Custom, Excise & Service Tax Tribunal
M/S. Krishna Carago Movers Pvt.Ltd vs Cc, Amritsar on 18 July, 2016
?CUSTOMS, EXCISE & SERVICE TAXAPPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 DIVISION BENCH COURT NO.1 Appeal No.C/56088/2013-Cus(DB) [Arising out of the OIO No.13/C/Amritsar/12 dt.4.12.12 passed by the CC,Amritsar) Date of Hearing/Decision: 18.07.2016 For Approval &signature: HonbleMr.Ashok Jindal, Member (Judicial) Honble Mr. V.Padmanabhan, Member(Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? Yes M/s. Krishna Carago Movers Pvt.Ltd. Appellant Vs. CC, Amritsar Respondent
Appearance Shri Naveen Bindal, Advocate- for the appellant Shri Satyapal, A.R.- for the respondent CORAM: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.V.Padmanabhan, Member (Technical) FINAL ORDER NO: 61148/2016 Per Ashok Jindal:
The appellant is in appeal against impugned order demanding cost of recovery charges post March, 2010.
2. The facts of the case are that the appellant is notified CFS on 6.12.2007 and started its operation with the effect from 1.3.2008. As per CBEC instruction dated 14.12.95 read with circular No.52/97-Cus dated 17.10.97 a CFS is required to deposit in advance cost recovery charges i.e. charges of the custom official posted at port. Advance deposit may be made for three months. The appellant paid cost recovery charges till Feb., 2010. Thereafter, the appellant did not pay any cost recovery charges till September, 2010. On 6.9.2010, the cost of recovery charges amounting to Rs.36 lakh were demanded from the appellant. The appellant deposited Rs.15 lakh and Rs.21 lakh respectively on 22.9.2010 and 29.9.2010. Further on 18.0.5.2011, a demand of Rs.1,35,95,,874/- was raised but the appellant submitted that the appellant has achieved bench mark performance by February, 2010 itself, therefore, the demand after March, 2010 is not sustainable. But the appellant further deposited an amount as below:
Date Amount 09.06.2015 15 lacs 24.08.2011 17,34,629 10.04.2012 10 lacs 05.07.2012 8,24,865/-
The Revenue further sent notice on 4.6.2012 raising the demand of Rs.1,33,50,164/- for the period March, 2008 to 31.03.2012. The appellant filed civil writ petition No.19083/12 before the Honbe High Court and Honble High Court directed the appellant to make detailed representation to the respondent. In compliance to the direction of Honble High Court, the Revenue passed the impugned order on 14.12.2012 whereby the appellant was asked to pay a sum of Rs.1,18,00/249/- for the period March 2010 to 31.03.2012. Aggrieved with the said order, the appellant is before us.
3. Shri Jagmonhan Bansal, Advocate, learned Counsel for the appellant submits that prior to introduction of Handling of Cargo in Customs Area Regulations, 2009 (Regulations), there was no rule or regulation except instruction of board prescribing rate and manner recovery of cost recovery charges and waiver thereof. The Revenue demanded charges relying on Regulation 6 (1) (o) of the Regulations. He submitted that the instruction used to govern all the facet of a CFS apart from cost recovery. A complete code by way of 2009 regulations was inserted w.e.f.7.3.2009 and clause (o) of regulation 6(1) deals with the same. The said provision explicit is that CFS is liable to pay charges at the rate and manner prescribed by the Ministry. He further submitted that till date, neither rate are prescribed nor manner has been prescribed. In the absence of prescribed rate and manner in exercise of power conferred by aforesaid regulation, the Revenue has no authority to demand the cost recovery charges from the appellant. To support this contention, he relied on the decision of the Larsen & Toubro Ltd.-2015 (39) STR 913 (SC) and Suresh Kumar Bansal-2016-TIOL-HC-DEL. He further submitted that as per instruction issued by CBEC dated 12.09.2005 if the CFS achieved the bench mark performance during the previous two years, it is entitled to waiver of charges. He submitted that admittedly the appellant has achieved bench mark performance within 2 years and there is no lapse on the part of the appellant but it is on the part of the Revenue. In fact the Revenue for the first time in September, 2010 raised the demand of Rs.36 lakh and the appellant instantly paid the same, thereafter the appellant claimed the waiver and the Revenue by one after another letter increased the demand. At no point of time, the respondent was sure about charges so amount was changed from time to time. There is no provision which requires determination of charges at the end of the appellant. Therefore, the respondent cannot claim when there is lapse on the part of the appellant. In the circumstances, it is prayed that the impugned order is to be set aside.
