TMI Blog2015 (5) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... hargeable or erroneously refunded alongwith interest payable thereon under section 75 and penalty provided therein. It further appears that under the said provision the assessee would be entitled to the benefit, in as much as maximum penalty that would be leviable is only 25 per cent, whereas otherwise it would be 50 per cent. Again under the said provision, the Central Excise Officer is empowered to proceed as provided under subsection (1), if he is of the opinion that the amount so paid by the assessee has not been paid fully and more amount is due and payable by him. Scheme of the act is that the tax would be held to be payable only after adjudication either under Section 72 or subsection 2 of section 73 of the said Act. As already stated by us hereinabove that even when an assessee voluntarily pays tax under subsection (3) and 4A of section 73, even in that case, in so far as disputed amount is concerned, determination as required under subsection 2 of section 73 is required to be done. By now it is settled principle of law that when a law requires a particular things to be done, in a particular manner, it has to be done in that manner alone and not at all. If the Statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the services offered by the Petitioner bank is regarding credit card transaction. In the credit card transactions, two banks are involved i.e. acquiring bank and issuing bank. It is the contention of the Petitioner that the issuing bank that issues the credit card and charges the customer a fee, which could be in the nature of membership fee etc. It is further contended that the issuing bank issues a monthly billing statement to the customer as per the pre-defined billing cycle. According to the Petitioner, the issuing bank pays service tax on the various fees and charges collected from the cardholder. According to the scheme, the acquiring bank is the bank with which the Merchant Establishment has a contract to honour the credit cards by using its infrastructure. The acquiring bank makes the payments to Merchant Establishment based on the credit slip indicating the credit given by Merchant Establishment to the customer. The Merchant Establishment provides goods and services on credit, to the credit card customers under the payment assurance with the acquiring bank. As per practice, the acquiring bank makes payment to the Merchant Establishment after deducting the acquiring char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent authorities, service tax was paid under protest. It is categorically submitted by the learned Senior Counsel that in the return filed by the Petitioner for the relevant years, the petitioner has categorically shown in the return, that no service tax is payable on account of interchange fees. The learned Senior Counsel submits that neither there is an adjudication on the return filed by the Petitioner nor an action is taken by the respondent as required under Section 73 of the said Act by issuing a show cause notice to the Petitioner. It is the contention of the learned Senior Counsel that unless a show cause notice is issued to the Petitioner, in view of the provisions of the said Act, the Petitioner is not liable to discharge its liabilities, as required, as per the provisions of the said Act. It is further contended that unless there is an adjudication under Section 73 of the said Act, no amount can be said to be due to revenue, so as to permit them to take coercive action under Section 87 of the said Act. 7. The learned Senior Counsel relies on the Judgment of the Constitution Bench of the Apex Court in the case of State of Rajasthan v/s. Ghasilal reported in AIR 1965 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, with the malafide intention, recourse to said provision is not taken to and the Petitioners have approached this Court. 10. The learned Counsel further submits that in case of Petitioner, there has been adjudication in so far as the liabilities of the Petitioner for a period post 2006 is concerned and as such when there is adjudication in the case of Petitioner itself, no errors could be found with the action taken by the respondent in taking recourse to section 87 of the said Act. He submits that the Petitioner having paid the service tax for the relevant period, the amount of interest is an amount due and payable and as such action under Section 87 of the said Act is justifiable and warrants no interference. 11. Shri Pradeep Jetly further states that though Petitioner was liable to pay the service tax, they have not paid the same and in the audit which was conducted by the department, it was found that the Petitioner had evaded to pay duty. It is submitted that in this background, the Petitioner was informed to make payments. It is therefore, submitted that having accepted the version of the department, the Petitioner having paid service tax, it does not now fall in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the remaining part of the service tax shall be paid by the service provider. 69. Registration - (1)] Every person liable to pay the service tax under this chapter or the rules made there under shall, within such time and in such such manner and in such form as may be prescribed, make an application for registration to the 10[Superintendent of Central Excise.] 1[(2) The person or class of persons notified under sub-section (2) of section 69, shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency as may be prescribed.] 70. Furnishing of Returns (1) Every person liable to pay the service tax shall himself assess the tax due on the services provided by him and and shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency [and with such late fee not exceeding 6[twenty thousand rupees], for delayed furnishing of return, as may be prescribed.] [(2) The person or class of persons notified under sub-section (2) of section 69, shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency as may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being heard in respect of any material gathered on the basis of the audit under sub-section (1) and proposed to be utilised in any proceeding under the provisions of this Chapter or rules made thereunder. Explanation: For the purposes of this section,- (i) chartered accountant shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of Chartered Accountants Act, 1949 (38 of 1949); (ii) cost accountant shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959)] 73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously re-funded (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within [eighteen months] from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has been erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. PROVIDED ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e service tax payable by such person for the period of eighteen months, as if the notice was issued for the offences for which limitation of eighteen months applies under sub-section (3) where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the [Central Excise Officer] 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 [Central Excise Officer] 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 [Central Excise Officer] shall proceed to recover such amount in the manner specified in this section, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remains to be paid by such person and shall proceed to recover such amount in the manner specified in sub-section (1). Explanation: For the purposes of this sub-s and section 78, specified records means records including computerised data as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of account shall be considered as the specified records.] [(4B) The Central Excise Officer shall determine the amount of service-tax due under sub-section (2)- (a) within six months from the date of notice where it is possible to do so, in respect of cases whose limitation is specified as eighteen months. (b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A);] (5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003. (6) For the purposes of this section, relevant date means, - (i) in the case of taxable se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication in the Official Gazette] for the period] by which such crediting of the tax or any part thereof is delayed. PROVIDED that in the case of a service provider, whose value of taxable services provided in a financial year does not exceed sixty lakh rupees during any of the financial years covered by the notice or during the last preceding financial year, as the case may be, such rate of interest, shall be reduced by three per cent. per annum] [76. Penalty for failure to pay service tax Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, in addition to such tax and the interest on that tax amount in accordance with the provisions of section 75, a penalty which shall not be less than 9 [one hundred rupees] for every day during which such failure continues or at the rate of 10[two per cent.] of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax: PROVIDED that the total amount of the penalty payable in terms of this section shall not exceed the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus amount, if any, to such person; [PROVIDED that where the person (hereinafter referred to as predecessor) from whom the service tax or any other sums of any kind, as specified in this section, is recoverable or due, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any person, all goods, in the custody or possession of the person so succeeding may also be attached and sold by such officer empowered by the Central Board of Excise and Customs, after obtaining the written approval of the Commissioner of Central Excise, for the purpose of recovering such service tax or other sums recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change.] (d) the Central Excise Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the person or class of persons notified under sub-section (2) of section 69, shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency, as may be prescribed. 18. Section 72 of the said Act provides for best judgment assessment. It provides that if any person liable to pay service tax, fails to furnish the return under Section 70, or having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made thereunder, the Central Excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. 19. Section 72A which has been inserted by the amendment in the year 2012, provides that if the Commissioner of Central Excise, has reasons to believe that any perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice of notice is stayed by an order of a Court, shall be excluded in computing the period of limitation as aforesaid. Sub-clause 1A thereto provides that notwithstanding anything contained in sub-section (1), the Central Excise Officer may serve subsequent to any notice or notices served under sub-section (1), a statement, containing the details of service tax not levied or paid or short-levied or short-paid or erroneously refunded for the subsequent period, on the person chargeable to service tax. It further provides that then service of such statement shall be deemed to be service of notice on such person, subject to the condition that the grounds relied upon for the subsequent period are same as are mentioned in the earlier notices. sub-section 2 of the said section provides that the Central Excise Officer 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, or erroneously refunded to, such person not being in excess of the amount specified in the notice and thereupon such person shall pay the amount so determined. 21. Perusal of sub-section 3 of section 73 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in part, as he may accept to be the amount of tax chargeable or erroneously refunded alongwith interest payable thereon under Section 75 and penalty equal to one per cent of such tax, for each month, for the period during which the default continues, upto a maximum of twentyfive per cent. of the tax amount before service of notice on him and inform the Central Excise Officer 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 and proceedings in respect of the said amount of service-tax shall be deemed to have been concluded. The proviso thereto provides that the Central Excise Officer may determine the amount of service tax, if any, due from such person, which in his opinion remains to be paid by such person and shall proceed to recover such amount in the manner specified in sub-section (1). 24. Subsection 4B of Section 73 of the Act provides that the Central Excise Officer shall determine the amount of servicetax due under subsection( 2) within six months from the date of notice where it is possible to do so, in respect of cases whose limitation is specified as 18 months. In the rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of the outstanding amount of service tax. Proviso to the said section provides that the total amount of the penalty payable in terms of the said section shall not exceed 50 per cent of the service tax payable. 