TMI Blog2014 (5) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. First notice was server as on 18.4.2002 for the period 1.9.1999 till the date - assessee submitted the reply - second notice was issued on 12.5.2003, under Section 71(2) for verification of ST-3 returns for the period 1.9.1999 to 30.9.2003. - appellant filed reply on 28.5.2003 and submitted all the details. - no order was passed against both the notices - This shows that he was fully satisfied that there is no escaped assessement or has been under assessment. When the third notice under Section 73(1)(a) of the Act had been issued on 6.9.2003 by the Deputy Commissioner, in pursuance of which the impugned order has been passed, the complete facts and details relating to the impugned transactions, namely, copy of the contract, gross amount received, the amount received towards remuneration, etc. were made available, therefore, it cannot be said that at the time of issue of notice, there was any material with the Deputy Commissioner to believe that by reason of omission or failure on the part of the appellant to disclose fully and truly all material facts, the value of taxable service has escaped assessment or has been under-assessed or service tax has not been paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to hold that activities of the appellant covered under consignment agent under section 65 (72) (now 105) (j) read with section 65 (16) (now 25) of the Finance Act, 1994 and also the demand of Rs.21,64,603 in respect of reimbursement for other charges is taxable under the Finance Act, 1994? V. Whether the penalty, under Section 78 of the Finance Act, 1994 can be imposed when the appellant has paid the admitted amount before the Order-in-Original and further when there is no suppression or concealment of the service tax? Central Excise Appeal No. 338 of 2013 has been admitted on following substantial question of law: I Whether in the facts and circumstances, the impugned Final Order No.ST/A/57309-57310/2013-CU(DB) dated 16.8.2013 whereby allowed the Departmental Appeal No.ST/350/3008 passed by the Hon'ble Tribunal is valid under the law? II. Whether the Hon'ble Tribunal is right in allowing the Departmental Appeal No.ST/350/2008 on the basis of the provisions of Section 76 substituted by the Finance Act, 2006 w.e.f. 18.4.2006 whereas dispute is for the period from 1.9.1999 to 31.3.2003? Brief facts, giving rise to the present appeals, are that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for rendering service to TISCO and to that extent, the appellant is not liable to pay service tax as claimed by the department. It has been further stated that it may be placed on record that it would be beneficial for the revenue and for the appellant if the revenue consider appellant's submission made in this behalf and ask the appellant to produce the records and documents to substantiate the same to come to a decision in this behalf. It appears that by an order dated 16.5.2002, the appellant has been asked to furnish the details. However, on the pursuation of the authority, the appellant applied for the registration on 22.6.2002, got its registration done in the category C F Agent vide Registration No. 2803.ST/C F/2/2002, dated 22.6.2002. The appellant received a show cause notice dated 9.10.2002 from the office of the Deputy Commissioner, Central Excise, Divisioin III, Ghaziabad, demanding service tax for the period, 1.9.1999 till the date of issuance of the show cause notice, under Section 73 for making the assessment and also imposing the penalties, under Sections 75A, 76, 77 and 78 of the Finance Act, 1994, under the category of C F agent services. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en, neither the Superintendent, Central Excise has passed any order, nor has referred the matter to the Assistant Commissioner, as required under Section 71(3) of the Act, which, at the relevant time, provided that if on verification, under sub-section (2), the Superintendent of Central Excise is of the opinion that service tax on any service provided has escaped assessment or has been under-assessed, he may refer the matter to the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise, who may pass order of assessment as he thinks fit. Subsequently, third notice dated 6.9.2003 has been issued by the Deputy Commissioner, under Section 73 of the Act. In the notice, it is specifically mentioned that the notice is being issued under Section 73 (1) (a) of the Act. In the notice, the petitioner was required to show cause why an amount of Rs.55,31,773/= should not be determined as service tax on the gross value of Rs.11,06,35,467, realized towards taxable service rendered to their client, i.e. TISCO during the period from 1.9.1999 to 31.3.2003. To show cause why the appellant should not be asked to pay, by way of penalty, under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 71. Unless either of the two conditions are attracted, the authority cannot assume the jurisdiction to issue the notice under Section 73(1)(a). (b) In the present case, it is not the case that there was a failure on the part of the assesseee to make a return, under Section 70 for the relevant period. The returns in ST-3 were duly filed for the relevant period and the same is apparent from the notice itself. In pursuance of the order of the authority, the appellant applied for the registration, got the registration done, furnished ST-3 