Custom, Excise & Service Tax Tribunal
National Aviation Co. Of India Ltd vs Commissioner Of Service Tax on 15 July, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.ST/388/10 (Arising out of Order-in-Original No.13/STC-I/BR/10-11 dated 17/06/2010 passed by Commissioner of Service Tax-I, Mumbai) For approval and signature: Honble Mr.M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) 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? ========================================
National Aviation Co. of India Ltd., Appellant Vs. Commissioner of Service Tax, Respondent Mumbai Appearance:
Shri.Piyush Chhajed, C.A.for appellant Shri.K.S.Mishra, Addl. Comm. (AR), for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical) Date of Hearing : 15/07/2015 Date of Decision : 15/07/2015 ORDER NO Per: M.V. Ravindran
1. This appeal is directed against Order-in-Original No.13/STC-I/BR/10-11 dated 17/06/2010 passed by Commissioner of Service Tax-I, Mumbai.
2. The relevant facts that arise for consideration are that the appellant herein are providing services of transportation of passengers embarking in India for international journey by air services (here in after referred to as services). The service tax liability of the said services came into statue from 01/05/2006. A show-cause notice was issued for demand of service tax liability for the amount collected by the appellant for the said services prior to 01/05/2006. The appellant contested the show-cause notice on merits, as well as on limitation, claiming before the adjudicating authority that the amount of advance received was for the services to be rendered after 01/05/2006, but they were not aware that the service tax liability would arise. On limitation, it was the submission that they were under the bonafide impression that the service tax liability may not arise on an amount received as advance for the journeys to be conducted after 01/05/2006. The adjudicating authority did not agree with the contentions raised and confirmed the demands along with interest and also imposed penalties.
3. The learned Chartered Accountant would draw our attention to the facts of the case as also to the show-cause notice and the order-in-original. On merits, it is his submission that prior to 01/05/2006 any amount collected by the appellants were for the services which were not under tax net and the taxability of the services rendered to their customers on first class and business class were effective from 01/05/2006. They would submit that they could not be held liable to pay such service tax for the amount collected in advance. For this proposition, he relied upon the Notification No.36/2010-ST dated 28/06/2010 and the clarification issued by the Board consequent to such issuance of notification and submits that from 01/07/2010, the service tax liability on the air travel by economy class came under service tax net and the board in the said circular issued, exempted any amount received as advance for the flights to be taken after 01/10/2010. He would submit that this circular should be applied for the case in hand also. He also relies upon the judgement of the apex Court in the case of Suchitra Components Ltd., Vs. CCE, Guntur reported in 2008 (11) STR 430 (SC). On limitation, it is his submission that the Assistant Commissioner of Service Tax, vide letter No.ST/Mum/Gr.I/ATS/7913 dated 10/11/2006 sought the details from the appellant as to their service tax liability on the amounts charged from the passengers for the period 01/05/2006 to 30/09/2006. He submitted that the appellant replied to the said letter on 14/03/2007 itself and there was no further correspondence. Accordingly, it is his submission that the Revenue was aware of the entire issue on 10/11/2006 and hence the show-cause notice issued on 10/03/2010 is hit by limitation. It is also his submission that findings recorded by the adjudicating authority that the appellants issue clarified from the Board as to the taxability of the amount received as early as in 06/08/2009, they should have started discharging the service tax on the amounts so received in advance by their own, is an incorrect proposition as the appellant were in doubt and hence, such clarification was sought. He would rely upon the judgement of the Apex Court in the case of Uniworth Textiles Ltd., - 2013 (13) 31 taxmann.com 67 (SC) was the proposition in situation like the case in hand extended period cannot be invoked.
4. The learned DR on the other hand reiterated the findings of the adjudicating authority and submits that the appellant should have discharged the service tax liability on the amount received in advance, as the taxable services were rendered subsequent to the date the services were taxed i.e., 01/05/2006. He would submit that there is no dispute that the said amounts, for which services were undertaken by the passengers after 01/05/2006 are liable to be taxed. He would submit that the appellant being in the organised sector, was aware of the taxability of the services rendered by them and should have discharged their service tax liability on his own. As regards the limitation, it is his submission that the appellant did not inform the department about the amounts received in advance from the passengers for the services and having not declared such an amount, there was an element of mis-statement and hence, invocation of extended period was correct.
5. We have considered the submissions made at length by both sides and perused the records.
5.1 The issue involved is regarding the taxability of an amount on the services, which came into service tax net from 01/05/2006; it is not disputed that the amount on which the tax liability under the service is of are the amounts, which were received in advance by the appellant from the passengers, who took the services either entirely or partially after 01/05/2006.
