TMI Blog2010 (9) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... NTED BY: S/Shri A.R.M. Madhav Rao and Hemant Bajaj, Advocates, for the Appellant. Shri R.K. Verma, DR, for the Respondent. [Order per: Chittaranjan Satapathy, Member (T)]. - These appeals involve a common issue as to whether service tax in relation to goods transport service received by the appellants during the period 16.11.1997 to 1.6.1998 can be recovered by issue of show-cause notice in the year 2004. The issue has been referred to the Larger Bench by a Single Member Bench of the Tribunal vide Agauta Sugars Vs. CCE - 2007 (8) STR 496 taking note of difference of opinions expressed by different Benches of the Tribunal as reflected in the cases of BPL Engineering Ltd. Vs. Commissioner of Service Tax - 2006 (3) STR 747 (Tri.-Bang.) and R.K. Marbles Pvt. Ltd. Vs. CCE, Jaipur-II - 2007-TIOL-29-CESTAT-DEL on the one hand and CCE Vs. Mangalam Cement - 2007 (7) STR 673 (Tri. - Del.) on the other. 2. In the case of R.K. Marbles (supra), it has been held on 3.1.2006 by the Single Member Bench of the Tribunal that the issue is squarely covered by the decision of the Tribunal in the case of L.H. Sugar Factories Vs. CCE, Meerut - 2004 (165) ELT 161 on 1.1.2004 which has been uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of return was not applicable in the customer's case. 2000 (i) By Section 16 of the Finance Act, 2000, the provisions of the Act were amended to provide for levy of service tax on goods transport service for the period July, 16, 1997 to August 1, 1998. The definitions of 'assessee' and 'taxable service' and the charging and valuation Sections 66 and 67 were amended and definitions of 'goods carriage' and 'goods transport operator' were inserted. (ii) Section 117 of the Finance Act, 2000 validated Rule 2(1)(d)(xvii) and previous actions on the basis thereof. 2003 (i) By Section 158 of the Finance Act, 2003, the provisions of the Act was modified with effect from July 16, 1997. A proviso was inserted below Section 68(1) making the customer of the goods transport operator as the person liable to pay service tax to the credit of the Central Government. Section 71A was inserted making the customer liable to furnish service tax return within six months from the date on which the Finance Bill, 2003 received the assent of the President. The rule-making power under Section 94 was amended to include the making of rule for furnishing the return under Section 71A. (ii) Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in the case of S.S. Gadgil Vs. Lal Co. - (1964) 53 ITR 231 (SC). SUBMISSIONS ON BEHALF OF THE DEPARTMENT:- 7 (a) The legislative intent must be the foundation of the interpretation of the statute. As has been held by the Hon'ble Supreme Court in the case of British Airways PLC Vs. Union of India - 2002 (139) ELT 6 (SC) = 2002-TIOL-114-SC-CUS, it is the duty of the Court to make such construction of a statute which shall suppress the mischief and advance the remedy. He also cites the decision of the Hon'ble Supreme Court in the case of Directorate of Enforcement Vs. Deepak Mahajan - 1994 (70) ELT 12 (SC) which has held that every law is designed to further the ends of justice and not to frustrate the same on the mere technicalities. (b) After the Hon'ble Supreme Court rendered the decision in the case of Laghu Udyog Bharati (supra), the necessary amendments have been made in the law to make clear the Legislative intent and to enable the Department to collect the tax levied on recipients of transport service. No interpretation should be placed on the law which would defeat the legislative intent. (c) In the case of L.H. Sugars (supra), show-cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees who are liable to file return under Section 70. Admittedly, the liability to file return is cast on the appellants only under Section 71A. The class of persons who come under Section 71A is not brought under the net of Section 73. The above being the position show cause notices issued to the appellants invoking Section 73 are not maintainable." 3. We entirely agree with the conclusion arrived at by the Tribunal. We find no merit in these appeals and the same are accordingly dismissed. No order as to costs." 10. The L.H. Sugar (supra) decision, as stated earlier, has been applied by the Tribunal to the cases of BPL Engineering (supra) and R.K. Marbles (supra) though in those cases the show-cause notices were issued in the year 2004 and hence those cases were different from that of L.H. Sugars (supra) in which the show-cause notices were issued in 2002. In the case of BPL Engineering (supra) the date of the show-cause notice is not mentioned but it is stated by the Tribunal therein that the show-cause notice had been issued only after the amendment in 2004. In the case of R.K. Marbles (supra), the Tribunal has noted that the show-cause notice was issued on 5.11.2004. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. xxx xxx xxx xxx xxx 11. The provisions of Rule 6 and Rule 7A of the Service Tax Rules, 1994 read as under :- 6. Payment of service tax. - (1) The service tax on the value of taxable services received during any calendar month shall be paid to the credit of the Central Government by the 25th of the month immediately following the said calendar month. Provided further that where the assessee is an individual or proprietary firm or partnership firm, the service tax on the value of taxable services received during any quarter shall be paid to the credit of the Central Government by the 25th of the month immediately following the said quarter. The assessee shall deposit the service tax liable to be paid (2) by him with the bank designated by the Central Board of Excise and Customs for this purpose in Form TR-6 or in any other manner prescribed by the Central Board of Excise and Customs. xxx xxx xxx xxx 7A. Returns in case of taxable service provided by goods transport operators and clearing and forwarding agents. - Notwithstanding a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax and provisions of Section 71 shall apply accordingly. The provisions of Section 71A and Rule 7A were necessitated because the liability arising due to the validating provisions, which were upheld by the Apex Court, required making of special provisions of fixing a date for filing of the returns and payment of the tax dues. Such returns required to be filed by virtue of the validating provisions, which made the liability survive in respect of the period in question, could not have obviously been filed periodically, as contemplated by Section 70. Section 70 was not applicable to such special contingency and the provision applied to the normal situation, which required that the person liable to pay service tax shall himself assess and furnish a return in the prescribed form and in the prescribed manner. Such returns were to be filed under Rule 7 under which every assessee was required to submit half yearly returns in ST-3 Form or ST-3A by 25th of the month by following the particular half-year. Therefore, the scheme of Section 70 read with Rule 7 read with prescribed Forms ST-3 and ST-3A was wholly inapplicable to the situation, which arose by virtue of service tax liability of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere required to be made under Section 71A and Rule 7A and a special Form ST-3B was required to be prescribed. Since the date of filing of returns was specially prescribed for cases where the recipients of services of GTO for the said period were made liable, only the special provisions of Rule 7A could be applicable, which required the return to be filed and service tax paid by such assessees within the outer date of six months from 13-5-2003, and such payment was to be evidenced by furnishing TR-6 challans and indicating their particulars as well as the particulars of the tax paid in the ST-3B Form itself. 13. The reliance of the respondents-assessees on the ratio of the decision in L.H. Sugar Factory (supra), which is affirmed by Hon'ble the Supreme Court by its order reported in 2006 (3) S.T.R. 715 (S.C.) = 2005 (187) E.L.T. 5 (S.C.) is wholly misconceived in view of the amendments in the law, particularly, by insertion of the proviso to Section 68(1) and Section 71A which created enforceable liability of the recipients of services from GTOs during the period from 16-11-1997 to 1-6-1998. As held in J.K. Industries Ltd. v. CCE, Indore reported in 2006 (3) S.T.R. 14 (Tri.-Del.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice would be issued. If action of recovery was not contemplated in accordance with Section 73, there was no sense in enacting the provisions of Section 71A. The interpretation of these provisions in the context of the decisions relied upon by the learned Counsel had come up for consideration before the Hon'ble Supreme Court in Gujarat Ambuja Cement Ltd. v. Union of India reported in 2006 (3) S.T.R. 608 (S.C.) = 2005 (182) E.L.T. 33 (S.C.), in which Hon'ble Supreme Court held that the law must be taken as having always been as was now brought about by the Finance Act, 2000 and that the statutory foundation for the decision in Laghu Udyog Bharati - 2006 (2) S.T.R. 276 (S.C.) = 1999 (112) E.L.T. 365 (S.C.) was replaced and the said decision had ceased to be relevant for the purposes of construing the provisions of the Act, as amended by the Finance Act, 2000. Therefore, reliance placed on behalf of the respondents on the earlier decision of the Hon'ble Supreme Court in Laghu Udyog Bharati and the decision of the Tribunal in L.H. Sugar Factories Ltd. case in which the ratio of the Laghu Udyog Bharati was followed, is misplaced. 14. It will be noticed from the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nullify the effect of this Court's decision in Laghu Udhdyog Bharati by retrospectively amending and validating provisions held to be illegal. It is a well settled principle that validation of a tax declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal (vide Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, 2000 (123) E.L.T. 3 (S.C.) = (1970) 1 SCR 388; Indian Aluminium Co. Ors. v. State of Kerala, (1996) 7 SCC 637; K. Sankaran Nair v. Devaki, (1996) 11 SCC 428; B. Krishna Bhat v. State of Karnataka, (2001) 4 SCC 227; N.A. Co-operative Mfg. Federation v. Union of India, AIR 2003 SC 1329). As a proposition of law this cannot be and is not disputed. The question is whether by enacting Sections 116 and 117 of the Finance Act, 2000 and Section 158 of the Finance Act, 2003, the bases on which this Court struck down Rule 2(1)(d), (xii) and (xvii) of the Service Tax Rules, 1994 had been displaced or removed. 