Custom, Excise & Service Tax Tribunal
Al Haramain Diagnostic Centre vs Commissioner Of Gst And Central ... on 11 December, 2023
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Service Tax Appeal No. 40006 of 2023
(Arising out of Order-in-Appeal No. 43/2022 (CTA-I) dated 26.09.2022 passed by Commissioner of GST and
Central Excise (Appeals-I), 26/1, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034)
M/s. Al Haramain Diagnostic Centre ...Appellant
rd
No. 251, Hamid Building, 3 Floor,
Anna Salai,
Chennai - 600 006.
Versus
Commissioner of GST and Central Excise ...Respondent
Chennai North Commissionerate, 26/1, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034.
APPEARANCE:
For the Appellant : Shri T.R. Srinivasan, Chartered Accountant For the Respondent : Shri N. Satyanarayanan, Assistant Commissioner / A.R. CORAM:
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) DATE OF HEARING : 26.09.2023 DATE OF DECISION : 11.12.2023 FINAL ORDER No. 41093 / 2023 Order:-
Service Tax Appeal No. ST/40006/2023 has been filed by M/s. Al-Haramain Diagnostic Centre, aggrieved by the Order-in-Appeal No. 43 / 2022-ST dated 26.09.2022 passed by the Commissioner of GST & Central Excise (Appeals-I), Chennai - 600034, who upheld impugned Order-in-Original No. 24 / 2021 dated 30.06.2021 passed by 2 Service Tax Appeal No. 40006 /2023 the Additional Commissioner of GST & Central Excise, Chennai North Commissionerate, confirming demand of Service Tax of Rs.36,36,856/- under reverse charge, under Section 73(1) read with Section 68(2) of Finance Act, 1994 and confirming penalty imposed under Section 78(1) and penalty of Rs.10,000/- under Section 77 of the Finance Act, 1994 besides levy of interest under Section 75 of Finance Act, 1994.
2.1 The brief facts of the case are that the Appellants are authorised by Malaysian Government to conduct screening tests and bio metric registration of the persons seeking employment in Malaysia and upload the results in the web portal - Foreign Workers Centralised Management Scheme (FWCMS) maintained by M/s. Bestinet SDN BHD, Malaysia. M/s. Bestinet have entered into an agreement with the Appellant to provide IT Solutions through the Web Portal FWCMS. They collect fees from the Appellant towards supply of hardware FWCMS system and software, installation and commissioning of such FWCMS. M/s. Bestinet also collects service fee per person from the Appellant for uploading the outcome of the screening test along with bio- metric registrations of the persons seeking employment into FWCMS Portal.
2.2 Investigation conducted by DGGI revealed that the activity rendered by M/s Bestinet is a „Service‟ as per Section 65B (44) of the Finance Act, 1994, and the same is taxable in terms of Section 65B(51) of the Act. In terms of Rule 3 of Place of Provision Rules, 2012, service is deemed to have been provided at the location of the service recipient. The department was of the view that in terms of Notification no. 30/2012-ST dated 30.06.2012, Service Tax is payable under reverse charge basis by the Appellant on the services rendered from abroad. The Appellant failed to get 3 Service Tax Appeal No. 40006 /2023 themselves registered with the department and failed to file the statutory ST-3 returns for the period April 2014 to June 2017.
2.3 A Show Cause Notice dated 30.11.2019 was issued to the Appellant by DGGI proposing to treat the services received from M/s. Bestinet, Malaysia as import of service and consequently proposed to demand Service Tax of Rs.36,36,856/- under reverse charge basis and proposed to demand Service Tax of Rs.1,60,58,278/- towards consideration received for screening tests under proviso to Section 73(1) of Finance Act,1994. Vide Order-in-Original No.24/2021 dated 30.06.2021, the Adjudicating Authority held that the services received from M/s. Bestinet, Malaysia is import of service and confirmed the demand of Service Tax of Rs.36,36,856/- on reverse charge basis and imposed equal penalty under Section 78(1) and Rs.10,000/- under Section 77(1) of the Finance Act,1994 but dropped the demand of Rs.1,60,58,278/- on the consideration received towards screening tests holding that the services are covered under exemption Notification No. 25/2012-ST dated 20.06.2012.
3. Aggrieved, the present appeal has been filed before this forum by the Appellant.
4.1 Ld. Chartered Accountant Shri T.R. Srinivasan, appeared for the Appellant and submitted that the Appellant does not charge any consideration from M/s. Bestinet and the Appellant‟s income arises from providing diagnostic services to individuals which is exempt from Service Tax vide Notification No.25/2012 dated 20.06.2012 under the heading "Health Care Services" as held in the Order-in-Original.
