Custom, Excise & Service Tax Tribunal
Arrow Commercial Services vs Cgst & Ce Kanpur on 11 March, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70790 of 2016
(Arising out of Order-In-Original No.KNP-EXCUS-000-COM-009-15-16 dated
17/09/2015 passed by Commissioner, Customs, Excise & Service Tax,
Kanpur)
M/s Arrow Commercial Services .....Appellant
(120/611, Lajpat Nagar, Kanpur)
VERSUS
Commissioner, Service Tax, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur) APPEARANCE:
Shri Amit Awasthi, Advocate & Shri Raj Shukla, Advocate for the Appellant Shri Santosh Kumar, Authorized Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.-70127/2024 DATE OF HEARING : 11.03.2024 DATE OF DECISION : 11.03.2024 SANJEEV SRIVASTAVA:
This appeal is directed against Order-In-Original No.KNP- EXCUS-000-COM-009-15-16 dated 17.09.2015 of the Commissioner, Central excise and Service Tax, Kanpur. By the impugned order following has been held:-
"(i) I hold that value of 'consumable stores' and 'salary paid to their staff as deducted by the party from the gross receipts of taxable services is liable to be included in the taxable value of services of 'Cleaning Activity' provided by the party during the period from 01.04.2009 to 31.03.2014. As well, w.e.f.
01.07.2012 abetment/exemption claimed by the party under Notification No. 15/2012-ST dated 17.03.2012 as superseded vide Notification No. 30/2012-ST dated 20.06.2012 is liable to be denied to the party. Accordingly, I confirm the demand of Service 2 Service Tax Appeal No.70790 of 2016 Tax amounting to Rs. 2,03,45,896/- [Rupees Two Crores Three Lakhs Forty Five Thousands Eight Hundred Ninety Six only] (incl. Education Cess and Secondary and Higher Education Cess) under the proviso to Sub Section (1) of Section 73 of the Finance Act, 1994 and order for its recovery under the provisions of Section 73(2) of the Finance Act, 1994 appropriating Service Tax of Rs. 4,31,035/- already deposited by the party.
(ii) I confirm the liability of interest at the appropriate rates on the aforesaid short paid Service Tax of amount of Rs. 2,03,45,896/- and order for its recovery under the provisions of the Section 75 of the Finance Act, 1994 appropriating interest of Rs. 12,712/- already paid by the party.
(iii) I impose penalty of Rs. 10,000/- upon the party under the provisions of Section 77(1)(b) of the Finance Act, 1994 for the reasons as discussed hereinabove.
(iv) I impose penalty of Rs. 10,000/- upon the party under the provisions of Section 77(1)(c) of the Finance Act, 1994 for the reasons as discussed hereinabove.
(v) I impose penalty of Rs. 10,000/- upon the party under the provisions of Section 77(1)(d) of the Finance Act, 1994 for the reasons as discussed hereinabove.
(vi) I impose penalty of Rs. 10,000/- upon the party under the provisions of Section 77(1)(e) of the Finance Act, 1994 for the reasons as discussed hereinabove.
(vii) I also impose a penalty of Rs. 10,000/- upon the party under Section 77(2) of the Finance Act, 1994, for failure to submit proper and authentic Service Tax Returns in a manner as provided under Rule 7 of the Service Tax Rules, 1994 and for failure in paying proper duty in a manner as provided under Rule 6 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time.
(viii) I also impose a penalty of Rs. 2,03,45,896/- [Rupees Two Crores Three Lakhs Forty Five Thousands Eight Hundred Ninety Six only) upon the aforesaid party, under Section 78 of the Finance Act, 1994, for contravention of various provisions of the Act/Rules discussed hereinabove."
2.1 The appellants are providing services classifiable under the category of 'Cleaning Service'. For computing taxable value they were claiming abatement on salaries etc, as admissible for payment of service tax.
3Service Tax Appeal No.70790 of 2016 2.2 A show cause notice was issued on the basis of 3rd Party information received from the Income Tax Department. It was alleged that appellant was suppressing the value of taxable services provided by referring to Form 26 AS. By show cause notice dated 24.10.204 appellant were called to show cause as to why:-
"(a) the values of consumable stores and salary paid to their staff for the period from 01.04.2009 to 31.03.2014 should not be considered as the value of taxable service provided in the category of CLEANING ACTIVITY services and abatement/ exemption w.e.f. 01.07.2012 claimed under Notification No. 15/2012-ST dated 17.03.2012 as superseded vide Notification No. 30/2012-ST dated 20.06.2012 should not be denied to them, and the amount of Rs. 18,60,99,011/- received by them from service recipients of CLEANING ACTIVITY services should not be considered as taxable amount of Cleaning Activity services provided by them during the period from 01.04.2009 to 31.03.2014 and short-paid Service Tax to the tune of Rs.
