Custom, Excise & Service Tax Tribunal
M/S Agauta Sugar & Chemicals vs Cce, Noida on 1 September, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH COURT NO.1
LARGER BENCH
For approval and signature:
Honble Justice Shri R.M.S. Khandeparkar, President
Honble Dr. Chittaranjan Satapathy, Technical Member
Honble Shri Ashok Jindal, Judicial Member
1.Whether Press Reporters may be allowed to see under
Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication in
any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy
of the order?
4. Whether order is to be circulated to the Departmental
Authorities?
ST/Appeal No. 32/2007
(Arising out of order in appeal No.143/CE/Appl/Noida/06 dated 18.10.2006 passed by the Commissioner (Appeals), Customs & Central Excise, Meerut-II, Noida)
M/s Agauta Sugar & Chemicals Appellant
Vs
CCE, Noida Respondent
Present for the Appellant : Shri A.R.M. Madhav Rao, Advocate Present for the Respondent : Shri R.K. Verma, DR .
ST/Appeal No. 88/2007(Arising out of order in Appeal No. 104/GRM/ST/JPR.I/2006 dated 7.12.2006 passed by the Commissioner (Appeals), Customs & Central Excise, Jaipur) M/s Jaipur Glass & Potteries Appellant Vs CCE, Jaipur-I Respondent Present for the Appellant : Shri Hemant Bajaj, Advocate Present for the Respondent : Shri R.K. Verma, DR ..
ST/Appeal No. 532/2006(Arising out of order in Appeal No. 65/GRM/CE/JPR.I/2006 dated 29.8.2006 passed by the Commissioner (Appeals), Customs & Central Excise, Jaipur) M/s Guljag Industries Ltd Appellant Vs CCE, Jaipur-I Respondent Present for the Appellant : None Present for the Respondent : Shri R.K. Verma, DR Coram: Honble Justice Shri R.M.S. Khandeparkar, President Honble Dr. Chittaranjan Satapathy, Technical Member Honble Shri Ashok Jindal, Judicial Member Date of Hearing: 30.6.2010 Date of Pronouncement: 01.9.2010 Misc. Order Nos. 219/2010 SM (Br.) Per Dr. Chittaranjan Satapathy These appeals involve a common issue as to whether service tax in relation to goods transport service received by the appellants during the period 16.11.1997 to 1.6.1998 can be recovered by issue of show-cause notice in the year 2004. The issue has been referred to the Larger Bench by a Single Member Bench of the Tribunal vide Agauta Sugars Vs. CCE 2007 (8) STR 496 taking note of difference of opinions expressed by different Benches of the Tribunal as reflected in the cases of BPL Engineering Ltd. Vs. Commissioner of Service Tax 2006 (3) STR 747 (Tri. Bang.) and R.K. Marbles Pvt. Ltd. Vs. CCE, Jaipur II 2007-TIOL-29-CESTAT-DEL on the one hand and CCE Vs. Mangalam Cement 2007 (7) STR 673 (Tri. Del.) on the other.
2. In the case of R.K. Marbles (supra), it has been held on 3.1.2006 by the Single Member Bench of the Tribunal that the issue is squarely covered by the decision of the Tribunal in the case of L.H. Sugar Factories Vs. CCE, Meerut 2004 (165) ELT 161 on 1.1.2004 which has been upheld by the Honble Supreme Court in CCE, Meerut Vs. L.H. Sugar Factories Ltd. 2005 (187) ELT 5 (SC) on 27.7.2005. Hence the demand of tax was set aside.
3. In the case of BPL Engineering (supra), it has been held on 10.5.2006 by the Division Bench that the demands cannot be confirmed as the show-cause notice had not been issued prior to the amendment made in the law in 2004 following the decision in L.H. Sugar (supra).
4. In the case of Mangalam Cement (supra), it has been held in favour of the Revenue that the show-cause notice issued in 2004 is clearly within the prescribed period and therefore the demand is valid.
STATUTATORY/ LEGAL DEVELOPMENTS:-
5. For a better understanding of the issues involved in these cases, we briefly indicate the statutory/ legal developments that have taken place from time to time in respect of levy on goods transport service:-
1997(i) Goods transport service was made taxable vide Section 65(4)(m) by amendment of the Finance Act, 1994 by the Finance Act, 1997.
(ii) The levy was to become effective upon notification in terms of Section 66(3) of the Act.
(iii) Under Section 68(1A), service tax was to be collected from such person and in such manner as was to be prescribed and such person was to be treated as the person responsible for collecting the service tax.
(iv) By notification bearing No. 41/97-ST dated November 5, 1997, the levy was made effective from November 16, 1997.
(v) By Notification bearing No. 42/97-ST dated November 5, 1997, Rule 2(1)(d)(xvii) of the Service Tax Rules, 1944 (the Rules) was made treating the customer of the goods transport operator as the person responsible for collecting the service tax.1998
(i) By notification bearing No. 49/98-ST dated June 2, 1998, exemption was granted in respect of goods transport service.
(ii) By the Finance (No.2) Act 1998, the provisions in the Act relating to levy of service tax on goods transport service were done away with.
July 27, 1999 The Honble Supreme Court in Laghu Udyog Bharati v. Union of India - 2006 (2) S.T.R. 276 (S.C.) = 1999 (112) E.L.T. 365 (S.C.) held, inter alia, that Rule 2(1)(d)(xvii) making the customer of the goods transport operator as responsible for collecting the service tax was ultra vires the Act. It was held that Section 68(1A) did not make the customer the assessee and Section 70 providing for filing of return was not applicable in the customers case.
2000(i) By Section 16 of the Finance Act, 2000, the provisions of the Act were amended to provide for levy of service tax on goods transport service for the period July, 16, 1997 to August 1, 1998. The definitions of assessee and taxable service and the charging and valuation Sections 66 and 67 were amended and definitions of goods carriage and goods transport operator were inserted.