return, disclosed receipts and also deposited the service tax under protest. Right from the very beginning, the appellant disputed the liability and requested the authority to adjudicate the matter. In pursuance of the first notice, dated 18.4.2002, complete details have been furnished. The first notice was also issued under Section 73 pursuant to which, complete details have been furnished, but the authority has chosen not to pass any order and to raise the demand on the ground that there was any escaped assessment or under-assessment. In pursuance of the notice under Section 71(2), the copy of the contract and the bills etc. were produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the appellant placed reliance on various decisions of the Apex Court. (e) He submitted that once on the same issue, a notice under Section 73 has been issued and no order has been passed and further a notice under Section 71(2) has been issued on that too no order has been passed, thus, third notice for the same cause, under Section under Section 73 is not justified. The submission is that in the notice, there is a specific mention that it is being issued under Section 73(1)(a). The Tribunal has illegally observed that the notice was within time as it has been issued within one year from the date of filing of the ST-3 return. The limitation of one year is provided for Section 73(1)(b) inasmuch as no case has been made out that the notice is being issued in consequence of an information. Reliance is being placed on the three decisions of the Tribunal, namely, CCE Indore v. Siddharth Tubes Ltd. 2004 (170) ELT 331 (Delhi Tribunal), Bridgestone India Pvt. Ltd. v. CCE, Indore, 2013 (294) ELT (Delhi Tribunal) and Shreeji Colourchem Industries v. CCE Cus., Vadodara, 2013 (294) ELT 615 (Ahmedabad Tribunal). (f) The notice was issued on 6.9.2003. The reply was filed on 9.10.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has the authority to sell can be said to be a consignment agent. Since under the agreement, the appellant has no authority to sell the goods, the appellant cannot be treated to be a consignment agent. Reliance is being placed on the decision of the Karnataka High Court reported in 2010(17) STR 225 (Kar), Commissioner of C. Ex., Bangalore-I (Paragraphs 11, 12 13). The submission is that the nomenclature is not decisive, but it is the real nature of the transaction, which is decisive. (l) On the point of penalty, he submitted that the penalty cannot be levied, both under Sections 76 and 77. Reliance is being placed on the decisions reported in 2006 (197) ELT 465 (SC), Nizam Sugar Factory v. Collector of Central Excise, A.P., 2010 (2) STR 622, Punjab Haryana, 2012 (27) STR 225 (Karnataka), Commissioner of Service Tax, Bangalore v. Motor World, 2000 (197) ELT 465 (Paragraph 9). (m) Learned counsel for the appellant submitted that in view of Section 80, as it existed at the relevant time, no penalty could be levied, unless a case is made out that there was no reasonable cause. The appellant has made out a case of reasonable cause and, therefore, penalty could not be levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 73(1) (a) of the Act. We have considered rival submissions and perused the material on the record. It would be appropriate to refer relevant provisions of the Service Tax Rules to adjudicate the issues. Rule 90 defines taxable service, which reads as under: 90. taxable service means any service provided,- ..... ...... .... (j) to a client, by a clearing and forwarding agent in relation to clearing and forwarding operations, in any manner; Clause (23) defines 'clearing and forwarding agent, which reads as under: (23) clearing and forwarding agent means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes it consignment agent. Sections 71, 72 and 73 as they existed at the relevant time read as under: (Prior to amendment by the Finance Act 2004 w.e.f. 10.9.2004) 71.Verification of tax assessed by the assessee. (1) The Superintendent of Central Excise may, on the basis of information contained in the return filed by the assessee under section 70, verify the correctness of the tax assessed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed period has escaped assessment or has been 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 period of five years or six months, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sections 76, 77 and 78, which deal with the imposition of penalty on failure to collect or payment of service tax, read as under: Section 76. Penalty for failure to collect or pay service tax Any person responsible for collecting service tax in accordance with the provisions of sub-section (1) or sub-section (1A) of section 68, as the case may be, who-- (a) fails to collect such tax; or (b) having collected the service tax, fails to pay such tax to the credit of the Central Government in accordance with the provisions of sub-section (2) or who fails to pay the service tax in accordance with sub-section (3) of that section, shall pay,-- (i) in the case referred to in clause (a), in addition to paying the tax in accordance with the provisions of sub-section (3) of that section and interest in accordance with the provisions of section 75, by way of penalty, a sum equal to the amount of service tax that he failed to collect; and (ii) in the case referred to in clause (b), in addition to paying the tax in accordance with the provisions of sub-section (2) or, as the case may be, sub-section (3) of that section and interest in accordance with the provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. 