2,03,45,896/- (including Edu. Cess and S.H.E.C.) thereon for period from 01.04.2009 to 31.03.2014, should not be demanded and recovered from them under proviso of Section 73(1) of the Finance Act, 1994 by invoking extended period of limitation. And Service Tax to the tune of Rs. 4,31,035/- deposited by the party vide challans dated 01.10.2014 and 08.10.2014 should not be appropriated against the demand of Service Tax confirmed;
(b) Interest at the applicable rate should not be demanded and recovered from them under Section 75 of the Finance Act, 1994 appropriating amount of interest to the tune of Rs. 12,712/- as deposited by the party vide challans dated 08.10.2014, against the demand of interest confirmed;
(c) Penalty should not be imposed upon them under Section 77(1)(b), 77(1)(c), 77(1)(d), 77(1)(e) and 77(2) of the Finance Act, 1994 for the reasons as discussed above;
(d) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 for suppressing the correct value of taxable services provided by them from the department, and contravening the provisions of the Finance Act, 1994, with intent to evade payment of Service Tax."
2.3 The show cause notice has been adjudicated as per the impugned order. Aggrieved, the appellant is in appeal.
3.1 We have heard Shri Amit Awasthi & Shri Raj Shukla, Advocate appearing for the appellant and Shri Santosh Kumar, Authorized Representative for the Revenue.
4Service Tax Appeal No.70790 of 2016 3.2 Arguing for the appellant learned counsel submits that:
➢ Many issues which arise in the present case were not properly placed before the adjudicating authority at the time of adjudication.
➢ Some of these issues are as follows:
○ on limitation, ○ on admissibility of various deductions ○ service tax paid by the recipient of the service under reverse charge mechanism 01.07.2012, 30/2012 dated 20.06.2012; and ○ decisions of the Tribunal whereby the demand raised on the basis of 26AS has been held to be not maintainable..
➢ In view of non-presentation of these issues in proper perspective before the adjudicating authority, they have not been considered properly and finding recorded ➢ the matter needs to be remanded back to the Original Authority for proper appreciation of the facts and evidence in the matter.
3.3 Learned Authorized Representative reiterated the findings recorded in the impugned order.
4.1 We have considered the impugned order along with the submissions made in the appeal and during the course of argument.
4.2 Following paragraphs taken from the impugned order would reveal that the matter was not properly represented before the adjudicating authority. Adjudicating authority was left with no option but to decide the issues raised in the show cause notice without any submissions on the issues framed in the order.
"CASE FOR THE PARTY
25. Smt. Shveta Bajpai, Proprietor of M/s Arrow Commercial Services responded to the impugned Show Cause Notice dated 24.10.2014 vide their reply dated NIL but received on 20.11.2014, wherein proprietor of the party mainly stated that:-5
Service Tax Appeal No.70790 of 2016 ➢ Impugned liability of Service Tax to the tune of Rs. 2,03,45,896/- is neither correct not justified as per law of Service Tax like non-consideration of expenditures incurred as per exemption provided in the act; ➢ Copies of agreements/contracts and bill etc., of the service provided, Service Tax paid and brief details along with supporting documents were submitted by them on 19.03.2014 in response to the query raised; ➢ Total receipts from the financial year 2009-10 to 2013- 14 was clearly shown and a separate calculation for every year was explained that how they derive the taxable value of Service Tax and details of payment challans
26. In continuation to previous reply dated 20.11.2014, Smt. Shveta Bajpai, Proprietor of M/s Arrow Commercial Services vide their another letter dated NIL (received on 10.06.2015) further submitted that :-
➢ Regarding the year 2009-10 to 2012-13 all required documents and details were submitted by them vide their letter dated 26.09.2014.
➢ In reply to Para 4 of the impugned SCN, they have submitted copies of challans which were remaining to pay;
➢ Mr. Amit Solomon, Manager of applicant firm appeared before Superintendent (Preventive), Central Excise Kanpur on 20.10.2014 and tendered his statement before the authority in respect of their. questions. They do agree with the said statement of Shri Amit Solomon.
RECORD OF PERSONAL HEARING
27. Shri R.K. Yadav, Advocate appeared for Personal Hearing on behalf of the party on 26.05.2015 and reiterated the written reply already made by the party.
He had nothing else to state.
6Service Tax Appeal No.70790 of 2016 DISCUSSIONS AND FINDINGS:
28. I have carefully examined the case records, the documents relied upon and the party's written replies as well as oral submissions made by the advocate of the party at the time of personal hearing.
The main issues to be decided in the case are:
(i) Whether any exemption of Service Tax in respect of Consumable Store (material consumed) was available to the party under Notification No 12/2003-ST dated 20.06.2003 under the circumstances of the instant case;
(ii) Whether the salary paid by the party to their staff may be considered as the payment to third party in terms of the provisions of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 and whether these payments are deductible from the gross receipt against provision of taxable services Cleaning Activity, for computation of Service Tax liability;
(iii) Whether w.e.f. 01.07.2012, the party was liable to discharge Service Tax against provision of services of Cleaning Activity on reverse charge basis as prescribed under Notification No. 5/2012-ST dated 17.03.2012 superseded vide Notification No. 30/2012-ST dated 20.06.2012;
(iv) Whether Service Tax of Rs. 2,03,45,896/- short paid against provision of taxable services of Cleaning Activity by the party relevant for the period from 01.04.2009 to 31.03.2014 is demandable and recoverable from the party under the provision of Section 73(1) of the Finance Act, 1994 by invoking extended period of limitation
(v) Whether due interest on short paid Service Tax of Rs.