5.2 We would like to record that the reliance placed by the learned Chartered Accountant on the Boards Circular No.334/3/2010-TRU dated 01/07/2010 will not carry the appellants case any further, as the circular is not for the relevant period in hand; as also we see from the Circular that the said circular was issued specifically in respect of notification No.36/2010-ST, while the issue in hand it pertains to the situations wherein new services were brought into tax net from 01/05/2006. On merits, we find that the appellant has a very weak case as the service tax liability on the amounts received in advance has to be discharged is the settled law.
5.3 On limitation, we find that the appellant has a very strong case as the show-cause notice is dated 10/03/2010, demanding service tax liability for the amounts collected prior to 01/05/2006. We find that a letter dated 10/11/2010 from the department was addressed to the appellant, which reads as under:
OFFICE OF THE ASSISTANT COMMISSIONER OF SERVICE TAX, ROOM NO.35, 2ND FLOOR, MADHU INDUSTRIAL ESTATE, P.B.MARG,WORLI, MUMBAI 400 013 F.No.ST/MUM/DIV-III/GR-I/ATS/7913 Mumbai, the 10/11/2006 To:
M/s.Air India Ltd., Finance Building Old Airport,Kalina Santacruz (E) Mumbai 400 029 Sub: Levy of Service Tax on International Journey by Aircraft .. reg Gentlemen, You are aware that service tax is leviable with effect from 01st May 2006 on services provided by an aircraft operator to passengers embarking in India for international journey by any class, other than economy class, under Section 65 (105) (zzz0) read with section 66 of the Finance Act, 1994. Board of Airline Representatives in India (BAR) have sought clarifications on the levy of service tax on the above mentioned service.
In this regard, the Central board of Excise & Customs (Ministry of Finance) vide Circular No.85/3/2006-ST dated 17/10/2006 has interlia clarified that service tax is leviable on the total value of the ticket. The copy of said Circular is available on Website: www.servicetax.gov.in In view of the above you are requested to submit the following information so that early action can be taken. Further you are also requested to inform the amount of service tax paid during September 06, by return of tax, if any.
Month wise (May 06 to Sept 06) Value of Ticket Gross amount charged from the passenger Value on which service tax paid Difference between gross amount & value on which ST paid Amount of service tax paid Reasons for non-compliance of service tax with reference to Col.No.5 (1) (2) (3) (4) (5) (6) (7) Yours faithfully Sd/- (S.P Sonawale) Assistant Commissioner Service Tax, Div-III Mumbai 5.4 In response to the said letter as reproduced herein above, the appellant informed details as sought by letter dated 14/03/2007 and it is not in dispute. It can be noticed from the letter received by the appellant from the office of the Assistant Commissioner, service tax apecific details were called for and such details were given. In our view the appellant had volunteered the information as soon it was sought by the departmental authorities. In our view the details which were not sought could not have been supplied by the appellant as against this, on limitation, the findings of the adjudicating authority are as follows:
4.3. On going through the submissions, the case records and the relevant provisions, I find that the Noticee had indeed requested the Board to grant exemption for the services provided after 01.05.2006 for which payments have been received before 01.05.2006. The department communicated Boards decision vide F. No. ST/Div-III/GIII/Misc-5/09 dated 06.08.2009 that exemption cannot be granted. Even after receiving the clarification from the Board, NACIL had not paid the Service Tax on the tickets issued/service rendered by them from 01.05.2006. Thus NACIL intentionally evaded the payment of Service Tax. They chose not to comply with the provisions of the Act and the Rules made there under to avoid payment of service tax. The service tax liability of the noticee for the services rendered from 01.05.2006 is clearly established. Receipt of payment prior to that date will not obviate the tax liability. Regarding the variation in the demand amount, I find that since they have collected such amount much before the service became taxable and hence the taxes were not collected separately from the customers. Thus the amounts collected are inclusive of service tax and the correct amount of service tax is Rs.74,48,904/-.
4.4 In self assessment procedure the responsibility is on the tax payer to assess and pay the tax liability correctly. It is not open to them to take the plea that no demand for extended period can be made when full disclosure of material details was not made by them. The case laws relied on by the noticee is different on material facts mainly dealing with Central Excise issues under different circumstances. As such their plea against demand for extended period and for non-imposition of penalty for non-payment of service tax in time is not legally tenable. As per Section 75 of the Act, interest on delayed payment is automatic and mandatory. Considering all the above facts and evidences, I pass the following order:
5.5 We do not understand the reasoning given by the adjudicating authority for coming to a conclusion that the service tax liability arises on the appellant for the period prior to 01/05/2006 as it is no doubt that services were utilised by passengers post 01/05/2006 and the amounts were collected prior 01/05/2006.