29. Section 87 provides for recovery of any amount due to Central Government. It provides that where any amount payable by a person to the credit of the Central Government under any of the provisions of the said Chapter or of the rules made thereunder is not paid, the Central Excise Officer shall proceed to recover the amount by one or more of the modes mentioned therein. Various modes of recovery are provided including the recovery of land revenue, causing movable or immovable property to be sold. 30. Perusal of the aforesaid provisions would reveal that the same are complete Code in the matter of imposition of service tax, the duty cast upon a person providing taxable service to pay the service tax, furnishing return, determination of the liability to pay tax on the best judgment assessment and recovery of service tax not levied or not paid or shortlevied or shortpaid or erroneously refunded, interest, penalty on account of nonpayment of service tax etc. Peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax within 18 months from the relevant date, where any service tax has not been levied or paid or shortlevied or short paid or erroneously refunded, requiring him to show cause why he should not pay the amount specified in the notice. Proviso thereto extends limitation of 18 months to 5 years in the circumstances as mentioned in the proviso. Subsection 1A provides for a statement containing the details of service tax not levied or paid or shortlevied or shortpaid or erroneously refunded for the subsequent period, subject to the condition that the grounds relied upon for the subsequent period are the same as mentioned in the earlier notice. Subsection 2 thereof empowers the Central Excise Officer to consider the representation, if any made by the person to whom notice is served and determine the amount of service tax due or erroneously refunded and thereupon such person is required to pay the amount so determined. Subsection 3 thereto deals with the situation where the assessee may voluntarily pay the amount of service tax on the basis of the tax ascertained by the Central Excise Officer or on the basis of his own assessment thereof before the service of notice in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us be abundantly clear that the Statute casts a duty upon a person who is providing taxable service to any person, to pay service tax at the rate prescribed as specified in section 66. The Statute mandates every person who is liable to pay service tax, to assess the tax himself, due on the services provided by him. The Statute casts a duty upon a person who is liable to pay service tax, to himself assess the tax due on the services provided by him and submit to the Superintendent of Central Excise, a return in such form as prescribed. Section 72 enables the Central Excise Officer in case of person who fails to furnish return under section 70 or having made a return, fails to assess the tax in accordance with the provisions of the said chapter or rule made therein, to require the person to produce such accounts, documents or other evidence, as may be deemed necessary. It further enables the said officer to pass an order after taking into account all the relevant material which is available or which he has gathered and after giving an opportunity to the person concerned of being heard, to make the assessment of the value of taxable service to the best of his judgment and determine th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued to the assessee in respect of the amount paid. However, even in this eventuality, if the Central Excise Officer is of the view that the amount of service tax so paid has not been paid in full, is empowered to proceed against assessee and determine the amount and proceed to recover the sum in the manner provided in subsection(1). The benefit that the assessee would get by voluntarily paying service tax under the scheme provided is that he would be saved from the rigours of penalty payable on account of non payment of service tax payable and interest thereon. Similarly, subsection 4A would deal with the situation wherein in the course of any audit, investigation or verification, it is found that service tax is not levied or paid or shortlevied or shortpaid or erroneously refunded. The said subsection would deal with an eventuality when true and complete details of transactions are available in the specified records. In this case, an assessee is again having an option to pay service tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded alongwith interest payable thereon under section 75 and penalty provided therein. It further app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty. In the first case, no penalty is leviable whereas in the second case penalty is leviable only to the maximum extent of 25 per cent as against 50 per cent in the normal case. Again in either of these eventualities, if the Central Excise Officer is of the opinion that the service tax has not been paid as per the liability which is cast upon such an assessee, again the said Central Excise Officer is empowered to conduct an enquiry as provided under subsection 2 of section 73 of the Act and is further required to determine the amount payable by an assessee, upon which the assessee will be liable to pay the said amount. It can thus be seen that though in the aforesaid two eventualities, assessee voluntarily accepts the liability and makes the payment, proceedings under Section 73(1) and (2) cannot be initiated against such assessee, atleast in so far as the duty which is admitted by him and paid. However, even in these eventualities, in respect of service tax, which is disputed by him and not paid is the procedure as required under subsection 1 and 2 is required to be followed. It could thus be seen that prior to determination of the amount of service tax due from assessee or erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to be due within s. 16(1)(b) of the Act, for till then there is only a liability to be assessed to tax. . It was contended before their Lordship of the Apex Court, that there was no breach of section 16(1)(b) of the Act. No tax was due till the assessee filed returns under Section 7(1) of the Act. It was further contended that there cannot be noncompliance of section 7(2), unless a return is filed without depositing the tax due on the basis of the return, and as no return was filed earlier than 18th December, 1959, there had been no violation of the requirements of Section 7(2). It was further contended that no further tax was due till assessment is made under Section 10 of the Act. However, it was contended by the learned Advocate General, that the tax becomes due because of the