Custom, Excise & Service Tax Tribunal
(Ii) The Commissioner Of Customs & vs (Ii) Shri K. Prabhakar Reddy on 11 November, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Appeal No: ST/258 & 381/2008
(Arising out of Order-in-Original No: 3/2008 (Service Tax) dated 29.2.2008 passed by the Commissioner of Customs, Central Excise & Service Tax, Hyderabad-IV Commissionerate, Hyderabad.)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
(i) Shri K. Prabhakar Reddy
Transport Contractor
Shop No. W-11, CIE Balanagar
Hyderabad.
(ii) The Commissioner of Customs &
Central Excise
Hyderabad-IV Commissionerate
Hyderabad.
Appellant
Vs.
(i) The Commissioner of Customs &
Central Excise
Hyderabad-IV Commissionerate
Hyderabad.
(ii) Shri K. Prabhakar Reddy
Transport Contractor
Shop No. W-11, CIE Balanagar
Hyderabad.
Respondent
Appearance Shri K. S. Ramesh, Consultant for the appellant.
Mrs. Sudha Koka, SDR for the revenue.
CORAM SHRI M. V. RAVINDRAN, HONBLE MEMBER (JUDICIAL) SHRI P. KARTHIKEYAN, HONBLE MEMBER (TECHNICAL) Date of Hearing: 11.11.2010 Date of decision: 11.11.2010 FINAL ORDER No._______________________2010 Per Shri M. V. Ravindran, These two appeals are directed against Order-in-Original No.3/2008 (Service Tax) dated 29.2.2008. Since both the appeals are arising against the findings given in the said Order-in-Original, they are disposed off by common order.
2. Revenue is in appeal in Appeal No.ST/381/2008 and assessee is in appeal in Appeal No.ST/258/2008.
3. The relevant facts that arise for consideration are the assessee - appellant (herein referred to as appellant) was providing services of Rent-a-Cab scheme operator services and Tour Operators services. On intelligence, the officers visited the premises of the appellant and conducted the search, found some relevant records and documents pertaining to the services rendered by the appellant. On scrutiny of records, it was noted that the appellant had rented the cabs to various customers and collected certain amounts by raising bills and they have not obtained Service Tax registration from the department for the services rendered, subsequently, they obtained the Service Tax registration. Statements were recorded and it was concluded that the appellant had evaded Service Tax liability under Rent-a-Cab scheme and also under Tour Operators services. Coming to such a conclusion, show cause notice was issued demanding Service Tax so escaped, also recovery of the amounts which was collected by the appellant as Service Tax from his clients and not deposited with the Government and also for recovery of interest and imposition of penalties. The appellant contested the show cause notice on various grounds and admitted his liability to discharge Service Tax on Rent-a-Cab Scheme, contested levy of Service Tax as Tour Operators services, and deposited an amount of Rs.10,44,196/- as against the demand of Rs.12,99,388/- as Rent-a-Cab service. The Adjudicating Authority after following the principles of natural justice, confirmed demands raised under Rent-a-cab services and interest thereon and imposed penalty under Section 78 of the Finance Act, 1994 for an amount of Rs.12,99,388/-, but dropped the proceedings initiated for the recovery of the demands on Tour Operators services and confirmed demand of an amount of Rs.15,56,751/- as an amount collected by the appellant towards Service Tax and not deposited with the Government, as provided under Section 11D of the Central Excise Act, 1944 made applicable to the Service Tax provisions and also imposed penalty under Section 77 and an interest on the amounts confirmed under Section 11B. Aggrieved by such an order, the appellant is in appeal before us while Revenue is in appeal against the dropping of the proceedings by the Adjudicating Authority in respect of Tour Operators services.
