Custom, Excise & Service Tax Tribunal
The Commissioner Of Service Tax, ... vs M/S Secon Surveys (P) Ltd on 15 September, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: ST/10/2006 & ST/100/2004 [Arising out of Order-in-Original No. 10/2005 dated 30.11.2005, passed by the Commissioner OF Service Tax, Bangalore and Order-in-Appeal No. 167/2004 CE dated 31.08.2004, passed by Commissioner of Central Excise (Appeals), Bangalore] For approval and signature: HON'BLE SHRI S. S. GARG, JUDICIAL MEMBER HONBLE ASHOK K. ARYA, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s Secon Surveys (P) Ltd. No. 147, 7B Road, EPIP, Whitefield, Bangalore 560066. The Commissioner of Service Tax, Bangalore Appellant(s) Versus Commissioner of Central Excise & Service Tax, C.R. Building, I.S. Press Road, Kochi 18. M/s Secon Surveys (P) Ltd. No. 147, 7B Road, EPIP, Whitefield, Bangalore 560066. Respondent(s)
Appearance:
Mr. N. Anand, Advocate For the Appellant Mr. Pakshi Rajan, A.R. For the Respondent Date of Hearing: 19/05/2016 Date of Decision: 15/09/2016 CORAM :
HON'BLE SHRI S. S. GARG, JUDICIAL MEMBER HONBLE SHRI ASHOK K. ARYA, TECHNICAL MEMEBR Final Order Nos. 20766 & 20767/2016 This order will dispose of two appeals, one filed by the assessee against the Order-in-Original No. 10/2005 dated 30.11.2005 passed by the Commissioner of Service Tax, Bangalore and the second appeal filed by the Department against the Order-in-Appeal No. 167/2004 CE dated 31.08.2004 passed by the Commissioner of Central Excise (Appeals), Bangalore.
2. For the sake of convenience, we take up the appeal filed by the assessee-appellant. The appellant, M/s Secon Surveys (P) Ltd., is a private limited company and is engaged in the business of surveying apart from rendering Consultancy Service and Construction Supervision for Highways, etc. During the course of audit, the appellant furnished information, records, documents and copies of contracts/agreements, bills etc. as required by the authorities. After completion to audit, the Department issued a letter dated 04.12.2002 to the appellant stating that the activities of the appellant would fall within the ambit of Consulting Engineer and asked the appellant to pay service tax @ 5% of the gross amount realized from 7.7.1997 onwards. The appellant replied to the above letter of the audit party on 11.12.2002 stating that the activity and the nature of land surveyor is distinct and separate than the normal engineering service. Thereafter a show-cause notice dated 31.7.2003 was issued leveling the following allegations :
(i) That the appellants are engaged in providing services in the field of civil engineer like topographical, hydrographical, geo-tech surveys and investigations, pipeline transportation studies, infrastructure development studies, design and consultancy for irrigation and water management, supervision and surveying in respect of highway construction, bridges and environmental impact studies;
(ii) That these services come within the scope of consulting engineer as defined in Section 65(25);
(iii) That the clarification in Trade Notice No. 53 CE (Service Tax)/97 dt. 4.7.1997 the scope of services of a consulting engineer is specified and the said list is not exhaustive;
(iv) That as per MF (DR) Circular F. No. 177/5/2001 CX.4 (37B order No. 1/1/2002-ST) dt. 26.2.2002, inspection, survey, assessment, technical assistance, consultancy, etc. would be liable for service tax under consulting engineer;
(v) CBEC Circular No. 49/11/2002-ST dated 18.12.2002 was also relied on;
(vi) That the appellants activity was detailed in the Statement of Facts annexed to the show-cause notice;
(vii) That during the period from 1.4.1998 to 31.3.2003, the appellant charged a gross sum of Rs. 58,05,08,327/- as charges for consulting engineer service and the service tax liability thereon works out to Rs. 3,40,25,416/-; and
(viii) That the appellant had suppressed facts and had contravened Sections 68, 69 & 70 of the Finance Act, 1994.
3. The appellant refuted the above allegations in the show-cause notice. The Deputy Commissioner of Central Excise, Bangalore passed Order-in-Original dated 16/7/2004 demanding service tax on the following :
(a) That insofar as Land Survey is concerned the same was not covered under the Consulting engineer category prior to 26.2.2002.
(b) That Land survey would be including within the ambit of definition of consulting engineer only w.e.f. 27.2.2002 pursuant to Boards Circular No. 1/1/2002-S.T dated 26.2.2002.