4Service Tax Appeal No. 40006 /2023 4.2 It was further submitted that the impugned Order-in-Appeal had held that M/s. Bestinet is the Service Provider and the Indian Workers are the service receivers and the Appellant is not the Service receiver and in such a case, the impugned services provided by M/s. Bestinet are exempt under Serial No. 34 of Notification No.25/2012 which reads as under :-
"34. Services received from a provider of service located in a non-taxable territory by
a) Government, a local authority, a Government authority or an individual in relation to any purpose other than commerce, industry or any other business or profession:
b) an entity registered under Section 12AA of Income Tax Act,1961 for the purpose of providing charitable activities or
c) a person located in a non-taxable territory."
The above ground was not considered in the impugned order for deciding on the eligibility of the said exemption.
4.3 The Ld. Chartered Accountant contended that the liability to pay Service Tax under reverse Charge Mechanism under Notification No.30/2012 dated 20.06.2012 in respect of import of services is only on the service receiver as the relevant clause (1)(B) reads as under:
"(B) provided or agreed to be provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory (other than non-
assessee online recipient)"
Since the OIA already concluded that the Appellant is not the service receiver, the liability to pay service tax under reverse charge shall not be applicable on the applicant.
4.4 It was submitted that the Service Provider confirmed that the Appellant is a mere collection Agency between the Service provider (M/s. Bestinet) and service receiver (Indian Workers) and not the actual service 5 Service Tax Appeal No. 40006 /2023 receiver. In this regard it was informed that in the new process of bio-medical registration, the fee for registration was to be directly paid by candidates even before they visit the medical centre.
4.5 It was contended that the impugned Order-in- Appeal had already erred in its conclusion that the appellant is collecting over and above the reimbursement amount of $30 which is factually incorrect and inconsistent with the observations in the impugned order. It is pertinent to note that the Appellant providing diagnostic service collects fees in relation to the said service along with $30 which it collects as pure agent with respect to the bio-medical registration on behalf of BESTINET which are distinctly mentioned in the invoice/ receipt. The impugned order affirmed that "the Indian Worker pays $30 to Bestinet as indicated in the invoice issued by the Appellant to the service recipient and the Indian Worker is aware of the same" which unequivocally confirmed that the $30 is distinctly captured in the invoice thereby establishing that the collection of fees related to diagnostic service is not in addition to this amount. Thus, the fees collected for the diagnostic services cannot be clubbed to conclude that the Appellant is collecting bio-medical registration amounts over and above the $30. Hence the conclusion that the Appellant is collecting amounts exceeding 30$ is factually incorrect.
4.6.1 Further, it was contended that the active element of intent to evade duty by action or inaction needs to be present for invoking extended period which has to be clearly brought in the Show Cause Notice. Reliance is placed on the following cases to substantiate that allegation of suppression must be proved:-6
Service Tax Appeal No. 40006 /2023
(i) Commissioner of Central Excise, Bangalore-II Vs. ITC [(257) ELT 514(Kar.]), maintained in Supreme Court [2013 (295) ELT A64 (SC)].
(ii) Indian Oil Corporation Vs. Officer of Central Excise, Kolkata-Vi [2013 (298) ELT 556 (Tri-Kolkata)].
4.6.2 It has been submitted that the Appellant was under
the bonafide belief that Service Tax is not payable on the impugned transactions relying on the decision of Supreme Court in the case of Collector of Central Excise Vs. Chempar Drugs and Liniments [1989 (40) ELT 276 (SC)] wherein it was held that non-declaration of information in the returns is not suppression if there is no deliberate withholding of information. Also in the case of Jaiprakash Industries limited Versus Officer of Central Excise, Chandigarh [2002-TIOL- 633-SC-CX-LB] it was held that „---- this court has held that wherever there is the scope for believing that the goods are not excisable to duty and therefore, no license is required to be taken out, then the extended period of limitation for demand under Section11 A is inapplicable. This Court has held that mere failure or negligence on the part of the manufacturer in not taking out a license and not paying duty does not attract the extended period of limitation. This Court has held that there must be evidence to show that the manufacturer knew that the goods were liable to duty and that he was required to take out a licence. This Court has held that for invoking the extended period of limitation, duty should not have been paid, short-levied, or erroneously refunded because of either fraud, collusion, wilful mis-statement, suppression of fact or contravention of any provision or rules. This Court has held that these ingredients postulate a positive act and therefore mere failure to pay duty and /or take out a licence which is not due to any fraud, collusion or wilful mis- statement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation.---".