2.3 Naresh Kumar shall take delivery of the incoming materials, arrange transport to the yard, sort and stock them after weighment, if necessary, quality-wise, section by section, length by length in good countable order, with intervening bars in the godowns, shed or in the open yard as instructed by TATA STEEL's representative. CR products shall be stored in a covered shed only. 2.4 Naresh Kumar shall load and unload the wagons and complete the same within the free time allowed by the Railway Authorities. Naresh Kumar shall be responsible for all demurrage, wharfage and/or any other incidental charges incurred due to his failure to hand over the wagons to the Railways either empty or loaded within free time allowed. All charges incurred in connection with booking of/or taking delivery of the materials shall be borne by Naresh Kumar itself, and such sundry expenses are presumed to be covered by the consolidated rate indicated in the PaymentTerms clause. Demurrage/Wharfage or incidental charges even when they are incurred due non-placement of wagons in the right position, condition of road during the rainy season etc. shall be borne by Naresh Kumar. 2.5 Naresh Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the handling agency agreement with TATA STEEL for publicity or any other promotional purpose in its favour, without any written approval of TATA STEEL. 2.14 Naresh Kumar shall be responsible for maintaining the stockyards/warehouse/offices in its premises in a neat and clean condition. It shall maintain the weigh bridge in proper operating condition and other places inside the yard, which shall be clean and maintained promptly and properly each and every day. 2.15 Naresh Kumar shall not pass any information or any other understandings arrived at between TATA STEEL and Naresh Kumar to any other person without the written consent of TATA STEEL. It shall maintain secrecy of all documents and information. 2.16 Naresh Kumar shall be solely responsible for the safe custody of TATA STEEL's materials once they have received the same at the premises, till such materials are dispatched to the customer as per TATA STEEL's advise. 2.17 All the expenses from the time the materials are received by Naresh Kumar at their premises till the time they are dispatched from Naresh Kumar's factory premises shall be borne by Naresh Kumar. It is clearly understood that If Nare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar shall take all necessary steps to take delivery of the materials and ensure proper stacking of the materials in covered storage area. Any loss due to pilferage and/or shortage or mix up or improper stacking of materials, shall be borne by Naresh Kumar. It would be appropriate to refer the reply dated 28th May, 2003, submitted pursuant to the notice under Section 71(2) and the proceedings recorded on 28th May, 2003, which read as under: Reply to Notice NO.6065 dated 20th May, 2003 Dear Sir, We, M/s Naresh Kumar Company (P) Limited, have received the above referred Notice treating us as 'Consignment Agent' of TISCO and thus making us liable for payment of Service Tax under the provisions of Finance Act, 1994. At the outset, we would like to reiterate that we have submitted a detailed submission on 15th May 2002 in which it has been legally clarified that we do not come under the ambit of Service Tax at all. We once again contended the same vide our Letter dated 8th November 2002 and requested your honour to please consider the written submission dated 15th May 2002. We have also submitted that we have deposited the amount under protest till the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant/ other stockyards or consignment agent's yard, receiving the goods, unloading the goods at Ghaziabad public siding or the nearest Public Railway Station, as the case may be, transpiration of the goods to the stockyard of TISCO, weighment or re-weighment of the consignments, maintaining the stock in proper way, loading the materials/delivery of the materials to the customers of TISCO on production of the original delivery orders, maintainable of accounts and records as also proper documentations, keep the stock properly till they are delivered to the customers etc. and sometimes cutting and bending/bundling at the written request of the customers by gas cutting to facilitate unloading the materials [clause 8(iii) of the consignment agency contract dated 2.4.98 refers.] As per clause 8(iv) of the said contract, extended from time to time, in bills, remuneration and cutting/bending/bundling charges due in a month are to shown separately . In the agreement dated 21.12.2002, entered into for 1.11.2002 to 31.10.2004, scope of work is the same so far as the handling of the materials is concerned except that CR products shall be stored in a covered shed only. This agreement, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, detailing the terms and conditions of appointing them as the consignment agent of Ghaziabad stockyrd. Meanwhile inquiry was also made from their clients 'TISCO' under the provisions of Section 14 of the Central Excise Act, 1944, as made applicable in relation to Service Tax under Section 83 of the Finance Act, 1994 (32 of 1994). In the said inquiry, copy of consignment agency contracts/agreements entered into by TISCO with the said N.K. Company as extended from time to time covering the period in dispute were also obtained. 