TMI Blog2014 (1) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - Revenue has necessary jurisdiction under Section 73 of the Act, particularly with reference to the limitation prescribed thereunder. 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. In order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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 Hon ble 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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'. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 recipient 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 retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrospectively 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 pursuanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice 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 Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.98 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, des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Furthermore, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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