TMI Blog2016 (4) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that:- a mere mechanical reproduction of the language of the proviso to Section 73(1) of the Finance Act, 1994 does not per se justify invocation of the extended period of limitation. A mere ipse dixit that the noticee wilfully suppressed the material facts with intent to evade payment of service tax is not sufficient. The notice must contain particulars of facts and circumstance in support of such allegation. Even if such particulars are not included in the notice, the Department should be in a position to justify and/or substantiate its allegation of suppression of material facts on the part of the noticee. Any suppression on the part of the Petitioner as would entitle the Department to invoke the extended period of limitation was not found. Petitioner was diligent in responding to all the notices issued by the Department and in its replies, the Petitioner clearly explained the nature and scope of its business. Specimen copies of contracts entered into by the petitioner when its clients were also made available to the Department. So, there was full and sufficient disclosure of the nature of petitioner’s business to the Department and it cannot be said that the Petitioner su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng engineering service and architect service - Held that:- the language of the notice suggests that the demand raised therein is per-determined. It is quite evident that the Commissioner issued the impugned show cause notice at the instance of CERA without any independent application of mind and, thereby, abdicated his powers and duty, which is not permissible in law. Service contracts simpliciter and not composite works contracts come within the service tax net under the provisions of the Finance Act. The petitioner is involved in performance of composite works contracts and vivisection of such contracts to segregate the service element and impose service tax on the same is not permissible. - Decided in favour of petitioner - WP 912 of 2013 - - - Dated:- 7-4-2016 - Arijit Banerjee, J. For the Petitioner : Mr. J. K. Mittal, Adv. Mrs. Nilanjana Banerjee, Adv. For the Respondent : Mr. S. B. Saraf, Adv. Mrs. S. Mitra, Adv. JUDGMENT Arijit Banerjee, J. (1) In the instant writ petition, the petitioner challenges a show cause-cum-Demand Notice dated 21st April, 2006 demanding service tax of ₹ 65.25 crores (approx.) for the period 1st October, 2000 to 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 19th May, 2004, the petitioner denied its liability for payment of service tax on account of consulting engineers services. In the said letter, the petitioner stated that it rendered no consultancy or technical assistance service within the meaning of the service tax provisions. (8) Thereafter, for 16 months there was no communication from the respondent Department. (9) Then, a fresh enquiry was instituted by the respondent by its summons dated 20th September, 2005. The said summons was replied to by the petitioner by its letter dated 28th September, 2005 by referring to its earlier reply dated 19th May, 2004 stating that the petitioner does not render consulting engineering service. It was also stated in the letter that the petitioner s business is to execute civil construction jobs for which it has obtained registration under construction services. (10) Thereafter, the respondent issued the Show Cause-cum-Demand Notice dated 21st April, 2006 demanding service tax of ₹ 65.25 crores (approximately) for the period from 1st October, 2000 to 31st March, 2005. In the said notice there was no reference to the earlier notices sent by the Department. (11) The pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute book for the material period of time. If the department is permitted to invoke the extended period of limitation on the grounds of suppression for a demand prior to 10th September, 2004, it will amount to giving retrospective effect to the provisions which is not permissible under the law. In this connection, reliance was placed on a Supreme Court decision in the case of Mithilesh Kumari-vs.-Prem Behari Khare reported in 1989 (40) ELT 257. In that case the Hon ble Supreme Court observed that the presumption against retrospective operation of a statute is strong in cases in which the statute, if operated retrospectively, would prejudicially affect vested rights or the illegality of past transactions or impair contracts or impose new duty or attach new disability of past transactions. (16) The department issued a Show Cause Notice dated 7th September, 2009 covering the period 10th September, 2004 to 15th June, 2005 and, further, passed an order dated 15th February, 2012 pursuant to such show cause notice. The period covered by the said show cause notice over lappsed with the period covered by the impugned show cause notice dated 21st April, 2006. Double assessment for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action intended to evade tax, for example, a deliberate misstatement or suppression pursuant to a query in order to evade tax. It was observed that once the extended period of limitation has been invoked, it cannot be treated as being within the normal period of limitation once it is found that the extended period of limitation could not have been invoked. (18) By the impugned show cause notice, service tax was demanded for consulting engineering service. Under Section 65(31) of the Finance Act, 1994, at the material point of time only an engineering firm was covered and a body corporate was not included. Body corporates were included by amending the said provision with effect from 1st May, 2006. Hence prior to 1st May, 2006 a limited company which is a body corporate was not liable to pay service tax under the category consulting engineering service. The petitioner is admittedly a body corporate and, therefore, it will not be covered under consulting engineering service for the material period. In this connection reliance was placed on a decision of a Division Bench of the Karnataka High Court in the case of CST, Bangalore-vs.