4. Learned AR opposed the contention of the learned Counsel and submitted that the appellant was entitled for exemption from the charges only after the payment of cost recovery charges till the date of order granting exemption as the exemption is prospective. In the case of arrear of charges the CFS is liable to pay charges till the date of waiver. In this case, the appellant has made payment of charges during the period 2008 to 2010 in six instalments during the period September, 2010 t July, 2012. The appellant further failed to make advance payment of charges asked to pay from the Revenue. Therefore, the appellant is not entitled for exemption and the appellant is liable to pay charges from the date till from the date of issue of the order waiver.
5. Heard both sides and considered the submissions.
6. On careful consideration of the submissions made by both sides, we find that short issue involved before us:
(a) Whether the appellant is entitled for exemption from payment of cost recovery charges for March 2010 or not and
(b) Whether the appellant can be held responsible for non payment of cost recovery charges when no calculation was made by the Revenue.
7. We find that the appellant started working as CFS with effect from 1.3.2008 and as per instruction dated 14.12.95 read with circular No.52/97-Cus dated 17.10.97, a CFS is required to deposit in advance the cost recovery charges. It is fact on record that cost recovery charges are to be calculated by the Revenue, the appellant cannot pay cost recovery charges without calculation of demand of cost recovery charges payable by the appellant. Therefore, we hold that in the absence of any calculation of the demand made by the revenue, the appellant cannot be responsible for non payment of cost recovery charges. We find that as per CBEC circular dated 12.9.05, if CFS achieved bench mark performance during the previous years, it is entitled for waiver of charges. Admittedly, in this case the appellant has achieved the bench mark performance within the initial two years. As the appellant has achieved the bench mark performance, in that circumstance, the Revenue is duty bound to examine the issue and disposed of the claim of waiver failing which the Revenue cannot continue to demand of cost recovery charges from the appellant.
8. We further take note of the fact that the regulation 2009 has been introduced with effect from 7.3.2009 clause (o) of Regulation 6(1) deals the case in hand which is reproduced as under:
Shall bear the cost of the customs officer posted by the principal Commissioner of Customs or Commissioner of Customs, as the case may be on cost recovery basis and shall make payments at such rates and in the manner specified by the Government of India in the Ministry of Finance unless specifically exempted by an order of the said Ministry
8. On perusal of the said provision, we find that the CFS is required to pay the cost recovery charges at rate and manner specified by the Ministry. As, no manner or rate has been prescribed under the regulation or any other way subsequent to the regulation, in that circumstance, we are of the view that cost recovery charges cannot be demanded from the appellant. The same view has been taken by the Apex Court in the case of Larsen & Toubro Ltd (supra):
25.?In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner.
26.?We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the service component of a works contract from the goods component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books of account of the contractor are not looked into for any reason) by determining in different works contracts how much shall be the percentage of the total amount charged for the works contract, attributable to the service element in such contracts. It is this scheme and this scheme alone which complies with constitutional requirements in that it bifurcates a composite indivisible works contract and takes care to see that no element attributable to the property in goods transferred pursuant to such contract, enters into computation of service tax.
33.?Section 13(3) of the Central Sales Tax Act says :-
The State Government may make rules, not inconsistent with the provisions of this Act and the rules made under sub-section (1), to carry out the purposes of this Act.
34.?In the aforesaid judgment it was found that Section 9(2) of the Central Sales Tax Act conferred powers on officers of the various States to utilize the machinery provisions of the States sales tax statutes for purposes of levy and assessment of central sales tax under the Central Act. It was also noticed that the State Government itself had been given power to make rules to carry out the purposes of the Central Act so long as the said rules were not inconsistent with the provisions of the Central Act. It was found that, in fact, the State of Uttar Pradesh had framed such rules in exercise of powers under Section 13(3) of the Central Act as a result of which the necessary machinery for the assessment of central sales tax was found to be there. The Delhi High Court judgment unfortunately misread the aforesaid judgment of this Court to arrive at the conclusion that it was an authority for the proposition that a tax is leviable even if no rules are framed for assessment of such tax, which is wholly incorrect. The extracted passage from Mahim Patrams case only referred to rules not being framed under the Central Act and not to rules not being framed at all. The conclusion therefore in paragraph 36(2) of the Delhi High Court judgment is wholly incorrect. Para 36(2) reads as follows :-
(2)?Service tax can be levied on the service component of any contract involving service with sale of goods etc. Computation of service component is a matter of detail and not a matter relating to validity of imposition of service tax. It is procedural and a matter of calculation. Merely because no rules are framed for computation, it does not follow that no tax is leviable. [at para 36]
36.?In a recent judgment by one of us, namely, Shabina Abraham & Ors. v. Collector of Central Excise & Customs, judgment dated 29th July, 2015, in Civil Appeal No. 5802 of 2005 = 2015 (322) E.L.T. 372 (S.C.), this Court held :-
It is clear on a reading of the aforesaid paragraph that what revenue is asking us to do is to stretch the machinery provisions of the Central Excises and Salt Act, 1944 on the basis of surmises and conjectures. This we are afraid is not possible. Before leaving the judgment in Murarilals case (supra), we wish to add that so far as partnership firms are concerned, the Income Tax Act contains a specific provision in Section 189(1) which introduces a fiction qua dissolved firms. It states that where a firm is dissolved, the Assessing Officer shall make an assessment of the total income of the firm as if no such dissolution had taken place and all the provisions of the Income Tax Act would apply to assessment of such dissolved firm. Interestingly enough, this provision is referred to only in the minority judgment in M/s. Murarilals case (supra).