9. On examination of the said copies of consignment agency contracts/agreements, it has been observed that initially M/s Naresh Kumar Coal sales Ltd., Ghaziabad were appointed as the consignment agent vide consignment agency contract No.SA/STD/CONS.AG9 dated the 2nd April 1998 for 'Handling steel materials at Ghaziabad'. However, this company was later on amalgamated in N.K. Company w.e.f. 1.4.99 by order dated 10.1.2000 of the Hon'ble High Court, Calcutta. As per renewals, taken place from time to time, the amendments made thereunder were always treated as inseparable part of the original consignment agency contract dated 2.4.98 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l materials for transportation to the customer/s premises, receiving or dispatching the consignments by rail or road, taking delivery of the incoming materials, arrange transport to the yard, sort and stock them after weighment, if necessary, loading and unloading the wagons, holding responsibility for demurrage, wharfage and/or any other incidental charges incurred due to failure on their part, loading of the materials on the transport of the customers or transporters, nominated by TISCO, maintaining the stockyard/warehouse/office etc. However, in this agreement-dated 21.12.2002, work of cutting bending or bundling on the behest of the customers has been taken away. 22. Further the Clause 5.3 of this agreement-dated 21.12.2003 very clearly provides that the rates of remuneration, as indicated therein are inclusive of all taxes and levies including the service tax payable by N.K. Company. It is thus apparent that it remained in the knowledge and to the proper understanding of the said N.K. Company that they were covered within the ambit of service providers in terms of section 65 (j) of the said provisions and also that the services provided by them under the said consignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and paid the Service Tax only on the remaining portion. Thus, it also appears that they have willfully evaded the payment of Service Tax and reflected only rest amount in their quarter-wise ST-3 forms (Copy of the record of the said proceedings forms part of this Notice as ANNEXURE-E). 27. The above illustration makes it clear that the said N.K. Company have only disclosed a part of such charges of remuneration for paying service tax liability, whereas as per Rule 6(8) of the Service Tax Rules, 1994 the value of such kind of taxable service are deemed to be the gross amount of remuneration or commission (whatever name called) paid to such agent by the client engaging such agent. ON investigation, the above example has been found to be a practice followed by the said N.K. Company during the entire period covered under this Notice. During the said period they have raised bills and received payments aggregating to Rs.11,06,35,467/- and service tax payable on this gross amount of remuneration works out to Rs.55,31,773/-. Out of this service tax liability, they have deposited as yet an amount of Rs.33,67,170/- only. It, therefore, appears that they are further liable to pay an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Show Cause Notice V(91) STC/NK Co/GZB/19/2003 173 dated 23.09.2003. Main issue involved in this appeal is whether appellants are liable to pay service tax on their activities under Clearing Forwarding Agents Service and Consequently liable to interest, and penalties under Finance Act. 15. Appellants have raised the preliminary objection that when two notices dated 09.10.2002 and other notice under Section 71 (2) of Finance Act on 20.05.2003 were issued to them, third Show Cause Notice is not sustainable. On the other hand Revenue's contention is that appellants did not submit any details about Commission received and notice dated 09.10.2002 was issued to them for getting correct details and in absence of details amount of service tax was not specified in the Show Cause Notice dated 09.10.2002. Notice dated 20.05.2003 was issued under Section 71 (2) of the Finance Act asking the appellant for producing, books of accounts. Notice dated 20.05.2003 was not under Section 73 of the Finance Act. We find that this appeal is against the impugned order passed in adjudication proceeding of the Show Cause Notice dated 23.09.2003. It is not case of the appellants that other two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reported in 2002 (139) ELT 12 (SC). In case of SACI Allied Products Ltd. Tribunal has decided the issue which was not raised in Show Cause Notice and in order passed by Collector. There is no such situation here in the present case: In Toyo Engineering India Ltd. (2006(201) ELT 513 (SC) the Supreme Court held that department can not travel beyond the Show Cause Notice. We find that impugned order has been passed by the Commissioner as per Show Cause Notice dated 23.09.2003. Present case is different from above cases as appellants did not provide any information to the Department at the time of issue of earlier Show Cause Notice. 18. It is also pointed out by the appellants that first Show Cause Notice is still valid without specifying the amount of tax in view of decision of Tribunal (LB) in case of Bihari Silk Rayon Processing mills (P) Ltd., (Supra). In this case the Show Cause Notice which was adjudicated was not specifying any amount and Larger Bench held that Show Cause Notice is not invalid for want of amount specified as other details were mentioned in the Show Cause Notice. This decision also not applicable to present case as Show Cause Notice dated 09.10.