(ii)?Section 117 of the Finance Act, 2000 validated Rule 2(1)(d)(xvii) and previous actions on the basis thereof.2003
(i) By Section 158 of the Finance Act, 2003, the provisions of the Act was modified with effect from July 16, 1997. A proviso was inserted below Section 68(1) making the customer of the goods transport operator as the person liable to pay service tax to the credit of the Central Government. Section 71A was inserted making the customer liable to furnish service tax return within six months from the date on which the Finance Bill, 2003 received the assent of the President. The rule-making power under Section 94 was amended to include the making of rule for furnishing the return under Section 71A.
(ii) Rule 7A was inserted in the Rules with effect from May 14, 2003 providing for furnishing of return by the customer of a goods transport operator for the period November 16, 1997 to June 2, 1998 within a period of six months from May 13, 2003 failing which the interest and penal consequences as provided in the Act were to follow.2004
Section 73 was substituted by the Finance (No.2) Act, 2004 with effect from September 10, 2004. Prior to the said substitution, it applied to a case where return was to be filed under Section 70 but not where it was to be filed under Section 71A. The substituted section sought to cover a Section 71A read with Rule 7A situation.
March 17, 2005 The Honble Supreme Court upheld the amendments made by Finance Acts, 2000 and 2003 in the case of Gujarat Ambuja Cements Ltd. v. Union of India, 2006 (3) S.T.R. 608 (S.C.) = 2005 (182) E.L.T. 33 (S.C.).
SUBMISSIONS BY THE APPELLANTS:-
6 (a) The issue that no show cause notice can be issued even after 10.9.2004 is already settled by the Tribunal in R. K. Marble (supra) and in B.P.L.Engineering (supra). In the present cases, the show cause notices have been issued after that date and hence, they require to be set aside.
(b) The relevant period is 16.11.1997 to 1.6.1998. No demand could have been raised prior to amendments made in Section 73 with effect from 10.9.2004. As such the demand is time-barred by the time amendment is made and therefore the show-cause notice issued in the year 2004 is invalid.
(c) Even under the amended Section 73, the present demand is time-barred. The appellants were required to file a single return under Rule 7A and not a periodical return under Rule 7. As such, Section 73(6)(i)(c) was applicable in respect of the appellants and therefore, the relevant date was the date when service tax was required to be paid by the appellants. As per Rule 6(1), the service tax for the period 16.11.1997 to 1.6.1998 was required to be paid by 15th day of the following month i.e., by 15th December, 1997 for the first period and by 15th July 1998 for the last period. As such, the demands raised in the year 2004 are time-barred. The Tribunal has erred in Mangalam Cement (supra) by ignoring Rule 6 of the Service Tax Rules.
(d) A demand which is time-barred under an existing provision of law cannot be revived by an amendment made to the said provisions as held by the Honble Supreme Court in the case of S.S. Gadgil Vs. Lal & Co. (1964) 53 ITR 231 (SC).
SUBMISSIONS ON BEHALF OF THE DEPARTMENT:-
7 (a) The legislative intent must be the foundation of the interpretation of the statute. As has been held by the Honble Supreme Court in the case of British Airways PLC Vs. Union of India 2002 (139) ELT 6 (SC), it is the duty of the Court to make such construction of a statute which shall suppress the mischief and advance the remedy. He also cites the decision of the Honble Supreme Court in the case of Directorate of Enforcement Vs. Deepak Mahajan 1994 (70) ELT 12 (SC) which has held that every law is designed to further the ends of justice and not to frustrate the same on the mere technicalities.
(b) After the Honble Supreme Court rendered the decision in the case of Laghu Udyog Bharati (supra), the necessary amendments have been made in the law to make clear the Legislative intent and to enable the Department to collect the tax levied on recipients of transport service. No interpretation should be placed on the law which would defeat the legislative intent.
(c) In the case of L.H. Sugars (supra), show-cause notices were issued in 2002 prior to the amendments made in 2003 and 2004 and the said decision is not applicable to the present cases where the show-cause notices have been validly issued in 2004.
(d) Mangalam Cement (supra) has adequately dealt with the issue relating to show-cause notices issued in the year 2004 and the ratio of the same is applicable to the present cases.
(e) In the case of S.S. Gadgil (supra), time limit was sought to be extended after the expiry of the prescribed period and in that context the said judgment was delivered by the Honble Supreme Court, but in the instant cases, the time limit was prescribed under Section 71A which was inserted by the Finance Act, 2003 and hence the ratio of S.S. Gadgil (supra) is not applicable to the present cases.
FINDINGS
8. We have considered the arguments from both sides as well as the case records and the cited decisions. First, we examine the applicability of the decision in L. H. Sugar (supra) to the cases under reference.
APPLICABILITY OF L.H. SUGAR DECISION:-
9. In the case of L.H. Sugar (supra), the Tribunal took note of the fact that the show-cause notices were issued to the appellants on different dates in 2002 demanding service tax from them for the services received from the goods transport operators. In para 8, the Tribunal held that the appellants are deemed to be persons liable to pay service tax but went on to hold that appellants were required to file returns only under Section 71A and since Section 73 applied only to assessees who are liable to file return under Section 70, the show-cause notices issued to the appellants under Section 73 as it stood on the date of issue of show-cause notice and also under the provisions as amended by Finance Act, 2003 were not sustainable and hence the order demanding service tax was also set aside. On appeal from the Department, the Honble Supreme Court held as follows:-
We have heard counsel for the parties.
2. Learned Counsel for the parties have drawn our notice to the relevant provisions of the Finance Act as it stood in the year 1994 and thereafter as it stood after the various amendments to the Act in subsequent years. Having considered the relevant provisions of the Act, the Tribunal has, inter alia, recorded the following conclusion.
