Karnataka High Court
M/S Alp Consulting Ltd., vs Assistant Commissioner Of Service Tax on 24 September, 2018
1/18
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 24TH DAY OF SEPTEMBER, 2018
BEFORE
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
W.P.No.22677/2015 (T-TAR)
BETWEEN
M/S. ALP CONSULTING LTD.,
'ALP HEIGHTS', No.3, PALACE ROAD
12TH MAIN, VASANTHNAGAR
BANGALORE-560052
(REPRESENTED BY DIRECTOR
Mr. JAYACHANDRAN PILLAI
AGED ABOUT 43 YEARS
S/O KRISHNA BALAKRISHNA PILLAI).
...PETITIONER
(By Mr. V. RAGHURAMAN, ADV.,)
AND
1. ASSISTANT COMMISSIONER OF SERVICE TAX
VCES - DESIGNATED AUTHORITY
ABOVE BMTC BUS STOP
DOMLUR, BANGALORE-560071.
2. COMMISSIONER OF SERVICE TAX
BANGALORE COMMISSIONERATE
TTMC BUILDING
ABOVE BMTC BUS STOP
DOMLUR, BANGALORE-560071.
3. CENTRAL BOARD OF EXCISE AND CUSTOMS
REPRESENTED BY ITS CHAIRPERSON
DEPARTMENT OF REVENUE
NORTH BLOCK, NEW DELHI-110001.
4. UNION OF INDIA
REPRESENTED BY THE
Date of Order 24-09-2018 W.P.No.22677/2015
M/s. ALP Consulting Ltd., Vs.
Assistant Commissioner of Service Tax & Ors.
2/18
SECRETARY TO THE MINISTRY OF
FINANCE, GOVT. OF INDIA
NORTH BLOCK, NEW DELHI-110001.
5. THE COMMISSIONER OF CENTRAL TAX
BENGALURU NORTH COMMISSIONERATE
HMT BHAVAN, GANGA NAGAR
BENGALURU-560032.
...RESPONDENTS
(By Mr. JEEVAN J. NEERALGI, ADV.,)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
IMPUGNED ORDER DATED 10-02-2015 PASSED BY THE R-1
VIDE ANN-A. QUASH THE IMPUGNED ORDER DATED 10-02-
2015 PASSED BY THE R-1 VIDE ANN-A AS BEING ARBITRARY,
ILLEGAL, ERRONEOUS AND VIOLATIVE OF ARTICLE 14 AND 19
OF THE CONSTITUTION & ETC.
THIS PETITION COMING ON FOR PRLY. HEARING IN 'B'
GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
Mr. V. Raghuraman, Adv. for Petitioner. Mr. Jeevan J. Neeralgi, Adv. for Respondents.
The petitioner/assessee-M/s. Alp Consulting Ltd. has filed this writ petition in this Court on 29.04.2015 aggrieved by the order passed by the Assistant Commissioner of Service Tax, Bengaluru u/s.106 of Chapter VI of the Finance Act, 2013 (for short 'Act') in rejecting the Declaration of the petitioner/assessee in Form VCES-I dated 11.11.2013 declaring tax liability Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 3/18 of Rs.6,24,97,844/- for the period April 2012 to December 2012 for the services provided by it for "Manpower Recruitment and Supply Service" and "Business Support Services".
2. The reasons assigned by the Assistant Commissioner of Service Tax, (VCES-1) in para-12.8 and para-12.9 of the impugned order Annexure-A dated 10.02.2015 are quoted below for ready reference:
"12.8 The Declarant's contention that, by way of an Audit Query dated 18-11-2013 the Department has itself established that the issue involved in the VCES application is covered under the provision of Section 73A which is clearly different from the issue involved in the earlier proceedings which culminated into an Order dated 23-12-2010, is again under a wrong premise. Although, not denying that the Audit Query dated 18-11-2013 contained a reference to Section 73A, it was only a procedural Audit Query issued after conclusion of Audit in which the legal provisions invoked was wrongly referred to, by mistake, as Section 73A. The said Audit Query was followed by a Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors.4/18
Audit Note and a Show Cause Notice C.No.V/16/40/2014-ST Adjn. Dated 18-02-2014 wherein the legal provisions for demand of service tax defaulted has been correctly invoked under Section 73(1) of the Act, which fact, it appears that the Declarant has overlooked with an intention to mislead the issues.
12.9 Having concluded in the foregoing paragraphs that the issue gets covered only under Section 73(1) of the Act and not under Section 73A of the Act, the observation of the Hon'ble High Court of Karnataka, that whether the issues that arose in the Notice dated 19-03- 2010 culminating in the Order dated 23-12-2010, are the very same issues, which has arisen for the subsequent period April 2012 to December 2012, in respect of which, the Declarant is seeking benefit of the Scheme, is answered in the affirmative. The issue in the Notice dated 19-03-2010 culminating in the Order dated 23-12-2010 and which has arisen for the subsequent period April 2012 to December 2012, are issues under Section 73(1) of the Act only and not under Section 73A of the Act."
Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 5/18
3. Assailing the said order, the learned counsel for the petitioner has urged before the Court that the reasons assigned by the learned Authority are not sustainable as the provisions of Section 73 of Chapter V of the Finance Act, 1994 as inserted by Finance Act, 2006 w.e.f. 18.04.2006 are not applicable to the aforesaid period, whereas the provisions of Section 73A of the Chapter VI of Finance Act, 1994 would be applicable. He, therefore, submitted relying upon the decision of the Bombay High Court in the case of Bajaj Auto Limited vs. Union of India (2002 SCC online Bom 167) that the assessee has offered and actually paid the said service tax for the period from April-2012 to December-2012 in two installments as permitted under the said Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES). Therefore, upon such payment in two installments the petitioner should be allowed the immunity from penalty and prosecution to the assessee Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 6/18 and therefore, the rejection of the said Declaration by the Respondent-Assistant Commissioner is not sustainable and deserves to be quashed.
4. On the other hand, the learned counsel for the Revenue-Mr.Jeevan J. Neeralgi, drew the attention of the Court to the provisions of Section 106 of the said VCES, 2013 and he submitted that if the issue with regard to 'any period' 'on any issue' is pending in litigation at any Forum from the side of the assessee, no Declaration can be made by the assessee under VCES, 2013 and the same cannot be accepted by the Respondent-Authority and therefore, the present rejection of the Declaration by the concerned authority was justified.
5. Further, he drew the attention of the Court towards the appeal of the assessee being still pending before the Appellate Tribunal of CESTAT which Appeal No.ST/828/2011 for the period October-2004 to March-2009 on the same issue about non-levy or short Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 7/18 levy under Section 73 of the Act and since the same is still pending, the assessee cannot be allowed to keep the lis pending before the said Tribunal also and claim the benefit of VCES, 2013 also even though for the subsequent period April-2012 to December-2012.
6. The relevant definitions of "tax dues" under Section 105(e) and Section 106 including the Second Proviso to Section 106 are quoted below for ready reference:
" Section 105:
(e) "tax dues" means the service tax due or payable under the Chapter or any other amount due or payable under section 73A thereof, for the period beginning from the 1st day of October, 2007 and ending on the 31st day of December, 2012 including a cess leviable thereon under any other Act for the time being in force, but not paid as on the 1st day of March, 2013.
Person who may make declaration of tax dues.
Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 8/18
106. (1) Any person may declare his tax dues in respect of which no notice or an order of determination under section 72 of section 73 or section 73A of the Chapter has been issued or made before the 1st day of March, 2013:
Provided that any person who has furnished return under section 70 of the Chapter and disclosed his true liability, but has not paid the disclosed amount of service tax or any part thereof, shall not be eligible to make declaration for the period covered by the said return:
Provided further that where a notice or an order of determination has been issued to a person in respect of any period on any issue no declaration shall be made of his tax dues on the same issue for any subsequent period.
(2) Where a declaration has been made by a person against whom, -
(a) an inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short-paid has been initiated by way of -
(i) search of premises under section 82 of the Chapter; or Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors.9/18
(ii) issuance of summons under section 14 of the Central Excise Act, 1944, as made applicable to the Chapter under section 83 thereof; or
(iii) requiring production of accounts, documents or other evidence under the Chapter or the rules made thereunder; or
(b) an audit has been initiated, and such inquiry, investigation or audit is pending as on the 1st day of March, 2013, then, the designated authority shall, by an order, and for reasons to be recorded in writing, reject such declaration."
7. The provisions of Sections 73 and 73A of Chaper V of Finance Act, 1994 are also quoted below for ready reference:
73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within [thirty months] from the relevant date, serve notice on the person chargeable with Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors.10/18
the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax 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 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) willful 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, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words [thirty months], the words "five years" had been 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 [thirty months] or five years, as the case may be."
Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 11/18 73A. Service tax collected from any person to be deposited with Central Government (1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made thereunder from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government."
8. On the last date of hearing on 17.09.2018, after hearing both the learned counsels, this Court had given some time to the learned counsel for the petitioner-assessee to take instructions from the petitioner as to whether the assessee would like to withdraw its pending appeal from the CESTAT for the tax period of 2007 in order to save the applicability of Second Proviso to Section 106 of the VCES 2013.
Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 12/18 The said order passed by this Court on 17.09.2018 is quoted below for ready reference:
"1. Learned counsel for the petitioner Mr.V.Raghuraman prays for some time to take instructions from the petitioner-company, as to whether the petitioner-company wants to keep the lis alive by pressing the pending Appeal before the National Appellate Tribunal (NAT), which is pending for the tax period of 2007, so as to enable to claim the benefit of Voluntary Compliance Encouragement Scheme, 2013, vide Annexure-B for the later period April 2012 to December, 2012, saving the applicability of Second Proviso to Section 106 introduced by the said Scheme.
