TMI Blog2018 (2) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention. In the present case, the revenue argues that appellant wilfully suppressed the value of taxable services and thus did not discharge its liability of paying the service tax on same. The contention of the appellant is that the appellant was under a bona fide belief that the appellant was not liable for payment of Service Tax for the Mandap Keeping and Management, Maintenance and Repair Services. The Revenue has not been able to prove an intention on the part of the appellant to evade tax by suppression of material facts. In fact, it is clear that the appellant did not have any such intention and was acting under bona fide beliefs. For these reasons, it is held that the revenue cannot invoke the proviso to Section 73(1) of the Finance Act to extend the limitation period for issuing of SCN. The SCN was issued on 24.10.2008. The undischarged liability for payment of service tax with respect to Mandap Keeper Service and Management, Maintenance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services is justified in the facts and circumstances of the case. 4. The facts of the case are that on 11.03.2005, an enquiry was initiated by the Service Tax Department/Commissioner, Service Tax, Delhi regarding non-payment of service tax by the appellant on the Franchisee Services under reverse charge mechanism. This service was being received by the appellant from M/s. Inter-Continental Hotel Corporation, USA, for which it paid a franchisee fee. The enquiry was subsequently transferred to the Directorate General of Central Excise Intelligence, R.K. Puram, New Delhi (hereinafter referred to as the DGCEI ), who expanded the scope of the enquiry from Franchisee Fee to Mandap Keeper, Management Repair Maintenance, Business Exhibition Services and Club Membership Services provided by the appellant in all its units throughout India. During the enquiry, the appellant informed the authority that they were already registered with the Service Tax Department and had paid service tax amounting to ₹ 7,66,681/- for the Franchisee services. The revenue also -(i) took notice of the fact that the appellant was not paying service tax on the gross receipt of revenue under Mandap Keepe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross value and charging service tax @ 60% of the applicable rate. This does not appear to be correct. ii. Separate Bills for sale of beverages liquor in the banquet functions were shown and no service tax was paid on that. iii. The functions wherever the audio video equipment were provided from outside another bill was raised and no service tax was being levied on that. iv. The hotel also levies service charge @ 10% of the bill value which is in the nature of tip and is distributed amongst the staff and is added in the food bill itself. No service tax was being paid on this amount as well. v. The banquet halls were being provided on rent and a separate bill was raised for catering. The hotel was discharging service tax on the rental value under mandap keeper (rental) taking no abatement on the same while taking abatement on the food bill at the same time. vi. When investigation was initiated, the appellant started accepting the stand taken by DGCEI and started paying service tax on the above stated components. II. Management, Maintenance or Repair Services: (Para 14.1 of SCN) The appellant is providing maintenance services to shopping arcade i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was firstly, lump sum composite bill for hall rentals inclusive of food charges; secondly, lump sum composite bill for food charges inclusive of hall rentals and lastly, hall charges and charges for food and beverages, liquor, mineral water separately charged in the invoices. 10. The appellant urges that it was acting under a bona fide belief that the sale of the abovementioned items would attract VAT and not service tax. The appellant further submitted that the appellant had, during the enquiry itself, paid service tax on the sale of the abovementioned items for the period 2004-05 and 2005-06 with interest and also started paying service tax on these items regularly from April 2006. 11. As regards the invocation of the extended limitation period for penalty liability, it was argued that the appellant had not suppressed any material facts or committed any fraud with the intent to evade payment of service tax and was in fact, under a bona fide belief that it was entitled to claim exemption from payment of service tax on sale of goods while providing services under the Notification No. 12/2003-ST. The appellant also submitted that the sale value of food, beverages, mineral wate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o calculation error claimed that ₹ 49,37,872/- was payable towards service tax and even if the Department's calculation were to be taken as correct, SCN of ₹ 96,685/-, being the difference could have been issued but the Department had instead issued a show cause notice alleging non-payment of the entire amount of ₹ 49,37,872/-. 14. In this regard, the appellant referred to the case of Commissioner of Central Excise v. Chemphar Drugs Limiments [1989 (40) ELT 276 (SC)] wherein the Supreme Court held that: In order to make a demand under Section 11A of the Central Excises and Salt Act for beyond a period of six months and up to a period of five years something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required to be established. Where department had full knowledge about the facts and the manufacturer's action or inaction is based on their belief that they were required or not required to carry out such action or inaction, the period beyond six months cannot be made applicable. 