Custom, Excise & Service Tax Tribunal
M/S. Punj Lloyd Ltd vs C.C.E.&S.T., Rohtak on 28 April, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI 110 066.
Date of Hearing 28.04.2015
For Approval &Signature :
Honble Honble Justice G. Raghuram, President
Honble Mr. R.K. Singh, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3.
Whether Lordships wish to see the fair copy of the order?
Seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
Application No.ST/STAY/60849/2013-CU[DB]
Appeal No.ST/60049/2013-CU[DB]
[Arising out of Order-in-Original No.24/ST/COMMR/DM/RTK/2013-14, dated 24.06.2013 passed by C.C.E., Rohtak]
M/s. Punj Lloyd Ltd. Appellant
Vs.
C.C.E.&S.T., Rohtak Respondent
Appearance Shri Sujit Ghosh, Advocate Shri Shashank Shekhar, Advocate - for the appellant Shri Govind Dixit, DR - for the respondent CORAM: Honble Justice G. Raghuram, President Honble Mr. R.K. Singh, Member (Technical) Final Order No.52285/2015, dated 28.04.2015 Per Mr. R.K. Singh :
Stay application along with appeal is filed against Order-in-Original No.24/ST/COMMR/DM/RTK/2013-14, dated 24.06.2013 in terms of which a total impugned demand of Rs.38,63,21,820/- for the period 01.04.2006 to 31.03.2011 was confirmed along with interest and penalties. Out of the said impugned demand, demand of Rs.13,99,74,736/- for the period 01.04.2006 31.03.2007 has been confirmed on account of denial of 67% abatement under notification No. 1/2006ST, dated 01.03.2006 on the ground that the appellant had taken CENVAT credit of input services. The remaining demand of Rs. 23,26,68,080/- for the period 01.09.2006 to 31.07.2009 and Rs.1,36,79,004/- for the period 01.04.2010 to 31.03.2011 has been confirmed under Commercial or Industrial Construction Service (CICS).
2. The appellant has contended that (i) when Notification No. 15/2004ST was replaced by Notification No. 1/2006ST, dated 01.03.2006 an additional condition of non-availment of CENVAT credit on input services was also introduced and due to oversight they took CENVAT of input services amounting to Rs.32,59,779/-. The said amount was reversed along with interest even before the impugned order and therefore in the light of the judgement of Allahabad High Court in the case of Hello Minerals Water (P) Ltd. Vs Union of India [2004 (174) ELT 422 (All)], it was entitled to the benefit under Notification No.1/2006ST. It stated that the said judgement of the High Court has been followed in the case of Precot Mills Vs. CCE [2006 (201) ELT 356 (Tri.-Mad.)]. (ii) As regards demand under Commercial or Industrial Construction Services (CICS), the appellant has contended that (i) it provided service to the joint venture between the appellant and M/s Whessoe Oil and Gas Ltd. (WOGL) and that joint ventures not being a separate legal entity it was in effect service to self and therefore not liable to service tax (ii) the service was provided in relation to construction of port or other port in as much was the construction work for completion of the remaining work of the jetty for M/s. Ratnagiri Gas and Power Pvt. Ltd. (RGPPL) at Dabhol and therefore was not liable to service tax under notification No. 16/2005ST. (iii) There was no wilful mis-statement or suppression of facts and therefore the excluded period was not invocable.
3. Ld. Departmental Representative, on the other hand, contended that (i) in terms of the judgement of Supreme Court in the case of Chandrapur Magnet Wires Pvt. Ltd. Vs. CCE, Nagpur [1996 (81) ELT 3 (SC)], the exemption under Notification is subject to the condition of non-availment of CENVAT credit and can be granted only if the CENVAT credit is reversed before the clearance of the goods and CESTAT in the case of Hind Lamps Vs. CCE, Kanpur [2010 (250) ELT 237 (Tri.-Del)] has distinguished the case of Hello Minerals (supra) to hold that CENVAT credit should have been reversed before the due date of payment of service tax. It also cited judgements in the cases of CCE, Thane-I Vs. Nicholas Piramal Ltd. [2009 (244) ELT 321 (Bomb.)] and Sunil Hi-Tech Engineers Vs. CCE, Nagpur [2014 (36) STR 408 (Tri. Mumb.)] (ii) The joint venture between the appellant and M/s. WOGL, London was a separate legal entity and had a separate service tax registration and therefore the service rendered cannot be said to be service to self. (iii) Construction cannot be said to be in relation to port or other port in as much as the jetty was solely used by a single party namely RGPPL and therefore was a personal property which could not be used by any other party and hence does not qualify to be called port or other port meant for use by general public. (iv) The appellant is guilty of suppression of facts in as much as it did not pay service tax and also did not file any ST-3 returns and that this act of evasion would not have been detected but for the audit conducted by the Department.
