Custom, Excise & Service Tax Tribunal
Adiraj Manpower Services Pvtltd vs Cce Pune Ii on 15 July, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
WEST ZONAL BENCH
COURT No.
Service Tax Appeal No. 86153/2015
(Arising out of Order-in-Original No. PUN-EXCUS-002-COM-009-14-15
dated 24.02.2015 passed by Commissioner of Central Excise, Customs
& Service Tax, Pune-II)
Adiraj Manpower Services Pvt. Ltd. Appellant
Ambethan Chowk, Chakan,
Pune 410 501.
Vs.
Commissioner of Cen. Excise, Pune-II Respondent
ICE House, 41-A, Sasson Road, Opp. Wadia College, Pune 411 001.
Appearance:
Shri Ashok Nawal, Advocate for the Appellant Shri Roopam Kapoor, Authorised Representative for the Respondent CORAM:
Hon'ble Mr. Sanjiv Srivastava, Member (Technical) Hon'ble Dr. Suvendu Kumar Pati, Member (Judicial) FINAL ORDER NO. A/86237/2019 Date of Hearing: 03.04.2019 Date of Decision: 15.07.2019 PER: SANJIV SRIVASTAVA This appeal is directed against the Order in Original No PUN-EXCUS-002-COM-009-14-15 dated 24.02.2015 of Commissioner Central Excise, Pune-II. By the impugned order Commissioner has held as follows:
"41.1 I confirm the demand of Service Tax and Education Cess totally amounting to Rs 10,81,74,382/-
(Rupees Ten Crore Eighty One Lakhs Seventy Four Thousand Three Hundred and Eighty Two Only) attributable to delayed payment of Service Tax by the assessee i.e. M/s Adiraj Manpower Service Pvt Ltd., Pune in respect of MRSA services provided by them during the 2 ST/86153/2015 period from April 2012 to March 2014, as detailed in Anne4xure -I of the Show Cause Notice, under the provisions of Section 73(2) of the Act. I further order appropriation of Service Tax and Education Cess totally amounting to Rs 10,81,74,382/-, since paid by the assessee, as detailed in Annexure-I of the SCN., against the aforesaid confirmed demand.
41.2 I confirm the demand of Service Tax and Education Cess totally amounting to Rs 39,33,395/- (Rupees Thirty Nine Lakhs Thirty Three Thousand Three Hundred and Ninety Five Only) short paid/ not paid by the assessee i.e. M/s Adiraj Manpower Service Pvt ltd., Pune in respect of MRSA services provided by them to M/s Sigma, during the period from April 2012 and September 2012 to March 2014, as detailed in Anne4xure -II of the Show Cause Notice, under the provisions of Section 73(2) of the Act. I further order appropriation of Service Tax and Education Cess totally amounting to Rs 71,534/-, since paid by the assessee, against the aforesaid confirmed demand.
41.3 I also order recovery of interest, at the appropriate rate(s) as applicable during the relevant period, on the demand of Service Tax as confirmed at paras 41.1 and 41.2 above under the provisions of Section 75 ibid. I further order appropriation of the amount of interest of Rs 17,06,959/- since paid by the assessee against their interest liability arising out of the demand confirmed at para 41.1 above as detailed in Annexure-I of SCN. Further, I also order appropriation of interest of Rs 12,876/- since paid by the assessee against their interest liability arising out of the demand confirmed at para 41.2 above.
41.4 Further, for their failure to pay the due service tax within stipulated dates during the period from April 2012 to March 2014, as proposed in para 27.2 of the Show Cause Notice and as discussed/ held in para 39.8(a) above, I impose a penalty of Rs 100/- for every day during 3 ST/86153/2015 which such failure to pay due service tax continued or at the rate of one percent of such tax, per month, whichever is higher, starting with the first day after due date till the date of actual payment of outstanding amount of service tax under the provisions of Section 76 of the Act. Further, I order appropriation of the amount of Rs 43,243/- and Rs 43,455/- since paid by the assessee towards the their aforesaid penal liability.
41.5 I also impose a penalty of Rs 40,000/- (Rs 10,000/- for each half yearly ST-3 return for the period from April 2012 to March 2014) for their failure to provide the correct details in the service tax returns filed during the period from April 2012 to March 2014, under the provisions of Section 7(2) of The Act. Further, the assessee would also be liable to pay late fees at the appropriate rates for their failure to file ST-3 return during the period from April 2013 to September 2013 within the prescribed time limit, as stipulated under Section 70(1) of the Act read with Rule 7 of the Rules. The amount of Rs 2700/- already paid by the assesses stands appropriated against the aforesaid late fees payable by them in respect of the ST-3 return for the period from April 2013 to September 2013, filed late by them.
41.6 I also impose a penalty of Rs 19,66,698/- (Rupees Nineteen Lakhs Sixty Six Thousand Six Hundred and Ninety Eight Only) upon the assessee i.e. M/s Adiraj Manpower Service Pvt ltd., Pune under the provisions of Section 78(1) of the Act, for their tax delinquency during the period from April 2012 and September 2012 to March 2014. The said penalty imposed is equal to 50% of the Service Tax payable as determined at para 41.2 above, attributable to the period April 2012 and September 2012 to March 2014, as details of all these transactions are available on the specified records of the assessee, as stipulated under the first proviso to Section 78(1) of the Finance Act,1994.
4 ST/86153/2015 41.7 Further I also give an option to the assessees, under the second and third proviso to Section 78(1) of the Finance Act, 1994 to pay penalty equivalent to 25% of the demand of Service Tax as determined/ confirmed in para 41.2 above (i.e. 25% of Rs 39,33,395/- which is equal to Rs 9,83,349/-) provided the assessee pays the entire amount of demand of service tax, as determined/ confirmed in para 41.2 relevant to the period from April 2012 and September 2012 to March 2014 i.e. Rs 39,33,395/- along with interest payable thereon as ordered in para 41.3 above on the said amount as well as the 25% penalty, within 30 days of the communication of this order.
42 This order is issued without prejudice to any other action that may be taken against the noticee under the provisions of Chapter-V of the Finance Act, 1994 and/ or the rules made thereunder and/ or any other law for the time being in force."
2.1 Appellants are providing the services under the category of "Manpower Recruitment or Supply Agency Service". Acting on intelligence that the appellant is charging service tax to their customer for providing the taxable service but have not deposited the service tax collected with the exchequer, the business premises of the appellants was visited by the officers of anti evasion section of Pune I Commissionerate.
2.2 Scrutiny of the records/ documents recovered/ produced during the course of investigation revealed that-
i. Appellants had failed to pay their service tax liability on or before the due date for the period April 2012 to March 2014.
ii. They had failed to correctly assess and discharge their true service tax liability in as much as that they failed to include the value of taxable service supplied to M/s Sigma Electric Manufacturing Corporation Pvt 5 ST/86153/2015 Ltd, for the period from September 2012 to March 2014.
iii. They had failed to file the ST-3 return for the period April 2013 to September 2013 by the due date as stipulated under Section 70(1) of the Finance Act, 1994 (Act) read with Rule 7 of Service Tax Rules, 1994 (Rules).