4. The learned counsel appearing on behalf of the appellant reiterates that they are not in appeal against the liability of Service Tax on Rent-a-Cab services, and the interest payable thereon. It is his submission that they have paid 90% amount of Service Tax and undertake to pay the balance and interest payable. It is his submission that they are only challenging the imposition of equal penalty of Rs.12,99,388/-. It is his submission that the appellant was not aware that Service Tax is liable to be collected and paid on the value of services. It is his submission that bonafide error has occurred, as the companies to whom such services were rendered instructed that Service Tax is not leviable in relation to the supply of buses and cabs. It is his submission that no Service Tax was paid or released to the appellant and hence, he was under the impression that no Service Tax is payable. It is his submission that on being informed by the authorities, they have discharged 90% of Service Tax and ready to pay the balance and interest thereon. He submits that penalty imposed under Section 78 of the Finance Act, 1994 be set aside. He would rely upon the decision of the Honble Supreme Court in the case of Tamil Nadu Housing Board Vs. Commissioner of Central Excise - 1994 (74) ELT 9 (SC), Collector Vs. Chemphar Drugs - 1989 (40) ELT 276 (SC), M/s. Pahwa Chemicals Vs. Commissioner of Central Excise - 2005 (189) ELT 257 (SC). As regards the confirmation of amount under Section 11D, it is his submission that amount payable in this case is not collected as Service Tax as there is no taxable liability as held by the Adjudicating Authority under the category of Tour Operators services. He would submit that the invoices indicated an amount as Service Tax for the period 2005-06 but no amounts were collected. He would submit that they have produced the evidences for non-collection of the amounts but the Adjudicating Authority has not considered them in his Order-in-Original. It is his submission that if an amount is not payable by them as Service Tax during the relevant period, the question of collecting the same and deposited it with the Government under Section 11D does not arise. It is his submission that the Adjudicating Authority has, only, on the presumptive ground held that the total amount in the invoice without any breakup would have been collected in one way or the other, as the customer would make payment for the amount of invoices.
5. The learned SDR on the other hand would submit that the penalty imposed by the Adjudicating Authority for not discharging the Service Tax liability on the Rent-a-Cab services is correct and should not be set aside. It is the submissions that the Adjudicating Authority has rightly imposed the penalty under Section 78. She would submit that the revenue is in appeal against that portion of the order which has not imposed the penalty under Section 76 of the Finance Act for these services. It is her submission that penalty under Section 76 is imposable on the appellant. As regards the appeal against the confirmation of demand of an amount of Rs.15,56,751/- under Section 11D of the Central Excise Act, 1944, it is her submission that there is no dispute that an amount was shown in the invoices as Service Tax. She would submit that this amount may have been collected by the assessee from his clients, whenever clients make the payment of the invoices. She would submit that once an amount is shown as Service Tax, that amount needs to be deposited with the Government and if he has not done so, it can be recovered by invoking provisions of Section 11D. As regards the revenues appeal, it is her submission that the proceedings dropped by the Adjudicating Authority relating to demand of Rs.58,41,575/-, she would submit that the appellant had the permission from the local transport authorities for contract carriage. It is her submission that no permission was granted to the appellant under the tourist permit nor the vehicles were registered as tourist vehicles and the permits available on record were found to be for contract carriage vehicles only and not for tourist vehicles. It is her submission that there is no evidence or record to indicate that the vehicles were used as tourist vehicles as per the definition of tourist vehicle under Section 2 (43) of Motor Vehicles Act. In the absence of any such evidence or record, it is evident that they do not hold any tourist permit and the permits issued were for contract carriage only. She would submit that the judgments of the Honble High Court of Madras in the case of Secretary, Federation of Bus Operators Association of Tamil Nadu Vs. UOI - 2001 (134) ELT 618 (Mad.) and the dismissal of an appeal by the Honble Supreme Court against the said judgment as reported on 2003 (157) ELT A144 (SC) would indicate that the appellant is liable to discharge the tax liability as a tour operator. It is her submission that the proceedings which have been dropped should be confirmed and penalties and interest should be imposed on the appellant.
