Madras High Court
Commissioner Of Central Excise vs Customs on 31 October, 2013
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, T.S.Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 31.10.2013 CORAM: The Honourable Mrs. JUSTICE CHITRA VENKATARAMAN and The Honourable Mr. JUSTICE T.S.SIVAGNANAM CMA Nos.1308, 1315, 1330, 1422, 3490 of 2009 & 562 of 2010 CMA No.1308 of 2009 Commissioner of Central Excise Puducherry Commissionarate Goubert Avenue, Beach Road Puducherry 605 001. .... Appellant Vs. 1.Customs, Excise and Service Tax Appellate Tribunal Chennai, South Regional Bench Chennai 600 006. 2.M/s Pondicherry Paper Ltd. Pillaiar Kuppam Post Bahour Commune Puducherry 607 402. .... Respondents Civil Miscellaneous Appeal filed under Section 35G of the Central Excise Actg, 1944, against the Final Order No.1480 of 2008, dated 23.12.2008, on the file of the Customs, Excise & Service Tax Appellate Tribunal, South Regional Bench, Chennai- 600 006. For Appellant : Mr.K.Ravi Anantha Padmanabhan Sr.Central Govt. Standing Counsel For Respondents: Tribunal -R1 ( in all CMAs) Mr.N.Viswanthan R2 (CMA No.3490/2009) Mrs.L.Mythili R2 (CMA No.1330 of 2009) Mr.K.Mahesh- R2 (CMA No.1350 of 2009) COMMON JUDGMENT
(The Judgment of the Court was delivered by T.S.SIVAGNANAM,J.) These appeals have been filed by the Revenue, challenging the order passed by the Customs, Excise and Service Tax Appellate Tribunal (Tribunal).
2.The question which falls for consideration in all these Appeals are whether the show cause notices, issued on the private respondent in each of these Appeals under Section 73(1A) of the Finance Act, 1994 (hereinafter referred to as the 'Act'), as amended with effect from 10.9.2004, and the consequential demands issued by the jurisdictional Commissioner, are valid.
3. The private respondent in all these Appeals are persons who have availed the services of the Goods Carriage Operators and who have not filed returns or paid Service Tax. The Assessing Authority adjudicated the show cause notices and confirmed the proposal made therein. Aggrieved by such demands, the respondents preferred Appeals to the Commissioner (Appeals). The First Appellate Authority allowed the Appeals by placing reliance on the decision of the Customs Excise & Service Tax Appellate Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE, MEERUT-II v. L.H.SUGAR FACTORIES LTD., reported in 2004 (165) E.L.T. 161 (Tribunal), as confirmed by the Honble Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE, MEERUT-II v. L.H.SUGAR FACTORIES LTD., reported in 2005 (187) E.L.T. 5 (SC). The order passed by the first Appellate Authority was confirmed by the Tribunal and aggrieved by the same, the Revenue is before us by way of these Appeals, which have been admitted on the following substantial questions of law:
C.M.A.Nos.1308, 1315, 1330 & 1422 of 2009 "1.Whether or not the show cause notice issued under Section 73 includes person falling under Section 71A in view of the Supreme Court laying down the law in the cases of Gujarat Ambuja Cements Ltd., and L.H.Sugar Factories Ltd. without being appraised of the above aspects raised in the grounds of appeal?
2.Whether or not the Show Cause Notice issued under the amended Section 73 by the Finance Act, 2004 removing the Clause "the person liable to file returns under section 70" is maintainable in law, especially such an amendment read with Section 71-A has been confirmed by the Supreme Court vis-a-vis the Legislative Competence in terms of Section 68 of the Finance Act in re: Gujarat Ambuja Cements Ltd, 2005 (182) ELT 33(SC) levying Service Tax on the Service Recipient/Service Provider with retrospective effect for the period 16.11.1997 to 02.06.1998 and which was not the ratio decidendi before the Supreme Court in L.H.Sugar Factories Ltd and Gujarat Carbon & Industries Ltd. 2005(187) ELTs and 2008(12) STR 3 SC ?"
C.M.A.Nos.3490 of 2009 & 562 of 2010 "1.Whether or not the show cause notice issued under Section 73 includes person falling under Section 71A in view of the Supreme Court laying down the law in the cases of Gujarat Ambuja Cements Ltd., and L.H.Sugar Factories Ltd. without being appraised of the above aspects raised in the grounds of appeal?
2.Whether or not, in the light of Section 73 covering persons falling under Section 70 and 71 and harmonious reading of five Sections, namely Sections 68, 70, 71 and 73 as amended, a demand issued under Section 73 includes persons falling under Section 71 A ?"
4.The legal issue which requires to be considered in all these Appeals are with regard to the effect of Sections 68, 71 (A) and 73 of the Finance Act 1994, as amended with effect from 10.9.2004 and Rule 6 and Rule 7(A) of the Service Tax Rules and their applicability. The further question would be regarding the applicability of the decision of the Tribunal in the case of L.H.SUGAR FACTORIES LTD., as confirmed by the Honble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, MEERUT-II v. L.H.SUGAR FACTORIES LTD., reported in 2005 (187) E.L.T. 5 (SC). The other question which also requires to be considered is with regard to the effect of the decision of the Honble Supreme Court in the case of GUJARAT AMBUJA CEMENTS LTD., Vs. UNION OF INDIA reported in 2005 (182) ELT 33 (SC).
5. We have heard Mr.Ravi Anantha Padmanabhan, learned Senior Central Government Standing Counsel appearing for the appellant in all the Appeals and Mr.N.Viswanathan, Mrs.L.Mythili, Mr.K.Magesh, learned counsels appearing for the respondents/assessees and perused the materials placed on record.