In this regard, further reliance was placed on
(i) Collector of Central Excise Vs. H.M.M Ltd.
[2002-TIOL-120-SC-CX]
(ii) Sanjay Industrial Corporation Vs. Officer of Central Excise, Mumbai [2015-TIOL-17-SC-CX] 7 Service Tax Appeal No. 40006 /2023
(iii) Bharat Hotels Ltd. Vs. Officer of Central Excise [2018-TIOL-178-HC-Del-ST]
(iv) Apex Electricals (P) Ltd. Vs. Union of India [1992 (61) ELT 413 (Guj.)]
(v) British Airways Vs. Officer (Adjn.), Central Excise, Delhi [2014-TIOL-979-CESTAT-Del.] 4.6.3 In this regard, it was further pointed out that there cannot be suppression in case where the company has not disclosed information in the ST returns which the company is not legally required to and thereby invocation of extended period of limitation on this ground is improper and liable to be set aside. Reliance in this regard was placed on the decision of Balsara Extrusions Pvt. Ltd. Vs. Commissioner of Central Excise [2001 (131) ELT 586 (Tri.-Mum.)] and Apex Electricals Pvt. Ltd. Vs. Union of India [1992 (61) ELT 413 (Guj.)]. Further, it was stressed that the burden of proof that the Appellant had mala-fide intention rests with the authority and in this regard reliance was placed on
(i) Commissioner of Central Excise, Bangalore-II Vs. ITC [2010 (257) ELT 514 (Kar.)] maintained in Supreme Court [2013 (295) ELT A64 (SC)]
(ii) New Decent Footwear Industries Vs. Union of India [2002 (150) ELT 71 (Del.)] 4.7 It was further stated by the Ld. Chartered Accountant, that it is a settled principle in law, that when facts are known to the department, extended period of limitation is not applicable. The records of the company had disclosed all information required as per law in the financials which were provided to the authorities for the purpose of audit and it cannot be said that the company was engaged in deliberate mis-information. Reliance in this regard was placed on Officer of Central Excise, Mumbai Vs. CMS Computers Pvt. Ltd. [2005 (182) ELT 20 (SC)] wherein it 8 Service Tax Appeal No. 40006 /2023 was held that where the facts were in the knowledge of the authorities, there is no suppression of facts. Additionally various courts, in numerous cases such as Hindustan Safety Glass Works Vs. Commissioner of Central Excise [1993 (65) ELT 166 (ALL)], Commissioner of Central Excise, Kanpur Vs. Manohar Glass Works [1996 (83) ELT 163(T)], Vasant Sahakari Sakhkar Karkhana Vs. CCE [1989 (43) ELT 98 (Tri.)] have also held that non-furnishing of information / facts which are known to all concerned, cannot be considered as suppression of facts. In this context, it was pointed that the CBEC Circular No. 312/28/97-CX dated 22nd April 1997 312/28/97-CX., had clarified that mere non-
declaration is not sufficient for invoking the longer period, but a positive mis-declaration is necessary in the context of the Supreme Court decision in the case of M/s. Padmini Products and Chemphar Drugs. In this regard, further reliance was also placed on the following judicial pronouncements: -
(i) Blackstone Polymers Vs. Officer of Central Excise, Jaipur-II [2014 (301) ELT 657 (Tri.-Del.)]
(ii) Jaipur Jewellery Show Vs. Officer of Central Excise &ST, Jaipur-I [2017 (49) STR 313 (Tri.-Del.)]
(iii) Officer of Central Excise, Raipur Vs. Rajaram Maize Products [2010 (258) ELT 539 (Tri.-Del.)]
(iii) M/s. Krishna Polymers Vs. CCE & ST, Raipur [2018 (11) TMI 352-CESTAT, New Delhi]
(iv) Hindalco Industries Ltd. Vs. Officer of Central Excise, Allahabad [2003 (161) ELT (Tri.-Del.)]