(c) That insofar as Geo-tech investigation the same is covered only w.e.f. 1.7.2003 onwards under the category of technical testing, analysis, inspection and certificate services. In this regard, reliance was placed on the amendment made by the Finance Act, 2003 and the Board Circular No. 79/9/2004-S.T. dated 13.5.2004. Hence, geo-tech investigations were not covered under consulting engineer prior to 1.7.2003.
(d) That the activity of Right of Use/Ownership (ROU/ROW) did not involve any consultancy service.
(e) That work executed by the appellant as a sub-consultant was not liable for tax in the light of Trade Notice No. 53/97 dated 4.7.1997.
(f) That services relating to software development, data capture and process were not taxable in the light of Notification No. 4/99 ST dt. 28.2.1999.
(g) That insofar as payments received in foreign exchange the same were exempted vide Notification No. 6/99 ST dt. 9.4.1999.
(h) That services in the nature design, consultancy and auxiliary were not taxable as held by the Tribunal in Daelim Industries, etc.
(i) Insofar as pure consultancy services, the same was taxable.
(j) As regards turnkey projects involving design consultancy work is concerned, the same was not taxable in the light of decision of State of Punjab v. Associated Hotels India Ltd., Daelim Industries Co. Ltd. V. CCE, L&T Ltd. v. CCE.
(k) That the appellant was liable for payment of interest.
(l) As regards penalties, in the light of developments made by the Finance Acts, and the Board Circulars bringing new service categories within the ambit of service tax net, there was reasonable cause and penalty was not imposed.
3.1. Based on the above findings, the original authority passed the following order :
(i) Demand of service tax of Rs. 1,48,41,374/- was confirmed.
(ii) A sum of Rs. 1,07,21,090/- already paid by the appellant was appropriated.
(iii) Interest of Rs. 1,48,41,374/- at the applicable rate from the date on which it is payable till the date of payment was demanded.
(iv) No penalty was imposed exercising the discretion vested in the said authority in terms of Section 80 of the Finance Act, 1994. 3.2. Aggrieved by the same, the appellant filed appeal before the Commissioner (Appeals) challenging the following issues :
(i) That the finding of the adjudicating authority that pursuant Board Circular dt. 26.2.2002, the activity of Land Survey fell under consulting engineer service. That service of surveying was brought under service tax net only by Budget 2004 and it did not fall under consulting engineer earlier.
(ii) That the adjudication order was wrong in holding some of the services under consulting engineer service category.
3.3. The Commissioner (Appeals) proceed to passed the Order-in-Appeal dated 31.8.2004. The findings of the Commissioner (Appeals) is summarized as under :
(i) A reading of the Board Circular dt. 26.2.2002 relied on by the adjudicating authority did not indicate that land survey is subject to service tax as consultancy engineer service.
(ii) That the adjudicating authority had taken the word survey from the circular out of context and misinterpreted the same.
(iii) That even after the Board Circular dt. 26.2.2002, the provisions relating to consulting engineer had not changed. Hence the order of the adjudicating authority that after 26.2.2002 land survey would fall within consulting engineer was unwarranted and without basis.
(iv) That turnkey projects could not be taxed under the category of consulting engineer in the light of Daelim Industrial Company vs. CCE, 2003 (155) ELT 457 (T) as affirmed by the Supreme Court in 2004 (170) ELT A181.
(v) That extended period of limitation under Section 73 of the Act was rightly invoked.
3.4. In the light of the findings the Commissioner (Appeals) passed the following order :
(a) The demands pertaining to following were set aside
(i) Land survey and related activities from 26.2.2002.
(ii) Turnkey projects involving design consultancy work.
(iii) Consulting services which are composite in nature involving design consultancy and auxiliary services.
(b) The adjudication order imposing service tax on pure consultancy was upheld.
(c) The appellants were held liable to pay interest under Section 75.
(d) In the light of setting aside of the service tax, refund of tax paud, if any, was to be sanctioned.
4. Aggrieved by the said order, the Department filed appeal before the Tribunal (ST/100/2004) and tagged with the appeal of the assessee-appellant.
5. After the order of the Commissioner (Appeals), the Respondent-Commissioner proceeded to issue a review show-cause notice dated 10.12.2004 in exercise of powers under Section 84 of the Finance Act, 1994 proposing to review the Order-in-Original No. 14/2004 dt. 16.7.2004 passed by the Deputy Commissioner of Central Excise and a review show-cause notice was issued to the appellant and the appellant strongly contested the review show-cause notice on the following grounds :
(a) The appellant contested the original adjudication order before the Commissioner (Appeals) and an Order-in-Appeal had been passed vide Order No.167/2004-CE dated 31.8.2004. The Original adjudication order had merged insofar as issues contested before the Commissioner (Appeals). Hence, the revisionary powers exercised by the Commissioner in review show cause notice were without authority.