6. Service Tax was introduced under Chapter V of the Finance Act, 1994. For the purposes of these Appeals, we shall deal with the provisions of the Act, as it stood at the relevant point of time. Section 66 of the Act was the charging Section and provided for the levy of Service Tax at the rate of 5% of the value of the taxable services, which are provided to any person by the person responsible for collecting the Service Tax. Thus, the levy was on the provider of taxable services. 'Taxable service', as defined under Section 65 of the Act, includes only three services, namely, service provided to an investor by a stock broker, to a subscriber by telegraph authority and to a policy holder by an insurer carrying on general insurance business. In terms of Section 68 of the Act, every person providing taxable service was required to collect the service tax at specified rates. Section 69 of the Act provided for the registration of the persons responsible for collecting service tax and in terms of sub-sections (2) & (5), it was the provider of the service, who was responsible for collecting the tax and to get himself registered. Sections 65, 66, 68 and 69 of the Act are of relevance to the cases on hand. Under Section 70 of the 1994 Act, every person responsible for collecting the Service Tax must furnish to the Central Excise Officer, a quarterly return. Sections 71, 72, 73 and 74 deal with filing of returns, assessment, reopening of escaped assessments and rectification of mistakes of assessment orders respectively. Section 75 of the Act provided for payment of interest when the person responsible for collecting the Service Tax, delayed in payment of the Service Tax. Section 76 of the Act dealt with penalty for failure to collect the Service Tax and Section 77 of the Act dealt with penalty for failure to furnish the return. Section 78 of the Act dealt with penalty for suppressing the value of taxable services and Section 79 of the Act dealt with penalty for failure to comply with notices; Section 94 of the Act empowered the Central Government to make rules for carrying out the provisions of the Act, pursuant to which, the Service Tax Rules, 1994, were framed.
7. By Finance Act, 1997, Section 65 was amended, extending the meaning of 'taxable services' to include 18 different services, including the service to a customer of a 'Goods Transport Operator' in relation to 'carriage of goods' by road in a 'goods carriage', thereby bringing the included services also within the umbrella of 'service tax liability. Clause (m) of Section 65(41) of the Act defined 'Goods Transport Operator' to mean any commercial concern engaged in the transportation of goods, but does not include a courier agency. The services rendered by Goods Transport Operators were brought under the net of taxation and it remained on the person responsible for collecting the Service Tax under Section 66(3) of the Act. Section 67 of Act provided the measure of the valuation on taxable services. Section 68 of the Act provided for collection and recovery of service tax. Section 68(1-A) of the Act provided that the service tax for such service shall be collected from such person and in such manner as may be prescribed and to such person, all the provisions shall apply as if he is the Person responsible for collecting the service tax in relation to such service. The Goods Transport Operators went on an all India strike, protesting against the imposition of Service Tax on them. Thereafter, the Service Tax Rules 1994, were amended, whereby, the imposition of the tax was shifted on the customers of the Goods Transport Operators. This amendment was brought into effect from 16th of November 1997. The challenge to the provisions was considered in the case of LAGHU UDYOG BHARATI reported in 1999 (112) ELT 365 (SC). During the pendency of the challenge to the amendment, on 02.06.1998, Notification No.49 of 1998 was issued, exempting services provided by goods transport operators from the levy of service tax altogether and by the Finance Act, 1998, with effect from 16th of October 1998, all provisions in the Finance Act, 1994, including Section 65(41), sub clause (m) relating to the levy of service tax on services provided by goods transport operators were omitted. By Finance Act, 1998 (No.2), Section 69 was also amended and various sub-sections were omitted including sub-sections (2) & (5) of Section 69; consequently, the Service Tax Rules, 1994, were amended by Service Tax (Amendment) Rules, 1998, to delete the provisions relating to service by 'goods transport operators'. Therefore, the liability for the service tax in respect of goods transport operators was kept alive for the period 16.11.1997 to 01.06.1998.
8. The Honourable Supreme Court considered these facts in Laghu Udyog Bharati Vs. Union of India reported in 1999 (112) ELT 365 (SC) and the exemption granted from 2nd June, 1998, which was prospective and that no exemption was granted with regard to the period from 16th of July 1997 to 2nd June 1998 and held "All that Section 68(1-A) of the Act enables to be done is that with regard to the Assessees or the persons who are responsible for collecting the service tax, the individual or the officer concerned can be identified and it is that person who would be a person responsible for collecting the service tax. In other words this provision, namely, Section 68(1-A) cannot be so interpreted as to make a person as an Assessee even though he may not be responsible for collecting the service tax. The service tax is levied by reason of the services which are offered. The imposition is on the person rendering the service." The Supreme Court further held, "Section 94 gives the Central Government power to make the rules. These rules are to be made for carrying out the provisions of the chapter. The chapter relates to taxing the services which are provided. The tax is on the value of the services and it is only the person who is providing the service can be regarded as an Assessee. The rules, therefore, cannot be so framed which do not carry out the purpose of the chapter and cannot be in conflict with the same." The Supreme Court also held, "By amending the definition of "person responsible for collecting of service tax" in the impugned rules with regard to services provided by the clearing and forwarding agents and the goods transport operator a person responsible is said to be the client or the customer of the clearing and forwarding agents and the goods transporter...... with regard to the service rendered by clearing and forwarding agents and the goods transport operator the definitions contained in Rule 2(d)(xii) and (xvii), which seeks to make the customers or the client as the Assessees, is clearly in conflict with Sections 65 and 66 of the Act. Section 68(1-A) cannot, to our mind, regard a customer or a client of the clearing and forwarding agent or of the goods transport operator being treated as an Assessees who will become liable to file a return and be subjected to the levy of service tax and if he does not file the return, would render himself to penalty and other proceedings." The Supreme further held "we have no hesitation in holding that the provisions of Rule 2(d)(xii) and (xvii), insofar as it makes persons other than the clearing and forwarding agents or the persons other than the goods transport operator as being responsible for collecting the service tax, are ultra vires the Act itself. The said sub-rules are accordingly quashed." Ultimately the Honourable Supreme Court held that Sections 70 and 71 of the Act clearly showed that the return to be filed pertains to the payment which are received by the person rendering the service in respect of the value of the taxable services and such type of information cannot be supplied by the receipient of the services namely the customer; moreover, the operative portion of sub-section (1) of Section 70 of the Act clearly stipulates that it is the person responsible for collecting the Service Tax,who has to furnish the return. Therefore, it was held that under the rules ,the person who is receiving the services, cannot be made responsible for filing the return and paying the tax and such position is not contemplated by the Act; thus while striking down the Service Tax Rules, namely, Rule 2(i)(d)(xii) and (xvii), the Honourable Supreme Court directed that any tax which had been paid by the customers or clients of goods transporters shall be refunded within 12 weeks from their making a demand for refund.
