Custom, Excise & Service Tax Tribunal
Continental Drugs Company Pvt. Ltd vs Commissioner Of Service Tax on 11 December, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.ST/109/08 (Arising out of Order-in-Original No.20/Commr(AK)/08 dated 27/02/2008 passed by Commissioner of Central Excise (Adj.), Mumbai) For approval and signature: Honble Mr. P.R. Chandrasekharan, Member (Technical) Honble Mr. Anil Choudhary, Member (Judicial) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Continental Drugs Company Pvt. Ltd., Appellant Vs. Commissioner of Service Tax, Respondent Mumbai Appearance:
Shri.S.S.Gupta, CA, for appellant Shri.S.G.Dewalwar, Addl. Comm. (AR), for respondent CORAM:
Honble Mr. P.R.Chandrasekharan, Member (Technical) Honble Mr.Anil Choudhary, Member (Judicial) Date of Hearing : 11/12/2013 Date of Decision : 11/12/2013 ORDER NO Per: P.R.Chandrasekharan
1. The appeal is directed against Order-in-Original No.20/Commr(AK)/08 dated 27/02/2008 passed by Commissioner of Central Excise (Adj.), Mumbai.
2. The appellant is M/s.Continental Drugs Company Pvt. Ltd., Worli, Mumbai. Investigation conducted by the Directorate General of Central Excise Intelligence (DGCEI), revealed that the appellant was providing security services to other group companies but were not registered with the jurisdictional excise authorities for the purpose of payment of service tax. They provided security services to their group companies, namely, Zee Telefilms Ltd., Essel Propack Ltd., Playwin Infravest Pvt.Ltd., ASC Enterprises Ltd., ETC Network, E-City Entertainment and Pan India Paryatan Ltd. and were receiving consideration for the services rendered of a fixed sum every month. The consideration so received amounted to RS.10,23,69,997/- for the period 31/10/1999 to July 2004 and the service tax payable thereon amounted to Rs.59,40,500/-. Accordingly, a show-cause notice dated 20/01/2005 was issued to the appellant proposing to demand the above service tax amount along with interest thereon and also proposing to impose penalties under the provisions of Finance Act, 1994. The appellant contested the levy; however, the claim of the appellant was rejected and the service tax demand was confirmed along with interest thereon and penalties were imposed under the provisions of Section 75A, 76, 77 & 78 of the Finance Act 1994. Aggrieved of the same, the appellant is before us.
3. The Ld. Consultant for the appellant submits that it is not correct to say that the appellant had rendered only security services to their various group companies for which they received consideration. In addition to security services, they had also rendered other services such as common maintenance and house keeping, common group auditing, etc. and consideration pertained to undertaking such services also. This is evident from the statements of Shri Vinay V Mokashi dated 11/02/2004, Finance Head of M/s.Essel Propack before the investigating authority. He also relies on the statement dated 19/03/2004 of Shri Navin Agarwal, Company Secretary and Senior Manager (Finance and Accounts) of one of the recipient of services wherein it has been stated that the appellant provided services of skilled manpower requirement and common facilities to the group companies and the expenses incurred were shared by the group companies and reimbursed to the appellants. Similarly, Shri Deepak Motiram Bendre, Vice President (Accounts) of ETC Networks Ltd., one of the recipients of the service has also stated that the services received by them from the appellant included guidance on business planning, financial planning, auditing, business strategy and security services. Shri Amol Chandra, Financial Advisor of Essel Group in his statement dated 28/01/2004 has also confirmed receipt of services such as management advice, auditing, advice on deployment of funds and market borrowing in addition to security services. Reliance is also placed on the Circular dated 26/08/2002 and 07/02/2003 which indicates the share of the each other group companies for the services rendered by the appellant to them. In their reply to the show-cause notice also, the appellant had clearly stated that in addition to the security services, the appellant had also provided services, such as common maintenance, house keeping, common group auditing, etc. It is his contention that the appellant had charged the group companies only the actual costs incurred for rendering the services and the same was done without any profit motive and no charges were received towards the services rendered and therefore, the impugned demands are not sustainable in law. It is also argued that reimbursement received was towards salary of the employees and this Tribunal in the case of Bhootpurva Sainik Society Vs. CCE & ST, Allahabad 2012 (25) STR 39 (Tri-Del) had held that if an activity undertaken without any profit motive then it cannot be considered as a service rendered by a commercial concern. Therefore, there will not be any service tax liability on such activity. Reliance is also placed on the decision of the Honble Apex Court in the case of Padmini Products Vs. CCE 1989 (43) ELT 195 (SC), Collector of Central Excise Vs. Chephar Drugs & Liniments 1989 (40) ELT 276 (SC) to support their claim that the demand is time barred and the extended period of time cannot be invoked for mere failure or negligence on the part of the manufacturer to take out licence or pay duty when there was scope for doubt that goods were not dutiable. The ratio of these decisions would apply to the facts of the present case. It is also contended that the service tax liability on the security services rendered would amount to only Rs.15 lakhs as against the demand of Rs.59 lakhs confirmed in the impugned order. Accordingly, he prays that the impugned order be set aside and appeal allowed.
