TMI Blog2019 (7) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... ply. - appellants are not eligible for the benefit of said exemption Valuation - addition of Canteen Charges for determining the taxable value - HELD THAT:- The canteen charges are reimbursable expenses for providing the services - Once it is held that these charges have not been recovered from M/s Sigma then by no stretch of imagination can these charges be considered as charges towards providing the taxable service. Hence we hold that such canteen charges which have been recovered by the appellant from their own employees cannot be added to the value determined in respect taxable service provided - Matter for remanded for recomputing the demand after reducing the taxable value by the canteen charges so recovered. Extended period of limitation - HELD THAT:- Since the fact about non-payment of service tax in respect of services provided to M/s Sigma, by treating the agreement as job work agreement was never brought to the knowledge of department hence extended period of limitation has been rightly invoked by the adjudicating authority - The issue of limitation has to be considered on the facts of case in hand and the conduct of the assessee/ appellant. There cannot be applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the aforesaid confirmed demand. 41.2 I confirm the demand of Service Tax and Education Cess totally amounting to ₹ 39,33,395/- (Rupees Thirty Nine Lakhs Thirty Three Thousand Three Hundred and Ninety Five Only) short paid/ not paid by the assessee i.e. M/s Adiraj Manpower Service Pvt ltd., Pune in respect of MRSA services provided by them to M/s Sigma, during the period from April 2012 and September 2012 to March 2014, as detailed in Anne4xure II of the Show Cause Notice, under the provisions of Section 73(2) of the Act. I further order appropriation of Service Tax and Education Cess totally amounting to ₹ 71,534/-, since paid by the assessee, against the aforesaid confirmed demand. 41.3 I also order recovery of interest, at the appropriate rate(s) as applicable during the relevant period, on the demand of Service Tax as confirmed at paras 41.1 and 41.2 above under the provisions of Section 75 ibid. I further order appropriation of the amount of interest of ₹ 17,06,959/- since paid by the assessee against their interest liability arising out of the demand confirmed at para 41.1 above as detailed in Annexure-I of SCN. Further, I also order appropria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Finance Act,1994. 41.7 Further I also give an option to the assessees, under the second and third proviso to Section 78(1) of the Finance Act, 1994 to pay penalty equivalent to 25% of the demand of Service Tax as determined/ confirmed in para 41.2 above (i.e. 25% of ₹ 39,33,395/- which is equal to ₹ 9,83,349/-) provided the assessee pays the entire amount of demand of service tax, as determined/ confirmed in para 41.2 relevant to the period from April 2012 and September 2012 to March 2014 i.e. ₹ 39,33,395/- along with interest payable thereon as ordered in para 41.3 above on the said amount as well as the 25% penalty, within 30 days of the communication of this order. 42 This order is issued without prejudice to any other action that may be taken against the noticee under the provisions of Chapter-V of the Finance Act, 1994 and/ or the rules made thereunder and/ or any other law for the time being in force. 2.1 Appellants are providing the services under the category of Manpower Recruitment or Supply Agency Service . Acting on intelligence that the appellant is charging service tax to their customer for providing the taxable service but hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to March 2014 (including service value provided to M/s Sigma Electric Manufacturing Corporation Pvt Ltd., Chakan, Pune from September 2012 to March 2014) from the assesssee, as detailed in Annexure should not be demanded and recovered from them in terms of proviso to sub section (1) of Section 73 of the Finance Act, 1994. The amount of Service Tax of ₹ 69,450/- Education Cess ₹ 1,389/- and SHE Cess ₹ 695/- toatally amounting to ₹ 71,534/-, paid by the assessee vide challan no 86709 dated 24.03.2014 during the course of enquiry/ investigations , out of the demand mentioned above, should not be appropriated against the afore said demand of Service Tax. (iii) Interest of, on the demand of Service Tax as demanded at (i) and (ii) should not be demanded and recovered from the assessee, under the provisions of Section 75 of the Finance Act, 1994. Further the interest of ₹ 17,06,959/- already paid by them against their interest due, for the demand at (i) above, and the interest of ₹ 12,876/- already paid by the them vide challan no 86709 dated 24.03.2014 should not be adjusted and appropriated against the interest due for the demand confirmed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered by the definition of Service as defined under Section 65B(44) and is also not specified as service under Section 66D (negative list). Hence these services are leviable to service tax but are exempted by the Notification No 25/2012-ST {Seven Hillds Construction {2013 (31) STR 611 (T-Mum)], Ritesh Enterprises [2010 (18) STR 17 (T-Bang)], Nagar Taluka Shramik Seva Sangh [2010 (19) STR 119 (Commr Appl)], Karwar Dock Port Labour [2010 (17) STR 423 (T-Bang)]. iii. Canteen charges recovered from employees and reimbursement of other expenses should not have formed the part of taxable value of services provided by the Appellant. They were providing the canteen facilities to their employees and recovering the charges towards providing such service to their employee form them. Such charges and other reimbursable expenses could not have formed the part of taxable value. iv. Late Fee could not have been demanded from them as they had filed their SR-3 