4. We have considered the contentions of both sides. As the arguments had been heard at length, both sides agreed that the appeal itself could be disposed of. Accordingly, we waive the requirement of pre-deposit and proceed to decide the appeal itself.
5. As regards the eligibility for the benefit of Notification No. 1/2006ST after reversal of the CENVAT credit taken on input services along with interest, it needs to be appreciated that in the notification No. 15/2004ST there was no bar against taking CENVAT credit of input services. When the said notification was superseded by Notification No. 1/2006ST an additional condition of non-availment of CENVAT credit on input services was also introduced. It is thus possible that initially this may have escaped the attention of the appellant. No prudent person would take the risk of being saddled with a demand of almost Rs. 14 crores merely for input service credit of just above Rs. 32 lakhs. As regards the possible argument that there is no equity in taxation and exemption Notifications have to be construed strictly, suffice to say that in the case of Hello Minerals (supra) the Allahabad High Court has clearly held as under:-
18. In view of? the above decision we are of the opinion that reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence the benefit has to be given of the notification granting exemption/rate of duty on the final product since the reversal of the credit on the input was done at the Tribunals stage. We find that the judgement of Allahabad High Court had taken into account the Supreme Court judgement in the case of Chandrapur Magnet Wires Pvt. Ltd.(supra). Indeed in the above case, the Honble Supreme Court concluded that we see no reason why the assessee cannot make a debit entry in the credit account before removal of the exempted final product. This observation in no way necessarily implies that the Supreme Court would have necessarily found it unacceptable if a debit entry in the credit account was made after removal of the exempted goods, particularly when such debit entry reversed the CENVAT credit along with interest before the primary adjudication. Seen in this light the distinguishing effort by CESTAT in the case of Hind lamps (supra) fails to be convincing. The Bombay High Court judgement in the case of Nicholas Piramal (Supra) cited by the ld. Departmental Representative was with regard to the interpretation of Rule 57C and Rule 57CC of Central Excise Rules, 1944 and Rule 6 of CENVAT Credit Rules, 2004 and hence has no direct applicability to the issue at hand. The CESTAT judgement in the case of Sunil Hi-Tech Engineers (supra) cited by ld. Departmental Representative was in relation to service tax liability of main contractor vis-a-vis sub-contractor and hence is not germane to the issue at hand. As regards the other judgement Dilip ChhabriaDesigns [2015-TIOL-851-HC-Mum-CX], cited by Revenue to distinguish the judgement in the case of Hello Minerals (supra), we find that the facts in that case were very different in as much as in that case the assessee did not reverse the credit at the time of removal of goods or after removal . Without dwelling further on the subject, we may only add that as on today the judgement of Allahabad High Court in the case of Hello Minerals (supra) continues to be good law with regard to the subject at hand and has been repeatedly followed by CESTAT, e.g., in the case of Hindustan Construction Co. Ltd. Vs. CST, Mumbai (Order No.S/924/14/CSTB/C-I, dated 03.09.2014), B.G. Shirke Construction Tech. Vs. CCE, Pune [2009 (13) STR 683 (Tri. Mum.)] and Khyati Tours & Travels Vs. CCE, Ahmedabad [2012 (27) STR 366 (Tri. Ahmd.)]. As such we hold that the component of impugned demand arising as a result of denial of the benefit of Notification No. 1/2006ST is not sustainable
6. Coming to the other component of impugned demand under CICS, the appellant has contended that it was service to self in as much as it rendered service to a loosely formed joint venture which is not a separate legal entity. We find that the said joint venture had taken a separate service tax registration.. Even as per the agreement between WOGL and the appellant, both associated together in a joint venture in accordance with the terms and conditions set out in the said agreement and submitted a joint tender. Both parties had equal share in the joint venture and both the parties were required to provide their individual and independent services to joint venture against payments and were required to raise invoices to the joint venture for their corresponding services provided to the joint venture. Thus, the appellant received payment for the service rendered. Further, as discussed below, the service rendered related to construction of port and the port was not of the appellant or meant for the appellant. In these circumstances, we find the contention that