(v) Mahindra Holiday and Resorts India Ltd. Vs. Officer of LTU [2018-TIOL-3052-CESTAT-MAD] 9 Service Tax Appeal No. 40006 /2023 4.8 Further, it was contended that where the issue involved interpretation of law, extended period of limitation cannot be invoked and in this regard, reliance was placed on the following judicial pronouncements:
EID Parry (I) Ltd. Vs. ACT [1999-VIL-01-SC] CST Vs. Vijay Television (P) Ltd. [2015 (40) STR 671 (Mad.)] CCE Vs. Gujarat Intelligence Security (India) [2011 (24) STR 167 (Guj.)] Polyspin Limited Vs. CC [2007 (214) ELT 347 (Tri.-Chennai)] Larsen & Toubro Limited Vs. CCE [2015 (317) ELT 346 (Tri.-Chennai)] ITC Limited Vs. CCE [2012 (285) ELT 292 (Tri.-Chennai)] K.K Appachan Vs. CCE [2007 (7) STR (230) (CESTAT- Bang.)] CST Vs. Deutsche Asset Management (i) Private Limited [2016-VIL-203-CESTAT-Mum-ST] PT-Education & Training Service Limited Vs. CCE [2009-TIOL-110-CESTAT-Del] Sujana Metal Products Limited Vs. CCE [2011 (273) ELT 112 (Tri.-Bang.)] Sri Shakti LPG Limited Vs. CC, CE& ST [2005 (187) ELT 487 (Tri.-Bang.)] In the light of the above, it was argued that the invocation of extended period was liable to be set aside.
5. The Ld. Authorised representative Shri N. Satyanarayanan representing the department reiterated the findings of the lower Adjudicating Authorities. He has justified with the reasons for demand of Service Tax by the lower Adjudicating Authorities.
10Service Tax Appeal No. 40006 /2023
6. Heard both sides and carefully considered the submissions and evidences on record.
7. The following issues arise for decision in this appeal:
(i) Whether the service received from M/s. Bestinet, Malaysia is to be treated as import of service and consequently demand of Service Tax of Rs.36,36,856/-
under reverse charge basis is justified?
(ii) Whether invocation of extended period in terms of Section 73(1) of the Finance act, 1994 is maintainable or not considering the facts of the case?
8. The Medical Services Agreement entered into by the appellant viz., Al-Haramain Diagnostic Centre, Chennai with M/s. Bestinet SDN BHD, Malaysia, has been carefully studied. M/s. Bestinet is the developer and the owner of IT solution called Foreign Workers Centralized Management System (FWCMS) for the Government of Malaysia to manage all aspects of foreign worker recruitment. The FWCMS is a full-fledged web-based proprietary, end-to-end foreign worker management solution. The appellant has consented to collaborate with the Bestinet as a Medical Centre in the implementation of FWCMS. As part of this FWCMS, Remote System comprising equipment and software was provided by the Bestinet to the appellant. For the provision of FWCMS to the appellant, the appellant has agreed to pay initial fees of US$ 5,000 towards supply of equipment and FWCMS Software and for installation and commissioning of the system and a sum of US$ 2,000 as a deposit for the safe return of FWCMS equipment and software besides a sum of US$ 1,000 towards initial pre-deposit credit for the service fees. Further a transaction fee of US$ 15 per foreign worker 11 Service Tax Appeal No. 40006 /2023 (subsequently increased to US$ 30) who undergoes biometric registration and medical test at Al-Haramain Diagnostic Centre regardless of the outcome of the medical tests has to be collected from each candidate who undergoes these medical tests for biometric registration on FWCMS.
9. The original adjudicating authority has held that the supply of hardware and software of FWCMS as a service of „supply of tangible goods‟ and held that the appellant is liable to pay Service Tax on US$ 5,000 under Reverse Charge Mechanism. But this finding has not been carried into the order portion. Further, there is no discussion also in the impugned order. I find that the appellant is charging Rs.2,000/- per candidate inclusive of fees of US$ 30 payable by the appellant to the Bestinet. The Show Cause Notice proposed to demand Service Tax on this entire amount of Rs.2,000/- received from each candidate. There is no break- up of which amount is received for medical tests and what amount is towards capturing of biometric details. At Paragraph 12.17 of the Order-in-Original dated 30.06.2021 by the Additional Commissioner, it was recorded that the appellant have not collected any amount exclusively for biometric registration of candidates and biometric registration is an integral part of the medical test process and the entire fees collected only towards medical test services. The appellant has also submitted a Certificate dated 08.06.2021 issued by a Chartered Accountant to the effect that the appellant has not collected any amount exclusively for biometric registration of candidates. There is also no allegation in the Show Cause Notice that the appellant has charged or collected any amount from the prospective candidates on account of the biometric registration by the appellant. All the charges towards medical tests are exempted under Notification No. 25/2012- ST and as such the demand in respect of medical tests was ordered to be dropped by the original adjudicating authority.
