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2016 (9) TMI 1108 - MADRAS HIGH COURT

2016 (9) TMI 1108 - MADRAS HIGH COURT - 2016 (45) S.T.R. 18 (Mad.) - Challenge to the show cause notice - Availment of appeal remedy available to petitioner in terms of Section 86 of the Finance Act, 1994 - petitioner was entitled to file an appeal before CESTAT but did not availed the same only for the reason that the impugned proceedings has been initiated by the second respondent by invoking the extended period of limitation which is not invocable in the petitioner's case - whether there is a .....

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ive remedy and the CESTAT is entitled to appreciate and reappreciate the facts and therefore, there is no justification on the part of the petitioner to bye-pass the Appeal remedy, more particularly, on the only ground raised by the petitioner before this Court which is purely a question of fact. Nevertheless, this Court examined the Order-in-Original as to whether any finding has been recorded in this regard. It is not in dispute that the basis of the show-cause notice was set-out in the impugn .....

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case against the petitioner is brought under Clause (c) to (e) in the proviso under Section 73(1), viz., wilful misstatement, suppression of facts, contravention of the provisions with intent to evade payment of service tax. To ascertain as to whether there was wilful mis-statement or suppression of facts or contravention of the provisions of the Act or the Cenvat Credit Rules with intent to evade payment of service tax is essentially and purely a question of fact, which has to be agitated befo .....

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tition dismissed as not maintainable - W.P.No.31167 of 2016 & W.M.P.Nos.27012 & 27013 of 2016 - Dated:- 7-9-2016 - T. S. Sivagnanam, J. For the Petitioner : Mr. S. Joseph Prabakar For the Respondents : Mr. N. Senthilkumar Junior Standing Counsel for Central Excise ORDER Heard Mr.S.Joseph Prabakar, learned counsel appearing for the petitioner and Mr.N.Senthilkumar, Junior Standing Counsel for Central Excise, accepting notice on behalf of respondents. With the consent of the learned counsel on eit .....

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them in terms of Section 86 of the Finance Act, 1994. By virtue of the said provision, the petitioner is entitled to file an Appeal before the CESTAT. 4. The learned counsel for the petitioner submitted that the only reason for which the petitioner has not availed the Appeal remedy is on the ground that the impugned proceedings has been initiated by the second respondent by invoking the extended period of limitation which is not invocable in the petitioner's case. Though such was the stateme .....

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e question of law, but a mixed question of fact and law. Therefore, question whether extended period of limitation could be invoked or not is essentially a question of fact. The contention raised by the petitioner is that in the absence of specific and explicit averments about suppression of facts, the larger period of limitation cannot be invoked in the facts of the case and as there is no finding rendered to the said effect, both the Order-in-Original and Order-in-Appeal they are liable to be .....

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Corporate Office. 7. The petitioner / assessee vide letter, dated 04.05.2009, intimated the Department that they have paid service tax under protest and to refund the service tax amount collected from their customers, as they have objected for payment of service tax based on the Circular No.108/02/09-ST dated 29.01.2009. Based on the said letter given by the petitioner to the Commissioner, the Survey Intelligence & Research Section (SIR) of the respondent-Department took up the case for inv .....

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are discharging Service Tax only in respect of Meadows Enclave project under WCS at Chennai, a joint venture which was signed on 14.07.2007 as all other residential complex/villas at Chennai are exempted as they are less than 12 residential units; that they have first registered with the Service Tax on 11.01.2007 for the construction of Complex Service and included Works Contract Services on 09.07.2007 and have been discharging Service Tax under Works Contract Service; that the assessee registe .....

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d a statement was recorded from the said Official. Based on such documents and statements, the second respondent issued a show-cause notice dated 14.09.2012, among other things pointed out that:- "3.1. The assessee pays commission to his overseas agent towards his market promotional activity abroad which is determined on the foreign inward remittances. The assessee is not entitled to avail input credit on the provisions of non taxable service rendered under CCS / WCS i.e., Service Tax amoun .....

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ees agent at Dubai is marketing building project developed by the assessee in India, the principal pays commission go upto 20% subject to a maximum of US $ 25,000 per transaction on all foreign inward remittances out of the sale generated by them. 8. The second respondent to justify their action in invoking extended period of limitation mentioned the following in the Show-Cause notice:- "5.1. Whereas it appears from the foregoing that the assessee have contravened the provisions of Rules 6( .....

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intention to avail ineligible Cenvat Credit and to evade payment of service tax, by not disclosing the actual value of taxable services provided under WCS (by inflating the land value resulting in short payment of service tax). Hence, the extended period as contemplated under Rule 14 of Cenvat Credit Rules, 2004 read with proviso to Section 73(1) of the Act is invokable for demand of such ineligible credit. It further appears that the assessee are liable for penal action under Rule 15 of the Cen .....