9. At that point of time, on 12th May, 2000, Finance Act, 2000 made amendments to the relevant provision relating to the service tax provision with retrospective effect. It validated the levy and collection of service tax for the period between 16.7.1997 and 12.5.2000 in respect of services of goods transport operators and clearing and forwarding agents. The amendment also sought to deny refund of service tax to users and also for recovery of refund already granted consequent to the judgment of the Supreme Court in Laghu Udyog Bharati case. Section 115 of the Finance Act 2000 was made retrospective from 16.7.1997. Thus, Service Tax became payable on the service rendered by the clearing and forwarding agents, with effect from 16.7.1997, but in the case of service tax with respect to goods transport operators, it became payable only from 16.11.1997, in view of Notification No.41/97 ST dated 5.11.1997. Subsequently, by Notification No.49/98 dated 2.6.1998, which came into effect from 2.6.1998, service of goods transport operators came to be exempted from the levy of service tax. Therefore, the liability of service tax in respect of goods transport operators is sought to be kept alive by the above amendment for the period 16.11.1997 to 2.6.1998.
10. Section 116 of the Finance Act, 2000 amended Section 65(6) with effect from 16.7.1997 to 16.10.1998, which reads as follows:
"Section 65(6) : "assessee" means a person liable for collecting the service tax and includes -
(i) his agent; or
(ii) in relation to services provided by a clearing and forwarding agent, every person who engages a clearing and forwarding agent and by whom remuneration or commission (by whatever name called) is paid for such services to the said agent; or
(iii) in relation to services provided by a goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage;"
11. Section 117 of the Finance Act, 2000 sought to retrospectively validate the taxes collected earlier under the Service Tax Rules, which the Honourable Supreme Court directed to be refunded in the case of Laghu Udyog Bharati Vs. Union of India reported in 1999 (112) ELT 365 (SC). Section 117 of Finance Act 2000 reads as follows:
117. Validation of certain action taken under Service Tax Rules.- Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, Sub-clauses (xii) and (xvii) of Clause (d) of Sub-rule (1) of Rule 2 of the Service Tax Rules, 1994 as they stood immediately before the commencement of the Service Tax (Amendment) Rules, 1998 shall be deemed to be valid and to have always been valid as if the said sub-clauses had been in force at all material times and accordingly,-
(i) any action taken or anything done or purposed to have been taken or done at any time during the period commencing on and from the 16th day of July, 1997 and ending with the day, the Finance Act, 2000 receives the assent of the President shall be deemed to be valid and always to have been valid for all purposes, as validly and effectively taken or done;
(ii) any service tax refunded in pursuance of any judgment, decree or order of any court striking down Sub-clauses (xii) and (xvii) of Clause (d) of Sub-rule (1) of Rule 2 of the Service Tax Rules, 1994 before the date on which the Finance Act, 2000 receives the assent of the President shall be recoverable within a period of thirty days from the date on which the Finance Act 2000 receives the assent of the President, and in the event of non payment of such service tax refunded within this period, in addition to the amount of service tax recoverable, interest at the rate of twenty-four per cent, per annum shall be payable, from the date immediately after the expiry of the said period of thirty days, till the date of payment.
Explanation.--For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force."
12. Section 73 of the Finance Act, 1994 which dealt with escaped assessment, reads as follows:
"Section 73: Value of taxable services escaping assessment If (a)the Assistant Commissioner of Central Excise, or, as the case may be, the Deputy Commissioner of Central Excise has reason to believe that by reason of omission or failure on the part of the assessee to make a return under section 70 for the prescribed period or to disclose wholly or truly all material facts required for verification of the assessment under section 71, the value of taxable service for the quarter has escaped assessment or has been under-assessed, or any sum has erroneously been refunded, or
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assistant Commissioner of Central excise or, as the case may be, Deputy Commissioner of Central Excise has, in consequence of information in his possession, reason to believe that the value of any taxable service assessable in any prescribed period has escaped assessment or has been under-assessed, or any sum has erroneously been refunded, he may, in cases falling under clause (a), at any time within five years, and in cases falling under clause (b), at any time within six months from the date of filing the return, serve on the assessee as notice and proceed to assess or reassess the value of the taxable services."
13. Based on the decision in the case of Laghu Udyog Bharati Vs. Union of India reported in 1999 (112) ELT 365 (SC), consequent on the amendment made, when show cause notices were issued, the assessees once again challenged the provisons and the notice which came to be considered in the case of L.H.SUGAR FACTORIES LTD. & OTHERS V. CCE reported in 2004 (165) E.L.T. 161 (Tri.Delhi). During the pendency of the appeal and the writ petitions challenging the validity of the Finance Act, 2000 amendment, Finance Act 2003 brought in further amendment. The same was assented to by the President on 14th May 2003. By Section 158 of the Finance Act 2003, sub-section (1) of Sections 68, 71 ,73 and 94 of the 1994 Act were further amended. In addition to this, Section 71A of the Act was inserted with retrospective effect from 16.7.1997. The amended Sections 68(1), 71A and 73, read as under:
"Section 68(1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed.
(2)---
Provided that -
(i) in relation to services provided 'by a clearing and forwarding agent, every person who engages a clearing and forwarding agent and by whom remuneration or commission (by whatever name called) is paid for such services to the said agent for the period commencing on and from the 16th day of July, 1997 and ending with the 16th day of October, 1998; or
(ii) in relation to services provided by goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage for the period commencing on and from the 16th day of November, 1997 and ending with the 2nd day of June, 1998, shall be deemed always to have been a person liable to pay service tax, for such services provided to him, to the credit of the Central Government";
"Section 71A Filing of return by certain customers - Notwithstanding anything contained in the provisions of sections 69 and 70, the provisions thereof shall not apply to a person referred to in the proviso to sub-section (1) of section 68 for the filing of return in respect of service tax for the respective period and service specified therein and such person shall furnish return to the Central Excise Officer within six months from the day on which the Finance Bill, 2003 receives the assent of the President in the prescribed manner on the basis of the self assessment of the service tax and the provisions of section 71 shall apply accordingly."
Value of taxable services escaping assessment (1) If
(a) the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise has reason to believe that by reason of omission or failure on the part of the assessee, to make a return under section 70 for any prescribed period or to disclose wholly or truly all material facts required for verification of the assessment under section 71, the value of taxable service has escaped assessment or has been under assessed or service tax has not been paid or has been short-paid or any sum has erroneously been refunded, or
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise has in consequence of information in his possession, reason to believe that the value of any taxable service assessable in any prescribed period has escaped assessment or has been under assessed or service tax has not been paid or has been short-paid or any sum has erroneously been refunded, he may, in cases falling under clause (a), at any time within five years, and in cases falling under clause (b), at any time within one year, from the relevant date, serve notice on the person chargeable with the service tax which has escaped assessment or has been under assessed or has not been paid or has been short-paid, or to whom any sum has been erroneously refunded, requiring him to show cause why he should not pay the amount specified in the notice.