2. Learned counsel for the petitioner has relied upon the Division Bench judgment of the Delhi High Court in the case of Frankfinn Aviation Services P. Ltd., vs. Asst.Commissioner, Designated Authority, VCES, Service Tax 2014 (34) S.T.R. 165 (Del.), whereas the learned counsel for the Revenue has relied upon the Division Bench judgment of the Madhya Pradesh High Court in the case of Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors.13/18
Yashwant Agrawal & Co., vs. Union of India 2017 (47) S.T.R. 10 (M.P.).
3. Prima-facie, this Court is of the opinion that the words 'any period' 'on any issue', in the said Second Proviso would cover any dispute for any period pending adjudication at any Forum and therefore, to avoid the multiplicity of litigation, the petitioner-assessee has to withdraw all pending litigations against the Department in order to avail the benefit of VCES Scheme, 2013.
Put up the matter on 24.09.2018 as prayed."
9. Learned counsel for the petitioner-assessee however relied upon the aforesaid Bombay High Court decision and urged before the Court that the payment of service tax for the subsequent period in question from April-2012 to December-2012 falls under Section 73A of the Act and therefore the issue pending before the CESTAT under Section 73 of the Act is not the same issue and therefore the said Declaration can be accepted by the Respondent-authority.
Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 14/18
10. Having heard the learned counsel for the parties, this Court is satisfied that the Second Proviso to Section 106 of the VCES-2013 does not make any distinction about the payment of service tax by the assessee under the VCES as to Section 73 or Section 73A of the Act. There is no watertight compartment between the payment of due service tax by the assessee under the said VCES whether it is under Section 73 of the Act or 73A of the Act. Section 73 of the Act envisages recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded to the assessee whereas Section 73A of the Act which was later on inserted by Finance Act, 2006 envisages the service tax wrongly collected by any person to be deposited with Central Government. Section 73A of the Act was obviously to prevent any situation of unjust enrichment to the assessee by retaining the amount even wrongly collected from the customers in the name of service tax and therefore that amount so collected as Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 15/18 service tax in any case was liable to be deposited with the Central Government.
11. The short payment of service tax under Section 73 of the Act whether or not levied earlier or short levied earlier does not stand on a different footing so far as VCES, 2013 is concerned. The purpose of the said Scheme announced by the Government is to put an end to the litigation by the Assessee against the Government and by depositing the entire amount of service tax either not paid earlier or short levied earlier under Section 73 of the Act or wrongly collected service tax but not paid under Section 73A of the Act. The reference of all the three provisions of Section 72, 73 or 73A of the said Chapter VI of the Finance Act, 1994 in the definition of 'tax due' under Section 105 of the Act does not create any water-tight compartments between these three provisions and the consideration of the Declaration under the said Scheme cannot be made, if any lis or issue is kept alive for adjudication by any Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 16/18 Forum by way of litigation initiated by the Assessee. The Second Proviso clearly begins with a negative stipulation that "Where a notice or an order of determination has been issued to a person in respect of 'any period' 'on any issue', no Declaration shall be made of his tax dues on the same issue for any subsequent period". Therefore, the Second Proviso to Section 106 of the Act is a clear bar in the present case for the assessee.
12. The appeal filed by Assessee admittedly pending before the CESTAT regarding its liability to pay service tax on the service provided by it for the previous period. Merely because the period in the appeal before the Tribunal and the period covered in the Declaration are different, the Second Proviso cannot be rendered otiose or inapplicable to the case. The VCES and the determination of issues by competent adjudication Forums cannot be separated in any water-tight compartments and segregated in silos, so to say.
Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 17/18
13. If the benefit of immunity from penalty and prosecution is sought by the Assessee, he cannot be allowed to keep on a hanging sword of litigation on the head of Revenue. If such an interpretation as is canvassed by the learned counsel for the Assessee were to be accepted by the Court, that would defeat the very purpose of the Scheme announced for the defaulting assessees. Such interpretation cannot be permitted because the objective of the beneficial Scheme is to give benefit of immunity from penalty and prosecution to the Assessees and both parties should buy peace on contentious issues. The combined purpose of Sections 73 and 73A of the Act is obvious and clear and that is not to allow the Assessee to retain any component of service tax in any manner whether already assessed but not paid, deposited short levied or short paid or erroneously refunded or even wrongly collected but not so far deposited and paid to the Central Government.
Date of Order 24-09-2018 W.P.No.22677/2015 M/s. ALP Consulting Ltd., Vs. Assistant Commissioner of Service Tax & Ors. 18/18 The loophole left in Section 73 of the Act was sought to be plugged by the Legislature by bringing on the statute book Section 73A of the Act and therefore, both these provisions cannot be read in isolation for the purpose of VCES.
14. Consequently, this Court does not find any merit in this writ petition filed by the petitioner and the assessee's Declaration was rightly rejected by the Respondent-authority.
15. The present writ petition is liable to be dismissed and the same is accordingly dismissed. No costs.
Sd/-
JUDGE TL