return in time. For the period April 2013 to September 2013 they had filed the service tax return on 25.10.2013 which was within the due date. Hence no late fees could have been levied upon them. v. Extended period of limitation sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the case of Venus Albums Co Pvt Ltd [2019 (22) GSTL 386 (T-Chan)] and Sarkar Sen Company {2016 (45) STR 479 (AAR)] benefit of Notification No 25/2012-ST has been extended to job work activities. v. The processed undertaken by them are nothing but intermediary process as explained in the table below: Manufacturing Process Process Performed By Base Metal bringing from storage and pouring in melting furnace Job Worker i.e. Appellant Melting in Furnace Principal Manufacturer Manufacture of Raw Casting Principal Manufacturer Fettling Deburring of the raw casted goods Job Worker i.e. Appellant Material Handling and Handing over to next machining operation after acceptance of quality control Job Worker i.e. Appellant Machining Raw casted goods Principal Manufacturer Assembly Principal Manufacturer or Job Worker i.e. Appellant as applicable Packing of Finished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n time, and this has not happened once but has been happening every month. Since Appellants have been constantly defaulting on the payment of service tax within the due date the penal proceedings against them are warranted. ii. The appellants were registered for man power recruitment and supply services. In respect of the services supplied to M/s Sigma, they had been paying the service tax under the category of Manpower Recruitment and Supply Services upto August 2008. They changed the practice with effect from September 2008 and stopped paying service tax in respect of the supply made to M/s Sigma claiming the same to be job work exempted in terms of Notification No 25/2012-ST (Sl No 30). iii. From the terms and condition of the contract entered between the appellants and M/s Sigma (Contracts dated 1st January 2012, 1st January 2013 1st January 2014) it is quite evident that the services provided by them were those of manpower supply and not of job work. (Specifically conditions at Sl No 10 to 17 of Terms and Conditions). iv. If the agreement was for the job work then why should contract have conditions like minimum wages to labour, submission of muster etc by the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty imposed is under Section 76. Penalty under Section 76 is for failure to deposit the tax in time. When admittedly appellants were not depositing the tax by the due date, the penalties need to be imposed even if the appellants claim no mens rea. Hon ble Supreme Court has in case of Gujarat Travancore Agency Cochin [1989 (42) ELT 350 (SC)] laid down the law stating- 4. ... It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what it intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services provided by Appellant would be liable to service tax from 1st July, 2012. 42 However in this regards as explained above exemption Notification No 25/2012-ST dated 20.06.2012 which at its entry no 30(c) exempts following category of service. Intermediate production process as job work in relation to any good on which appropriate duty is payable by the principle manufacturer 5.4 From the above submissions made in appeal it is clear that appellant do not dispute taxability of the services provided by them to M/s Sigma but are claiming the benefit of exemption in terms of Notification No 25/2012- ST. 5.5 The Terms and Conditions specified in the Contract between the Appellant and M/s Sigma are reproduced below: The Contractor has undertaken the responsibility of Fetling, Material Handling, Assembly, Pouring, Supply of Cast machine part, painting. 1. The Contractor has undertaken this job contract which is highly specialized in its nature where trained and expert team with coordination is required. 2. The contractor shall receive the consideration as per the services rendered and as per rates mentioned in Schedule II attached herewi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk under the direct control, supervision and administration of the Contractor and the Company will have no right to interfere in it.. 10. It is also agreed between the parties that the Contractor shall decide the service conditions of the employees engaged by the Contractor, but ensure that he will pay them the wages not less than the rates of minimum wages as applicable for his scheduled industry. The mode of payment will be as described by the Government Authorities. 11. It is agreed that the Contractor shall take necessary license whenever required under the provisions of Contract Labour (Regulation Abolition) Act, 1970 and shall submit a copy of the same to the Company. 12. The Contractor shall maintain various records, registers and shall submit timely returns required under legislation, rules and regulations applicable to him and hi personnel. The contractor shall submit Xerox copies of musters, vouchers to the company in respect of his personnel. 13. The Contractor indemnifies the Company that he shall bear any burden of whatsoever nature like fees, fines, penalty, damages, rise in wages, HRA,, Back-Wages, etc in respect of his personnel under the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thereafter it may continue with written understanding on the same terms and conditions. SCHEDULE I Provide services for Fetling, Material Handling, Assembly, Pouring, Supply of Cast machine part, Painting, at our establishment situated at Gate No 154/1 155/1, Mahalunge, Chakan, Pune, 410501, which consists of plant area, offices, stores, canteen, utilities, open land, scrap yard etc.. SCHEDULE II The rate per Kg is given below: Particulars Copper/ kg Zinc/ Kg Aluminium/ kg Steel/ kg Fetling 0.83 Material Handling 0.58 Packing Pouring Supply Cast/ Machined Parts 2.49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may, by notification in the Official Gazette, appoint, no contractor to whom this Act applies, shall undertake or execute any work through contract labour except under and in accordance with a licence issued in that behalf by the licensing officer. Section 20. Liability of principal employer in certain cases.