12Service Tax Appeal No. 40006 /2023 The amount of tax demanded on supply of tangible goods service is neither quantified nor mentioned in the final part of the order.
10. Regarding the demand of Service Tax on fees of US$ 15 which was subsequently increased to US$ 30 during the disputed period whether is to be subjected to Service Tax or not is the main issue involved in this case. The original adjudicating authority has held that M/s. Bestinet is the service provider and the appellant is the service receiver. He has rejected the contention of the appellant that they are the pure agents of the foreign workers and the foreign workers only can be considered as service recipients for use of FWCMS software. I am of the opinion that the appellant is performing the activity of registration of Indian workers with FWCMS and so, the appellant has to be considered as an agent of M/s. Bestinet in providing the service of biometric registration to prospective workers.
11. Both the lower adjudicating authorities have held that M/s. Bestinet is the service provider. For the service recipients, the original authority held the appellant as the service recipient whereas the impugned order held the prospective candidates as service recipients.
12. Thus, an examination of the Order-in-Original and the impugned order reveals many contradictions as to who are the service recipients. Any foreign worker who is planning to go to Malaysia is required to register on Bestinet‟s FWCMS which is achieved through the remote system employed with the appellant. The service of registration of the foreign workers is performed by the appellant as an agent of M/s. Bestinet, Malaysia. As such, I am of the considered view that the appellant is the service 13 Service Tax Appeal No. 40006 /2023 provider along with M/s. Bestinet as both have collaborated and the prospective candidates / foreign workers are the service recipients which has been rightly held by the appellate authority. The facts also indicate that the appellant has not collected any consideration towards biometric registration of the prospective candidates / foreign workers. To this effect, even the appellant has submitted a Certificate from the Chartered Accountant. As the appellant is collecting US$ 30 for the purpose of biometric registration which has been paid to M/s. Bestinet in terms of the agreement entered into with them there is no additional consideration received by the appellant for provision of this service of biometric registration.
13. The Ld. Consultant for the appellant has argued that if M/s. Bestinet is treated as the service provider both by the lower adjudicating authorities and as the service is provided from a non-taxable territory, the appellant not being a service recipient is exempted under Serial No. 34 of Notification No. 25/2012 which states that services received from a provider of service located in a non-taxable territory are exempted. Even his other contention that Service Tax liability under Reverse Charge Mechanism under Notification No. 30/2012 dated 20.06.2012 in respect of import of services is only on the service receiver and the appellant not being a service recipient but the foreign workers no Service Tax liability can be fastened to the appellant on Reverse Charge Mechanism basis.
14. To sum up, the appellant was collecting Rs.2000/- for each prospective employee who are the service receivers which is inclusive of US$ 30 which is paid to M/s. Bestinet upon raising of periodical invoices on the appellant. The total demand confirmed of Service Tax during the period from September 2014 to June 2017 worked out to 14 Service Tax Appeal No. 40006 /2023 Rs.36,36,856/- after giving exemption for the amounts collected towards diagnostic / medical screening tests. The Service Tax liability was computed on this US$ 30 which is the fees collected by the appellant for biometric registration of the candidates on FWCMS. The appellant acted as an agent of the Bestinet in collecting the fees of US$ 30 which was paid on periodical basis to M/s. Bestinet. The invoices raised by the appellant did not indicate collection of any other amount over and above US$ 30 payable by each foreign worker. In view of the above findings, the nature of services rendered by the appellant were in the nature of a pure agent as far as the fees for biometric registration is concerned. The amount alleged to have been collected by the appellant over and above US$ 30 is only towards screening test conducted by the appellant which was already held to be exempt in the impugned Order-in-Original dated 30.06.2021 under Notification No. 25/2012-ST dated 20.06.2012. As such, the demand of Rs.36,36,856/- collected by the appellant as fees for biometric registration of foreign workers who are the ultimate service recipients and which was paid to M/s. Bestinet, cannot be sustained. As the appellant succeeds on merits there is no need to discuss about the invocation of extended period.
15. Consequently, the impugned order is ordered to be set aside and the appeal is allowed with consequential reliefs, if any, as per law.
(Order pronounced in open court on 11.12.2023) Sd/-
(VASA SESHAGIRI RAO) MEMBER (TECHNICAL) MK