2.3 After completion of investigations a show cause notice dated 26th September 2014, has been issued to the Appellant asking them to Show Cause as to why-
(i) Service Tax of Rs 10,50,23,672/- and Education Cess Rs 21,00,473/- and SHE Cess Rs 10,50,237/- totally amounting to Rs 10,81,74,382/- (Rupees Ten Crore Eighty One Lakhs Seventy Four Thousand Three Hundred and Eighty Two Only) on the Taxable value of Rs 87,51,97,267/- provided by them during the period from for the period April 2012 to March 2014, as detailed in Annexure -I of this Notice, should not be demanded and recovered from them in terms of proviso to sub section (1) of Section 73 of the Finance Act, 1994. Further, the total amount of Service Tax of Rs 10,50,23,672/- and Education Cess Rs 21,00,473/- and SHE Cess Rs 10,50,237/- totally amounting to Rs 10,81,74,382/-order appropriation of Service Tax and Education Cess totally amounting to Rs 10,81,74,382/-, since paid by the assessee, out of the demand mentioned above as detailed in Annexure-I of this Show Cause Notice, should not be appropriated against the above said demand of Service Tax.
(ii) Service Tax of Rs 38,18,830 and Education Cess Rs 76,377/- and SHE Cess Rs 38,188/- totally amounting to Rs 39,33,395/- (Rupees Thirty Nine Lakhs Thirty Three Thousand Three Hundred and Ninety Five Only) arising out of reconciliation for the period from April 2012 to March 2014 (including service value provided to M/s Sigma Electric Manufacturing Corporation Pvt Ltd., 6 ST/86153/2015 Chakan, Pune from September 2012 to March 2014) from the assesssee, as detailed in Annexure -should not be demanded and recovered from them in terms of proviso to sub section (1) of Section 73 of the Finance Act, 1994. The amount of Service Tax of Rs 69,450/- Education Cess Rs 1,389/- and SHE Cess Rs 695/- toatally amounting to Rs 71,534/-, paid by the assessee vide challan no 86709 dated 24.03.2014 during the course of enquiry/ investigations , out of the demand mentioned above, should not be appropriated against the afore said demand of Service Tax.
(iii) Interest of, on the demand of Service Tax as demanded at (i) and (ii) should not be demanded and recovered from the assessee, under the provisions of Section 75 of the Finance Act, 1994. Further the interest of Rs 17,06,959/- already paid by them against their interest due, for the demand at (i) above, and the interest of Rs 12,876/- already paid by the them vide challan no 86709 dated 24.03.2014 should not be adjusted and appropriated against the interest due for the demand confirmed at (ii) above.
(iv) Penalty should not be imposed on the assessee, under the provisions of Section 76 of the Act for failure to pay Service Tax, by the due date(s) in accordance with Section 68 of Finance Act, 1994, read with Rule 6(1) of the Service Tax Rules, 1994. And the penalty of Rs 43,243/- already paid by the assessee vide challan no 2197 dated 10.09.2012 and penalty Rs 43,455/- paid by the assessee vide challan no 40903 dated 10.09.2012 should not be adjusted and appropriated towards the said penalty.
(v) Penalty should not be imposed on the assessee, under the provisions of Section 77(2) of the Finance Act, 1994, for the delay in filing of ST-3 return for the period April 2013 to September 2013 as required under Section 70 of the Finance Act, 1994..
7 ST/86153/2015
(vi) Penalty should not be imposed upon them under the provisions of Section 78(1) of the Act."
2.4 The show cause notice has been adjudicated by the Commissioner by the impugned order referred in para 1, supra. Aggrieved by the order appellants have filed this appeal.
3.1 Appellants have in their appeal assailed the impugned order stating that-
i. Penalty should not be imposed on them as they have paid the delayed service tax along with interest on their own volition. It was due to liquidity issues and delayed billing cycle that there was delay in payment of tax. However they had been paying the service tax due though late but on their own volition along with interest. Hence no penalty should have been imposed upon them. [OTS Advertising Pvt Ltd [2013 (32) STR 303 (T-Bang)] , Adecco Flexione Workforce Solutions Ltd [2012 (26) STR 3 (Kar)].
ii. Service tax is not liable to be paid on the job work activities undertaken for M/s Sigma (Demand of Rs 39,33,395/- not tenable). They were undertaking the job work for M/s Sigma from September 2012 onwards where supervision, management and control of activities of production lied with them. They were required to provided the processed goods as per the requirement of customer. The activities undertaken by them will qualify for exemption under Notification No 25/2012-ST dated 20.06.2012 at Sl No 30. {Delhi Cloth and General Mills Ltd [AIR 1963 SC 791], National Metal Works [2005 (179) ELT 189 (T-Del)], Mahavir Aluminium Ltd [2007 (212) ET 3 (SC)]}. In period post 1st July 2012, the activities undertaken by them will be covered by the definition of Service as defined under Section 65B(44) and is also not specified as service under Section 66D (negative list). Hence these services are leviable to 8 ST/86153/2015 service tax but are exempted by the Notification No 25/2012-ST {Seven Hillds Construction {2013 (31) STR 611 (T-Mum)], Ritesh Enterprises [2010 (18) STR 17 (T-Bang)], Nagar Taluka Shramik Seva Sangh [2010 (19) STR 119 (Commr Appl)], Karwar Dock & Port Labour [2010 (17) STR 423 (T-Bang)]. iii. Canteen charges recovered from employees and reimbursement of other expenses should not have formed the part of taxable value of services provided by the Appellant. They were providing the canteen facilities to their employees and recovering the charges towards providing such service to their employee form them. Such charges and other reimbursable expenses could not have formed the part of taxable value.
iv. Late Fee could not have been demanded from them as they had filed their SR-3 return in time. For the period April 2013 to September 2013 they had filed the service tax return on 25.10.2013 which was within the due date. Hence no late fees could have been levied upon them.
v. Extended period of limitation should not have been invoked. Department had initiated the enquiry in their case on 14.12.2012 and have issued the show Cause Notice on 26.09.2014. Hence the demand beyond normal period of limitation is barred by limitation, i.e. demand for the period April 2012 to September 2013 is barred by limitation. {Chemphar Drugs [1989 (40) ELT 276 (SC)], M P Laghu Udyog Nigam Ltd [2015 (37) STR 308 (T-Del)], INDO US MIM TEC PVT Ltd [2014 (36) STR 92 (T-Bang)], Larsen & Tubro Ltd [20007 (2110 ELT 513 (SC)]], Suprasesh G I S & Brokers P Ltd [2009 (13) STR 641 (T-Chennai)], Meghmani Dyes & Intermediates Ltd [2013 (288) ELT 514 (Guj)], Cambay Organics Pvt Ltd [2007 (217) ELT 586 (T-Ahd)], Maruthi Industrial 9 ST/86153/2015 Carbohydrates Ltd [2007 (216) ELT 142 (T- Chennai)] vi. Interest and penalty could not have been imposed on them. As there is no suppression of facts. Further in term of Fifth proviso to Section 78, penalties under section 76 and 78 could not have been imposed simultaneously. {United Communication Udupi {2012 (281) ELT 168 (Kar)], Amaravati People Co- op Bank Ltd [2014 (36) STR 456 (T-Mum)], Caldreys India Refractories Ltd [2014 (360 STR 102 (T- Mum)].
vii. Penalty under Section 77(2) could not have been imposed on them as there was no delay in filing the return and if there was any delay then the same was only a procedural lapse and not a substantial irregularity. [Air Express Cargo services [2005 (182) ELT 409 (T-Mum)], ABC Engineering Works [2010 (20) STR 44 (T-Bang)], Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] 4.1 We have heard Shri Ashok Nawal, Advocate for the Appellant and Shri Roopam Kapoor, Principal Commissioner, Authorized Representative for the revenue.