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mployed any of the ingredients specified in proviso to Section 73(1). 10. The learned counsel for the petitioner vehemently contended that though in the show-cause notice in paragraph No.5.1 (quoted above) there is an averment as to why the extended period is being invoked in the Order-in-Original, there is no finding to the said effect and this defect was not rectified by the Appellate Authority and as this defect goes to the root of the matter, both the impugned orders are liable for interfere .....

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Original as to whether any finding has been recorded in this regard. It is not in dispute that the basis of the show-cause notice was set-out in the impugned order that deliberately the petitioner did not disclose the fact of availment of Input Service Credit of exempted service. The record of the proceedings show that the second respondent has discussed the matter pertaining to the transaction done by the assessee and it cannot be disputed by the petitioner that the entire proceedings was on ac .....

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of limitation. Section 73 of the Finance Act deals with recovery of service tax not levied or paid or short levied or short paid or erroneous refunded. Sub-section (1) of Section 73 of the Act would be relevant for this case, which is as hereunder:- "73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded (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 Offic .....

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usion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or the rules 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 "one year", the words "five years" had been substituted." 13. In terms of sub-section (1) of Section 73, the Central Excise Officer may within one year serve notice on the person chargeable with the s .....

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ession of facts or contravention of any of the provisions of the said chapter or of the Rules made thereunder with intent to evade payment of service tax. 14. In the case on hand there is no allegation of fraud or collusion and the case against the petitioner is brought under Clause (c) to (e) in the proviso under Section 73(1), viz., wilful misstatement, suppression of facts, contravention of the provisions with intent to evade payment of service tax. On perusal of the show cause notice, dated .....

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ng availment of Cenvat Credit would not have come to light and these facts would disclose that the petitioner did not disclose the facts with intention to avail ineligible Cenvat Credit and to evade payment of service tax, by not disclosing the actual value of the taxable service provided under works contract service by inflating the land value resulting in short payment of service tax. This appears to be the basis for invoking the extended period under the proviso to Section 73(1) read with Rul .....

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and May 2007 in September 2008 it was stated that they voluntarily disallowed credit attributable towards exempted services at ISD levels, which according to the petitioner was not warranted as per Rule 6(3). The petitioner further stated that the Cenvat credit of ₹ 1,10,064/- paid for April 2007 and May 2007 paid in September 2008 could have been utilized by them, as cenvat credit can be availed on basis of the date of payment of service tax and could have fully utilized without disallow .....

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of limitation is not in accordance with law. 16. Thus the Adjudicating Authority was required to examine the merits of the contentions raised and decide the issues and also to take note, in the given facts and circumstances extended period of limitation, could have been invoked. The Court on perusal of the explanation offered to the show cause notice finds that the petitioners have justified their action by referring to the Rules and decisions of CESTAT, Mumbai. 17. The second respondent while .....

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illas. The assessee paid service tax on the commission amount paid to their overseas agent under Business Auxiliary Service (Import of Service) and have subsequently availed input credit on the same. Further as input service distributor they had distributed the input credit to their branches in Chennai & Kerala. On verification it was found that the assessee had wrongly availed input credit paid under BAS (on less than 12 residential dwelling units) being the non taxable output service rende .....

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at Credit of ₹ 97,190/- has been written off in their book of accounts on 31.03.2010 have been erroneously shown in their ST-3 return as closing balance of Cenvat Credit available for distribution which would be rectified in their next return. Further, it has been verified that they have not availed input credit under Input Service Distributor (ISD) in respect of service tax paid under BAS towards commission to overseas agent in their subsequent ST-3 return from May 2009 onwards. Further, .....

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the following findings:- " 5. ......... It is a fact that the appellants had taken credit of service tax paid under reverse charge as recipient of service on the Commission paid to the agent appointed by them abroad towards marketing of their projects abroad; and that the projects in question (the flats) that were marketed abroad were exempted as the said projects were less than 12 units (flats). The above facts are not disputed by the appellants. However, they argued that they as an ISD av .....

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ice used by units exclusively engaged in providing of exempted services shall not be distributed. In this case, the impugned credit pertaining to the exempted service alone and accordingly, the appellants are not entitled for both availing and distributing the same. 6. Regarding the plea of quantification, it is observed that the Impugned Order quantified based on the details provided by the appellants and on perusal, it revealed that there is no difference in the cenvat credit for the respectiv .....

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the knowledge of the Department. This was identified only during the investigation by the SIR wing of the Department which would have otherwise gone unnoticed. Thus, the appellants had contravened relevant provisions of Act and Rules in order to avail the undue benefit and therefore, as a sequel, they are liable for penal action as provided under the relevant provisions of Act and Rules." 19. In Uniworth Textiles Ltd. Vs. Commissioner of Central Excise, Raipur, [2013 (288) E.L.T. 161 (SC)] .....

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