The above would show that even the amended Section 73 takes in only the case of assessees who are liable to file return under Section 70. Admittedly, the liability to file return is cast on the appellants only under Section 71A. The class of persons who come under Section 71A is not brought under the net of Section 73. The above being the position show cause notices issued to the appellants invoking Section 73 are not maintainable.
3. We entirely agree with the conclusion arrived at by the Tribunal. We find no merit in these appeals and the same are accordingly dismissed. No order as to costs.
10. The L.H. Sugar (supra) decision, as stated earlier, has been applied by the Tribunal to the cases of BPL Engineering (supra) and R.K. Marbles (supra) though in those cases the show-cause notices were issued in the year 2004 and hence those cases were different from that of L.H. Sugars (supra) in which the show-cause notices were issued in 2002. In the case of BPL Engineering (supra) the date of the show-cause notice is not mentioned but it is stated by the Tribunal therein that the show-cause notice had been issued only after the amendment in 2004. In the case of R.K. Marbles (supra), the Tribunal has noted that the show-cause notice was issued on 5.11.2004. Both the Tribunal Benches have granted relief in BPL Engineering (supra) and R.K. Marbles (supra) applying the decision of the L.H. Sugars (supra) but without taking into account the fact that Section 73 was amended with effect from 10.9.2004. On the other hand, the effect of the amendment has been taken into consideration by the Tribunal in the case of Mangalam Cement (supra) as is evident from the following findings: -
10.The relevant? provisions of Sections 68(1), 71A and 73 as amended by Finance Act, 2004, with effect from 10-9-2004 read as under :-
68. Payment of service tax. - Every person providing taxable service to any person shall pay?(1) service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed. Provided that -
xxx???xxx???xxx xxx xxx xxx xxx
(ii) in relation to services provided by goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage for the period commencing on and from the 16th day of November, 1997 and ending with 2nd day of June, 1998, shall be deemed always to have been a person liable to pay service tax, for such services provided to him, to the credit of the Central Government.
Filing of return?71A. by certain customers. - Notwithstanding anything contained in the provisions of Sections 69 and 70, the provisions thereof shall not apply to a person referred to in the proviso to sub-section (1) of Section 68 for the filing of return in respect of service tax for the respective period and service specified therein and such person shall furnish return to the Central Excise Officer within six months from the day on which the Finance Bill, 2003 receives the assent of the President in the prescribed manner on the basis of the self-assessment of the service tax and the provisions of Section 71 shall apply accordingly. (emphasis added).
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 one year from the relevant date, serve notice on the person chargeable with 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.
xxx???xxx???xxx xxx xxx xxx xxx
11.The provisions of Rule 6 and Rule 7A of the Service Tax Rules, 1994 read as under :-
6.?Payment of service tax. - (1) The service tax on the value of taxable services received during any calendar month shall be paid to the credit of the Central Government by the 25th of the month immediately following the said calendar month.
Provided further that where the assessee is an individual or proprietary firm or partnership firm, the service tax on the value of taxable services received during any quarter shall be paid to the credit of the Central Government by the 25th of the month immediately following the said quarter.
The assessee shall deposit the service tax liable to be paid?(2) by him with the bank designated by the Central Board of Excise and Customs for this purpose in Form TR-6 or in any other manner prescribed by the Central Board of Excise and Customs.
xxx xxx xxx xxx 7A.?Returns in case of taxable service provided by goods transport operators and clearing and forwarding agents. - Notwithstanding anything contained in Rule 7, an assessee, in case of service provided by -
(a) goods transport operator for the period commencing on and from the 16th day of November, 1997 to 2nd day of June, 1998; and
(b) clearing and forwarding agents for the period commencing on and from the 16th day of July, 1997 to 16th day of October, 1998, shall furnish a return within a period of six months from the 13th day of May, 2003, in Form ST-3B along with copy of Form TR-6 in triplicate, failing which the interest and penal consequences as provided in the Act shall follow.
12.Relevant Form? ST-3B in which returns of service tax for the period in question were to be filed required the mode of payment, challan Nos. and date of challans to be mentioned. The amount of service tax payable was also required to be mentioned against item No. 7. A declaration in the self-assessment memorandum included in the said Form to the effect that the particulars were in accordance with the records and books maintained and were correctly stated, was to be made and it was also to be stated that the assessee had assessed and paid the service tax correctly in terms of the provisions of the Act and the Rules made thereunder. The contents of the said form clearly indicate that it required the tax to be paid with particulars of challans of payments to be shown therein. This form indicates that it was prescribed for a specific situation arising by virtue of the validating provisions that necessitated insertion of Rule 7A for filing of the returns by the recipient of services provided by goods transport operators for the specific period from 16th day of November 1997 to 2nd day of June 1998. The returns were to be furnished within a period of six months from 13-5-2003 in the said form, along with copy of TR-6 in triplicate, which is a challan showing payment of tax. If the return was filed within the time prescribed, no interest or penalty was to be paid. Rule 7A was inserted in the context of Section 71A, which was inserted on or before 16-7-1997. The said provision of Section 71A reproduced hereinabove, inter alia, provided that any person referred to in the proviso to sub-section (1) of Section 68 shall furnish return within six months from the date on which the Finance Bill, 2003 received the assent of the President, in the prescribed manner on the basis of the self-assessment of the service tax and provisions of Section 71 shall apply accordingly. The provisions of Section 71A and Rule 7A were necessitated because the liability arising due to the validating provisions, which were upheld by the Apex Court, required making of special provisions of fixing a date for filing of the returns and payment of the tax dues. Such returns required to be filed by virtue of the validating provisions, which made the liability survive in respect of the period in question, could not have obviously been filed periodically, as contemplated by Section 70. Section 70 was not applicable to such special contingency and the provision applied to the normal situation, which required that the person liable to pay service tax shall himself assess and furnish a return in the prescribed form and in the prescribed manner. Such