Explanation: Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of five years or one year, as the case may be.
(2) The Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
(2A) Where any service tax has escaped assessment or has been under-assessed or service tax has not been paid or has been short paid or erroneously refunded, the person chargeable with the service tax, may pay the amount of tax on the basis of his own ascertainment of such tax or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of service tax, and inform the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of service tax so paid:
Provided that the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise may determine the amount of short payment of service tax, if any, which in his opinion has not been paid by such person and, then, the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise shall proceed to recover such amount in the manner specified in this section, and the period of one year referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.
Explanation 1.- Nothing contained in this sub-section shall apply to cases falling under clause (a) of sub-section (1).
Explanation 2.- For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax, if any, as may be determined by the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise, but for this sub-section.
(2B) The provisions of sub-section (2A) shall not apply to any case where the service tax had become payable or ought to have been paid before the day on which the Finance Bill, 2003 receives the assent of the President.
(3) For the purposes of this section, relevant date means,
(i) in the case of taxable service in respect of which service tax has escaped assessment or has been underassessed or has not been paid or has been short-paid
(a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
(b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
(c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;
(ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof;
(iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.
14. The amended Section 73 dealing with escaped assessment on account of failure to file return under Section 70 for any prescribed perod or failure to disclose wholly and truly all material facts for assessment under Section 71, thus resulting in the value of taxable service escaping assessment or under assessment or that service tax has not been paid or short paid or any sum erroneously refunded, or where the Assistant Commissioner has reason to believe that there has been an omission to assess or is under assessed, that service tax has not been paid or short paid or any sum erroneously refunded, however took note only of those assessees who are liable to file return under Section 70 and not in respect of cases falling under Section 71A. As is evident from the reading of Section 70 of the Act, the provisions do not apply to persons - service provided by clearing and forwarding agent or goods transport operators for the period from 16.7.1997 ending with 16.10.1998 or 2.6.1998 as the case may be - referred to in the proviso to sub-section (1). In respect of assessees falling under Section 71A, for the period commencing from 16th July 1997, Section 71A sought to provide that such persons shall furnish return to the Central Excise Officer within six months from the day on which the Finance Bill, 2003 receives the assent of the President in the prescribed manner on the basis of the self assessment of the service tax and the provisions of Section 71 of the Act shall apply accordingly. This period was extended by the Honourable Supreme Court, by order dated 17.11.2003 for a period of two weeks with effect from the date of the order.
15. Section 94 of the Act, as originally enacted on the rule-making power of the Central Government, was amended with effect from 16.07.1997, that the Central Government would also have the power to frame Rules relating to the manner of furnishing returns under Section 71A of the Act. Thus the object of these amendments to the Sections was to nullify the effect of the decision of the Honourable Supreme Court in the case of LAGHU UDYOG BHARATI reported in 1999 (112) ELT 365 (SC), by retrospectively amending and validating the provisions which were held to be illegal.
16. Writ petitions were filed, challenging the constitutional validity of Sections 116 and 117 of the Finance Act, 2000 and Section 158 of the Finance Act, 2003, by which, the decision of the Honourable Supreme Court in the case of LAGHU UDYOG BHARATI reported in 1999 (112) ELT 365 (SC), striking down the Service Tax Rules, was sought to be overruled. The challenge to these provisions resulted in the decision of the Honourable Supreme Court in the case of GUJARAT AMBUJA CEMENTS LTD. v. UNION OF INDIA reported in 2005 (182) ELT 33 (SC).
17. While considering the question as to whether the levy of service tax on carriage of goods by transport operators was legislatively competent, the Apex Court pointed out that the Supreme Court in the case of LAGHU UDYOG BHARATI reported in 1999 (112) ELT 365 (SC), did not consider the question of legislative competence and accordingly, it proceeded to consider the same. The Honourable Supreme Court held "by virtue of the amendment to the word "assessee" in Section 65(5) and the amendment to Section 66(3), the liability to pay the tax is not on the person providing the taxable service but, as far as the service provided by clearing and forwarding agents and goods transport operators are concerned, on the person who pays for the services. As far as Section 68(1A) is concerned, by virtue of the proviso added in 2003, the persons availing of the services of goods transport operators or clearing and forwarding agents, have explicitly been made liable to pay the service tax. As we have said, Rule 2(1)(d)(xii) and (xvii) had been held to be illegal in Laghu Udhyog Bharati only because the charging provisions of the Act provided otherwise. Now that the charging section itself has been amended so as to make the provisions of the Act and the Rules compatible, the criticism of the earlier law upheld by this Court can no longer be availed of. There is thus no question of the Finance Act, 2000 overruling the decision of this Court in Laghu Udhyog Bharati as the law itself has been changed. The Supreme Court further held "we hold that the law must be taken as having always been as is now brought about by the Finance Act, 2000. The statutory foundation for the decision in Laghu Udhyog Bharati has been replaced and the decision has thereby ceased to be relevant for the purposes of construing the present provisions (vide Ujagar Prints vs. Union of India.
18. The Supreme Court also held that it is clear that Section 66 read with Section 65(41)(j) and (ma) of Chapter V of the Finance Act, 1994, do not seek to levy tax on goods or passengers. The subject matter of tax is not on goods and passengers, but the service of transportation itself and it cannot be termed as a colourable legislation. It was brought to the notice of the Honourable Supreme Court that levy of service tax on the users of service rendered by goods transport operators was introduced, with effect from 16.11.1997, that the levy was exempted for the period subsequent to 02.06.1998 in view of the Notification, dated 02.06.1998. However, the Department had raised demands for service tax for periods subsequent to 02.06.1998. While taking note of the said fact, the Honourable Supreme Court pointed out that it has been conceded by the Union Government that amendments made in the Act would have to be read along with the notifications, so that the levy and collection of service tax would be only in respect of services rendered by goods transport operators between the period 16th November, 1997 and 2nd June, 1998. Regarding the liability to pay interest or penalty on the outstanding amount, the Honourable Supreme Court observed that such liability will arise only if the dues are not paid within the period of two weeks from the date of the order of the Honourable Supreme Court i.e., 17.11.2003, and in those cases in which tax may have been paid, but not refunded to the writ petitioners, for whatever reason, there is no question of levy of any interest or penalty. Accordingly, with the aforementioned clarification, the writ petitions challenging the validity of Sections 116 and 117 of the Finance Act, 2000 were dismissed.