- (1) If any amenity required to be provided under section 16, section 17, section 18 or section 19 for the benefit of the contract labour employed in an establishment is not provided by the contractor within the time prescribed thereof, such amenity shall be provided by the principal employer within such time as may be prescribed. (2) All expenses incurred by the principal employer in providing the amenity may be recovered by the principal employer from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor. Section 21. Responsibility for payment of wages.- (1) A contractor shall be responsible for payment of wages to each worker employed by him as contract labour and such wages shall be paid before the expiry of such period as may be prescribed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees of the contractor. It also lay down the condition that proper records and registers to be maintained in this respect. In case any financial burden on this account is cast on the Company then the Company is having liberty to recover the same from the bills of contractor. How is company concerned in matter relating to payment of wages, to ESI Account and Provident Fund Account in respect of the employees of the contractor, in a job work contract? In our view the agreement between the appellant and the M/s Sigma is nothing but a contract labour agreement, executed for the purpose of providing requisite manpower and is not a job work contract. Hence the services provided by the appellant cannot be said to be those in respect of which Sl No 30 of exemption Notification No 25/2012-ST shall apply. 5.8 Appellant shave referred to decision in case of Venus Album Co Pvt Ltd [2019 (22) GSTL 386 (T-Chand)] Sarkar and Sen Company {2016 (45) STR 479 (AAR)]. In the said decisions it was held that if the activities undertaken were held to be of that job work in respect of the finished goods cleared on payment of duty then will be exempted in terms of this notification. None of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State. 42. In Govind Saran Ganga Saran v. Commissioner of Sales Tax, 1985 Supp (SCC) 205, this Court pointed out three components of a taxing statute, namely subject of the tax; person liable to pay tax; and the rate at which the tax is to be levied. If there is any ambiguity in understanding any of the components, no tax can be levied till the ambiguity or defect is removed by the legislature [See Mathuram Agrawal v. State of Madhya Pradesh, (1999) 8 SCC 667; Indian Banks Association v. Devkala Consultancy Service, (2004) 4 JT 587 = AIR 2004 SC 2615; and Consumer Online Foundation v. Union of India, (2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be gathered by necessary implication or by construction of words; in other words, one has to look to the language alone and the object and purpose for granting exemption is irrelevant and immaterial. 45 . In Parle Exports case (supra), a Bench of two-Judges of this Court considered the question whether nonalcoholic beverage base like Gold spot base, Limca base and Thumps Up base, were exempted from payment of duty under the Central Government notification of March, 1975. While considering the issue, this Court pointed out the strict interpretation to be followed in interpretation of a notification for exemption. These observations are made in para 17 of the judgment, which read as follows : How then should the Courts proceed? The expressions in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. It is, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise v. Parle Exports (P) Ltd., (1989) 1 SCC 345, this Court while accepting that exemption clause should be construed liberally applied rigorous test for determining if expensive items like Gold Spot base or Limca base of Thums Up base were covered in the expression food products and food preparations used in Item No. 68 of First Schedule of Central Excises and Salt Act and held that it should not be in consonance with spirit and the reason of law to give exemption for non-alcoholic beverage basis under the notification in question . Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by respondent mentioned in the notification were entitled to benefit. 46. The above decision, which is also a decision of two- Judge Bench of this Court, for the first time took a view that liberal and strict construction of exemption provisions are to be invoked at different stages of interpreting it. The question whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State.... 50. In Tata Iron Steel Co. Ltd. v. State of Jharkhand, (2005) 4 SCC 272, which is another two-Judge Bench decision, this Court laid down that eligibility clause in relation to exemption notification must be given strict meaning and in para 44, it was further held - The principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption (See Novopan India Ltd. v. CCE and Customs). 