returns were to be filed under Rule 7 under which every assessee was required to submit half yearly returns in ST-3 Form or ST-3A by 25th of the month by following the particular half-year. Therefore, the scheme of Section 70 read with Rule 7 read with prescribed Forms ST-3 and ST-3A was wholly inapplicable to the situation, which arose by virtue of service tax liability of the receiver of GTO services, which arose by virtue of the validating laws at the much later but with effect from 16-11-1997. The special provisions enacted under Sections 71A and Rule 7A were designed to give effect to and realize the purpose underlying the validating provisions. It can be seen from the proviso to sub-section (1) of Section 68, which was inserted with effect from 16-7-1997, in relation to the services provided by goods transporter operator, that every person who was liable to pay the freight for the transportation of goods for the period commencing from 16th November, 1997 and ending with 2nd June, 1998, shall be deemed always to have been a person liable to pay service tax for such services provided to him, to the credit of the Central Government. This provision made the respondents-assessees liable to pay the service tax in respect of the services provided by the goods transport operators to them during the said period and the respondents-assessees having failed in their attempt to challenge the constitutionality of Section 116, which inserted the said proviso in Section 68(1) and their petition along with writ petitions of Gujarat Ambuja Cement Ltd. having been dismissed by Honble the Supreme Court, they were liable to pay service tax by the time extended by Honble the Supreme Court as per the directions contained in the order, which was passed in a group of petitions including that of the present respondents. The contention that the service tax was payable by the respondent-assessees on 25th of the next calendar month as contemplated by Rule 6, which should be treated as the relevant date, is, therefore, wholly misconceived and if accepted, will make the validating provisions redundant though upheld by Honble the Apex Court. Rule 6 relating to payment of service tax on the value of taxable services received during any calendar month by 25th of the month immediately following the calendar month has obvious reference to the periodic returns and payment of tax contemplated by Section 70 read with Rule 7 and the prescribed Forms ST-3 and ST-3A. Sub-rule (5) of Rule 6 refers to Form ST-3A, and Explanation to sub-rule (6) of Rule 6 refers to Form TR-6. In the very scheme of things, the provisions of Rule 6 cannot apply to the specific liability arising to pay service tax on the basis of validating provisions for which special provisions were required to be made under Section 71A and Rule 7A and a special Form ST-3B was required to be prescribed. Since the date of filing of returns was specially prescribed for cases where the recipients of services of GTO for the said period were made liable, only the special provisions of Rule 7A could be applicable, which required the return to be filed and service tax paid by such assessees within the outer date of six months from 13-5-2003, and such payment was to be evidenced by furnishing TR-6 challans and indicating their particulars as well as the particulars of the tax paid in the ST-3B Form itself.
?13.The reliance of the respondents-assessees on the ratio of the decision in L.H. Sugar Factory (supra), which is affirmed by Honble the Supreme Court by its order reported in 2006 (3) S.T.R. 715 (S.C.) = 2005 (187) E.L.T. 5 (S.C.) is wholly misconceived in view of the amendments in the law, particularly, by insertion of the proviso to Section 68(1) and Section 71A which created enforceable liability of the recipients of services from GTOs during the period from 16-11-1997 to 1-6-1998. As held in J.K. Industries Ltd. v. CCE, Indore reported in 2006 (3) S.T.R. 14 (Tri.-Del.), such assessees were bound to file returns as mandatorily required by Section 7A. In the present case, the returns were filed by the respondents as per the said machinery provisions of Section 71A read with Rule 7A, though the service tax was paid by them subsequently, having lost on their writ petitions being dismissed by Honble the Supreme Court. The respondents paid up the service tax in consonance with the outcome of their petitions by the decision of Honble the Supreme Court, in a group of petitions in Gujarat Ambuja Cement Ltd. (supra). The service tax liability was assessed by the respondents-assessees in their ST-3B Form and was declared to be a correct self-assessment, as required by that Form. They have asserted that they had filed the ST-3B Form required to be filed under Rule 7A read with Section 71A within the time prescribed which was extended by Honble the Supreme Court by fifteen days from 14-11-2003. Under Section 71A, it was provided that notwithstanding anything contained in the provisions of Sections 69 and 70, the provisions thereof shall not apply to a person referred to in the proviso to sub-section (1) of Section 68 for the filing of return in respect of service tax for the respective period and service specified therein, and such person shall furnish return in the prescribed manner on the basis of the self-assessment of the Service tax, and the provisions of Section 71 shall apply accordingly. Even in cases where returns were furnished under Section 70 they were required to be taken up for verification under Section 71. Under Section 72, which provided for best judgment assessment also, there was reference to both the returns filed under Section 70 as well as cases where any person having made a return failed to comply with the provisions of Section, as also the cases where the proper officer was not satisfied with the correctness or the completeness of the accounts of the assessee. Under Section 73(1)(a) as it existed at the relevant time, there was reference not only to return made under Section 70, but also to cases where the proper officer had reason to believe that by reason of omission or failure, on the part of the assessee, to disclose wholly or truly all material facts required for verification of the assessment under Section 71, the value of taxable service had escaped assessment or had been under-assessed, the requisite show cause notice would be issued. If action of recovery was not contemplated in accordance with Section 73, there was no sense in enacting the provisions of Section 71A. The interpretation of these provisions in the context of the decisions relied upon by the learned Counsel had come up for consideration before the Honble Supreme Court in Gujarat Ambuja Cement Ltd. v. Union of India reported in 2006 (3) S.T.R. 608 (S.C.) = 2005 (182) E.L.T. 33 (S.C.), in which Honble Supreme Court held that the law must be taken as having always been as was now brought about by the Finance Act, 2000 and that the statutory foundation for the decision in Laghu Udyog Bharati - 2006 (2) S.T.R. 276 (S.C.) = 1999 (112) E.L.T. 365 (S.C.) was replaced and the said decision had ceased to be relevant for the purposes of construing the provisions of the Act, as amended by the Finance Act, 2000. Therefore, reliance placed on behalf of the respondents on the earlier decision of the Honble Supreme Court in Laghu Udyog Bharati and the decision of the Tribunal in L.H. Sugar Factories Ltd. case in which the ratio of the Laghu Udyog Bharati was followed, is misplaced.