the service rendered by the appellant was service to self is untenable. We have examined the nature of service rendered. The service rendered was for completion of the jetty which was for captive use of RGPPL (successor to Dhabol Power Company). Notification No.16/2005ST fully exempts CICS [65 (105) (zzq)] provided to any person by a commercial concern in relation to construction of port or other Port from the whole of service tax leviable thereon under section 66 of the finance act 1994. In terms of Section 65 (76) of the Finance Act, 1994, other Port has the meaning assigned to port in clause(4) of section 3 of the Indian Ports Act, 1908. As per section 3 (4) of the Indian Ports Act, 1908 port includes any part of a River or channel in which this act is for the time being in force. The Indian Ports Act, 1908 extends to the ports mentioned in the 1st schedule as per section 1 thereof. We find that in the said 1st schedule in part X Dabhol is mentioned under the Ratnagiri group of ports. It is also seen that Maharashtra Maritime Board Charter lists Dabhol as one of the 48 minor ports on the coastal line. It is also acknowledged by Maharashtra Maritime Board that in the Maharashtra State amongst several self-controlled jetties, Dabhol port is managed by RGPPL. It is thus obvious that the service rendered in relation to completion of jetty at Dabhol was clearly CICS rendered in relation to construction of other port. We find that the adjudicating authority in the impugned order has denied the benefits of Notification No.25/2007ST essentially on the ground that the jetty is owned and solely used by single party namely RGPPL which cannot be used by any other party and hence cannot be defined as port as it is not meant for use by general public. We find that this observation/reasoning is without any basis. Notification No.25/2007ST nowhere implies that CICS provided in relation to construction of a public port only is eligible for exemption and CICS provided in relation to a private port would not be eligible for the said exemption. The other reasoning feebly given in the adjudication order is that the said jetty is an integral part of a power project. We are not able to appreciate as to how that would affect its status of Dabhol jetty as other port. A port can very well be a captive port of a large project but that does not mean that it does not remain a port by virtue of that fact.
7. In the light of the foregoing analysis, we are of a clear view that the service (CICS) rendered by the appellant was in relation to construction of other port and therefore eligible for the benefit of full exemption under notification No.25/2007ST.
8. In the wake of the fact that the impugned demand has not been found to be sustainable, the allegation of wilful mis-statement or suppression of facts does not remain of much relevance and therefore does not have to be dwelt upon in detail. We find that this issue has been dealt with in the impugned order only in the following paragraph 32. I also find that the assessee had intentionally and wilfully suppressed the fact of providing impugned taxable services and collection/payment of impugned value of such taxable services and did not pay service tax as applicable on such services and did not file prescribed sT-3 returns in respect. I also find that the said facts of evading the payment of service tax would not have been detected but for the audit conducted by the Department. Thus the proviso to Section 73(1) of the Act ibid is invokable for demanding service tax for five years from the relevant date. Thus, the only basis on which wilful suppression has been upheld is that the appellant did not pay service tax and did not file ST-3 returns. Theres a long list of familiar judicial pronouncements holding that these two grounds by themselves are totally inadequate to sustain the allegation of wilful misstatement/suppression of facts. In case of CCE Vs. Chemphar Drugs Liniments [2002-TIOL-266-SC-CX], the Supreme Court held that something positive other than mere inaction or failure on the assessees part or conscious withholding of information when assessee knew otherwise is required for invoking extended period. In the case of Continental Foundation Joint Venture Vs. CCE, Chandigarh-I [2007 (216) ELT 177(SC)], the Supreme Court went to the extent of saying that any incorrect statement by itself cannot be equated with wilful mis-statement. In short we find that the impugned order falls way short in establishing wilful mis-statement/suppression of facts and consequently the question of invoking the extended period or penal provision of Section 78 of the Finance Act, 1994 does not arise.
9. In the light of the foregoing, we do not find the impugned demand is sustainable. Consequently, the impugned order is set aside and appeal allowed.
(Justice G. Raghuram) President (R.K. Singh) Member (Technical) SSK -9-