51. In Hari Chand case (supra), as already discussed, the question was whether a person claiming exemption is required to comply with the procedure strictly to avail the benefit. The question posed and decided was indeed different. The said decision, which we have already discussed supra, however, indicates that while construing an exemption notification, the Court has to distinguish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restrain the sense or effect of something, which had before been said. He has obtained this meaning from Law Lexicon by P. Ramnatha Aiyar. In order to examine the submission by learned Counsel as to whether this terminal part of Explanation (2) gives the explanation so much strength as to mean that the party, which has utilised the facility of sub-section (2B) of payment of short duty as ascertained by the assessee himself, is not liable to pay the interest as u/s. 11AB, we have tried to search for the meaning of phrase but for . As per Concise Oxford Dictionary, 11th Edition, but for means except for , if it were not for . In view of these meanings obtained from the Law Lexicon and the Oxford Dictionary attached to the word but and to the phrase but for , the Advocate pleaded that it should be interpreted that had sub-section (2B) not been in existence or rather the facility to pay the short duty was not available, the party would have been required to pay interest u/s. 11AB and if the facility is available, on compliance of the same, the party would not be liable to pay interest. Taking into consideration that the tail piece relied upon by learned Counsel is includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri A.P. Kolte to Explanation in question. 13. For all these reasons discussed, we are unable to agree with the proposition that interest u/s. 11AB is also not chargeable in case the short duty or unpaid duty is deposited with the Government before issuance of show cause notice. 5.12 Appellants had been paying the Service Tax in respect of the services provided to M/ Sigma till August 2012. All of sudden with informing the department thy stopped payment of the taxes claiming that services provided are exempted. It was only as result of investigations undertaken that the fact of non-payment of taxes came to light. Commissioner has in para 38.3 of his order have held as follows: 38.3 The assessee are working in self assessment regime and are expected to be vigilant about their tax liabilities. It is an undisputed fact that the assessee have been repeatedly paying service tax beyond the due dates to the government exchequer even after being pointed out by the department and therefore have not lived upto the high standards of tax compliance and information disclosure as is expected of an assessee in the self assessment regime. Further, although they had been payi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record that the appellant had not provided copy of the agreement to the department in respect of the services received from abroad and these were provided only in 2010 when the investigation commenced. Further, the exact details of the payments made in respect of the marketing promotion activities were given to the department for the first time only in January, 2011 vide letters dated 5-1-2011 and 7-1-2011. The show cause notice has been issued on 20-4-2011 and, therefore, it cannot be said that the show cause notice is barred by limitation of time. 6.5 A similar case came up for consideration before the Hon ble Apex Court in the case of Commissioner of Central Excise, Vishakhapatnam v. Mehta Co. - 2011-TIOL-17- S.C.-CX = 2011 (264) E.L.T. 481 (S.C.) and the question of time-bar was also raised. The Hon ble Apex Court held as follows : The cause of action, i.e., date of knowledge could be attributed to the appellant in the year 1997 when in compliance of the memo issued by the appellant and also the summons issued; the hotel furnished its reply setting out the details of the work done by the appellant amounting to ₹ 991.66 lakhs and at that stage only the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be seen from the said Section that it is for the appellant to prove that there was reasonable cause for the said failure. In the present case while there can be arguments or reasons for the period upto March, 2009 for failure to pay the duty, there does not seem to be any valid ground for non-payment of duty after April, 2009. In view of the said position, in my considered view, penalty for the period April, 2009 to March, 2011 cannot be waived under Section 80 of the Finance Act. 20. During the hearing, learned senior counsel for the appellant has quoted the following judgments :- (1) Petronet LNG Ltd. v. CST [2013-T1OL-1700-CESTATDEL}; (2) Reliance Industries Ltd. v. CCE ST [2014 (36) S.T.R. 820 (Tri.-Mum.)]; (3) Greatship (India) Ltd. - [2015 (37) S.T.R. 533 (Tri.- Mum.)]; (4) CCE v. Vinay Bele [ 2008 (9) S.T.R. 350 (Bom)]; (5) CCE v. D.R. Gade [2008 (9) S.T.R. 348 (Bom.)]; (6) Nizam Sugar Factory v. CCE [2006 (197) E.L.T. 465 (S.C.)] (7) CCE v. Lark Chemicals [ 2008 (9) S.T.R. 230 (Bom.)] (8) CCE v. Ashish Vasantrao Patil [ 2008 (10) S.T.R. 5 (Bom.)], and (9) CCE v. Quick Service reported in 2008 (10) S.T.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns by the due date hence the we are not in position to uphold the penalty imposed under section 77(2) of the Finance Act, 1994 and also the late fees imposed in terms of Section 70(1) of the Finance Act, 1994 in respect of these returns. Hence penalties and fees imposed in terms of these sections is set aside. 5.15 It is well provided by the Section 78 of the Finance Act, 1994 itself that penalty under Section 76 and 78 ibid should not be imposed simultaneously. The relevant proviso is reproduced below: Provided also that if the penalty is payable under this section, the provisions of section 76 shall not apply. Since we uphold the penalties imposed under Section 76, penalties imposed under Section 78 cannot be justified, Hence we set aside the penalties imposed under Section 78. 5.16 In view of our discussions as above we summarize our findings as follows: Issue Finding Demand of Service Tax of ₹ 10,81,74,382/- along with interest of ₹ 17,06,959/- for delayed payment of Service Tax Demand and appropriation of the amounts paid upheld. Demand in respect of Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X
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