?14.It will be noticed from the decision in L.H. Sugar Factories Ltd. (supra) that the show cause notice was issued in that case in the year 2002 and it is in that context the Tribunal concluded in Para 9 that the show cause notice issued to those appellants was not sustainable because under the provisions of Section 73, as it stood on the date of issue of the show cause notice and also under the provisions as amended by Finance Act, 2003 were not sustainable. Affirmation of that decision by Honble the Supreme Court by order dated 27-7-2005 cannot be construed as nullifying the effect of the ratio of the decision of the Apex Court in Gujarat Ambuja Cement Ltd., (supra), in which it was categorically held, in the context of the said provisions, that the law must be taken as having always been as is now brought about by the Finance Act, 2000, and that the statutory foundation for the decision in Laghu Udyog Bharati (which was followed in L.H. Sugar Factories Ltd. by the Tribunal) had been replaced and the decision has thereby ceased to be relevant for the purposes of construing the amended provisions. The Honble the Supreme Court in the context of the provisions of Section 71A held as under :-
In addition, Section 71 which provides for the filing of?returns was amended to provide, with retrospective effect, for the insertion of Section 71 A. Under the newly inserted section, the provisions of Sections 69 and 70 do not apply to a person referred to in the proviso to sub-section (1) of Section 68 as far as the filing of returns in respect of service tax for the period commencing from 16th July 1997 was concerned. It seeks to provide that such persons shall furnish return to the Central Excise Officer within six months from the day on which the Finance Bill, 2003 receives the assent of the President in the prescribed manner on the basis of the self-assessment of the service tax and the provisions of Section 71 shall apply accordingly. This period was extended by this Court by order dated 17-11-2003 for a period of two weeks with effect from the date of the order. Section 94 as originally enacted for the rule making power of the Central Government was amended to read with effect from 16th July 1997, that the Central Government would also have the power to frame rules relating to the manner of furnishing returns under Section 71A.
There cannot be any doubt that the object of these sections?20. is to nullify the effect of this Courts decision in Laghu Udhdyog Bharati by retrospectively amending and validating provisions held to be illegal. It is a well settled principle that validation of a tax declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal (vide Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, 2000 (123) E.L.T. 3 (S.C.) = (1970) 1 SCR 388; Indian Aluminium Co. & Ors. v. State of Kerala, (1996) 7 SCC 637; K. Sankaran Nair v. Devaki, (1996) 11 SCC 428; B. Krishna Bhat v. State of Karnataka, (2001) 4 SCC 227; N.A. Co-operative Mfg. Federation v. Union of India, AIR 2003 SC 1329). As a proposition of law this cannot be and is not disputed. The question is whether by enacting Sections 116 and 117 of the Finance Act, 2000 and Section 158 of the Finance Act, 2003, the bases on which this Court struck down Rule 2(1)(d), (xii) and (xvii) of the Service Tax Rules, 1994 had been displaced or removed.
?15.Relying on the decision of the ratio in Gujarat Ambuja Cement Ltd. this Tribunal in J.K. Industries Ltd. v. CCE, Indore (supra) held as under :-
It is a settled legal position that a statutory Act may be?enacted prospectively or retrospectively. The retrospective effect can be given in case of curative and validating statutes. The curative statutes by their very nature are intended to operate upon and affect past transactions having regard to the fact that they operate on conditions already existing [See, ITW Signode India Ltd. v. Collector of Central Excise reported in 2002 (158) E.L.T. 403 (S.C.)]. In the present case, as already held by the Honble Supreme Court in Gujarat Ambuja Cement Ltd. (supra), the law must be taken as having always been as was brought out by Finance Act, 2000 and that the statutory foundation for the decision of the Supreme Court in Laghu Udyog Bharati has been replaced and that decision has ceased to be relevant for the purposes of construing the provisions of the Act as amended by the Finance Act, 2000 and 2003. Therefore, the reliance on behalf the appellant on the earlier decision of the Supreme Court in Laghu Udyog Bharati case (supra) and on the decision of this Tribunal in L.H. Sugar Factories Ltd. case (supra) in which relying upon, the decision in Laghu Udyog Bharati, it was held that the show cause notices issued in that case by invoking Section 73 of the goods were not maintainable, is misconceived, as their ratio will now be applicable and the matter has to be viewed in the context of the amended provisions, the constitutionality of which has been upheld by the Apex Court in Gujarat Ambuja Cement case (supra).
The earlier position under which the recipient of service? provided by goods transport operator could not have been liable was drastically altered by the amended provisions. By Section 116 of the Finance Act, 2000 it was provided that during the period commencing on and from 16th day of July 1997 and ending with the 16th day of October 1998, the provisions of Chapter V of Finance Act 1994 (i.e. relating to service tax) shall be deemed to have effect subject to the modifications made thereunder. Section 65 of the Finance Act, 1994 was modified by substituting clause (6) thereof, as a result of which definition of assessee was altered so as to, inter alia, include in relation to services provided by a goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage. Thus, in respect of the services provided to the appellant for the said period in question the appellant, by virtue of the said amendment, became assessee who was liable for collecting the service tax under the amended definition clause.