4.2 Arguing the for the Appellants, Counsel stated that-
i. By Section 66BA introduced vide Finance Act, 2019 issue of classification of services under various categories was made relevant for levy and payment of service tax.
ii. In the present case the dispute is between the classification of services as Manpower Recruitment & Supply Service an Business Auxiliary Service. iii. Lump Sum service contract/ Job work does not amount to manpower recruitment & supply service {Shailu Traders {2018 (10) GSTL 462 (T-Del)], Shri Ramadhar Singh [2018 (9) GSTL 303 (T-Del)], Dhanashree Enterprises [2017 (5) GSTL 212 (T-
10 ST/86153/2015 Del)], Nortel Network 9I) Pvt Ltd [2017 (52) STR 489 (T-Del)]} iv. In the case of Venus Albums Co Pvt Ltd [2019 (22) GSTL 386 (T-Chan)] and Sarkar & Sen Company {2016 (45) STR 479 (AAR)] benefit of Notification No 25/2012-ST has been extended to job work activities.
v. The processed undertaken by them are nothing but intermediary process as explained in the table below:
Manufacturing Process Process Performed By Base Metal bringing from storage Job Worker i.e. Appellant and pouring in melting furnace Melting in Furnace Principal Manufacturer Manufacture of Raw Casting Principal Manufacturer Fettling & Deburring of the raw Job Worker i.e. Appellant casted goods Material Handling and Handing over Job Worker i.e. Appellant to next machining operation after acceptance of quality control Machining Raw casted goods Principal Manufacturer Assembly Principal Manufacturer or Job Worker i.e. Appellant as applicable Packing of Finished Goods. Principal Manufacturer or Job Worker i.e. Appellant as applicable vi. In the entire production process they were doing fettling which means by which a crude casting is turned into a cost effective quality component that meets all the standards required by the customer and removal of unwanted metal, also they were doing handling of material, pouring the material etc which is part of production process.
vii. It can be seen from the agreement that the payment was made to the appellant on per piece basis, hence what they rendered was business auxiliary service 11 ST/86153/2015 rightly covered under the Notification No 25/2012-
ST.
viii. During the period in dispute the date of filing the ST-
3 return had been extended by the Government and they had filed the return within the extended date as indicated in table below. Hence the penalty under Section 77 and Late Fees imposed on them cannot be justified.
Period Due Date Date of Notification/
Filing Order extending
due date
April 12-June 12 25.11.2012 21.11.2012 Ntf No 01/2013-
ST
July 12- 30.04.2013 25.04.2013 Order No
September 12 4/2013-ST
October 12- 31.08.2013 29.08.2013 Order No
March 13 4/2013-ST
April 13 - 25.10.2013 25.10.2013
September 14
ix. In terms of fifth proviso to Section 78 penalties
under section 76 and Section 78 could not be imposed simultaneously.
x. Extended period cannot be invoked as there is no case for suppression of facts etc. xi. Penalty under Section 78 cannot be imposed. {)TS Advertising Pvt Ltd [2013 (32) STR 303 9T-Bang)], Galaxy Construction Pvt Ltd [2017 (48) STR 37 (Bom)], Adecco Flexione Workforce Solutions Ltd [2012 (26) STR 3 (Kar)]} 4.3 Arguing for the revenue learned authorized representative while reiterating the findings recorded in the order of the Commissioner submitted that-
i. There is no dispute in respect of delayed payment of taxes to the tune of Rs 10,81,74,382/- along with the interest. It is admitted fact that appellants have failed to discharge the tax liability within time, and this has not happened once but has been happening 12 ST/86153/2015 every month. Since Appellants have been constantly defaulting on the payment of service tax within the due date the penal proceedings against them are warranted.
ii. The appellants were registered for man power recruitment and supply services. In respect of the services supplied to M/s Sigma, they had been paying the service tax under the category of Manpower Recruitment and Supply Services upto August 2008. They changed the practice with effect from September 2008 and stopped paying service tax in respect of the supply made to M/s Sigma claiming the same to be job work exempted in terms of Notification No 25/2012-ST (Sl No 30). iii. From the terms and condition of the contract entered between the appellants and M/s Sigma (Contracts dated 1st January 2012, 1st January 2013 & 1st January 2014) it is quite evident that the services provided by them were those of manpower supply and not of job work. (Specifically conditions at Sl No 10 to 17 of Terms and Conditions).
iv. If the agreement was for the job work then why should contract have conditions like minimum wages to labour, submission of muster etc by the Appellant to M/s Sigma and issues like payment under ESI Act, Provident Fund to the employees of the appellant be part of the contract.
v. All these conditions which are the part of the contract clearly show that the appellants were providing man power supply services and were not engaged in any job work.
vi. He further referred to Schedule I to the Contract and submitted that Fettling and Material and Supply Cast/ machined Parts are only three activities which are subjected to per Kg price, however the manpower supplied by the appellants to the M/s Sigma as per the agreement is undertaking the 13 ST/86153/2015 various activities like Fetling, Material Handling, Assembly, Pouring, Supply Cast/ machined Parts, Painting & Packing. Most of these activities as per the contract are not charged on kg or piece basis. vii. Hence the argument made by the appellants that they are undertaking the activities that would be covered by the exemption under Notification No 25/2012-ST (S No 30) would not be justifiable and is contrary to the contract.
viii. The case laws relied by the Appellant in this respect would not advance the case of the appellants. ix. In terms of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 the canteen charges need to be added to taxable value.
x. Appellants are liable to pay interest on the service tax short/ not paid by them by the due date. xi. Since appellants have willfully suppressed the material facts from the department extended period of limitation is rightly invoked for making the demand.
xii. Relying on the decision in case of Rikin Industries [2013 (3) ECS 220 9T-Ahd)], Dharmendra Textile Processors [20008-TIOL-192 SC-LB], Gujarat Travancore Agency Cochin [1989 (42) ELT 350 (SC)], Rajasthan Spinning & Weaving Mills [2009 (238) ELT 3 (SC)] penalties imposed o0n the appellants are justified.
5.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments.
5.2 There is no dispute in respect of the tax paid late amounting to Rs 10,81,74,382/- along with interest of Rs 17,06,959/-. Appellants have admitted their liability and have also deposited the tax due along with interest. The dispute in respect of these amounts is only to the extent of penalty imposed. In the impugned order no penalty in 14 ST/86153/2015 respect of these amounts has been imposed under Section 78 only penalty imposed is under Section 76. Penalty under Section 76 is for failure to deposit the tax in time. When admittedly appellants were not depositing the tax by the due date, the penalties need to be imposed even if the appellants claim no mens rea. Hon'ble Supreme Court has in case of Gujarat Travancore Agency Cochin [1989 (42) ELT 350 (SC)] laid down the law stating-
"4. ............ It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what it intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by Statute proceeds on the assumption that society suffers injury by and the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be 15 ST/86153/2015 measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum Volume 85, page 580, Paragraph 1023 :
"A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws.""