15. The appellant also submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the SCN with respect to Mandap Keeper Service and Management, Maintenance and Repair Services. The relevant parts of the SCN is excerpted below: INVOCATION OF EXTENDED PERIOD 16. Invocation of extended period under Section 73 of Finance Act,1994 for demand of Service tax short paid. Review of the documents revealed that M/s. BHL has wilfully suppressed the material facts with an intent to evade payment of service tax. a) Mandap Keeper Service: A review of the Service Tax returns (RUD 12) filed by M/s. BHL for the period 2004-05 ar1d 2005-06 showed that they have not paid service tax on the total value of the service by resorting to separate invoicing for beverage, liquor without adding it to gross value. Further although they change 10% service charge, they never added it for computation of value and suppressed the material facts. Further although they hire convention equipment they never show it as included in the gross value and used to issue separate invoice for it to the client. They have been asked/requested time and again to produce the documents substantiating their stand and to compute correct taxable value, but they failed to do so prolonging the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be cognizant of the fact that the appellant is a large corporate house, with an army of advisers and consultants and its plea of ignorance of its tax liability cannot be accepted at face value; rather the onus to show that it did not act mala fidely was upon it, rather than otherwise. 20. The only question of law that arises in the present appeal is whether the Central Excise and Sales Tax Appellate Tribunal (CESTA) fell into error in holding that the eviction of the extended period under proviso to Section 73(1) of the Finance Act in respect of two services, i.e. management, maintenance and repair services and Mandap Keeper services is justified in the facts and circumstances of the case. At the outset, the relevant section in question, i.e., Section 73 of the Finance Act (as applicable in 2008) needs to be stated. The section is reproduced below for reference- SECTION 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, Central Excise Officer may, within one year from the relevant date, serve notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Section, at the relevant time, read as follows: 28. Notice for payment of duties, interest, etc. (1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may,- (a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year; (b) in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we would like to point out the niceties that separate the analogous provisions of the two, an issue which received the indulgence of this Court in Associated Cement Co. Ltd. v. Commissioner of Customs [(2001) 4 SCC 59]3, at page 619 in the following words: 53. ... Our attention was drawn to the cases of CCE v. Chemphar Drugs and Liniments [(1989) 2 SCC 12]7, Cosmic Dye Chemical v. CCE [(1995) 6 SCC 117], Padmini Products v. CCE [(1989) 4 SCC 275], T.N. Housing Board v. CCE [1995 Supp (1) SCC 50] and CCE v. H.M. M. Ltd. (supra). In all these cases the Court was concerned with the applicability of the proviso to Section 11-A of the Central Excise Act which, like in the case of the Customs Act, contemplated the increase in the period of limitation for issuing a show-cause notice in the case of non-levy or short-levy to five years from a normal period of six months.... 54. While interpreting the said provision in each of the aforesaid cases, it was observed by this Court that for proviso to Section 11-A to be invoked, the intention to evade payment of duty must be shown. This has been clearly brought out in Cosmic Dye Chemical case where the Tribunal had held that so far as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these appeals it will have to be seen as a fact whether there has been a non-levy or short-levy and whether that has been by reason of collusion or any wilful misstatement or suppression of facts by the importer or his agent or employee. (Emphasis supplied) 23. It is important to note the proviso to Section 11A of the Excise Act at this stage. It states that: Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by the reason of- (a) fraud; or (b) collusion; or (c) any wilful misstatement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under section 11AA and a penalty equivalent to the duty specified in the notice. 24. As noticed in the excerpted portions of the Supreme Court s judgment, the material dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Act (as held in Uniworth), the interpretation of proviso to Section 28 may also be extended to interpret the proviso to Section 73 of the Finance Act. Uniworth (supra) is also authority on the meaning of wilful misstatement and suppression of facts ; the Court held that: 12. The conclusion that mere non-payment of duties is equivalent to collusion or wilful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of non-payment would amount to ordinary default? Construing mere non-payment as any of the three categories contemplated by the proviso would leave no situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the Appellant as fit for the applicability of the proviso. .. 14. In Sarabhai M. Chemicals v. Commissioner of Central Excise, Vadodara [(2005) 2 SCC 168], a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in Continental Foundation Joint Venture Holding v. Commissioner of Central Excise, Chandigarh-I (2007) 10 SCC 337, held that: 10. The expression suppression has been used in the proviso to Section 11A of the Act accompanied by very strong words as fraud or collusion and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. 27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word suppression in the proviso to Section 11A(1) of the Excise Act has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith respect to Mandap Keeper Service and Management, Maintenance and Repair Service as soon as the appellant became aware of the same (during the enquiry) and continued to pay service tax thereafter. The authorities are unanimous that to invoke the extended period under cognate provisions (such as Section 11A of the Excise Act or Section 28A of the Customs Act) the burden is cast upon it to prove suppression of fact. The Revenue has not been able to prove an intention on the part of the appellant to evade tax by suppression of material facts. In fact, it is clear that the appellant did not have any such intention and was acting under bona fide beliefs. For these reasons, it is held that the revenue cannot invoke the proviso to Section 73(1) of the Finance Act to extend the limitation period for issuing of SCN. The SCN was issued on 24.10.2008. The undischarged liability for payment of service tax with respect to Mandap Keeper Service and Management, Maintenance and repair services alleged in the SCN is for the period 2004-06 and 2005-08 respectively. Since the proviso to Section 73(1) cannot be invoked the SCN had to be served within one year from the relevant date. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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