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TMI Blog2014 (5) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... as right under the law to issue third show cause notice dated 23.9.2003 (from 1.9.1999 to 31.3.2003) on the same basis, same very issue and same very period and the said show cause notice dated 23.9.2003 and procedings thereon is legal and valid under the law? II. Whether the adjudicating order dated 14.2.2008 passed in respect of show cause notice dated 23.9.2003, almost after 4 1/2 years without giving any explanation for such delay for which after first hearing on 12.4.2004, another hearing held after 4 years on 9.10.2007 is sustainable in eyes of law in view of settled position of law? III. Whether the Tribunal was right in passing the impugned order without examine that the validity of show case notice dated 23.9.2003 without the existence of conditions laid down for issuance of under section 73 (1) (a) of the Finance Act, 1994? IV. Whether the Tribunal is 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to cut/bend or bundle the iron and steel for transportation and that the remuneration received from TISCO also includes such charges of cutting/bending and bundling of iron and steel as also the cost of transportation of goods by the transporter and having regard to the nature of the service rendered to TISCO, it does not come within the provisions of Section 65(72) of the Finance Act, 1994. In support of this claim, various pleas have been taken. The reply of the appellant is Annexure-4 to the writ petition. The appellant requested the authority to consider his reply/representation and pass the order before proceeding with the matter. It has been further pleaded that the appellant is not liable to pay service tax @ 5% on gross receipt from TISCO, which includes sundry expenditure. The sundry expenditure includes payment to make sundry party 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions of appointing the appellant TISCO's consignment agent on 28.5.2003. Said notice is Annexure 11. The appellant filed the reply to the notice on 28.5.2003 wherein it has been submitted that by a detailed submission made on 15.5.2002, it has been clarified that the appellant does not come within the ambit of service tax. The amount of service tax has been deposited under protest. However, the copy of the contract entered into between the appellant and the TISCO, copies of the bills were filed. The appellant appeared before the Superintendent, Central Excise on 28.5.2003. The said reply is Annexure-13. In the proceeding, copy of the contract entered into between the appellant and the TISCO and the bills raised for the period between 1.9.1999 and 31.3.2003 were examined. After the notice and the proceeding being taken, 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 provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal of the revenue. The Tribunal has accepted plea of the revenue that the penalty under Section 76 for the period 18.6.2006 to 9.5.2008 should be paid as per the amended provision of Section 76 of the Act. Heard Sri J.K. Mittal, learned counsel for the appellant and Sri Ashok Singh, learned Senior Standing Counsel, Union of India, appearing on behalf of the revenue. Learned counsel for the appellant advanced following submissions: (a)The notice, under Section 73(1)(a) of the Act is illegal inasmuch as at the time of issuance of the notice, there was no material to form the belief that there was omission or failure on the part of the assessee to make the return under Section 70 for any prescribed period, or failed to disclose fully and truly all material facts, as required for verification of the assessment, under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e primary material facts necessary for verification has been disclosed by the appellant, the obligation on the part of the appellant was discharged. It was not the duty of the appellant to suggest to the authority concerned how and in which manner to pass or not to pass the assessment order. Therefore, in the absence of fulfilment of the ingredients, as required, under Section 73(1)(a) of the Act, the notice is wholly illegal. (d) It is also submitted that the word 'the reason to believe' has been considered by the Apex Court in various cases wherein it has been held by the Apex Court that there must be a material on which the belief can be formed that there is an escaped assessment. The belief should be formed objectively, in good faith and not merely on pretence. To buttress his submission, learned counsel 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 justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chennai v. Sangamitra Services Agency. (2)2013(39) STR 9 (Del.), Intercontinental Consultants & Technocrats Pvt. Ltd. (j) The Tribunal has not considered that the detailed reply has been given to the show cause notice in this regard and the same has been challenged in the appeal, but the Tribunal has left to consider the same. He placed reliance on the decision of the Apex Court reported in 2005 (183) ELT 225 (SC), SACI Allied Products Ltd. v. Commissioner of C. Ex. Meerut (Paragraph 17). (k) The submission is that having regard to the scope of the work mentioned in the agreement, such act does not bring the appellant within the purview of consignment agent. Under the agreement, the appellant has no authority to sell the goods. As per law, a person, who sells the goods on behalf of the principal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for the respondent is that penalty can be levied, both, under Section 76 and 78. Reliance is being placed on the decisions of the Delhi High Court reported in 2012 (25) STR 417, Bajaj Travels Ltd. v. Commissioner of Service Tax. He further submitted that it is a case of misstatement and, therefore, Section 78 was applicable. Thus, the penalty has rightly been levied under Section 78. It is submitted that since the return has not been filed, within the specified period and the service tax has also not been deposited, therefore, penalty under Section 76 has rightly been imposed. In the end, he submitted that the Tribunal has examined each and every aspect of the matter and rejected the plea of the appellant. However, he