Hence we do not find any merits in the submissions of the appellants in this respect.
5.3 Now coming to issue of services provided to M/s Sigma, whether these service qualify to be the Manpower Recruitment & Supply Services or are job work services exempted under the Notification 25/2012-ST. With regards to taxability of the services provided in the regime of taxation of services introduced with effect from 1st July 2012 appellants have in their appeal memo para 41 stated as follows:
"41. In the present case, the activities undertaken by the Appellant would be covered by the definition of service as defined in Section 65B(44) of the Finance Act, 1994. Further upon perusal of the said negative list, it can be found that the services provided by Appellant which doesn't amount to manufacture, are not covered under any entry of the negative list of services. Therefore the services provided by Appellant would be liable to service tax from 1st July, 2012.
42 However in this regards as explained above exemption Notification No 25/2012-ST dated 20.06.2012 16 ST/86153/2015 which at its entry no 30(c) exempts following category of service.
"Intermediate production process as job work in relation to any good on which appropriate duty is payable by the principle manufacturer""
5.4 From the above submissions made in appeal it is clear that appellant do not dispute taxability of the services provided by them to M/s Sigma but are claiming the benefit of exemption in terms of Notification No 25/2012- ST.
5.5 The Terms and Conditions specified in the Contract between the Appellant and M/s Sigma are reproduced below:
"The Contractor has undertaken the responsibility of Fetling, Material Handling, Assembly, Pouring, Supply of Cast & machine part, painting.
1. The Contractor has undertaken this job contract which is highly specialized in its nature where trained and expert team with coordination is required.
2. The contractor shall receive the consideration as per the services rendered and as per rates mentioned in Schedule "II" attached herewith.
The Contractor shall be responsible for cleaning premises in highly hygienic condition. The Contractor while undertaking Fetling, Material Handling, Assembly, Pouring, Supply of Cast & machine part, painting or so shall avoid any wastage, theft, pilferage etc and shall not damage the premises of the Company.
3. The Contractor shall provide all items and equipment's proper uniform, protective clothing etc and maintain his personnel as per requirements of the Company in hygienic conditions at his own cost.
4. The Contractor has agreed that the premises of the Company shall be used by the Contractor only for the contractual work of the Company and the 17 ST/86153/2015 Contractor agrees that this agreement does not create or vest any right or status to the Contractor or his personnel to use the premises for any other purposes. The Contractor has expressly agreed that neither the Contractor nor his relatives, representatives, agents, employees of the Contractor shall use the premises for residential or any such private purpose.
5. The Contractor shall take all safety measures and medical care of his personnel and provide safety measures to avoid accidents to the personnel and damages to the property, premises and the equipment of the Company. The Contractor shall maintain hygienic conditions in the premises and in case of any failure on this account, the Contractor shall be liable for cost towards the same.
6. It is expressly understood herein that the Contractor has given the premises strictly for the purpose as envisaged in this agreement and no right of lease, tenancy, sub tenancy or license shall accrue to the Contractor in respect of the premises. The Contractor shall not commit any act or deed which would jeopardize the interests of the Company over the said premises.
7. The Contractor shall decide its own complement to be engaged for performance of this contract and the Company will not interfere in the decision of the Contractor in this respect.
8. In the event of any doubts as to interpretation of clause of agreement the interpretation of the Company shall be final and binding on the Contractor who has voluntarily agreed to accept the interpretation of the Company.
9. It will be the sole duty and discretion of the Contractor to recruit his own personnel of this own choice. The personnel engaged by the Contractor will work under the direct control, supervision and 18 ST/86153/2015 administration of the Contractor and the Company will have no right to interfere in it..
10. It is also agreed between the parties that the Contractor shall decide the service conditions of the employees engaged by the Contractor, but ensure that he will pay them the wages not less than the rates of minimum wages as applicable for his scheduled industry. The mode of payment will be as described by the Government Authorities.
11. It is agreed that the Contractor shall take necessary license whenever required under the provisions of Contract Labour (Regulation & Abolition) Act, 1970 and shall submit a copy of the same to the Company.
12. The Contractor shall maintain various records, registers and shall submit timely returns required under legislation, rules and regulations applicable to him and hi personnel. The contractor shall submit Xerox copies of musters, vouchers to the company in respect of his personnel.
13. The Contractor indemnifies the Company that he shall bear any burden of whatsoever nature like fees, fines, penalty, damages, rise in wages, HRA,, Back-Wages, etc in respect of his personnel under the provisions of any law.
14. .....
15. The Contractor shall ensure that the persons engaged by him shall not obstruct the working of the Company and in the event of any such obstruction the Contractor is liable for damages and compensation to the company.
16. The Contractor ensures that he will maintain the discipline among his own employees. In case of any misbehavior or mis conduct by the personnel engaged by the Contractor, The Contractor shall take proper action against such person, the Company shall not have any right to take such action. In the 19 ST/86153/2015 event if the Contractor does not take proper action the contract is liable to be terminated without notice.
17. The Contractor shall pay timely dues under ESI Act, Provident Fund if applicable in respect of his persons/ employees and shall maintain Registers, submit returns under ESI Act, Provident Fund Act. If due to failure of Contractor any financial or otherwise burden costs on the Company then Company is at liberty to recover the same from the bills of the Contractor.
18. If the Contractor fails to fulfill his responsibility fully or partially on any day or at any time an equal to the work done short, plus 10% damages shall be deducted from the Contractors bill.
19. It is agreed between the parties that if the Company finds the work of the Contractor unsatisfactory or if the there is any breach of terms of this contract, the Company shall have the right to terminate this contract without any notice or compensation to the Contractor.
20. ....
21. ....
22. ....
23. The Contractor shall fix the duty and timings of his own personnel as per his own requirement. However, it shall not conflict with the working of the Company and its employees.
24. The Contractor indemnifies the Company against any liability that may arise because of the persons engaged by him.
25. The Contractor will issue the equipment's materials etc. to his personnel on his (Contractor's) responsibility and will keep proper record of it. In case of any short-comings the Contractor is liable to pay the costs of the same to the Company. In the event of any doubts any doubts as to interpretation of clause of this agreement, the interpretation of the 20 ST/86153/2015 Company shall be final and binding on the Contractor.
26. This agreement is for the period of 12 months i.e. till 31st December 2013 and thereafter it may continue with written understanding on the same terms and conditions."
"SCHEDULE "I"
Provide services for Fetling, Material Handling, Assembly, Pouring, Supply of Cast & machine part, Painting, at our establishment situated at Gate No 154/1 & 155/1, Mahalunge, Chakan, Pune, 410501, which consists of plant area, offices, stores, canteen, utilities, open land, scrap yard etc..