19. In these cases, the respondents have been issued show cause notices, demanding payment of service tax for the services availed by them from the goods transport operators between the period from 16.11.1997 and 02.06.1998.
20. The demand raised for the period 16.11.1997 to 01.06.1998 came up for consideration before the CESTAT, Delhi, in the case of LH SUGAR FACTORIES LTD AND ORS. V. COMMISSIONER OF CENTRAL EXCISE reported in 2004 (165) ELT 161 (Tribunal Delhi).
21. The Tribunal, after taking note of Section 73 of the Act, as it stood then, as well as Section 71A of the Act, held that even the amended Section 73 of the Act covered only those assessees who were liable to file returns under Section 70 of the Act and in the case of availers of Goods Transport Service, the liability to file return was under Section 71A of the Act and the class of persons coming under Section 71A of the Act were not brought under the service tax net under Section 73 of the Act and therefore held that the show cause notices and demands were not maintainable. This decision of the Tribunal was confirmed by the Honourable Supreme Court in the decision in the case of L.H.SUGAR FACTORIES LTD.,reported in 2005 (187) ELT 5 (SC).
22. This again necessitated amendment to Section 73 of the Act by Finance Act, 2004, with effect from 10.09.2004. At this stage, it would be relevant to quote the amended Section 73 of the Act, which reads as follows:
"(e) for section 73, the following section shall be substituted, namely:--
"73. Recovery of service tax not levied or paid or short-paid or erroneously refunded.-- (1)Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied requiring him to show cause why he should not pay the amount specified in the notice:
Provided that where any service tax has not been levied or paid or has been short-levied or short paid or erroneously refunded by reason of --
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year", the words "five years" had been substituted.
Explanation:--Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforsaid period of one year or five years, as the case may be.
(2) The Assistant Commissioner of Central Excise, or, as the case may be, the Deputy Commissioner of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
(3) Where any service tax has not been levied or paid or has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid:
Provided that the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise may determine the amount of short payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and then, the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.
Explanation.----For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise, but for this sub-section.
(4) Nothing contained in sub-section (3) shall apply to a case where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of---
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax.
(5) The provision of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003.
(6) For the purposes of this section, "relevant date" means,--
(i) In case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid --
(a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filled by an assessee, the date on which such return is so filed;
(b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
(c) in any other case, the date on which the service tax is to be paid under this Chapter or the ruled mad thereunder;
(ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof;
(iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund."
23. The effect of this provision came up for consideration in the case of COMMISSIONER OF EX. & CUS. VADODARA-I v. EMICO ELICON LTD. reported in 2010 (20) S.T.R. 603 (Guj.). The question which fell for consideration was whether the show cause notice issued under the said case was barred by limitation and whether the Tribunal committed error in law in applying the decision of the Honourable Supreme Court in the case of GUJARAT AMBUJA CEMENTS LTD. Vs. UNION OF INDIA, (referred supra) and the decision of L.H. SUGAR FACTORIES LTD (supra). The Gujarat High Court held that till Section 73 of the Finance Act, 1994 came to be substituted with effect from 10.9.2004, the provisions of said Section could not be made applicable despite retrospective amendment in Sections 68 and 71A of the Finance Act, 1994 and therefore, the assessee could not be faulted with in not having filed a return after getting himself registered; it therefore confirmed the view taken by the Tribunal. This decision of the Gujarat High Court was followed in the subsequent decision in the case of COMMISSIONER OF CENTRAL EXCISE v. HIREN ALUMINIUM LTD. reported in 2010 TIOL 682 HC (Ahm)-ST.COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS v EMICO ELECON LTD., reported in 2010 (20) STR 603(Guj.) and held that show cause notice having been issued beyond 11.11.2004, was barred by limitation. Similar view was also taken by the Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE & SALES TAX, BELGAUM v. BELLARY STEELS & ALLOYS LTD., reported in 2012 (25) STR 350 (Kar).
24. In the preceding paragraphs, we have referred to the amendments which have been brought about under Section 68, insertion of Section 71A and substitution of Section 73 of the Act.
25. As noticed above, Section 71A, which deals with the filing of return of certain customers, starts with the non-obstante clause, stating that notwithstanding anything contained in the provisions of Sections 69 and 70, the provisions thereon shall not apply to a person referred to in the proviso to sub-section (1) of Section 68, filing of return in respect of Service Tax for the respective period and such person shall furnish return to the Central Excise Officer, within six months from the date on which the Finance Bill 2003, receives assent of the President, in the prescribed manner on the basis of the self assessment of the service tax and the provisions of Section 71 of the Act shall apply accordingly. The Finance Bill, 2003, received the assent of the President on 14.5.2003. Under sub-section (1) of Section 68, two provisos were inserted and clause (ii) of the said proviso provided that in relation to service provided by goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage for the period commencing on and from 16.11.1997 to 02.06.1998 and by virtue of Section 71A, which starts with a non-obstante clause, there is a duty cast upon the said person to file return within six months from the date on which the Finance Bill, 2003, received the assent of the President. As already noticed, the assent of the President was received on 14.5.2003 and the six months' period would expire on 13.11.2003.
26. Thus, Section 73, substituted by Finance Act, 2004 with effect from 10.9.2004, states that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise, may, within a period of one year from the relevant date, serve notice on the person chargeable with service tax which has not been levied or paid or which has been short-levied or short-paid. Therefore, the crucial question would be, what would be the relevant date. Short of repetition, sub-section (6) of Section 73 defining the relevant date needs to be noticed as hereunder:
(6) For the purpose of this section, relevant date means
(i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid -
(a)where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
(b)where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
(c)in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;
(ii)in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof;
(iii)in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.