(b) That the adjudication order had merged with the appellate order of the Commissioner (Appeals) and the jurisdiction of the Commissioner under Section 84 of the Act ceased. Reliance was placed on the decision in CST v. Shri Amarjeet Singh, (1963) 14 STC 501 (MP).
(c) That the initial show cause notice itself suffered from illegality since the same was based on audit partys observations/opinions and reliance was placed on judicial decisions in Indian and Easter Newspaper Society v. CIT, 1979 (119) ITR 996 (SC); Swastik Tin Works v. CCE, 1986 (25) ELT 798 (T) and Indian Plastics Ltd. v. CCE, 1988 (35) ELT 434 (T).
(d) That in Jeewanlal (1929) Ltd. v. CIT, (1977) 108 ITR 407 (Cal.), the Calcutta High Court held that if the authority reviewing had merely proceeded at the suggestion of the audit department, then it would be untenable in law.
(e) That there was no question of any intendment in a taxing statute and it ought to be interpreted strictly on the basis of words used in the Statute.
(f) That insofar as demand of service on land survey was concerned-
a. The adjudicating authority recorded detailed findings on non-taxability of the same under the category of consulting engineer and there was no illegality.
b. The review show cause notice was illegal in seeking to review the adjudication order since the same merged with the appellate order.
c. That a new service of survey and map-making has been specifically brought under service tax by the Finance Act, 2005 w.e.f. 16.6.2005 andt he same did not cover under the consulting engineer category. To support this contention reliance was placed on the decisions in CCE v. MRF Ltd. 2005 (179) ELT 472 (T) and in Roots Multiclean Ltd. v. CCE, 2005 (179) ELT 107 (T).
(g) As regards geo-tech investigations, hire charges for hiring chattel and crew was concerned the same did not fall under consulting engineer. That geo-technological investigation primarily involved soil drilling, boring, etc., and got specifically covered under new service site formation and clearance, excavation and earth moving and demolition introduced by the Finance Act, 2005 w.e.f. 16.6.2005. The adjudication order was proper in upholding this aspect. That insofar as charges towards hiring of chattel and crew, the same did not fall within the ambit of value of taxable service under Section 67, since these did not represent the value charged towards rendering of any taxable service.
(h) That as regards consulting services which was composite involving work and consultancy, the adjudication order had verified the necessary records and documents and rightly held that it was composite involving work and consultancy and the decision of the Tribunal in Daelim Industrial co. Ltd. v. CCE, 2003 (155) ELT 457 (T) affirmed by the Supreme Court in 2004 (170) ELT A181 (SC) was rightly followed. Further, the review show cause notice made bald allegations and the details of the review made by the respondent were not forthcoming in the show cause notice.
(i) That there was no suppression of facts warranting pressing into service the extended period of limitation under Section 73 of the Act. Reliance was placed on the decision in Calcutta Discount Co. Vs. ITO, 1961 (41) ITR 191 (SC) wherein it was held that as primary facts were within the knowledge of the Department, the assessee ws under no duty to disclose inferential facts or legal inferences which may be drawn from such facts. It was not the duty of the assessee to educate the assessing officer about the inferences of fact or law.
(j) That no penalties could be imposed for the reason that there was no liability to pay service tax as purportedly made out in the review show cause notice. That there was no mens-rea or culpable mental state ont he part of the appellant. That the adjudicating authority had rightly exercised the discretion vested in the said authority under Section 80 of the Act. Therefore, the proposals to invoke penal provisions were not proper. A number of decisions were relied on in this frame of reference.
6. Thereafter, the Respondent-Commissioner passed the Order-in-Original dated 30.11.2005. The findings in the impugned order-in-original are as under :
(i) Charges received for land survey prior to 26.2.2002:
? The Deputy Commissioner erred in holding that service tax was not leviable to 26.2.2002.
? Trade Notice dt.4.7.1997 clarified that all pre-design and feasibility study would get covered under consulting engineer. ? The appellants contention that the said service was brought under service tax net only w.e.f. 16.6.2005 under survey and map-making is not legally sustainable. ? The case laws cited by the appellant do not apply.