4. The Ld. AR appearing for the Revenue on the other hand refers to the statement of Shri Mohender Garg, Director of the appellant firm, who in his statement dated 04/02/2004 had confirmed that his company was engaged in providing security services to M/s.Essel Group of companies and except for 47 security personnel, one peon and five drivers, there was no other staff working in the appellant company. He also placed reliance of statement of Shri P.B.Pillai, Security Officer, who in his statement dated 22/01/2004 had stated that he was working as Security Officer with the appellant firm since 1996 and under him 49 security staff were working. Out of the 49 staff, about 20 persons were deployed at the building premises of the group entities and the balance were deployed at the premises of Zee Telefilm Ltd. and as personal security staff for the Chairman of the company. Ld. AR submits that from these statements, it is evident that the services rendered by the appellant to the group entities were only security service and nothing else. Reliance is placed on the enquiry made with the Additional Central PF Commissioner, Maharashtra by the investigating agency and as per the enquiry report, the appellants were providing only security services and the number of personnel engaged were about forty five. From these corroborative evidences, it is clear that the appellant had rendered only security services and on such security services, the appellant is liable to discharge service tax liability. Accordingly, he pleads that the impugned order is sustainable in law and the appeal is liable to be dismissed.
5. We have carefully considered the rival submissions.
5.1 During the course of arguments, the Ld. Consultant for the appellant was asked if he could submit the bills raised by the appellant on the various group of entities wherein the details of the services rendered were indicated and the amounts charged for various services. However, the Ld. Consultant fairly admitted that they do not have any records and the amounts have been collected by way of debit notes. Apart from the Circulars dated 26/08/2002 and 07/02/2003, they do not have any other document to produce in support of their claims that they had rendered various services such as house keeping, maintenance, group auditing, advices and financial planning and strategy, etc., in addition to security services. We have perused the circular dated 26/08/2002 and 07/02/2003. The said circulars does not reveal anything about the nature of the services rendered but merely gives the share of expenses by each of the group companies to the appellant on a monthly basis. From these circulars, it cannot be concluded that the services rendered by the appellants were other than security services. It is in this context, the statements of the employees of the appellant firm become relevant. Shri Mohinder Garg, Director of the appellant firm in his statement dated 04/02/2004 has clearly admitted that the appellant was engaged in providing security services to M/s.Essel group of companies and other than about 47 security persons, one peon and five drivers, there were no other staff working in the appellant firm. Similarly, Shri P.B. Pillai, who was the Security Officer, in his statement dated 22/01/2004, has clearly admitted that he was the Security Officer with the appellant firm and his responsibility was to provide security to M/s.Essel Group of companies and supervision of security staff. He has further stated that there were 49 security staff working under him who were deployed at the various premises of the group companies. From these statements, it is clear that the nature of service rendered by the appellant was only security services and nothing else. The enquiry report of the Additional PF Commissioner, Maharashtra, about the functioning of the appellant also shows that the appellant firm was engaged in providing in security services. There is no mention of any other activity undertaken by the appellant in the said enquiry report. Thus from the documentary evidences available on record, it is clearly established that the appellant was rendering only security services. Further, the deployment chart of the various personnel as on 27/01/2004 available on record also indicate the names of 46 Nos. of security staff, who were deployed at the various premises. In the records, there is an extract of the Ledger Account of M/s.ETC Networks Ltd., are of the recipients of the services. The said ledger shows payment of a sum of Rs.1,89,740/- per month to the appellant and the payments are shown as towards security charges. The formal extracts of other service recipients such as Pan India, Network Infravest Ltd., also show a monthly fixed payment to the appellant towards service charges. If the appellant had indeed rendered a multiplicity of services, the charges would have varied every month which also is a pointer towards the fact that the appellant rendered only one type of service. From the statements of the employees of the appellant firm, the service rendered was only security services and nothing else. From these documents available on record, it emerges that the appellant had rendered only security services to the group entities and not any other services as claimed by them.
5.2 As regards the claim of the appellant that they were operating on no profit no loss basis and therefore, cannot be considered as a commercial concern, this argument is without any merit. The appellants were charging consideration from the group companies entities for the services rendered on a monthly basis and the appellant had shown the income so received as business income in their balance sheet and the group entities which made the payments to the appellant firm had claimed these as expenditure, thereby enjoying the benefit of income tax by reducing their profits. In the light of these findings given by the adjudicating authority, the appellant cannot claim that they were not operating as a commercial concern. As regards the arguments that they received only reimbursement of salaries and nothing else, there is no evidence available on record to show that the income received by the appellant was completely disbursed by way of payment of salaries. In the absence of any such evidence, it is difficult to conclude that the appellant was operating a no profit and no loss basis. Therefore, the contention of the appellant that they were not operating as a commercial concern cannot be accepted. As regards the claim of the appellant that they had not suppressed any facts and therefore, extended period time cannot be invoked, the appellant has not brought on record any evidence to prove their bonafides. Bonafide belief is not blind belief but has to be based on reasonable measures taken to entertain such belief. There is nothing in the records to show that the appellant consulted either by the department or obtained any legal opinion as their liability towards service tax. In the absence of any such evidence, it is difficult to accept this contention. Inasmuch as the appellant did not obtain any registration nor did they follow any of the statutory procedures the appellant had clearly suppressed the facts from the department with an intent to evade service tax. In these circumstances, the confirmation of duty demand invoking the extended period of time along with interest thereon cannot be faulted. Consequently, the appellant also liable to penalty under the provisions of the Finance Act, 1994.
6. In view of the foregoing, we do not find any merit in this appeal and accordingly, we dismiss the same.
(Operative part of the order pronounced in Court) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 10