The impugned judgment in the present case has referred to Ellis C. Reids case but has not extracted the real ratio contained therein. It then goes on to say that this is a case of short levy which has been noticed during the lifetime of the deceased and then goes on to state that equally therefore legal representatives of a manufacturer who had paid excess duty would not by the self-same reasoning be able to claim such excess amount paid by the deceased. Neither of these reasons are reasons which refer to any provision of law. Apart from this, the High Court went into morality and said that the moral principle of unlawful enrichment would also apply and since the law will not permit this, the Act needs to be interpreted accordingly. We wholly disapprove of the approach of the High Court. It flies in the face of first principle when it comes to taxing statutes. It is therefore necessary to reiterate the law as it stands. In Partington v. A.G., (1869) LR 4 HL 100 at 122, Lord Cairns stated :
9. Further following the said of the Apex Court in the case of Larsen & Toubro Ltd. (supra), the Honble Delhi High Court in the case of Suresh Kumar Bansal (supra) has observed as under:
49. The Supreme Court further overruled the decision of this court in G.D. Builders (Supra) wherein this curt had, inter alia, held that clauses (g), (zzd), (zzh), (zzq), and (zzzh) of sub-section 105 of section 65 of the Act would also take within their sweep indivisible composite works contracts. The Supreme Court further concluded that prior the enactment of the Finance Act 2007-by virtue of which section 65(105)(zzzza) of the Act was introduced and Section 67 of the Act was amended a composite contract was not taxable. This was so because in absence of Rule 2A of the Rules there was no machinery for excluding the non-service element from such composite works contracts involving an element of services and transfer of property in goods. Whilst the impugned explanation expands the scope of section 65(105)(zzzh) of the Act, it does not provide any machinery for excluding the non-service components from the taxable services covered therein. The Rules also do not contain any provisions relating to determination of the value of services involved in the service covered under section 65(105)(zzzh) of the Act. Thus the said clause cannot cover composite contracts such as the one entered into by the petitioners with the builder.
50. In Maharashtra Chamber of Housing Industry (Supra), the Bombay High Court upheld the constitutional validity of the impugned explanation by examining the object of the taxation. The court held that the legislative competence must be determined with reference to the object of the levy and not with reference to the incidence of tax or the machinery provisions. As indicated above, we are also of the view that in the present case, the parliament would have the legislative competence to levy service tax in relation to the services rendered in construction of a complex. However, as explained in commissioner central excise and customs, Kerala v. Larsen & Toubro Ltd. (supra) in absence of machinery provisions to exclude non-service elements from a composite contract, the levy on services referred to in section 65(105)(zzzh) could only be imposed on contracts of service simplicitor -that is, contracts where the builder has agreed to perform the services of constructing a complex for the buyer-and would not take within its ambit composite works contract which also entail transfer of property in goods as well as immovable property. The measure of tax assumes significance in such contracts as a levy of the service tax taking the gross amount charged by a builder for a composite contract would amount to a levy of service tax not only on the service element but also on the immovable property and the property in goods transferred or intended to be transferred to the ultimate buyer.
10. In view of the above discussion, we hold that as the appellant has already achieved the bench mark performance within the initial two years and there is no provision as per regulation 2009, therefore, to recover the cost of charges from the appellant the demand cannot be made against the appellant for the cost recovery charges with effect from 1.03.2010.
11. In view of the above discussion, the impugned order deserves no merit and hence the same is set aside.
12. In the result, the appeal is allowed with consequential relief, if any.
(Pronounced in the open court)
(V.Padmanabhan) (Ashok Jindal)
Member (Technical) Member (Judicial)
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