6. In the rejoinder, learned counsel would submit that the definition of tour operators would clearly indicate that the vehicles should be granted permit under Motor Vehicles Act for arranging tours. He would submit that the said definition has undergone a change from 15.7.2008, which is not relevant for the current case. He would submit that the decision of Honble High Court of Punjab and Haryana in the case of Kuldip Singh Gill - 2010 (18) STR 708 as relied upon by the learned SDR will not cover the case in their favour, as in the said judgment, the Honble High Court was considering the services rendered by Rent-a-Cab services and not tourist services, wherein the definitions are different.
7. We have considered the submissions made at length by both sides and perused the records.
7.1 We first take up the issue regarding the Service Tax liability on the appellant as regards the Rent-a-Cab services, since the appellant is not contesting the levy of Service Tax, we uphold the confirmation of the demand as done by the Adjudicating Authority and the interest thereon. This would leave us to decide the imposition of penalty on the appellant and revenues appeal for non-imposition of penalty under Section 76 of the Finance Act, 1994 and both sides are aggrieved by the penalty clauses i.e., appellant is submitting that there is no need for imposition of penalty under Section 78 as the appellant had bonafide while revenue is seeking the intervention of this bench for imposition of penalty under Section 76 of the Finance Act, 1994. We find that there is no dispute that almost 90% of the amount was paid, as soon as it was brought to his notice. The appellants plea before the Adjudicating Authority was that he had bonafide belief that they are not required to discharge the Service Tax liability, is not addressed to by the Adjudicating Authority, while coming to a conclusion that they are liable to imposition of penalty under Section 78. We find that appellant had tried to explain that the penalty need not be imposed on them as the companies to whom they were providing the taxis had advised them that the Service Tax liability does not arise in these cases. We are of the considered view that the appellant could have entertained that bonafide view for the reason that he being a sole proprietorship firm running a business of Rent-a-Cab service, could have been guided by the clients to whom he was providing the taxis for their use. We also find that the provisions of Section 73 (3) would apply in this case as the appellant have discharged almost 90% of the Service Tax demand and are willing to discharge the balance amount of Service Tax. It is seen that the appellant has pre-deposited an amount of Rs.5,00,000/- (Rupees Five Lakh only) as per direction of this bench, which can be adjusted for recovery of balance dues. In our considered view, the bonafide view entertained by the appellants could not be faulted with. Hence, invoking the provisions of Section 80 of the Finance Act, 1994 we hold that the penalty imposed by the Adjudicating Authority under Section 77 and 78 of the Finance Act, 1994 for not discharging the Service Tax liability under Rent-a-Cab services is set aside. The same provisions will also apply in case of penalties not imposed under Section 76 for which revenue is in appeal.
7.2 In sum, the appeal filed by the appellant with regard to setting aside the penalty is allowed and appeal filed by the revenue for imposition of penalty under Section 76 is rejected.
7.3 As regards the demand of an amount confirmed under Section 11D, we find that the Adjudicating Authority himself has come to a conclusion that during the period in consideration i.e., 2005-2006, the appellant is not liable to pay any Service Tax for the services rendered by him under the tourist services. To come to such a conclusion, he has gone through the entire records of the appellant and has noticed that the revenue has not adduced any evidence that the vehicles which were deployed by the appellants were tourist vehicles as defined under Section 2 (43) of Motor Vehicles Act. Though revenue is in appeal against such a finding (which is dealt with subsequently), we are of the considered view that the plea of the appellant regarding the amounts that they have shown in invoices as Service Tax was never recovered from the customers adduced evidence in form of ledger accounts from books of accounts, was not correctly appreciated by the Adjudicating Authority. We find that the provisions of Section 11D of the Central Excise Act, 1994, applies to the persons who collected an amount representing as a duty or tax, needs to be deposited is correct, but at the same time, in the case in hand there is a clear finding that the appellant is not liable to pay tax under the category of tour operator services, confirmation of demand of this amount is in our view is incorrect and the contentions raised by the learned counsel are correct. We find that the Tribunal in the case of CCE, Pune Vs. Jayashree Suraksha Rankshak Shakari Sanstha Maryadit - 2007 (7) STR 147 (Trib.-Mumbai; Sr. Terminal Manager, IOCL Vs. CCE, Coimbatore - 2007 (212) STR 536 (Tribunal.-Chennai) and Vikas Industries Vs. CCE 2008 (222) STR 216 have settled the law on this point. Respectfully following the same, we are of the considered view that the demands confirmed by the Adjudicating Authority under Section 11D are liable to be set aside and we do so. Since we have set aside the demands confirmed under Section 11D, consequently the interest liability on such an amount is also not liable to set aside. The appellants appeal on this ground is allowed.