5.6 Receipts of the payments prior to the date of journey recorded in accounts, as is the industry practice. If the authorities were claiming that the appellant has suppressed the details, they could have asked for the correct details from the appellants, which they did not do so. Further, we find that the post communication dated 06/08/2006, which is referred by the adjudicating authority, it was also in the knowledge of the department that a clarification has been issued, despite such clarification, there seems to be no follow up by the department like seeking for the details or demand of tax from the appellants, in the absence of any positive action of in suppressing the details from the department, we find that tax liability which is being worked out by invoking the extended period is not correct and we rely on the ratio of the Apex Court in the case of Uniworth Textiles Ltd., (supra), which is in paragraph Nos.22,23, 24 & 25, which we respectfully reproduce:
22.?We are not persuaded to agree that this observation by the Commissioner, unfounded on any material fact or evidence, points to a finding of collusion or suppression or misstatement. The use of the word willful introduces a mental element and hence, requires looking into the mind of the appellant by gauging its actions, which is an indication of ones state of mind. Blacks Law Dictionary, Sixth Edition (pp 1599) defines willful in the following manner :-
Willful. Proceeding from a conscious motion of the will; voluntary; knowingly; deliberate. Intending the result which actually comes to pass An act or omission is willfully done, if done voluntarily and intentionally and with the specific intent to do something the law forbids, or with the specific intent to fail to do something the law requires to be done
23.?In the present case, from the evidence adduced by the appellant, one will draw an inference of bona fide conduct in favour of the appellant. The appellant laboured under the very doubt which forms the basis of the issue before us and hence, decided to address it to the concerned authority, the Development Commissioner, thus, in a sense offering its activities to assessment. The Development Commissioner answered in favour of the appellant and in its reply, even quoted a letter by the Ministry of Commerce in favour of an exemption the appellant was seeking, which anybody would have found satisfactory. Only on receiving this satisfactory reply did the appellant decide to claim exemption. Even if one were to accept the argument that the Development Commissioner was perhaps not the most suitable repository of the answers to the queries that the appellant laboured under, it does not take away from the bona fide conduct of the appellant. It still reflects the fact that the appellant made efforts in pursuit of adherence to the law rather than its breach.
24.?Further, we are not convinced with the finding of the Tribunal which placed the onus of providing evidence in support of bona fide conduct, by observing that the appellants had not brought anything on record to prove their claim of bona fide conduct, on the appellant. 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. This Court observed 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 proved, and the very seriousness of such allegations demand proof of a high order of credibility.
25.?Moreover, this Court, through a catena of decisions, has held that the proviso to Section 28 of the Act finds application only when specific and explicit averments challenging the fides of the conduct of the assessee are made in the show cause notice, a requirement that the show cause notice in the present case fails to meet. In Aban Loyd Chiles Offshore Limited and Ors. (supra), this Court made the following observations :
21.?This Court while interpreting Section 11-A of the Central Excise Act in Collector of Central Excise v. H.M.M. Ltd. (supra) has observed that in order to attract the proviso to Section 11-A(1) it must be shown that the excise duty escaped by reason of fraud, collusion or willful misstatement of suppression of fact with intent to evade the payment of duty. It has been observed :
...Therefore, in order to attract the proviso to Section 11-A(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 willful misstatement 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 practiced or that the assessee was guilty of wilful misstatement or suppression of fact. In the absence of any such averments in the show-cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11-A(1) of the Act. It was held that the show cause notice must put the assessee to notice which of the various omissions or commissions stated in the proviso is committed to extend the period from six months to five years. That unless the assessee is put to notice the assessee would have no opportunity to meet the case of the Department. It was held :
...There is considerable force in this contention. If the department proposes to invoke the proviso to Section 11-A(1), the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said proviso....
6. In view of the foregoing, we hold that demands raised on the appellant are blatantly hit by limitation and we set aside the impugned order on the question of limitation. Since we have set aside the demands, the question of interest and penalties does not arise and they are also set aside.
7. The impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Dictated in Court) (Raju) Member (Technical) (M.V. Ravindran) Member (Judicial) pj 1 2