-Turbotech Precision Engineering Pvt. Ltd. repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be quashed. In this connection, reliance was placed on a decision of the Bombay High Court in the case of Hindustan Lever Ltd.-vs.-Union of India reported in 2011 (24) STR 97, wherein at paragraph 15 of the judgment it has been observed that it is well settled that adjudicatory proceedings have to be culminated within a reasonable time and if the same is not done, they stand vitiated on the said ground. The weight of the judicial pronouncements lean in favour of quashing the proceedings, if there has been an undue delay in deciding the same. The underlying principle laid down in the judgments is that in absence of any period of limitation, it is required that every Authority is to exercise its power within a reasonable period. In the case of Bhagwandas S. Tolani-vs.- B.C Aggarwal reported in 1983 ELT 44, the Bombay High Court rejected the department s contention that no time limitation is prescribed for adjudication by holding that if such contention was accepted, then the department could commence adjudication proceedings even after ten years, fifteen years or twenty years after the original show cause notice, which cannot be permitted. In the case of Universal Generics Pvt. Ltd.- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usal of reasonable opportunity to defend. (24) Mr. Mittal summed up his submissions as follows. The impugned show cause notice and the hearing notice are non-est and invalid in the eye of law. The show cause notice was issued more than seven years after initiating inquiry against the petitioner and under the direction of CERA. The hearing notice was issue seven years after issuance of the show cause notice. In the draft show cause notice dated 12th April, 2006, the department itself admitted that services provided by the petitioner do not fall under the category of consulting engineering service and without documentary support, such a show cause notice is not sustainable. In the case of CCE-vs.-Mohan Bakers Pvt. Ltd. reported in 2009 (241) ELT A23, this court dismissed the appeal filed by the department where the show cause notice was issued after two years from the date of inspection. In the case of Giriraj Industries-vs.- CCE Kolkata II reported in 2009 (242) ELT A84, this court approved the decision of the Tribunal that the show cause notice issued fifteen months after the cause of action arose is enough to include that the proceedings are initiated without any seriousness an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its writ jurisdiction to interfere with a show cause notice issued by the revenue Department excepting in the cases mentioned above. None of the exceptions apply to the facts of the instant case. It cannot be said that the notice does not disclose the alleged offence or is without jurisdiction or suffers from any incurable infirmity or is contrary to any judicial decision or there is no material justifying the issuance of the show cause notice. Hence, the instant writ petition is not maintainable in law. (26) Ld. Counsel then submitted that the High Court cannot entertain writ petitions on classification. The service provided by the petitioner can be reasonably classified into two categories or entries. He referred to this court s decision in the case of Stores Supply (India) Agency reported in 1988 (38) ELT 583 wherein it has been observed that the writ court should not interfere when two reasonable classifications are possible and the Revenue Authorities have adopted the one that is favourable to them. Interference is called for only when the classification is perverse. He then referred to the decision of the Hon ble Supreme Court in the case of ACST-vs.-P. Kesavan Co. re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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. The word suppression of facts can be easily read into the above provision which makes failure on the part of the assessee to truly disclose all material facts, a ground for invoking the extending the period of limitation. (29) The mere mentioning of a wrong provision of law would not vitiate the show cause notice as the assessing officer was otherwise competent to issue the same. This principle has been laid down by the Hon ble Supreme Court in the case of JK Steel-vs.-Union of India reported in 1978 (2) ELT J335 and also in the case of Sanjana-vs.- Elphinestone Spinning Weaving Mills reported in 1978 (2) ELT J399. (30) The petitioner is guilty of suppression of facts. In its reply dated 24th May, 2006, the petitioner had accepted that it rendered services which would come under the head of consulting engineering and had referred to the circular dated 18th December, 2002 bearing no. 49/11/2002-ST issued by the Central Board o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no bar on the respondent authorities to continue the adjudication proceedings. In the case of CCE, New Delhi-vs.-Bhagsons Paints Indus. (India) reported in 2003 (158) ELT 129, the Hon ble Supreme Court allowed the respondent authorities to complete the adjudication proceedings nine years after the issuance of the show cause notice as no period was prescribed by the statute. The Supreme Court overruled the decision of the Tribunal in Bhagsons Paints Indus. (India)-vs.