7.4 As regards the revenues appeal regarding dropping of the proceedings initiated by the show cause notice for the demand of the duty under the Tour Operators services, we find that the Adjudicating Authority has recorded the following findings.
29. The show cause notice does not discuss the registration details of the vehicles used for transportation but has concluded that the services were as of tour operator without having reference to the requirement of fulfilling the criteria as a tourist vehicle as defined in Section 2 (43) of the Motor Vehicles Act. The show cause needed to discuss the details of the vehicles owned and used in transportation, and to see if these were registered as tourist vehicles i.e., whether the vehicles used fulfilled the definition in Section 2 (43) of the Motor Vehicles Act. There is no need to prove his liability to Service Tax if the vehicles used were found to be registered as tourist vehicles or he was operating the vehicles under the tourist permit. There is no evidence that he was operating such vehicles under a tourist permit. He was operating these vehicles under the contract carriage permits. The vehicles used have to be held as tourist vehicles only if the same fulfilled the criteria laid down in Section 2 (43) of Motor Vehicle Act. As per Section 2 (43), Tourist vehicle means a contract carriage constructed or adapted and equipped and maintained in accordance with such specification as may be prescribed in this behalf; It can be noticed that a tourist vehicle has to conform to the specifications given under Rule 128 of Central Motor Vehicles Rules, 1988. The said Rule 128 of Central Motor Vehicle Rules specifies various special conditions as regards dimensions, structures, passenger entrance and exit, emergency doors, windows, driver entry and exit, etc. However, there is no record or evidence that the vehicles used were tourist vehicles as defined above. It is, thus, evident that they do not hold any tourist permit and the permits issued were for contract carriage only. Thus, by virtue of the ratio of various decisions, it isheld that once he is not holding a tourist permit or otherwise he is not using a tourist vehicle as defined in Section 2 (43) of the Motor Vehicle Act, the tax liability cannot be fastened on him as a tour operator and I hold accordingly.
It can be seen from the above reproduced findings that the Adjudicating Authority has considered the entire records and come to the conclusion that the vehicles which were utilized by the appellant herein were not shown by the revenue as tourist vehicles as defined under Section 2 (43) of the Motor Vehicle Act. We find that in the grounds of appeal before us, against such findings, revenue has again not adduced any evidence to show that the vehicles were registered as tourist vehicles. In the absence of any contrary evidence, the provisions of Section 65 (115) of definition of tour operator will not get attracted in the case before us as the vehicles which were used does not comply with the conditions laid down for the tourist vehicles as per the Motor Vehicles Act or the rules made there under. In view of this, we are in agreement with the findings recorded by the Adjudicating Authority and hold that the impugned order to the extent it drops the proceedings initiated in the show cause notice for the recovery of Service Tax under the category of tour operator is correct and does not require any interference.
8. In sum, the appeal filed by the appellant is allowed and the appeal filed by the revenue is rejected.
(Operative portion of this Order was pronounced in open court on conclusion of hearing) (P. KARTHIKEYAN) Member (T) (M. V. RAVINDRAN) Member (J) /rv/ 13