with regard to the sale of goods and the service provided. However, it does not empower the State Government to levy tax on the entire amount mentioned in the bill. The entire sale price includes the transportation charges also and out of that sale price what is the service aspect and what is the sale aspect requires to be decided by the authorities. It is only thereafter that sales tax could be imposed on the cost of the 18 food articles arrived at and the remaining extent including transportation is to be treated as liable for service tax. Therefore, the Court declared that a contract for outdoor catering "is a composite contract which falls under sub-clause (f) of Clause (29-A) of Article 366 of the Constitution of India and service tax is payable on service aspect and sales tax is payable on deemed sales aspect and it is not an indivisible contract."
8. The facts involved in the present case are identical to the facts that arose in the Writ Appeal Nos. 671 to 726/2011. Under these circumstances, these appeals are disposed of in terms of the Judgment dated 18-4-2011 passed in Writ Appeal Nos. 671 to 726/2011. Consequently, the substantial questions of law are answered in favour of the assessee and against the Revenue." (emphasis supplied)
19. We are conscious of the fact that in the decision in Sayaji Hotels Ltd v CCE Indore, 2011 (24) STR 177, that has been adopted by the adjudicating authority, a view contrary to that expressed in Sky Gourmet Pvt Ltd v CST, Bangalore, 2009 (14) STR 777 (Tri- Bang) has been taken. However, since Karnataka High Court has expressed a view in consonance with the aforesaid decision of the Tribunal in Sky Gourmet Pvt Ltd v CST, Bangalore and affirming the Tribunal decision in LSG Sky Chefs (India) Pvt Ltd v Commissioner of S.T. Bangalore, 2009 (18) STR 37 (Tri-Bang) that had followed the earlier LSG Sky Chefs (India) Pvt Ltd v Commissioner of S.T. Bangalore, 2009 (15) STR 545 (Tri-Bang), 19 we would yield to the superior wisdom of the Honourable High Court of Karnataka in this regard. Further, to our mind, a catering contract is not a pure service contract or can the dominant nature test be applied for interpreting so, for the simple reason that the Honourable Apex Court in the case of BSNL cited supra, has categorically held as under:
"47. We agree. After the 46th Amendment, the sale element of those contracts which are covered by the six sub-clauses of Clause (29A) of Article 366 are separable and may be subjected to sales tax by the States under Entry 54 of List II and there is no question of the dominant nature test applying."
20. Similar view as that expressed in Tribunal decision referred to above in Sky Gourmet Pvt Ltd v CST, Bangalore, 2009 (14) STR 777 (Tri-Bang) is seen taken in Daspalla Hotels Ltd v CCE, Vishakhapatnam, 2010 (18) STR 75 (Tri-Bang) and Saj Flight Services (P) Ltd v CST, Chennai, 2010 (19)STR 874 (Chennai).
21. We further find that the denial of the benefit of the Notification No.12/2003-ST by the adjudicating authority for the reason that VAT is levied on the turnover and not on the value of the ingredients that go into the preparation of such food articles, cannot be countenanced as it is settled law that the measures employed for assessing a tax should not be confused with the nature of the tax, UOI v Bombay Tyre International, 1983 20 (14) ELT 1896 (SC) refers. Therefore, even though VAT is levied on the turnover, as a measure of tax, nevertheless the fact remains that its nature is that of a tax levied only on the sale portion of the composite outdoor catering services rendered by the appellant. All that the notification 12/2003-ST requires, apart from adherence to the conditions therein, is that "there is documentary proof specifically indicating the value of the said goods and materials" sold by the service provider to the recipient of service. When the appellant is clearly indicating the value of the goods and materials separately in its bills and which is supported by the records maintained by the appellant, that would be documentary proof enough, particularly when the notification does not stipulate any specific document, the production of which alone, would amount to discharge of adducing documentary proof. Moreover, it is not the case of the Department that the value of the goods and materials sold as indicated in these bills have been contested/disputed by the customers of the appellant. In this context, it is also pertinent that the appellant's averment regarding the factum of its invoices reflecting the value of services and value of goods/materials sold separately while also indicating the service tax and VAT components separately, as well as the averment that they have been discharging their VAT liabilities in the manner as evidenced from their records and returns subjected to audit as well as offered for perusal of the officers over the years, remains uncontroverted.