-CCE reported in 1996 (88) ELT 400, which had wrongly read reasonability into the Central Excise Act, 1944 and had set aside the adjudication order on the ground of delay. In the case of CIT-vs.-Tara Agencies reported in (2007) 292 ITR 444, the Hon ble Supreme Court held that the courts cannot read words into a statute. In the instant case, the Finance Act, 1994, did not provide any specific time frame for completing adjudication nor did it say that the same was to be completed within a reasonable period. Hence, following the decision of the Hon ble Supreme Court in Bhagsons Paints (Supra) the adjudication proceedings can be validly continued. (33) The time frame of one year within which adjudication proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioners in this connection are not applicable to the instant petition. In each of those cases, the assessee had levied specific allegations against the revenue authorities, such as clandestine removal of relied on test results of the products. These reports and evidence were received from outside source and not known to the assessee and as such the courts in seisin of such matters set aside the notice or the order passed in such proceedings but at the same time gave liberty to the Department to re-initiate the proceedings by providing copies of the relied upon documents. In Kellog India (P) Ltd. (supra), Revenue Department had got the assessee s products tested and did not supply copies of test reports to the assessee. The same was held to be improper since the tests were carried out by the revenue authorities and the assessee had no knowledge of the report thereof. (36) Mr. Saraf then submitted that the show cause notice dated 21st April, 2006 covers consulting engineering services whereas the show cause notice dated 9th April, 2009 covers civil construction. Further, the time frame common to the said two notices is only for the period 19th December, 2004 to 31st Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings initiated under the Finance Act, 1994. The said response dated 27th October, 2013 cannot operate as estoppel to the proceedings initiated under the Finance Act, 1994. (39) On the basis of the aforesaid submissions, Mr. Saraf prayed for dismissal of the writ petition. Court s View:- (40) A number of grounds have been urged on behalf of the Petitioner in support of its contention that the show cause notice and the hearing notice impugned in the present proceeding are not maintainable in law and ought to be quashed. On the other hand, it has been contended on behalf of the Department that the instant Writ Petition is not maintainable. Since the point of maintainability is a preliminary point, the same is taken up for consideration first. (41) Appearing for the Department, Mr. Saraf has argued that ordinarily a show-cause notice or a notice of personal hearing cannot be interfered with in the exercise of the Writ Jurisdiction. It is only when the show cause notice is issued without jurisdiction or it does not disclose any offence to have been committed, that the Writ Court may interfere. In this connection, learned Counsel relied on this Court s decision in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to issue the impugned show cause notice, in my view the Writ Petition cannot be rejected at the threshold. Whether or not the petitioner will ultimately succeed on merits is a different question altogether. However, it cannot be said that the Writ Petition is not maintainability at all and should not be entertained for adjudication. (44) There can be no dispute that the question of limitation is a question of jurisdiction and that the Commissioner has no authority and / or jurisdiction to issue notice after the period of limitation prescribed in the Finance Act, 1994. (45) In M/s Raza Textiles Ltd., Rampur Vs- The Income Tax Officer, Rampur reported in AIR 1973 SC 1362, the Supreme Court held that no authority, much less a quasi-judicial authority, could confer jurisdiction on itself by deciding the jurisdictional fact wrongly. The question of whether the jurisdictional fact had rightly been decided or not was a question open to examination by the High Court in an application under Article 226 of the Constitution of India. (46) In the aforesaid case, the Supreme Court held that where the Income Tax Officer had assumed jurisdiction by deciding a jurisdictional fact erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words (eighteen months), the words five years had been substituted. (51) Sub-Section 6 of Section 73 defines relevant date as follows:- (6) For the purposes of this section, relevant date means,-- (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid--- (a) where under the rules made under this Chapter, a periodical return, showing particulars of service ta paid during the period to which the said return relates, is to be filed by an assesse, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to evade payment of service tax is not sufficient. The notice must contain particulars of facts and circumstance in support of such allegation. Even if such particulars are not included in the notice, the Department should be in a position to justify and/or substantiate its allegation of suppression of material facts on the part of the noticee. (56) Coming to the facts of the instant case, do we find any suppression on the part of the Petitioner as would entitle the Department to invoke the extended period of limitation? To my mind, the answer must be in the negative. The Department initiated the enquiry by issuing a letter dated 11th June, 1998. The Petitioner duly responded to the said letter by its letter dated 6th July, 1998, categorically stating therein that the Petitioner did not carry on the business of consolidating engineer and that the Petitioner was basically a civil engineering