27. To clarify further, Section 73A of the Act was introduced by Finance Act, 2006, with effect from 18.04.2006, to specify situations where service tax is payable by a person, and to provide for recovery procedure in respect of such amount due. In terms of Sub-section (1) of Section 73A, any person who is liable to pay service tax and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service from the recipient of taxable service, shall forthwith pay the amount so collected, to the credit of the Central Government. Likewise, in terms of sub-section (2), where any person who has collected any amount which is not required to be collected in any manner as representing service tax, shall forthwith pay the amount to the credit of the Central Government. Sub-section (3) deals with the power of the Central Excise Officer to issue a show cause notice for non-compliance of provisions of sub-section (1) or sub-section (2) of Section 73A of the Act. On receiving a reply to such show cause notice, the Central Excise Officer shall determine the amount in terms of Sub-section (4) of Section 73A. Sub-section (5) of Section 73A provides for adjustment of the amounts paid under Sub-section (1) or Sub-section (2) or Sub-section (4) against the service tax payable by the person on finalisation of assessment. Upon such adjustment, if there is any surplus amount left, the same shall, in accordance with Sub-section (6) of Section 73A, be credited to the consumer welfare fund referred to in Section 12C of the Central Excise Act, 1944, or refunded to the person who has borne the incidence of such amount in accordance with Section 11B of the said Act and such person is entitled to make an Application for refund within six months from the date of Public Notice. So far as cases filed under Section 73A of the Act is concerned, it is governed by Sub-section (6) of Section 73 of the Act, which states that the dates on which service tax is to be paid under the said Chapter or Rules made therein, shall be the relevant date for the purpose of Section 73(1) of the Act.
28. Rule 7A of the Service Tax Rules 1974, deals with returns in case of taxable service provided by Goods Transport Operators and Clearing and Forwarding Agents. The amendment to the said Rule was introduced by Service Tax (Amendment) Rules 2003, with effect from 14.5.2003, which coincides with the amendment with the date of insertion of Section 71A of the Act. Rule 7A starts with a non-obstante clause, stating that notwithstanding anything contained in Rule 7, which deals with returns, an assessee in the case of service provided by the Goods Transport Operators for the period commencing on and from 16.11.1997 to 02.06.1998, shall furnish a return, from 13.5.2003. The significance of fixing the period from 13.5.2003 is on account of the Presidential assent given for insertion of Section 71A as well as for modification of Section 68 which was made on 14.5.2003. Thus, on a cumulative reading of Section 68, as amended, Section 71A, as inserted, and Sections 73 and 74 substituted, read with Rule 7A of the Service Tax Rules, 1994, it is evidently clear that such of those persons who have availed the service of Goods Transport Operators between the period from 16.11.1997 and 02.06.1998, were liable to file return and the period within which they had to file return was within a period of six months and the period was to commence from 14.5.2003. The six months period in such cases, comes to end on 13.11.2003.
29. We have noticed that the procedure to be followed is a self- assessment procedure, by which, the assessee is bound to pay service tax in terms of Rule 6(1), by the 6th day of the month, if the duty is deposited electronically and by the 5th day of the month, in any other case. In terms of Rule 7(1), every assessee shall submit a half-yearly return in Form ST-3 or ST-3A, along with a copy of Form TR-6, in triplicate, for the months covered in the half-yearly return. Therefore, in cases where persons who have availed service of Goods Transport Operators during the said period, i.e., 16.11.1997 to 02.6.1998, and such of those who have failed to file return and pay tax on or before 13.11.2003, are liable to be proceeded with.
30. Now the question to be considered is as to whether the show cause notices issued to the respondents, seeking to recover service tax under Section 73(1A) of the Finance Act, 1994, as amended with effect from 10.9.2004, for failure to pay service tax and file return as required by the proviso to Section 68(1) and 71A of the Finance Act, 1994, read with Rule 7A of the Service Tax Rules, 1994, could be sustained as within the period of limitation. As per the provisions, the Assistant Commissioner of Central Excise may, within a period of one year from the relevant date, serve notice on the persons who have not paid tax or on whom tax has not been levied. The relevant date for this case would be the date on which service tax is to be paid under the said Chapter or Rules made thereunder. The service tax was payable along with the return on or before 13.11.2003 and therefore, the period of one year shall be from 13.11.2003 to 12.11.2004. In the interregnum, if show cause notices have been issued, they are valid in the eye of law and they are not barred by limitation.
31. As far as the present cases are concerned, the following tabulation would show as to when show cause notices were issued:
Sl no CMA No Year Name of the party Period of SCN SCN DATE OIO NO./ DATE OIO NO./ DATE AMT. Confirmed (Rs) 1 562 2009 L&T Ltd 16.11.97 to 01.06.98 8.3.04 & 9.11.04 17/2005 dt. 30.12.05 375718 2 1308 2009 Pondicherry Papers Ltd 16.11.97 to 01.06.98 8.5.02 & 9.11.04 395/2005 dt. 31.10.05 411662 3 1315 2009 Jackson Generators P Ltd 16.11.97 to 01.06.98 27.8.02 & 9.11.04 383/2005 dt. 21.10.05 108961 4 1330 2009 Arkema Peroxides P Ltd 16.11.97 to 01.06.98 8.5.02 & 9.11.04 396/2005 dt. 31.10.05 84377 5 1422 2009 Omnicast Precision Products P Ltd 16.11.97 to 01.06.98 8.5.02 & 9.11.04 394/2005 dt. 31.10.05 15940 6 3490 2009 L & T Ltd 16.11.97 to 01.06.98 8.3.04 & 9.11.04 18/2005 dt. 27.12.05 323626 7 660 2010 Sundaram Fastners Ltd 16.11.97 to 01.06.98 12.8.02 & 9.4.04 15/2005 dt. 27.12.05 204805
32. In the background of the above facts, we have no hesitation in holding that the notices have been issued as provided under Section 73 of the Act.
33. Now we shall consider the effect of the decision of the Gujarat High Court in the case of COMMISSIONER OF C.EX. & CUS., VADODARA-I v. EIMCO ELECON reported in 2010 (20) STR 603 (Guj). As is seen from the earlier paragraphs, the last date for payment of service tax along with return, is 12.11.2004. In the case of EIMCO, the order passed by the Adjudicating Authority was dated 28.2.2005. The Gujarat High Court held that it is apparent that till the point of time Section 73 of the Finance Act, 1994, came to be substituted with effect from 10.9.2004, provisions of the said Section could not be made applicable, despite retrospective amendment in Section 68 and 71A of the Finance Act, 1994. In such circumstances, it held that the assessee could not be faulted for not having filed a return after getting himself registered. Further, it made an observation that when one considers the language employed in the Proviso below Sub-section (1) of Section 68 and the provisions of Section 71A of the Finance Act, 1994, it is not possible to state that the language of the Statute is so clear that any default can be fastened on the respondent/assessee.