The provisions of Section 71A which were inserted by the Finance?8. Act, 2003 retrospectively w.e.f. 16th July 1997 were enacted to enable such persons falling under the proviso of sub-section (1) of Section 68 like the appellant to file the returns in respect of service tax for the said period within six months from the day on which the Finance Act, 2003 received the assent of the President in the prescribed manner, on the basis of the self-assessment of the service tax, as provided therein. It was also provided in Section 71A that the provision 71 shall apply accordingly, to such returns. Rule 7A thereupon came to be inserted by the Service Tax (Amendment) Rules, 2003 w.e.f. 14-5-2003 in which it was provided that, notwithstanding anything contained in Rule 7 which related to half-yearly return, an assessee in case of service provided by goods transport operator for the period from 16th day of November 1998 to 2nd day of June, 1998 shall furnish a return within a period of six months from the 13th day of May, 2003, in Form ST-3B along with copy of Form TR-6 in triplicate, failing which the interest and penal consequences as provided in the Act shall follow. It is, therefore, clear to us that not only the past recoveries were validated by Section 117, the amendment also provided for continuance of the liability of persons falling in the proviso of Section 68(1) who were to be deemed always to have been liable to pay service tax, for such services provided, to the credit of the Central Government. In such cases there was no scope for the applicability of Section 70 of the said Act and, therefore, the special provision for filing of returns was necessarily required to be made as per Section 71A, because, they could not have filed return earlier. Validating of legislation retrospectively curing defects in a taxing statute is a well recognized course, and the appellant did not acquire any vested right from the earlier defect in the statute and cannot seek a wind fall from the legislatures mistakes. The Parliament has enacted a valid law with retrospective effect and therefore the earlier judgments become irrelevant and the matter has to be viewed only in the context of the provisions now existing, which clearly provided for the liability of the appellant in respect of the services provided by the goods transport operators for which the appellant paid the freight and was deemed always to have been liable to pay service tax for the period in question from 16th July, 1997. The appellant was bound to file the returns as mandatorily required by Section 71A and accordingly the return was filed as per this machinery provision, with the payment of service tax as per the challan.
15.1?It was further held :
The service tax paid on the basis of self-assessment as per the statutory provision was a valid collection of tax by the government and therefore, it was in no way refundable to the appellant who was liable to pay the same under the amended provisions. The period for filing of the returns was provided in Section 71A, which was six months from the date on which the Finance Act, 2003 received the assent of the President, and the appellant filed the return within the period so prescribed. In a case which was covered by Section 71A read with Rule 7A, the date of filing of return cannot be drawn from the provisions of Section 70. In fact Section 71A clearly specified that the provision of Section 70 did not apply to persons referred to in the proviso to sub-section (1) of Section 68 for the filing of return. It cannot, therefore, be accepted that the time limit for filing of return by the appellant should be computed on the basis of the provision of Sections 70 and 73 as from the date on which the half-yearly return could have been filed under Section 70 read with Rule 7 which were wholly inapplicable in case of the appellant when specific provision of Section 71A was made in the context of the persons like the appellant for filing of the return and period within which the return was to be furnished was also provided. The contention that the appellant was not liable to pay the service tax since the recovery would have been time-barred on the basis of the deemed liability having been arisen earlier on the expiry of the relevant period in 1998, is, therefore, wholly misconceived.
16.In view of the? clear ratio of the decision of the Honble the Supreme Court in Gujarat Ambuja Cement Ltd. (supra), which was followed by this Tribunal in J.K. Industries Ltd. (supra), any contrary decisions simply giving directions without dealing with or showing dissent from the ratio laid down in these decisions or attempting to distinguish them, cannot be considered to be laying down any precedent on the doctrine of ratio decidendi. Mere directions, issued contrary to the settled legal position, cannot be said to be laying down any contrary ratio, so as to constitute an opposite precedent or laying down a contrary proposition. We are of the opinion that the ratio of the decision of Honble the Supreme Court in Gujarat Ambuja Cement Ltd. (supra), cannot be overlooked on the spacious plea of a learned Authorized Representative of the respondents-assessees that later is better. It is obvious that while affirming the decision of the Tribunal in L.H. Sugar Factories Ltd. (supra), the Honble the Supreme Court was not concerned with the validating provisions which prompted the decision in Gujarat Ambuja Cement Ltd. (supra). In fact, there could be no conflict between the two decisions, which dealt with different situations, one dealing with challenge against a show cause notice in a situation prevailing before the validating law and the other dealing with the effect of the validating provisions. Therefore, even if the decision of the L.H. Sugar Factories Ltd. rendered by the Tribunal came to be affirmed later on, that is, after the decision in Gujarat Ambuja Cement Ltd., the subsequent decision was relevant only in the context of the law, as stood prior to the validating provisions, the constitutionality of which came to be upheld by the Honble the Supreme Court in Gujarat Ambuja Cement Limited. For the same reason any contrary decision rendered by this Tribunal cannot be followed, because that would be defying the law laid down by the Honble the Supreme Court in Gujarat Ambuja Cement Limited.
?17.The contention that the notices were barred by limitation is wholly misconceived in view of the fact that the revised show cause notices were issued as per the amended provisions of Section 73 which came into force from 10-9-2004 within one year from the relevant date which was defined in sub-section (6) of Section 73 as under :-
Section 73(6). - For the purposes of this section, relevant date means, -
(h) in the case of taxable service in respect which service tax has not been levied or paid or has been short-levied or short-paid -
(a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, 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 service tax is to be paid under this Chapter or the rules made thereunder;
17.1It will be? seen from the above provisions that the show cause notice was required to be served within one year from the relevant date in cases where there was no fraud, collusion etc. The relevant date in cases where periodic return is filed and in cases where periodic return is not filed was governed by clauses (a) and (b) of sub-section (6)(i) of Section 73. In the present case, there is no dispute that the return which was filed as per the prescribed Form ST-3B under Rule 7A was not a periodic return, but a return which was required to be filed by the specified date, as contemplated by Section 71A read with Rule 7A. In sub-clause (c) of clause (i) of Section 73(6)(c) all other cases where no periodic return was involved, the date on which the service tax was to be paid was to be considered as the relevant date. In the present case, the service tax was to be paid within six months from 13-11-2003 by filing the return in the prescribed Form ST-3B under Section 71A read with Rule 7A. The relevant date, therefore, in the present case for filing such return was 14-11-2003. Therefore, even if 14-11-2003 is considered and not 30-11-2003, which was the date extended by the Supreme Court, the show cause notices issued on 4-11-2004 were clearly within the prescribed period of one year.