construction contractor. The Petitioner submitted to the Department a copy of its balance sheet for the year 1996-97 as also copies of some specimen contracts entered into by and between the Petitioner and its clients. Upon receipt of such reply from the Petitioner, the Department went on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business as consulting engineer and as such was not liable to pay service tax under that head. Even if such perception of the Petitioner was founded to be erroneous subsequently still the same would not, in my mind, amount to suppression of fact. Unless a party deliberately conceals material facts with a dishonest motive of eroding some liability or making some unlawful gain, he cannot be said to be guilty of suppression of facts. (59) As would appear from the show cause notice under challenge, there is no allegation of any conscious act on the part of the Petitioner that constitutes fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the Finance Act, 1994 or any Rule made therein with intent to evade service tax. There is only a sweeping statement that had investigation not been conducted material facts would not have been unearthed. There is no whisper in the impugned notice of the facts which have allegedly been suppressed. Mr. Mittal has vociferously argued that the vague assertion that the Petitioner had wilfully suppressed material facts with intent to evade payment of service tax was unfounded and I find substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court held: we find that suppression of facts can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression. (64) In Commissioner of Central Excise, Aurangabad Vs- Bajaj Auto Ltd. reported in 2010 (260) E.L.T 17 (S.C.) the Supreme Court referred to and followed its earlier judgments in Collector of Central excise, Hyderabad Vs- Chemphar Drugs and Liniments, Hyderabad (Supra), Cosmic Dye Chemical Vs- Collector of Central Excise, Bombay (Supra), Anand Nishikawa Co. Ltd. Vs- Commissioner of Central Excise, Meerut (Supra) and held that it was settled that mere failure to declare would not amount to wilful suppression. There must be some conscious, deliberate act with a view to evade tax. (65) The proposition which emerges from the judgments of the Supreme Court referred to above, is that m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... September, 2004 to 31st September, 2005 as the department has sought to do. The periods pertaining to which the show cause notice dated 21st April, 2006 and the show cause notice dated 7th September, 2009 were issued, overlapped to an appreciable extent. This is not permissible in law as held by this court in the case of Avery India Ltd.-vs.-Union of India (2011) (268 ELT 64) following the decision of the Hon ble Supreme Court in the case of Dankan Industries Ltd.-vs.-Commissioner of Central Excise, New Delhi (2006) (201 ELT 517). Two show cause notices could not have been issued in relation to the same period. The impugned show cause notice, therefore, cannot be sustained. (72) On a perusal of the impugned show cause notice, it appears to me that the demand raised therein is per-determined. The language of the notice suggests so. For example, the notice states, inter alia, that the noticee has rendered itself liable to penal action under Sections 76 and 78 of the Finance Act, 1994. Thus the Commissioner appears to have already made up his mind and come to a conclusion that the petitioner has evaded payment of service tax and education cess. When a demand is pre-determined, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent application of mind and, thereby, abdicated his powers and duty, which is not permissible in law. In this connection one may refer to the decision of the Hon ble Supreme Court in the case of Orient Paper Mills Ltd.-vs.- Union of India reported in 1978 (2) ELT J345. (75) In view of the aforesaid, it is not necessary for me to deal with the other grounds of challenge to the impugned show cause notice agitated by Mr. Mittal, Ld. Counsel for the petitioner including the ground of pendency of proceedings for an inordinately long period of time. (76) As regards the decisions relied upon by Ld. Counsel for the department in support of his contention that the High Court cannot entertain a writ petition on classification, in my view, the same have no manner of application to the facts of the instant case. The issue involved in the present case is not the correctness or justifiability of classification but of sustainability of a show cause notice. (77) Although I have not entered into the merits of the department s claim on account of service tax as raised in the impugned show cause notice in the sense that I have not dilated on the point as to whether or not the petitioner re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore that this judgment is wholly incorrect in its conclusion that the Finance Act, 1994 contains both the charge and machinery for levy and assessment of service tax on indivisible works contracts. 44. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax levied by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. With these observations, these appeals are disposed of. 45. We, therefore, allow all the appeals of the assessees before us and dismiss all the appeals of the revenue. (78) Thus, service contracts simpliciter and not composite works contracts come within the service tax net under the provisions of the Finance Act. The petitioner is involved in performance of composite works contracts and vivisection of such contracts to segregate the service element and impose service tax on the same is not permissible. (79) In the result, this application s ..... 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