34. In the above-said decision in the case of EIMCO ELECON (supra), the Gujarat High Court had not adverted to the effect of the insertion of Section 71A, insertion of the proviso in Section 68(1) and substitution of Section 73 read with insertion of Rule 7A of the Service Tax Rules, 1994. Therefore, the language of the Section is very clear as to the starting point of limitation with reference to the relevant date and the application under Section 71A. For this reason, and in the light of the provisions that we have seen, we hold that the decision taken by the Gujarat High Court is not applicable to the facts of the case. The said decision is followed by the Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE v. HIREN ALUMINIUM LTD. reported in 2010 TIOL 682 HC (Ahm)-ST. In the said case, the show cause notice itself was issued only on 29.8.2005, which was well beyond the period of limitation. Therefore, this decision is distinguishable on facts.
35. In the case of Bellary Steels and Alloys reported in 2012 (25) STR 350, decided by the Karnataka High Court, where show cause notice was issued after the amendment of the Finance Act retrospectively from 11.5.2000, after referring to the decision in the case of L.H. Sugar Factories Ltd., and in the case of Gujarat Carbon and Industries Ltd., the Karnataka High Court held against the Revenue.
36. For the reasons we have already stated above, the decision of the Karnataka High Court is also not applicable to the case on hand.
37. Learned counsel appearing for the assesses also referred to the decision in the case of UNION OF INDIA v. HIGHLAND PRODUCE CO. LTD. reported in 2012 (28) S.T.R. 244 (Ker.). The case before the Kerala High Court arose out of a Writ Petition filed, challenging the notices issued by the Service Tax Commissioner in respect of payments made to Goods Transport Agencies and those proceedings were quashed by the learned Single Judge and the Revenue preferred an appeal to the Division Bench. From the Judgment, we find that the Division Bench of the Kerala High Court took note of the decision in the case of LAGHU UDYOG BHARATI and decision in the case of GUJARAT AMBUJA CEMENTS and proceeded to hold that there was error in the order passed by the learned single Judge in this regard. On a reading of the said Judgment, we find that the Division Bench of the Kerala High Court has not considered the effect of the newly inserted Section 71 A. Further more, the Division Bench did not consider the effect of the substituted Section 73 to consider the point of limitation, in the light of the amendment brought about by Finance Act, 2004, with effect from 10.9.2004. Therefore, the said decision does not help the case of the assessees. Thus, on facts, we have no hesitation to hold that the notices issued on the respondents/assessees are well within time and not barred by limitation.
38. As regards the circular dated 17.8.2011, wherein the Central Board of Excise and Customs prescribed monetary limit for filing of appeals before the Tribunal, High Court and Supreme Court in consonance with national policy on litigation, as far as filing of cases before the High Court is concerned, the same was fixed at Rs.10,00,000/-. As per the said circular, the revised monetary limits shall come into force from 1.9.2011.
39. Learned counsel for the assessee, by placing reliance on the Division Bench decision of the Karnataka High Court in the case of CIT, BANGALORE v. RANKA & RANKA reported in 2012 (284) ELT 185 (Kar.), submitted that the circular dated 17.8.2011, issued by the Central Board of Excise and Customs, should be made applicable to pending cases also and the Karnataka High Court has taken a view that the benefit to which the assessee is entitled to, should not be dependant on the date of decision, over which neither the assessee nor the Revenue has any control. In that context, the circular would be discriminatory, if it is held to be prospective only.
40. We find from the materials placed by the learned counsel for the Revenue that the said decision is the subject matter of Appeal before the Supreme Court in SLP (Civil) No.27468 of 2012, which is stated to be pending. That apart, in yet another case, in the appeal which arose from the High Court of Delhi in the case of COMMISSIONER OF INCOME TAX v. SURYA HERBAL LTD., while disposing of the Special Leave Petition in SLP (Civil) CC NO.13694 of 2011, by order dated 29.8.2011, the Honourable Supreme Court, pointing out that the Circular dated 09.02.2011 should not be applied ipso facto, particularly when the matter has a cascading effect, granted liberty to the Department to move the High Court.
41. Learned counsel appearing for the Revenue further submitted that in the Special Leave Petition filed against the decision of the Karnataka High Court in the case of BELLARY STEELS & ALLOYS LTD. and the decision of the Kerala High Court in the case of HIGHLAND PRODUCE CO. LTD., specific ground has been raised, stating that the Karnataka High Court did not consider the order passed by the Honourable Supreme Court in the case of SURYA HERBAL (referred supra).
42. Considering the order passed by the apex court in the case of SURYA HERBAL (Supra), we feel that the issue raised before this Court merits to be considered on the strength of the provisions of Sections 73, 71A and 68 of the Act and hence, we do not think that one need to consider the question as to whether the circular is retrospective or not. As pointed out by the Honourable Supreme Court, given the significance of the questions of law raised in this case, considering the merits of the issues raised, we reject the reliance placed by the assessee on the decision of the Karnataka High Court in the case of RANKA AND RANKA (Supra) and the Circular dated 17.8.2011, holding that irrespective of the monetary limit involved in such cases, if the substantial question of law raised demands consideration by this Court, such circular ought not to be interpreted or understood to stand in the way of this Court to consider the merits of the case. In the circumstances, we reject the plea of the assessees in this regard.
43. In the light of the said decision, we allow the Appeals filed by the Revenue, holding that the Revenue has necessary jurisdiction under Section 73 of the Act, particularly with reference to the limitation prescribed thereunder. In the circumstances, we allow the appeals and set aside the order of the Tribunal.
44. Even though, the effect of Section 73 of the Act and the other decisions were not placed before the Tribunal for consideration, considering the question of law raised, on the admitted facts before this Court, we feel that it is not necessary for us to remand the matter back to the Tribunal for the purpose of considering the effect of Sections 68, 71A and 73 of the Act and Rule 7A of the Amended Rules.