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22. We also find it dichotomous that the adjudicating authority is determining that the VAT laws do not consider the appellant's manner of accounting the value of the goods/materials sold as "sale" when there is a studied silence on the above averments of the appellant regarding the documentary proof that the appellant relies on pertaining to its compliance of state VAT laws and when there is no reliance seen placed on any official notice/letter of the VAT authorities denying the appellant's discharge of its obligation under the State VAT Laws, or finding it wanting on any aspect, particularly when they are the authorities competent to determine the sufficiency of the appellant's compliance of the state VAT laws.
23. In view of our discussions above, the finding of the adjudicating authority that the appellant is not eligible for the benefit of Notification No.12/2003-St dated 20-06-2003 and the consequent demand and imposition of penalty, cannot sustain and is liable to be set aside.
WHETHER THE INVOKING OF EXTENDED PERIOD OF LIMITATION IS TENABLE
24. The Ld. Counsel for the appellant is right in his submission that the show cause notice nowhere alleges "willful misstatement or suppression of facts with intent to evade payment of duty" and thus the appellant was never called upon to answer such a charge. The Honourable Supreme Court in CCE v HMM Ltd, 1995(76) ELT 497 (SC), 1995 (76) ELT 497 (SC), in the context of 22 invoking of proviso to Section 11A (1) of the Central Excise Act, 1944 had held in para 2 as under:
" Therefore, in order to attract the proviso to Section 11A(1) it must be alleged in the show cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or wilful mis-statement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been noticed or that the assessee was guilty of willful mis-statement or suppression of fact. In the absence of such averments in the show cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11A(1) of the Act." (emphasis supplied).
25. Similar view have been taken in the decision in CCE & ST v Triveni Engineering & Industries Ltd, 2015 (317) ELT 408 (All). Further, in Uniworth Textiles Ltd v CCE, Raipur, 2013 (288) ELT 161 (SC), the Apex Court has held that it is a cardinal postulate of law that the burden of proving any form of mala fide lies on the shoulders of the one alleging it. The Apex Court went on to cite its observation in Union of India v. Ashok Kumar & Ors.
- (2005) 8 SCC 760 that "it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than 23 proved, and the very seriousness of such allegations demand proof of a high order of credibility."
26. That apart it is also pertinent that the findings of the adjudicating authority are only that the appellant has misstated/suppressed relevant facts and that therefore the invocation of extended period is upheld. Absent any finding that such misstatement/suppression was willful and that such willful misstatement /suppression of facts was with intent to evade payment of duty, the adjudicating authority erred in upholding the invocation of extended period of limitation. It is also pertinent that there is no evidence let in of any positive or deliberate act on the part of the appellant with intention to evade payment of duty.
27. We also note from the appeal records that the SCN dated 20.09.2013 has been issued pursuant to an audit conducted. The appellant has stated in its grounds of appeal that its records were also verified during the previous audit dated 26-11-08 for the period April 05 to October 08. There is no allegation that the appellant is not regularly filing its returns or have not reflected the manner of its levy of service tax in its invoices. The present SCN is also issued placing reliance on the records of the appellant alone and not premised on any statements recorded or any other evidence indicating any willful suppression or misstatement of facts. In such circumstances, when the appellant was inspected and audit conducted and the audit queries replied to, there could 24 not be a case of suppression and the Department could not have invoked the extended period of limitation, as has been held in a line of decisions, such as CCE, Bangalore v Pragathi Concrete Products (P) Ltd, 2015 (322) ELT 819 (SC), Rajkumar Forge v UOI, 2010 (262) ELT 155 (Bom), etc. We refrain from multiplying the authorities on the aforesaid settled positions in law. Therefore, we hold that the finding of the adjudicating authority invoking the extended period of limitation is unsustainable and the demand made on the appellant invoking the extended period of limitation is untenable.
28. In view of our discussions above, and in the light of the aforementioned decisions, we find that the demand of duty, appropriate interest and penalty imposed by the original authority are untenable. Accordingly, we set aside the impugned Order-in- Original Sl. No.26/ 2014-Commr dated 26.12.2014. The appeal is allowed with consequential relief in law, if any.
(Order pronounced in the open court on 16.04.2025) (AJAYAN T.V.) (M. AJIT KUMAR) MEMBER (JUDICIAL) MEMBER (TECHNICAL) MK