11. We thus find that in these two cases of BPL Engineering (supra) and R.K. Marbles (supra), the Division Bench of the Tribunal and the Single Member Bench of the Tribunal which respectively decided these two cases did take note of the fact that the show-cause notices in both the cases were issued after the amendment made in the year 2004. Yet they applied the ratio of the decision of L.H. Sugar (supra) which dealt with cases where show-cause notices were issued on different dates in 2002 i.e. prior to the 2004 Amendment. Therefore, with great respect, we are of the considered view that these two decisions have been rendered by wrong application of the ratio of the decision in the case of L.H. Sugar (supra) which dealt with a totally different fact situation. Hence, these two decisions cannot have any precedential value. On the other hand, in the case of Mangalam Cement (supra), the Division Bench has duly taken note of the amendment made in the year 2004 and has rightly distinguished the earlier decision in the case of L.H. Sugar (supra). Interestingly, Shri A.R.M. Rao, the learned counsel for one the appellants, in his written submission dated 22.6.2010, does not rely on the ratio of the L.H. Sugars (supra) nor any argument has been made before us in regard though reliance has been placed on both BPL Engineering (supra) and R.K. Marbles (supra). In view of the fact that the learned Single Member who heard the case of Agauta Sugar & Chemicals (supra) had three decisions before him, two of which [BPL Engineering (supra) and R.K. Marbles (supra)] were rendered by wrong application of the ratio of the decision in the case of L. H. Sugar (supra), he had no choice but to follow the third decision of the Division Bench in the case of Mangalam Cement (supra).
12. However, the learned counsel for the appellants has raised a new argument which was not taken up before the Division Bench in the case of Mangalam Cement (supra) as stated in his written submission, we proceed to deal with the submissions made in this regard by both sides. The main challenge by the appellants is against the action taken by the department to recover the service tax remaining unpaid by the appellants.
13. Article 265 of the Constitution of India stipulates that no tax shall be levied or collected except by authority of law. It has been held in the case of Mafatlal Industries Ltd. Vs. Union of India 1997 (5) SCC 536 that law means valid law and tax levied or collected contrary to law is to be refunded provided it has not been passed on to the consumer. It is not in dispute that the goods transport service was made taxable by the Finance Act, 1997 and that the levy of service tax on such service was made effective from 16th November 1997 and was leviable till issue of the exemption notification dated 2.6.1998. In Laghu Udyog Bharati (supra), the levy of the tax was not under challenge but its collection from the customers was challenged. The retrospective amendments made subsequently in the year 2000 and 2003 have been upheld by the Honble Supreme Court in the case of Gujarat Ambuja Cements (supra). It was specifically held by the Honble Supreme Court in that case that a legislature is competent to remove infirmities retrospectively and make any imposition of tax declared invalid, valid.
14. Once a valid levy is authorized under the law which meets the constitutional mandate, the tax becomes payable by the taxpayers. It is well recognized that taxes are required to be paid so that the Governments can run and provide essential amenities to the citizens. In the words of Chief Justice Oliver Wendell Holmes, Taxes are what we pay for a civilized society. It is also well recognized in all civilized countries that large proportion of the taxes are paid voluntarily by the taxpayers and the tax administration has to collect only the amounts which are not voluntarily paid. The degree of voluntary compliance with tax laws is usually high in most developed countries and the tax administrations have to collect only a small percentage of tax by their own efforts.
15. In the case of service tax on transport service, we find that the levy is authorized by the statute, its collection from the recipients of the service is also authorized by the statute even for the past period, by way of retrospective amendment, the validity of which has also been upheld by the Honble Supreme Court. Many of the taxpayers have paid the taxes as per such levy and no refund of such tax paid is required to be made to such taxpayers in terms of the retrospective amendment made. The tax administrators are required to recover the tax from the remaining taxpayers, who have not voluntarily come forward to comply with the tax laws and pay up the tax levied, such as the appellants in these cases. The tax officials are not only mandated to recover the taxes not paid, it is their solemn duty to ensure legally levied taxes are paid to the public exchequer. A three Judges Bench of the Honble Supreme Court in the case of Commissioner of Customs, Mumbai Vs. Virgo Steels 2002 (141) ELT 598 (SC) has held as follows:-
While the absence of notice may invalidate the procedure adopted by the proper officer under the Act, it will not take away the jurisdiction of the Officer to initiate action for the recovery of duty escaped. This is because of the fact that the proper Officer does not derive his power to initiate proceedings for recovery of escaped duty from Section 28 of the Act. Such power is conferred on him by other provisions of the Act which mandate the proper Officer to collect the duty leviable................ A cumulative reading of these provisions found in the Act clearly shows that the jurisdiction of a proper Officer to initiate proceedings for recovery of duty which has escaped collection is not traceable to Section 28. The power to recover duty which has escaped collection is a concomitant power arising out of the levy of customs duty under Section 12 of the Act. This judgment of the Honble Supreme Court makes it very clear that the jurisdiction of a tax collector to initiate proceedings for recovery of tax which has escaped collection, is not traceable to the legal provision which provides for issue of notice (e.g. Section 28 of the Customs Act, 1962). Rather, the power to recover tax which has escaped collection is a concomitant power arising out of the legal provision levying the tax (e.g. Section 12 of the Customs Act, 1962). The ratio of this judgment was relied upon by the Larger Bench of the Tribunal in Bombay Hospital Trust Vs. Commissioner of Customs, Sahar, Mumbai 2005 (188) ELT 374 (Tri. LB) to repel the argument that duty cannot be demanded in the absence of a specific legal provision for issuing a notice. The said Larger Bench order has since been affirmed by the Honble Bombay High Court vide Bombay Hospital Trust Vs. CC (ACC), Mumbai 2006 (201) ELT 555 (Bom.).