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants Revenue can not invoke extended period. We find that Show Cause Notice in this case was issued on 23.09.2003. ST-3 Returns were submitted by the appellants on 22.11.2002. Therefore Show Cause Notice is within one year from date of filing of ST-3 Returns which is relevant date for computing the time limit. We therefore hold that demand is within time limit of normal period. We therefore hold that Commissioner has rightly confirmed the Service Tax along with interest against the appellant. 21. It is the contention of appellants that they are eligible for cum tax benefit. This contention has been rejected by the Commissioner on the ground that Section 67 was amended with effect from 18.04.2006. Since demand pertains to period prior to 18.04.2006 he rejected this contention of the appellants. We note that cum tax benefit is available to the assessee if assessee shows that price includes tax payable by him in view of the Supreme Court decision in case Amrit Agro Industries Ltd. (Supra). We therefore reject this contention of the appellant. Deduction on account of reimbursement amount is not permissible as tax is to be paid on gross amount charged under Section 67 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) of the Act were available. Section 73(1)(a), as it existed at the relevant time, which has been referred hereinabove, provides that if the Assistant Commissioner or Deputy Commissioner has reason to believe that by reason of omission or failure on the part of the assessee, to make a return under Section 70, for any prescribed period, or failed to disclose fully and truly all material facts required for verification of the assessment under section 71, the value of taxable service tax has escaped assessment or has been under-assessed or service has not been paid or has been short-paid, he may, at any time, within five years, from the relevant date, serve notice on the person, charegable with the service tax, which has escaped assessment. In the present case, there is no dispute that the appellant has filed return in ST-3 for the relevant period. It is not the case of the revenue also that notice under Section 73(1)(a) of the Act has been issued for non-filing of return under Section 70 for a presecribed period. Notice has been issued on the allegation that the appellant had not disclosed fully and truly all material facts required for verification of the assessment under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. ...The expression reason to believe does not mean a purely subjective satisfaction the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section.... ....As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the end of the assessment year, the assessing authority must necessarily record not only his reasonable belief that the income has escaped the assessment, but also the default or failure committed by the assesee and failure to do so could vitiate the notice and the entire proceeding. In the case of Vikram Kothari (HUF) v. State of U.P., reported in (2011) 200 Taxman 152(All.), the Division Bench of this Court, in paragraphs 14 and 15, held as follows: Thus, on the plain reading of Section 147 and Section 149 legal position in respect of limitation emerges as follows: (i) In view of proviso to Section 147 no action can be taken under Section 147 beyond the period of four years if the case does not fall within the exception of the proviso mentioned in the proviso itself namely, if there is no case of failure on the part of the assessee to disclose fully and truly all material facts which are necessary for assessment for the year of assessment etc. (ii) If the case falls under the exception mentioned in the proviso to Section 147, namely there is failure on the part of the assessee to disclose fully and truly all material facts which are necessary for assessment for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 73 on 18.4.2002 for the period 1.9.1999 till the date of issue of the notice for making assessment and also for imposing penalty and on filing of reply by the appellant, no order has been passed. The Superintendent, Central Excise, Ghaziabad further issued notice on 12.5.2003, under Section 71(2) for verification of ST-3 returns for the period 1.9.1999 to 30.9.2003. The appellant requested to produce all the books of accounts, records containing all the details of transactions, including payment received in any kind undertaken between them and TISCO, along with copy of the contract entered into by them with the principal. The appellant filed reply on 28.5.2003 and submitted all the details. Thereafter, neither the Superintendent, Central Excise has passed any order nor has referred the matter to the Assistant Commissioner, as required under Section 71(3) of the Act regarding any satisfaction that in his opinion any service tax or any service provided has escaped assessment or has been under-assessed. This shows that he was fully satisfied that there is no escaped assessement or has been under assessment. When the third notice under Section 73(1)(a) of the Act had been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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