45. As regards the contention of the learned counsel for the assessees that the show cause notices were issued prior to the amendment of Section 73 of the Finance Act, the same is evident from the reading of the tabulation that all the initial notices were issued on the following dates viz., on 8.3.2004 in C.M.A No.562 of 2009; on 8.5.2002 in C.M.A No.1308 of 2009; on 27.8.2002 in C.M.A No.1315 of 2009; on 8.5.2002 in C.M.A No.1330 of 2009; on 8.5.2002 in C.M.A No.1422 of 2009; on 8.3.2004 in C.M.A No.3490 of 2009 and on 12.8.2002 in C.M.A No.660 of 2010. Thus, the initial notices referred above were issued prior to the amendment of Section 73 of the Act. After the decision of the Honourable Apex Court holding that the unamended Section 73 of the Act would not cover the case of Section 71A of the Act, the Revenue had issued second notice under Section 73 of the Act, after its amendment, by reason of which alone, the Revenue was vested with the jurisdiction to pass orders of assessment on the return filed by the assessee.
46. Learned counsel for the assessee further submitted that Section 71A is only a machinery section; as such, the amended provision of Section 73 of the Act could not be taken to confer them the jurisdiction to pass orders. We do not agree with the submissions made by the learned counsel for the assessee. As is evident from Section 71A of the Act, this is more of a self-assessment procedure, that notwithstanding anything contained in Sections 69 and 70 of the Act, the provisions thereof shall not apply to a person referred to in the proviso to Sub-section (1) of Section 68 of the Act for filing of return in respect of service tax for the respective period and service specified therein and such person shall furnish return within six months from the day on which the Finance Bill, 2003, receives assent of the President in the prescribed manner on the basis of the self assessment of service tax and the provisions of Section 71 of the Act shall apply accordingly.
47. Considering the limited purpose for which Section 71A of the Act was introduced to cover the period of six months and in terms of Sub-section (1) of Section 73 of the Act where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the proper officer, within one year from the relevant date, is entitled to serve notice, requesting the assessee to show cause why he should not pay the amount specified in the notice. For the purposes of Section 73 of the Act, relevant date has been defined under Sub-section (6) of Section 73 of the Act. Therefore, the contention of the assessee that Section 71A of the Act is just a procedural provision and hence there could be no jurisdiction on the Authority to pass an assessment, is a plea to be stated only to be rejected.
48. Learned counsel appearing for the assessee submitted that Section 80 of the Act provides for penalty not to be imposed in certain cases. It states that notwithstanding anything contained in the provisions of Section 76, Section 77 and first proviso to Sub-section (1) of Section 78 of the Act, 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 is further submitted that in terms of Section 78 of the Act, penalty can be imposed for suppression of facts or fraud or collusion or wilful mis-statement or contravention of any of the provisions of Chapter V of the Finance Act, 1994, or the Rules made thereunder with the intent to evade payment of Service Tax and since none of these elements are present in the cases of the assessees, the imposition of penalty was not proper.
49. In order to levy penalty under Section 78 of the Act, it is necessary to establish that Service Tax had not been paid by reason of fraud or collusion or wilful mis-statement or suppression of fact or contravention of any of the provisions of the Act, with an intent to evade payment of Service Tax. We have perused the order in original passed by the Assessing Authority and we find that there is no such finding against the assessee of it being guilty of wilfully not paying tax by reason of any of the matters provided in clauses (a) to (e) of Section 78(1) of the Act. Further more, Section 80 of the Act, which starts with a non-obstante clause, states that notwithstanding anything contained in the provisions of Sections 76, 77 and first proviso to Sub-section (1) of Section 78 of the Act, no penalty shall be imposable for any failure referred to in the said Provision viz., for failure to pay service tax, for contravention of Rules and Provisions of the Act, or for suppression of facts etc., if the assessee proves that there was reasonable cause for such failure.
50. From the facts noticed above, the entire dispute arose out of interpretation of the provisions of the Act, its successive amendments and insertion of new provisions. Therefore, it can hardly be said that there was wilful evasion to pay tax or not to comply with the provisions of the Act. As may be seen from the preceding paragraphs, the assessees appeared to have been under the bona fide belief that they are not liable to pay Service Tax and in support of their claim, they relied on the decision of the Tribunal in the case of LAGHU UDYOG BHARATI (Supra), which was affirmed by the Honourable Supreme Court. Therefore, we are inclined to accept the case of the assessees and hold that there was no justification for imposition of penalty, especially when there was no allegation of fraud, mis-representation, etc., Accordingly, the penalty imposed on the respondents/assesees shall stand deleted.
51. However, as far as the interest levied under Section 75 of the Act is concerned, it being for the delayed payment of service tax, we do not agree with the assessees' contention that a direction has to be given to delete the levy of interest by referring to Section 80 of the Act. The charging of interest and penalty are two separate provisions under the law.
52. The Honourable Supreme Court, in the case of PRATIDHA PROCESORS Vs UNION OF INDIA reported in (1996) 11 SCC 101, held that in fiscal statutes, the tax is the amount payable as a result of the charging provision and it is a compulsory extraction of money by a public authority for public purposes, the payment of which is enforced by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of a particular statute. It was further pointed out that interest is compensatory in character and is imposed on the assessee who has withheld payment of any tax as and when it is due and payable; that the levy of interest is levied on the delay in payment of tax due and payable on the due date. Thus, the Honourable Apex Court pointed out that interest is essentially compensatory and different from penalty, which is penal in character. In terms of Section 75 of the Act, payment of interest is mandatory on every person who fails to deposit the Service Tax or any part thereof to the account of the Central Government within the period prescribed. Therefore, the contention of the assessee that the levy of interest has to be cancelled cannot be accepted and such submission is rejected.
53. In the result, the Civil Miscellaneous Appeals filed by the Revenue are disposed of, holding that the Revenue has necessary jurisdiction under Section 73 of the Act, particularly with reference to the limitation prescribed thereunder and the show cause notices issued on the respondents/assessees are valid. For the reasons assigned, the penalty imposed on the respondents/assessees stands deleted and the prayer for cancelling the levy of interest stands rejected. No costs.
Index: Yes/No (C.V.,J) (T.S.S.,J) Internet :Yes/No 31.10.2013 rpa To 1.Customs, Excise and Service Tax Appellate Tribunal Chennai, South Regional Bench Chennai 600 006. 2.M/s Pondicherry Paper Ltd. Pillaiar Kuppam Post Bahour Commune Puducherry 607 402. CHITRA VENKATARAMAN,J and T.S.SIVAGNANAM,J rpa CMA Nos.1308, 1315, 1330, 1422, 3490 of 2009 & 562 of 2010 DATED: 31.10.2013