16. As regards issue of the demand notice, the Honble Supreme Court has also time and again held that citing a wrong provision of law in the demand notice will not vitiate a demand. For example, in the case of J.K. Steel Ltd. Vs. Union of India (1969) 2 SCR 418 = (AIR 1970 SC 1173) = 1978 (2) ELT J355 (SC), it was held as follows:-
If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under different power does not vitiate the exercise of the power in question. This is a well settled proposition of law. In this connection, reference may usefully be made to the decisions of this court in B. Balakotaiah v. Union of India, (1958) SCR 1052 = (AIR 1958 SC 232); and Afzal Ullah v State of U.P., (1964) 4 SCR 1991 = (AIR 1964 SC 264). The same principle was reiterated in the case of N.B. Sanjana, ACCE, Bombay Vs. The Elphinstone Spinning and Weaving Mills Co. Ltd. 1978 (2) ELT (J 399) (SC). Several High Courts and the Tribunal have followed this principle without exception and in the case of CCE, Calcutta Vs. Pradyumna Steel Ltd. 1996 (82) ELT 441 (SC) it has been reiterated, It is settled that mere mention of a wrong provision of law when the power exercised is available even though under a different provision, is by itself not sufficient to invalidate the exercise of that power.
This decision was rendered while overruling the Tribunals order which had held that since the provision mentioned in the show-cause notice was inapplicable, the show-cause notice was invalid.
17. The Honble Supreme Court in the case of Assistant Director of Mines & Geology v. Deeccan Cements Ltd. - 2008 (9) S.T.R. 449 (S.C.) = 2008 (222) E.L.T. 321 (S.C.) has observed in para 7 that :-
7.?The matter can be looked from another angle. Supposing somebody has paid the taxes and in other words there has been collection of the amount levied. There may be another person who may not have paid it. The latter person cannot be placed at a better footing than the former one. As mentioned earlier, some assesses have paid the tax and they can not be refunded the amount in view of the levy validated retrospectively. The retrospective legislation also contained a provision in Section 117 of the Finance Act, 2000 to recover any refund of service tax granted:-
(ii) ?any service tax refunded in pursuance of any judgment, decree or order of any court striking down sub-clauses (xii) and (xvii) of clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, 1994 before the date on which the Finance Act, 2000 receives the assent of the President shall be recoverable within a period of thirty days from the date on which the Finance Act, 2000 receives the assent of the President, and in the event of non-payment of such service tax refunded within this period, in addition to the amount of service tax recoverable, interest at the rate of twenty-four per cent. per annum shall be payable, from the date immediately after the expiry of the said period of thirty days, till the date of payment.
Interpreting a similar retrospective law, the Honble Supreme Court had held in the case of R.C. Tobacco Pvt. Ltd. Vs. U.O.I. - 2005 (188) E.L.T. 129 (S.C.) that the retrospective legislation did not provide for issue of any notice and it provided a special time limit for tax recovery. The Honble Supreme Court also observed that having upheld the constitutional validity of the retrospective legislation, it would be a pyrrhic victory for the Union of India if they could not in fact recover the tax.
18. In the light of the foregoing, when we consider the submissions made on behalf of the appellants, we arrive at the following inescapable conclusions: -
(i) The decision in Mangalam Cement (supra) lays down the correct proposition in law holding that the relevant date has to be determined with reference to Section 71A of the Finance Act, 1994 read with Rule 7A and that the time period for issue of a valid demand has to be calculated with reference to such relevant date under the amended Section 73.
(ii) The appellants can not now take a stand that the tax was payable during November 16, 1997 to June 1, 1998 when in fact no tax could be successfully demanded and recovered from them earlier in view of Honble Supreme Courts decisions in the case of Laghu Udyog Bharati (supra) and L. H. Sugar (supra). Having laid a successful challenge against the demand during the earlier period, now they can not turn around and say that the department should have raised the demand during that period itself. Such arguments are in the nature of Heads I win, tails you lose logic designed to deprive the public revenue its legitimate dues even after the levy has been declared valid by the highest Court of the land.
(iii) As rightly pointed out by the ld D.R, in the case of S.S. Gadgil (supra), time limit was sought to be extended after the expiry of the prescribed period and in that context the said judgment was delivered by the Honble Supreme Court, but in the instant cases, a special time limit has been prescribed under Section 71A which was inserted by the Finance Act, 2003 to operationalise the retrospectively validated levy and hence the ratio of S.S. Gadgil (supra) is not applicable to the present cases.
(iv) The decisions given in R. K. Marbles (supra) and in B.P.L. Engineering (supra) do not lay down the correct proposition of law having been rendered by wrong application of the decision in L.H. Sugar and hence those have no precedential value.
19. As the issue involved in these appeals relate to demand of tax and hence to determination of the rate of tax applicable, after answering the reference as above, we direct the Registry to list the appeals before the concerned Division Bench for final orders.
(Pronounced in open court on 1.09.2010) (Mr. Justice R.M.S. Khandeparkar) President (Dr. Chittaranjan Satapathy) Technical Member (Ashok Jindal) Judicial Member Rex ??
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