very fairly submitted that the notice has been issued 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion or failure on the part of the assessee, to make a return under section 70 for any prescribed period or to disclose wholly or truly all material facts required for verification of the assessment under section 71, the value of taxable service 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, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise has in consequence of information in his possession, reason to believe that the value of any taxable service assessable in any prescribed 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..... (8)The value of the taxable service in relation to the services provided by a clearing and forwarding agent to a client for rendering services of clearing and forwarding operations in any manner shall be deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client engaging such agent. Rule 7 reads as under: 7. Returns.--(1) Every assessee shall submit a half-yearly return in Form 'ST-3' or 'ST-3A' , as the case may be, alongwith a copy of the Form TR-6, in triplicate for the months covered in the half-yearly return. Every assessee shall submit the half-yearly return by the 25th of the month following the particular half-year. 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 Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee proves that there was reasonable cause for the said failure. It would also be appropriate to refer the relevant extracts of the agreement, entered into between the parties, which are as under: Scope of Work 2.1 This agreement is for unloading and handling of all steel materials consigned by TATA STEEL, to the Ghaziabad stockyard and thereafter loading the steel materials for transportation to the customer's premises. 2.2 Naresh Kumar shall receive or dispatch the consignments by rail and by road. The consignments shall be dispatched to Naresh Kumar either directly from TATA STEEL's plant or through its other stockyards/consignments agents/processing agents. 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 Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 2.11 Naresh Kumar shall nominate a responsible and experienced representative at the yard for twenty four hours to supervise the work at Ghaziabad stockyard on the directions of the Hub Manager from time to time. 2.12 Naresh Kumar shall deliver material to TATA STEEL's customers on production of the original delivery order/invoice issued by TATA STEEL and submitted by the customers for delivering the materials from the premises. If so required, Naresh Kumar shall load the materials on the transport of the customers or transporters nominated by TATA STEEL as and when instructed by the Hub Manager. 2.13 Naresh Kumar shall not in any manner make use 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 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deliver them on behalf of or as desired by TATA STEEL. 8.4 Naresh Kumar shall be responsible for the safe custody of the materials from the time the materials are received at their premises till the materials are delivered to the nominated transporter of TATA STEEL. Naresh 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 Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g materials in the manner provided under the said agreement as extended from time to time till date, which inter-alia includes acknowledgement receipt of the incoming goods both by rail and road, taking delivery of wagons carrying materials from TISCO Plant/ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all transactions of any kind undertaken between them and the TISCO, their clients (including particulars of payments received). They were also asked to produce the copies of the contracts entered into by N.K. & Company with the said principal, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2002. Briefly stated, the activities to be undertaken under this fresh consignment agency contract dated 21.12.2002 inter-alia include unloading and handling all steel materials, consigned by TISCO to Ghaziabad stockyard, loading the steel 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rer charges in trucks. From this, it appears that N.K.& Company in spite of having proper knowledge of taxability and nature of taxable services willfully categorized the gross amount of remuneration by separating a fraction thereof 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 payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred for adjudication of the case, which are being reproduced hereinbelow: Findings of the Tribunal "14. After hearing both sides, we find in this case Order-In-Original has been issued by the Commissioner adjudicating 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applicable to present case on two grounds firstly in present case Show Cause Notice dated 09.10.2002 has not been adjudicated and secondly the said decision of Delhi High Court is reversed by Supreme Court as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is not applicable in present case as Show Cause Notice were issued to them by the Department on 09.10.2002 and 18.05.2003 and in view of the fact that Show Cause Notices were issued to 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). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 78 of Chapter V of the Finance Act, 1994. The primary question for consideration is whether on the date of issue of notice, all the ingredients of Section 73 (1)(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 peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, I Ward, Distt. VI, Calcutta and others v. Lakmani Mewal Das, reported in 103 ITR 437 (SC), the Apex Court has observed as follows: "..The 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00) 241 ITR 672 (Mad.), the Madras High Court has held that in case where the initiation of proceeding is beyond a period of four years from 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount received relating to the expenses incurred on behalf of TISCO Company. The assessing authority issued the notice under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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