15. Relying on the decision of the ratio in Gujarat Ambuja Cement Ltd. this Tribunal in J.K. Industries Ltd. v. CCE, Indore (supra) held as under :- It is a settled l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Thus, in respect of the services provided to the appellant for the said period in question the appellant, by virtue of the said amendment, became 'assessee' who was liable for collecting the service tax under the amended definition clause. The provisions of Section 71A which were inserted by the Finance Act, 2003 retrospectively w.e.f. 16th July 1997 were enacted to enable such persons falling under the proviso of sub-section (1) of Section 68 like the appellant to file the returns in respect of service tax for the said period within six months from the day on which the Finance Act, 2003 received the assent of the President in the prescribed manner, on the basis of the self-assessment of the service tax, as provided therein. It was also provided in Section 71A that the provision 71 shall apply accordingly, to such returns. Rule 7A thereupon came to be inserted by the Service Tax (Amendment) Rules, 2003 w.e.f. 14-5-2003 in which it was provided that, notwithstanding anything contained in Rule 7 which related to half-yearly return, an assessee in case of service provided by goods transport operator for the period from 16th day of November 1998 to 2nd day of June, 1998 shall furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 70. In fact Section 71A clearly specified that the provision of Section 70 did not apply to persons referred to in the proviso to sub-section (1) of Section 68 for the filing of return. It cannot, therefore, be accepted that the time limit for filing of return by the appellant should be computed on the basis of the provision of Sections 70 and 73 as from the date on which the half-yearly return could have been filed under Section 70 read with Rule 7 which were wholly inapplicable in case of the appellant when specific provision of Section 71A was made in the context of the persons like the appellant for filing of the return and period within which the return was to be furnished was also provided. The contention that the appellant was not liable to pay the service tax since the recovery would have been time-barred on the basis of the deemed liability having been arisen earlier on the expiry of the relevant period in 1998, is, therefore, wholly misconceived". 16. In view of the clear ratio of the decision of the Hon'ble the Supreme Court in Gujarat Ambuja Cement Ltd. (supra), which was followed by this Tribunal in J.K. Industries Ltd. (supra), any contrary de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; 17.1 It will be seen from the above provisions that the show cause notice was required to be served within one year from the 'relevant date' in cases where there was no fraud, collusion etc. The 'relevant date' in cases where periodic return is filed and in cases where periodic return is not filed was governed by clauses (a) and (b) of sub-section (6)(i) of Section 73. In the present case, there is no dispute that the return which was filed as per the prescribed Form ST-3B under Rule 7A was not a periodic return, but a return which was required to be filed by the specified date, as contemplated by Section 71A read with Rule 7A. In sub-clause (c) of clause (i) of Section 73(6)(c) all other cases where no periodic retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the appellants has raised a new argument which was not taken up before the Division Bench in the case of Mangalam Cement (supra) as stated in his written submission, we proceed to deal with the submissions made in this regard by both sides. The main challenge by the appellants is against the action taken by the department to recover the service tax remaining unpaid by the appellants. 13. Article 265 of the Constitution of India stipulates that no tax shall be levied or collected except by authority of law. It has been held in the case of Mafatlal Industries Ltd. Vs. Union of India - 1997 (5) SCC 536 that law means valid law and tax levied or collected contrary to law is to be refunded provided it has not been passed on to the consumer. It is not in dispute that the goods transport service was made taxable by the Finance Act, 1997 and that the levy of service tax on such service was made effective from 16th November 1997 and was leviable till issue of the exemption notification dated 2.6.1998. In Laghu Udyog Bharati (supra), the levy of the tax was not under challenge but its collection from the customers was challenged. The retrospective amendments made subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not derive his power to initiate proceedings for recovery of escaped duty from Section 28 of the Act. Such power is conferred on him by other provisions of the Act which mandate the proper Officer to collect the duty leviable................ A cumulative reading of these provisions found in the Act clearly shows that the jurisdiction of a proper Officer to initiate proceedings for recovery of duty which has escaped collection is not traceable to Section 28. The power to recover duty which has escaped collection is a concomitant power arising out of the levy of customs duty under Section 12 of the Act." This judgment of the Hon'ble Supreme Court makes it very clear that the jurisdiction of a tax collector to initiate proceedings for recovery of tax which has escaped collection, is not traceable to the legal provision which provides for issue of notice (e.g. Section 28 of the Customs Act, 1962). Rather, the power to recover tax which has escaped collection is a concomitant power arising out of the legal provision levying the tax (e.g. Section 12 of the Customs Act, 1962). The ratio of this judgment was relied upon by the Larger Bench of the Tribunal in Bombay Hospital Trust Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned earlier, some assesses have paid the tax and they cannot be refunded the amount in view of the levy validated retrospectively. The retrospective legislation also contained a provision in Section 117 of the Finance Act, 2000 to recover any refund of service tax granted:- (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. Interpreting a similar retrospective law, the Hon'ble Supreme Court had held in the case of R.C. Tobacco Pvt. Ltd. Vs. U.O.I. - 2005 (188) E.L.T. 129 (S.C.) that the retrospectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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