2,03,45,896/-is demandable and recoverable from the 7 Service Tax Appeal No.70790 of 2016 party under the provisions of Section 75 of the Finance Act, 1994.
(vi) Whether penalties are imposable upon the party under Sections 77(1)(b) 77(1)(c), 77(1)(d), 77(1)(e), 77(2) and 78 of the Finance Act, 1994
29. Now at the outset, taking up the issues involved in the present case, I observe that there is no dispute regarding taxability of the party's activities for providing services of "Cleaning Activity" during the period relevant to April, 2009 to March, 2014; that the party itself had taken Service Tax registration in the category of "Cleaning Service" in July, 2005; that after an inquiry initiated against the party by the department, the party accepted their Service Tax liability of Rs. 2,46,476/-, Rs. 2,76,452/- and Rs. 1,84,558/- relevant to the Financial years 2009-10, 2010-11 and 2013-14 respectively submitting that Service Tax of Rs. 4,61,706/- and Rs. 3,04,050/- relevant to the financial years 2011-12 and 2012-13 had already been paid by them; that the party while computing their Service Tax liability relevant to the period from April, 2009 to March, 2014 against provision of taxable service of "Cleaning Activity" have claimed deduction of "Consumable Stores" [i.e. cost of material consumed] under Notification No 12/2003-ST from the gross receipt against provision of taxable services; that the party also considered the salary paid by them to their staff as the payment to third party as provided under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 and claimed further deduction of Salary paid to their staff from the gross receipt against provision of taxable services. Whereas, it appeared that no exemption of Service Tax with respect to the expenses incurred by the party towards "Consumable Stores" and "Salary paid to their 8 Service Tax Appeal No.70790 of 2016 staff" while providing taxable service of "Cleaning Activity" was admissible to the party during the period relevant to April, 2009 to March, 2014. And accordingly, Service Tax liability of the party for the said period was worked out to the tune of Rs. 2,03,45,896/- proposing denial to the claimed deduction of "Consumable Stores" and "Salary paid to their staff" from the gross value of the taxable service, vide the impugned Show Cause Notice. However, the party contended that impugned liability of Service Tax to the tune of Rs 2,03,45,896/- is neither correct not justified as per law of Service Tax like non consideration of expenditures incurred as per exemption provided in the Act. But, I find that the party in support of their above contention had not submitted any facts or documents with their defence replies. Thus, I have no option except to adjudicate the impugned Show Cause Notice on the basis of the facts available on record and merit of the case.
30. As regards party's claim for exemption of Service Tax on the value of "Consumable Stores" i.e. cost of material consumed while providing taxable service of "Cleaning Activity" by the party, I observe that Notification No. 12/2003-ST dated 20.06.2003 exempts so much of the value of all the taxable services, as is equal to the value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under section 66 of the Finance Act, 1994, subject to condition that there is documentary proof specifically indicating the value of the said goods and materials; that the party neither during the course of inquiry of this case nor while submitting their defence replies to the impugned Show Cause Notice had ever furnished any 9 Service Tax Appeal No.70790 of 2016 documentary proof showing the value of the goods and materials sold by them to the service recipients. In the instant case, I observe that the condition laid down in the Notification No. 12/2003-ST dated 20.06.2003 was a mandatory condition at the relevant time, and therefore, I have to take a view on the settled position of law regarding exemption Notification and fulfillment of conditions.
30.1 I find that the Constitution Bench of the Apex Court in case of CCE, New Delhi Vs. Harichand Shri Gopal [reported in 2010 (260) B.L.T. 0003 (SC|) has held that-
"22. The law is well settled that a person who claims exemption or ...""
4.4 From the above paragraphs it is evident that the appellant has not made any submissions before the adjudicating authority on most of the issues raised in the show cause notice. We find that the demand has been confirmed by the Original Authority without any response from the appellant and in its without consideration of various issues in proper perspective. In the absence of any response on these issues the order is a nonspeaking order and it requires the application of mind of the Adjudication Authority to these issues which are being raised by the appellant in the appeal before us. These go to the root of matter and require a finding from the original authority before we can consider them in appeal. Without expressing anything on the merits & arguments the matter needs to be remanded for denovo consideration by the Adjudicating Authority.
4.5 Learned Counsel also undertakes not to take any further adjournment in this case. Learned counsel for the appellant also undertakes that the appellant will not seek refund of any deposit made in this appeal till the time of the disposal of the matter in the de novo proceedings.
10Service Tax Appeal No.70790 of 2016 5.1 Appeal is allowed by way of remand. Matter is remanded back to the Original Authority for denovo consideration.
5.2 Needless to say as the matter is substantially old, the Original Authority should decide the matter within 90 days of the receipt of the order.
(Dictated and pronounced in open court) Sd/-
(P. K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) Nihal