SCHEDULE "II"
The rate per Kg is given below:
Particulars Copper/ Zinc/ Aluminium/ Steel/ kg Kg kg kg Fetling 0.83 Material 0.58 Handling Packing Pouring Supply Cast/ 2.49 Machined Parts Painting Total 2.49 1.41 0.00 0.00"
5.6 The above contract needs to be examined in light of the provisions of Contract Labour (Regulation & Abolition) Act, 1970. This Act permits companies and establishments in the manufacturing and services sectors to engage contract labour through contractors. Features of the said Act, relevant for the controversy in hand are reproduced below:
Section 2
(c) "contractor", in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods of 21 ST/86153/2015 articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor;
(e) "establishment" means--
(i) any office or department of the Government or a local authority, or
(ii) any place where any industry, trade, business, manufacture or occupation is carried on;
(i) "workman" means any person employed in or in connection with the work of any establishment to do any skilled, semiskilled or un-skilled manual, supervisory, or clerical work for hire or reward, whether the terms of employment be express or implied, but does not include any such person--
(A) who is employed mainly in a managerial or administrative capacity; or (B) who, being employed in a supervisory capacity draws wages exceeding five hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature; or (C) who is an out-worker, that is to say, a person to whom any articles or materials are given out by or on behalf of the Principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purposes of the trade or business of the principal employer and the process is to be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of the principal employer.
Licensing of contractors.- (1) With effect from such date as the appropriate Government may, by notification in the 22 ST/86153/2015 Official Gazette, appoint, no contractor to whom this Act applies, shall undertake or execute any work through contract labour except under and in accordance with a licence issued in that behalf by the licensing officer.
Liability of principal employer in certain cases.-
(1) If any amenity required to be provided under section 16, section 17, section 18 or section 19 for the benefit of the contract labour employed in an establishment is not provided by the contractor within the time prescribed thereof, such amenity shall be provided by the principal employer within such time as may be prescribed.
(2) All expenses incurred by the principal employer in providing the amenity may be recovered by the principal employer from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.
Responsibility for payment of wages.-
(1) A contractor shall be responsible for payment of wages to each worker employed by him as contract labour and such wages shall be paid before the expiry of such period as may be prescribed.
(2) Every principal employer shall nominate a representative duly authorized by him to be present at the time of disbursement of wages by the contractor and it shall be the duty of such representative to certify the amounts paid as wages in such manner as may be prescribed.
(3) It shall be the duty of the contractor to ensure the disbursement of wages in the presence of the authorized representative of the principal employer.
(4) In case the contractor fails to make payment of wages within the prescribed period or makes short payment, then 23 ST/86153/2015 the principal employer shall be liable to make payment of wages in full or the unpaid balance due, as the case may be, to the contract labour employed by the contractor and recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.
Registers and other records to be maintained.-
(1) Every principal employer and every contractor shall maintain such registers and records giving such particulars of contract labour employed, the nature of work performed by the contract labour, the rates of wages paid to the contract labour and such other particulars in such form as may be prescribed.
(2) Every principal employer and every contractor shall keep exhibited in such manner as may be prescribed within the premises of the establishment where the contract labour is employed, notices in the prescribed form containing particulars about the hours of work, nature of duty and such other information as may be prescribed.
5.7 In terms of the agreement between the Appellants and M/s Sigma it is abundantly clear that the appellant satisfies the definition of "contractor" under Section 2(c) the Contract Labour (regulation and Abolition) Act, 1970. Accordingly the agreement (Sl No 11) makes it obligatory on the Appellant to obtain the required license under the said Act. If the contract was for job work and not for contract labour then it should have only the description of job and the job charges to be paid. However from the agreement clause 10, provides for payment of wages to the employees/ workman employed by the contractor/ appellant and also the mode of payment. The agreement at S No 17 also provides for payment of dues under ESI Act and Provident Fund in respect of the persons/ employees of the contractor. It also lay down the condition 24 ST/86153/2015 that proper records and registers to be maintained in this respect. In case any financial burden on this account is cast on the Company then the Company is having liberty to recover the same from the bills of contractor. How is company concerned in matter relating to payment of wages, to ESI Account and Provident Fund Account in respect of the employees of the contractor, in a job work contract? In our view the agreement between the appellant and the M/s Sigma is nothing but a "contract labour" agreement, executed for the purpose of providing requisite manpower and is not a job work contract. Hence the services provided by the appellant cannot be said to be those in respect of which Sl No 30 of exemption Notification No 25/2012-ST shall apply.
5.8 Appellant shave referred to decision in case of Venus Album Co Pvt Ltd [2019 (22) GSTL 386 (T-Chand)] & Sarkar and Sen Company {2016 (45) STR 479 (AAR)]. In the said decisions it was held that if the activities undertaken were held to be of that job work in respect of the finished goods cleared on payment of duty then will be exempted in terms of this notification. None of these decisions have held that even the "Contract Labour"
agreement shall be treated as the job work agreement. Hence we do not find these decisions applicable in present set of facts.
5.9 The decisions in case of Shailu Traders [2018 (10) GSTL 462 9T-Del)], Shri Ramadhar Singh [2018 (90 GSTL 303 (T-Del)], Dhanshree Enterprises [2017 (5) GSTL 212 (T-Del)], Nortel Network (I) Pvt Ltd [2017 (52) STR 489 (T-Del)] all are in respect of the law as it existed prior to 1st July 2012 and hence not applicable in the amended regime. Appellants as pointed out do not dispute the taxability of the activities under taken by them post 1st July 2012 and have claimed that benefit of exemption under notification No 25/2012-ST (S No 30) should be admissible to them. We have held that the appellants are 25 ST/86153/2015 not eligible for the benefit of said exemption. We would also refer to the decision of Constitutional bench of Apex Court in case Dilip Kumar & Company [2018 (361) ELT 577 (SC)] wherein it following has been laid down:
"40. After considering the various authorities, some of which are adverted to above, we are compelled to observe how true it is to say that there exists unsatisfactory state of law in relation to interpretation of exemption clauses. Various Benches which decided the question of interpretation of taxing statute on one hand and exemption notification on the other, have broadly assumed (we are justified to say this) that the position is well-settled in the interpretation of a taxing statute : It is the law that any ambiguity in a taxing statute should ensure to the benefit of the subject/assessee, but any ambiguity in the exemption clause of exemption notification must be conferred in favour of revenue - and such exemption should be allowed to be availed only to those subjects/assesses who demonstrate that a case for exemption squarely falls within the parameters enumerated in the notification and that the claimants satisfy all the conditions precedent for availing exemption. Presumably for this reason the Bench which decided Surendra Cotton Oil Mills case (supra) observed that there exists unsatisfactory state of law and the Bench which referred the matter initially, seriously doubted the conclusion in Sun Export Case (supra) that the ambiguity in an exemption notification should be interpreted in favour of the assessee.
41. After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging 26 ST/86153/2015 provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State.