(ii) Charges received for geo-tech investigations:
? The order of the Deputy Commissioner that this would be covered only w.e.f. 1.7.2003 suffers from legal infirmity.
? These services are part of the engineering services carried out to examine the suitability of soil and to determine the type of structure, etc. ? The contention of the assessee is not legally sustainable.
(iii) Charges for hiring chattel and crew at the site:
? That the value of taxable service is the gross amount charged and these charges do not merit exclusion.
(iv) Charges received for consulting services, which are composite in nature:
? That the appellant failed to adduce any evidence to prove that these services did not involve any engineering consultancy.
? That in the absence of any proof, the service tax is liable to be demanded.
(v) That the plea taken by the appellant that the original order being review had merged in the Order-in-Appeal was not legally sustainable. That the order-in-appeal passed by the Commissioner (Appeals) was not binding on the Commissioner in revision proceedings under Section 84 of the Act. That Section 84 and 85 were independent sections, which operated in different spheres distinguishable from each other. The revision proceedings did not suffer from any legal infirmity.
(vi) That the contentions of the appellant regarding penalty were not legally sustainable. The provisions of law did not confer any benefit on the assessee. Since the extended period had been invoked on grounds of suppression of value of taxable service and the assessee did not make any rebuttal, the penal provisions were attracted.
On the basis of above findings, the following order was passed :
(a) He confirmed service tax of Rs. 1,35,28,574/- under Section 73 (1) of the Act.
(b) He demanded interest at the applicable rate under Section 75 of the Act.
(c) He imposed penalty of Rs. 200/- per day as provided in Section 76 of the Act
(d) He also imposed penalty of Rs. 1000/- as provided in Section 77 of the Act.
(e) He imposed further penalty of Rs. 1,50,00,000/- under Section 78 of the Act for having suppressed value of taxable service with an intent to evade payment of service tax.
7. Aggrieved by the said order, the appellant is before the Tribunal. The appeal of the Department is against that segment which has been allowed by the Order-in-Appeal of the Commissioner (Appeals) and the appellant is against the order of the Commissioners order of review show-cause notice passed under Section 84 of the Finance Act, 1994.
8. The learned counsel for the appellant submitted that the impugned order dated 30.11.2005 is not sustainable in law as the same has been passed ignoring the statutory provisions and the Boards Circular and also ignoring the decisions of the judicial fora on taxability of certain services involved in the present case. He further submitted that the Deputy Commissioner who issued show-cause notice lacked jurisdiction to pass an order and therefore, the entire proceedings are void ab-initio. Then he referred to various provisions of Finance Act, Central Excise Act, Central Excise Rules, 2002 and Service Tax Rules and submitted that service tax law does not have a statutory provisions in the Finance Act for independent appointment of Central Excise officers for the purpose of service tax law. Service Tax Rule 3 has the provisions for the Board to pick and choose a Central Excise officer appointed and invested with powers under Central Excise Act/Rules and assign to him such local limits with specified taxable services for the purpose of enforcing service tax law. The employment of words such, local limits, assign, specified taxable services and exercise his powers in Rule 3 of the Service Tax Rules are crucial. This conveys the intent of the rule maker, to show that a Central Excise officer as defined in Section 2(b) of the Central Excise Act read with Rule 3 of the Central Excise Rules can in turn be appointed under Rule 3 of the STR for the exercise of powers within such local limits assigned to them for specified taxable services; and the appointment made under Rule 3 of the Central Excise Rules does not mean an automatic appointment under Service Tax law, more so when the Finance Act, 1994 is silent on appointments. The provisions of Rule 3 of the Service Tax Rules cannot eclipse the Finance Act, 1994 and enable the Government to make appointments contrary to law. Section 65(121) is not a provision enabling appointment of officers of Central Excise. That power stems only from Central Excise Act/Rules. The words such, local limits, assign, specified taxable services and exercise his powers employed in Rule 3 of the Servie Tax Rules are to be given due play, otherwise they become meaningless and otiose. When the Central Excise Act/Rules give specific territorial limits to Central Excise officers, the service tax law, in the absence of an appointment provision, cannot invest those officers with all India jurisdiction.