charging sections of the Act i.e. section 3 with section 5. It was contended that a show cause notice had been given on December 4, 1959, and as there was delay in complying with the notice, there was breach of section 16(1)(b) of the Act. As such the order imposing penalty could not be sustained. The Lordship of the Apex Court found that the charging sections create a liability to pay the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has been drawn to Section 530(1)(a) of the Companies Act where the language used in taxes, cesses and rates due and payable and Section 61(1)(a) of the Provincial Insolvency Act, 1920 which refers to all debts due to the Crown. In the State of Rajasthan Ors. v. Ghasilal (1965 (2) SCR 805), this Court considered the provisions of the Rajasthan Sales Tax Act, 1955. It observed, that Section 3 which is the charging section of the Rajasthan Sales Tax Act, read with Section 1, makes tax payable i.e. creates a liability to pay the tax. That is the normal function of a charging section in a taxing statute. But till the tax payable is ascertained by the Assessing Authority under Section 10 or by the assessee under Section 7(2), no tax can be said to be due. For till then there is only a liability to be assessed to tax. A similar view was taken by this Court in its later decision in Associated Cement Co. Ltd. v. Commercial Tax Officer, Kota Ors. (1981 (48) S.T.C. 466 at page 480) holding that until the tax payable is ascertained by the Assessing Authority or by the assessee, no tax can be said to be due; for till then there is only a liability to be assessed to tax. 22. The Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld mean an ascertained liability. Their Lordships of the Apex Court have held that meaning of the words taxes due will have to be ultimately depend upon the context in which these words are used. The Apex Court found that the phrase taxes due cannot refer merely to a liability created by the charging section to pay the tax under the relevant law. It must refer to an ascertained liability for payment of taxes quantified in accordance with law. It is further held that taxes which are not legally assessed or assessments which have not become final and binding on the assessee, are not covered under section 11(2) (a) of the said Act. 39 In the present case also, as could be seen from aforesaid discussion that the scheme of the act is that the tax would be held to be payable only after adjudication either under Section 72 or subsection 2 of section 73 of the said Act. As already stated by us hereinabove that even when an assessee voluntarily pays tax under subsection (3) and 4A of section 73, even in that case, in so far as disputed amount is concerned, determination as required under subsection 2 of section 73 is required to be done. By now it is settled principle of law that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the provisions can be invoked when the tax has not been levied or paid . The learned Counsel submits that when the assessee has paid the tax, provisions of section 73 cannot be invoked. We find that the said contention deserves to be heard only to be rejected. On one hand, revenue coerces assessee to pay service tax on threat of taking action under Section 87 of the said Act, which can have drastic consequences, such as sealing, attaching accounts of bank etc. and when an assessee succumbs to the said pressure and deposits the sum under protest, innocuous argument is made that since now payment is made, provisions of section 73 cannot be invoked. It is to be noted that the consequences of not paying service tax when assessee is liable to pay service tax are very drastic in nature. Not only that under the provisions of Section 76 of the said Act, the assessee is liable to pay penalty, which can be upto 50 per cent of the service tax payable, the penal provisions as contained in Section 77 and 78 provides for severe penalties even on the directors of the company. If it is a view of the revenue that the petitioners though liable to pay service tax are evading payment of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of an assessee being considered as provided in section 73 could be found in Section 11(b) of the said Act. We are again at pains to say that the conduct of the revenue, firstly coercing the assessee to make payment and thereafter not deciding the returns under Section 72 or not taking recourse to section 73, and asking the assessee to take recourse to section 11B can not be said to be just, fair and reasonable approach. In that view of the matter, contention in that regard, in our considered view also needs to be rejected. 45. We may gainfully refer to observations of the Division Bench of this Court in the case of Lawson Tours and Travels (India) Pvt.Ltd (supra), which arose in the similar circumstances. Though the Division Bench has not elaborately adverted to the provisions of Statute, the view taken by the Division Bench is the same that has been taken by us. It will be appropriate to refer to paragraphs 3 and 4 of the said judgment, which read as under : 3) Notice was issued on this Writ Petition by the Petitioner's Advocate and Mr. Thorat appearing on behalf of the contesting Respondent Nos. 1 and 2, on instructions, states that the adjudication order will be pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions brought to our notice by him and by Shri Shridharan, there is no other provisions which would permit the authority to do so. At the cost of repetition, we may say that if a tax payer fraudulently or in order to deprive revenue from the amount which the revenue is entitled to, fails to pay tax, it is not as if, the authorities are without any power. The Statute vests ample power with the authorities to deal sternly with such of the assessee who either fraudulently or with intention to deprive revenue of its legitimate dues evades payment thereof. Not only that, but if the Central Excise Officer is of the opinion that for the purpose of protecting interest of the revenue, it is necessary to attach provisionally any property belonging to a person on whom notice is served under Section 73 or section 73 of the said Act, he is empowered to do so, however, with previous approval of the Commissioner of Central Excise. However, at the same time, the law enforcers cannot be permitted to do something which is not permissible within the four corners of law. 47. In that view of the matter, we are of the considered view that the impugned communication which demands the Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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