42. In Govind Saran Ganga Saran v. Commissioner of Sales Tax, 1985 Supp (SCC) 205, this Court pointed out three components of a taxing statute, namely subject of the tax; person liable to pay tax; and the rate at which the tax is to be levied. If there is any ambiguity in understanding any of the components, no tax can be levied till the ambiguity or defect is removed by the legislature [See Mathuram Agrawal v. State of Madhya Pradesh, (1999) 8 SCC 667; Indian Banks' Association v. Devkala Consultancy Service, (2004) 4 JT 587 = AIR 2004 SC 2615; and Consumer Online Foundation v. Union of India, (2011) 5 SCC 360.].
43. There is abundant jurisprudential justification for this. In the Governance of rule of law by a written Constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the Constitution itself. It is for this reason that the Courts insist upon strict compliance before a State demands and extracts money from its citizens towards various taxes. Any ambiguity in a taxation provision, therefore, is interpreted in favour of the subject/assessee. The statement of law that ambiguity in a taxation statute should be interpreted strictly and in the event of ambiguity the benefit should go to the subject/assessee may warrant visualizing different situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable to pay tax, and whether the revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State is to prove the liability of the 27 ST/86153/2015 persons, as may arise within the strict language of the law. There cannot be any implied concept either in identifying the subject of the tax or person liable to pay tax. That is why it is often said that subject is not to be taxed, unless the words of the statute unambiguously impose a tax on him, that one has to look merely at the words clearly stated and that there is no room for any intendment nor presumption as to tax. It is only the letter of the law and not the spirit of the law to guide the interpreter to decide the liability to tax ignoring any amount of hardship and eschewing equity in taxation. Thus, we may emphatically reiterate that if in the event of ambiguity in a taxation liability statute, the benefit should go to the subject/assessee. But, in a situation where the tax exemption has to be interpreted, the benefit of doubt should go in favour of the revenue, the aforesaid conclusions are expounded only as a prelude to better understand jurisprudential basis for our conclusion. We may now consider the decisions which support our view.
44. In Hansraj Gordhandas case (supra), the Constitutional Bench unanimously pointed out that an exemption from taxation is to be allowed based wholly by the language of the notification and exemption cannot be gathered by necessary implication or by construction of words; in other words, one has to look to the language alone and the object and purpose for granting exemption is irrelevant and immaterial.
45. In Parle Exports case (supra), a Bench of two-Judges of this Court considered the question whether non- alcoholic beverage base like Gold spot base, Limca base and Thumps Up base, were exempted from payment of duty under the Central Government notification of March, 1975. While considering the issue, this Court pointed out the strict interpretation to be followed in interpretation of a 28 ST/86153/2015 notification for exemption. These observations are made in para 17 of the judgment, which read as follows :
"How then should the Courts proceed? The expressions in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. It is, however, necessary to bear in mind certain principles. The notification in this case was issued under Rule 8 of the Central Excise Rules and should be read along with the Act. The notification must be read as a whole in the context of the other relevant provisions. When a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is as if it were contained in the Act itself. See in this connection the observations of this Court in Orient Weaving Mills (P) Ltd. v. Union of India, 1962 Supp 3 SCR 481 = AIR 1963 SC
98. See also Kailash Nath v. State of U.P., AIR 1957 SC
790. The principle is well-settled that when two views of a notification are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Coroline M. Armytage v. Frederick Wilkinson, (1878) 3 AC 355, that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions enacting an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit. While interpreting an exemption clause, 29 ST/86153/2015 liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided."
In the above passage, no doubt this Court observed that "when two views of a notification are possible, it should be construed in favour of the subject as notification is part of fiscal document". This observation may appear to support the view that ambiguity in a notification for exemption must be interpreted to benefit the subject/assessee. A careful reading of the entire para, as extracted hereinabove would, however, suggest that an exception to the general rule of tax has to be construed strictly against those who invoke for their benefit. This was explained in a subsequent decision in Wood Papers Ltd. case (supra). In para 6, it was observed as follows :
"... In Collector of Central Excise v. Parle Exports (P) Ltd., (1989) 1 SCC 345, this Court while accepting that exemption clause should be construed liberally applied rigorous test for determining if expensive items like Gold Spot base or Limca base of Thums Up base were covered in the expression food products and food preparations used in Item No. 68 of First Schedule of Central Excises and Salt Act and held 'that it should not be in consonance with spirit and the reason of law to give exemption for non-alcoholic beverage basis under the notification in question'. Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by respondent mentioned in the notification were entitled to benefit."
46. The above decision, which is also a decision of two- Judge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions 30 ST/86153/2015 are to be invoked at different stages of interpreting it. The question whether a subject falls in the notification or in the exemption clause, has to be strictly construed. When once the ambiguity or doubt is resolved by interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case (supra) deduced as follows :
"Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally".
47. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case (supra).
48. The next authority, which needs to be referred is the case in Mangalore Chemicals (supra). As we have already made reference to the same earlier, repetition of the same is not necessary. From the above decisions, the following position of law would, therefore, clear. Exemptions from taxation have tendency to increase the burden on the other unexempted class of taxpayers. A person claiming exemption, therefore, has to establish that his case squarely falls within the exemption notification, and while doing so, a notification should be construed against the subject in case of ambiguity.
49. The ratio in Mangalore Chemicals case (supra) was approved by a three-Judge Bench in Novopan India Ltd. v. Collector of Central Excise and Customs, 1994 Supp (3) SCC 606 = 1994 (73) E.L.T. 769 (S.C.). In this case, probably for the first time, the question was posed as to whether the benefit of an exemption notification should go to the subject/assessee when there is ambiguity. The three-Judge Bench, in the background of English and Indian cases, in para 16, unanimously held as follows :
31 ST/86153/2015 "We are, however, of the opinion that, on principle, the decision of this Court in Mangalore Chemicals - and in Union of India v. Wood Papers, referred to therein -
represents the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee - assuming that the said principle is good and sound - does not apply to the construction of an exception or an exempting provision, they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State...."
50. In Tata Iron & Steel Co. Ltd. v. State of Jharkhand, (2005) 4 SCC 272, which is another two-Judge Bench decision, this Court laid down that eligibility clause in relation to exemption notification must be given strict meaning and in para 44, it was further held -
"The principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption (See Novopan India Ltd. v. CCE and Customs)."
51. In Hari Chand case (supra), as already discussed, the question was whether a person claiming exemption is required to comply with the procedure strictly to avail the benefit. The question posed and decided was indeed different. The said decision, which we have already discussed supra, however, indicates that while construing an exemption notification, the Court has to distinguish the conditions which require strict compliance, the non- compliance of which would render the assessee ineligible to claim exemption and those which require substantial compliance to be entitled for exemption. We are pointing out this aspect to dispel any doubt about the legal position 32 ST/86153/2015 as explored in this decision. As already concluded in para 50 above, we may reiterate that we are only concerned in this case with a situation where there is ambiguity in an exemption notification or exemption clause, in which event the benefit of such ambiguity cannot be extended to the subject/assessee by applying the principle that an obscure and/or ambiguity or doubtful fiscal statute must receive a construction favouring the assessee. Both the situations are different and while considering an exemption notification, the distinction cannot be ignored."