8.1. The learned counsel further submitted that the Deputy Commissioner who passed the adjudication order dated 16.7.2004 do not have the pecuniary jurisdiction to adjudicate a demand notice involving the amount more than Rs. 5,00,000/-. To support this submission, the learned counsel produced the Boards Circular No. 752/68/2003-CX dated 1-10-2003 which was in force during the relevant time, specifically restricts the power of the Deputy Commissioner for the purpose of adjudication demand notice involving an amount of more than 5 lakhs. This submission of the learned counsel has force and we find that when the adjudication order lacks jurisdiction then the review of the same by impugned order is also bad in law. Learned counsel further submitted that the impugned order is bad in law because all the services covered by the impugned order became taxable services only from 16.6.2005 by virtue of Finance Act, 2005 which introduced new services in relation to survey and map making services, the scope of which is also explained in the contemporaneous exposition i.e. Board Circular issued by Govt. of India, explaining the Budget changes of 2005. The service tax cannot be charged retrospectively as per the decision of the Honble Supreme Court in the case of Govinddas Vs. ITO [1976 (103)ITR 123 (S.C.)] wherein the apex court has held that no tax can be imposed retrospectively so as to saddle a person with a liability which did not exist when an act took place. The impugned order is against the Boards Circular which is binding on the Department as per the Supreme Court decision in the case of Dhiren Chemical Industries [2002 (139) ELT 3 (S.C.)]. The learned counsel further submitted that the Respondent has ignored the legal principles of Doctrine of Merger and has proceeded to exercise powers in derogation of the principles of law. The Order-in-Original passed by the Deputy Commissioner merged in the Order-in-Appeal passed by the Commissioner (Appeals) on 31.8.2004. Therefore, seeking review of the order which merged in Order-in-Appeal much after the order-in-appeal is not legal and not sustainable in law. In support of this submission, the learned counsel relied upon the decision in the case of CIT Vs. Amritlal Bhogilal & Co. [AIR 1958 SC 868 Supreme Court]. He also submitted that the Department has also filed appeal against the Order-in-Appeal before the CESTAT whereas on the other hand passed Order-in-Original in exercise of powers of review under Section 84 of the Finance Act which is not correct in law. Further, the assessee has relied upon the following decisions on merits :
(i) CCE & C. Vadodara-II Vs. Mascon Multiservices & Consultants P. Ltd. [2009 (14) STR 190 (Tri-Ahmd.)]
(ii) CCE &C., Vadodara-II Vs. Mascon Multiservices & Consultants P. Ltd. [2010 (19) STR 484 (Guj)
(iii) CCE, Cus & ST, Vadodara II Vs. SKP Projects (P) Ltd. [2015 (38) STR 1144 (Tri.-Ahmd.)]
(iv) Geo Foundations & Structures (P) Ltd. Vs. CCE & C., Cochin [2009 (15) STR 408 (Tri.-Bang.)]
(v) CCE & Cus., Kerala Vs. Larsen & Toubro Ltd. [2015 (39) STR 913 (S.C.)]
(vi) CST, Bangalore Vs. Turbotech Precision Engineering Pvt. Ltd. [2010 (18) STR 545 (Kar.)]
(vii) CCE & ST Vs. Simplex Infrastructure & Foundry Works [2014 (34) STR 191 (Del.)]
(viii) CCE, Jaipur-I Vs. Consulting Engineers Groups Ltd. [2014 (36) STR 634 (Tri.-Del.)
(ix) CCE Vs. Sanghi Threads [2015 (321) ELT 180 (S.C.)
9. The learned A.R. on the on hand supported the Order-in-Original passed by the Deputy Commissioner but contested the Order-in-Appeal passed by the Commissioner (Appeals) and further he reiterates the finding of the impugned order-in-original passed by the Commissioner.
10. We have considered the submissions made by both the sides and perused the relevant materials on record. We find from the detailed submissions discussed above, the Deputy Commissioner lacks jurisdiction to pass the order and all the proceedings before him is void ab initio. Secondly, the order passed by the Deputy Commissioner is also bad in law as he did not have the pecuniary jurisdiction to pass adjudication order at the relevant time which is clear from the Boards circular dated 1.10.2003. Further, we also find that by Doctrine of Merger, the order passed by the Deputy Commissioner no longer survive and therefore, to review an order which does not exist in law is not permitted by law, more so when review order is passed much after order passed by the Commissioner (Appeals). We also find that the Department has also filed appeal against the Order-in-Appeal. In view of these facts and circumstances, we are of the considered opinion that the impugned order is bad in law and we set aside the same. We are also of the opinion that there is no merit in the Departments appeal filed against the Order-in-Appeal.
11. In view of the above discussion, we set aside the impugned order by allowing the appeal of the assessee and also dismiss the appeal of the Revenue.
(Pronounced in open court on 15/09/2016)
(ASHOK K. ARYA) (S. S. GARG)
TECHNICAL MEMBER JUDICIAL MEMBER
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