5.10 Now coming to the issue of addition of Canteen Charges for determining the taxable value. We do not find any merits in the impugned order holding that canteen charges are reimbursable expenses for providing the services and hence in term of Rule 5(1) of Service Tax (Determination of value) Rules, 2006. Commissioner has in para 36.2.4 specifically held that "In view of the above statutory provisions, I find that, although the assessee have contended that they have not recovered the canteen charges separately from M/s Sigma, the fact remains that they are required to include all the expenditure or costs incurred by them during the course of providing MRSA service and these costs are consideration for the taxable service provided." Once it is held that these charges have not been recovered from M/s Sigma then by no stretch of imagination can these charges be considered as charges towards providing the taxable service. Hence we hold that such canteen charges which have been recovered by the appellant from their own employees cannot be added to the value determined in respect taxable service provided.
5.11 Issue in respect of interest is settled by the Bombay High Court in case of Padmashree V V Patil SSK [2007 (215) ELT 23 (Bom)] wherein it has been held:-
"12. Learned Counsel Shri Kolte has also placed reliance upon the tail piece of Explanation (2) to sub-section (2B) reading "but for this sub-section". According to him, "but"
33 ST/86153/2015 is a conjunction used to indicate the intention of those who use it to limit or restrain the sense or effect of something, which had before been said. He has obtained this meaning from Law Lexicon by P. Ramnatha Aiyar. In order to examine the submission by learned Counsel as to whether this terminal part of Explanation (2) gives the explanation so much strength as to mean that the party, which has utilised the facility of sub-section (2B) of payment of short duty as ascertained by the assessee himself, is not liable to pay the interest as u/s. 11AB, we have tried to search for the meaning of phrase "but for". As per Concise Oxford Dictionary, 11th Edition, "but for" means "except for", "if it were not for". In view of these meanings obtained from the Law Lexicon and the Oxford Dictionary attached to the word "but" and to the phrase "but for", the Advocate pleaded that it should be interpreted that had sub-section (2B) not been in existence or rather the facility to pay the short duty was not available, the party would have been required to pay interest u/s. 11AB and if the facility is available, on compliance of the same, the party would not be liable to pay interest.
Taking into consideration that the tail piece relied upon by learned Counsel is included in the Explanation to particular sub-section (2B), we are unable to accept the interpretation as tried to be attributed by the learned Counsel for one simple reason that an explanation ought to be therefor the purpose of explaining the main provision, it cannot nullify the effect of main provision. If Explanation (2) interprets as attempted by learned Counsel due to the phrase with which it ends "but for this sub-section", the explanation will have to be ignored being in conflict with sub-section (2B), which it explains. However, the meaning of this clause "but for this sub-section" can be enlightened when we refer to Section 11AB (1), we have reproduced two portions of this provision (in parts) in the earlier part of this judgment and for the sake of convenience, now we 34 ST/86153/2015 are quoting entire sub-section (1) of Section 11AB, which reads :
"11AB. Interest on delayed payment of duty. - (1) where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under sub-section (2), or has paid the duty under sub-section (2B) of Section 11A, shall in addition to duty be liable to pay interest at such rate, not below 10% ....from the first date of the month succeeding the month in which the duty ought to have been paid under this Act or from the date of such erroneous refund as the case may be, but for the provisions contained in sub-section (2) or sub-section (2B) of Section 11A, till the date of payment of such duty."
Thus, why the clause "but for" is used, is evident from the tail piece of Section 11AB(1). Ordinarily, the interest is payable till payment of short duty as adjudicated, but in view of sub-section (2B), which gives liberty to the party to pay the short duty even before determination or without determination by the officer of Central Excise, the interest would stop to run to the extent of amount deposited by self ascertainment and on the date such amount is so deposited.
If the tail piece of Explanation (2) was to be so strong as to nullify the effect of sub-section (2B), Section 11AB would not have incorporated within it the clause "or has paid the duty under sub-section (2B)". Reading Section 11AB together with Section 11A (2B) and Explanation (2), we are unable to accede to the interpretation tried to be attributed by Advocate Shri A.P. Kolte to Explanation in question.
13. For all these reasons discussed, we are unable to agree with the proposition that interest u/s. 11AB is also not chargeable in case the short duty or unpaid duty is 35 ST/86153/2015 deposited with the Government before issuance of show cause notice."
5.12 Appellants had been paying the Service Tax in respect of the services provided to M/ Sigma till August 2012. All of sudden with informing the department thy stopped payment of the taxes claiming that services provided are exempted. It was only as result of investigations undertaken that the fact of nonpayment of taxes came to light. Commissioner has in para 38.3 of his order have held as follows:
"38.3 The assessee are working in self assessment regime and are expected to be vigilant about their tax liabilities. It is an undisputed fact that the assessee have been repeatedly paying service tax beyond the due dates to the government exchequer even after being pointed out by the department and therefore have not lived upto the high standards of tax compliance and information disclosure as is expected of an assessee in the self assessment regime. Further, although they had been paying service tax on the MRSA services provided by them, they failed to pay service tax in respect of manpower supply made by them on piece rate basis to M/s Sigma, and also failed to include the canteen charges recovered by them from their employees, while calculating their service tax liability and continued evade payment of service tax. I, therefore, hold that the extended period of under proviso to Section 73(1) of the Finance Act, 1994,a s amended has been correctly invoked in this case."
Since the fact about nonpayment of service tax in respect of services provided to M/s Sigma, by treating the agreement as job work agreement was never brought to the knowledge of department hence extended period of limitation has been rightly invoked by the adjudicating authority. In case of Bombay Dyeing & Mfg Co Pvt Ltd [1999 (113) ELT 331 (T)] following has been held:
36 ST/86153/2015 "9. Where this situation prevails, the assessee who is in the knowledge that the inputs so received are less than those shown in the covering documents, it is for him to voluntarily take the less credit. Where the assessee is in such knowledge and where the department have no knowledge of the situation, the department can allege suppression of facts. Weighment sheets are not the documents prescribed in the legislature. The assessee was working under the self removal procedure and therefore, there is no reason or cause for the jurisdictional officer to know about the existence of the weighment sheets and the shortages in the weighment of inputs that they indicated.
In this situation, we do not see any reason to agree with the submission on limitation."
Similarly tribunal has in case of Tech Mahindra [2015 (38) STR 1200 (T)] has held as follows:
"6.4 As regards the contention raised by the appellant that the appellant in their annual balance sheets provided the relevant information, we have perused the balance sheets and the balance sheets do not reflect the payments made for the various transactions separately. It only gives the gross amount of the expenditure incurred, in terms of foreign currency. From that information it cannot be gathered, for what purpose the expenditure was incurred, whether it was for a taxable service or otherwise. Therefore, unless the details of the expenditure incurred are given, it is not possible to make any conclusion one way or the other. It is on record that the appellant had not provided copy of the agreement to the department in respect of the services received from abroad and these were provided only in 2010 when the investigation commenced. Further, the exact details of the payments made in respect of the marketing promotion activities were given to the department for the first time only in January, 2011 vide letters dated 5-1-2011 and 7-1-2011. The show cause notice has been issued on 20-4-2011 and, therefore, 37 ST/86153/2015 it cannot be said that the show cause notice is barred by limitation of time.
6.5 A similar case came up for consideration before the Hon'ble Apex Court in the case of Commissioner of Central Excise, Vishakhapatnam v. Mehta & Co. - 2011-TIOL-17- S.C.-CX = 2011 (264) E.L.T. 481 (S.C.) and the question of time-bar was also raised. The Hon'ble Apex Court held as follows :
"The cause of action, i.e., date of knowledge could be attributed to the appellant in the year 1997 when in compliance of the memo issued by the appellant and also the summons issued; the hotel furnished its reply setting out the details of the work done by the appellant amounting to Rs. 991.66 lakhs and at that stage only the department came to know that the work order was to carry out the job for furniture also. A bare perusal of the records shows that the aforesaid reply was sent by the respondent on receipt of a letter issued by the Commissioner of Central Excise on 27-2-1997. If the period of limitation of five years is computed from the aforesaid date, the show cause notice having been issued on 15-5-2000, the demand made was clearly within the period of limitation as prescribed, which is five years."
In our considered view, the ratio of the aforesaid decision squarely applies to the facts of the present case. Since the copy of the agreement and relevant information were provided to the department only in 2011 the show cause notice issued in April, 2011 is clearly within the period of limitation and therefore, the demands confirmed as above for the period on or after 18-4-2006 cannot be said to be time-barred at all."
Thus we do not find any merits in the submissions of the appellant that extended period should not have been invoked for making this demand. The issue of limitation has to be considered on the facts of case in hand and the conduct of the assessee/ appellant. There cannot be 38 ST/86153/2015 application of the decisions in determining the issue of limitation on the basis of the law laid down therein ignoring the facts of case in hand. We do not find that decisions relied upon by the appellants will advance their case any further in the facts of present case.
5.13 It is settled law that penalty under Section 76 & 77of the Finance Act, 1994 is for the contumacious conduct of the appellants in relation to delay in payment of tax and filing of the relevant returns. These sections do not require establishment of any malafide intentions and mens rea for imposition of penalty. Tribunal has in case of Global Vectra [2016 (42) STR 118 (T-Mum)] held as follows:
"19.2 Even if see the dates of various challans, it would be seen that the appellant is paying part amount of the duty and for the remaining part of the duty, they are failing. Section 80 of the Finance Act reads as under :-
"80. Notwithstanding anything contained in the provisions of section 76, section 77 or section 78, no penalty shall be imposable on the assessee for any failure referred to in the said, provisions, if the assessee proves that there was reasonable cause for the said failure."
It would be seen from the said Section that it is for the appellant to prove that there was reasonable cause for the said failure. In the present case while there can be arguments or reasons for the period upto March, 2009 for failure to pay the duty, there does not seem to be any valid ground for non-payment of duty after April, 2009. In view of the said position, in my considered view, penalty for the period April, 2009 to March, 2011 cannot be waived under Section 80 of the Finance Act.
20. During the hearing, learned senior counsel for the appellant has quoted the following judgments :-
(1) Petronet LNG Ltd. v. CST [2013-T1OL-1700-CESTAT-
DEL};
39 ST/86153/2015 (2) Reliance Industries Ltd. v. CCE&ST [2014 (36) S.T.R. 820 (Tri.-Mum.)];
(3) Greatship (India) Ltd. - [2015 (37) S.T.R. 533 (Tri.- Mum.)];
(4) CCE v. Vinay Bele & [ 2008 (9) S.T.R. 350 (Bom)];
(5) CCE v. D.R. Gade [2008 (9) S.T.R. 348 (Bom.)];
(6) Nizam Sugar Factory v. CCE [2006 (197) E.L.T. 465 (S.C.)] (7) CCE v. Lark Chemicals [ 2008 (9) S.T.R. 230 (Bom.)] (8) CCE v. Ashish Vasantrao Patil [ 2008 (10) S.T.R. 5 (Bom.)], and (9) CCE v. Quick Service reported in 2008 (10) S.T.R. 235 (Bom.).
I have gone through the said judgments and do not consider it necessary to discuss these judgments as the question of penalty has to be examined in the facts and circumstances of each case. The learned senior counsel has laid a lot of emphasis on this Tribunal's decision dated 18-7-2014 in the case of Greatship (India) Ltd. (supra). In the said case, the issue was relating to penalty under Section 78. Here, as held by me, Section 78 penalty is only relevant for the first show cause notice, which, in my view, is also not chargeable in the facts and circumstances of the present case.
21. In view of the above discussions, I agree with Member (Judicial) as far as imposition of penalty under Section 78 of the Finance Act in respect of the first show cause notice is concerned. As far as penalty under Section 76 in respect of the second and third show cause notices is concerned, I agree with Member (Technical). The point of difference is accordingly answered."
Hence we do not find any merits in submissions of the appellant that penalties under Section 76 are not justified.
40 ST/86153/2015 We uphold the decision of the Commissioner in respect of penalties under Section 76.
5.14 In respect of penalties under Section 77 and late fees under Section 70, appellants have contended that there was no delay in filing the returns as the date for filing the returns was extended and they had filed the return within the extended date. The said submission needs to be examined in terms of the extended date by the CBEC for filing the ST-3 return. In table below actual date of filing the return and extended date are indicated:
Period Date of Filing Reference
Due Date Actual
Date
April 12 to June 12 25th Mar 21st Mar Notfn No 1/2013-
13 13 ST
July 12 to Sept 12 31st Aug 25th Apr Order 4/2013
13 13
October 12 to 10th Sept 29th Sept Order 4/2013
March 13 13 13
th
April 13 to Sept 13 25 Oct 25th Oct
13 13
From the table as above it is quite evident that the appellants had filed their ST-3 returns by the due date hence the we are not in position to uphold the penalty imposed under section 77(2) of the Finance Act, 1994 and also the late fees imposed in terms of Section 70(1) of the Finance Act, 1994 in respect of these returns. Hence penalties and fees imposed in terms of these sections is set aside.
5.15 It is well provided by the Section 78 of the Finance Act, 1994 itself that penalty under Section 76 and 78 ibid should not be imposed simultaneously. The relevant proviso is reproduced below:
"Provided also that if the penalty is payable under this section, the provisions of section 76 shall not apply."
Since we uphold the penalties imposed under Section 76, penalties imposed under Section 78 cannot be justified, Hence we set aside the penalties imposed under Section
78. 41 ST/86153/2015 5.16 In view of our discussions as above we summarize our findings as follows:
Issue Finding Demand of Service Tax of Rs Demand and 10,81,74,382/- along with appropriation of the
interest of Rs 17,06,959/- for amounts paid upheld.
delayed payment of Service Tax
Demand in respect of Service Demand of service tax
Provided to M/s Sigma to the and interest upheld
tune of Rs 39,33,395/- along with subject to giving the
interest. benefit of the Canteen
Charges recovered by
the appellants from
their employee. Matter
for remanded for re-
computing the demand
after reducing the
taxable value by the
canteen charges so
recovered.
Penalty under Section 76 Upheld
Penalty under Section 77(2) and Set aside. Section 78 and Late Fees imposed under Section 70(1) 6.1 Thus the appeal filed by the appellants is disposed off as indicated in para 5.16, supra.
(Order pronounced in the open court on 15.07.2019) (Sanjiv Srivastava) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) tvu