TMI Blog2019 (6) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of Commission Agent services, which as per them is exempted under Notification No 14/2004-ST is excluded then their total turnover will be less then ₹ 10 Lakhs and they will be exempted under Notification No 6/2005-ST. Since we do not agree with the contention of the appellants that the services provided by them as commission agent are exempt from payment of service tax the entire defence set up for getting this demand set aside collapses. Time limitation - Bonafide belief - HELD THAT:- We do not find anything placed on record to show the existence of such a bonafide belief - the demands made by invoking the extended period of limitation as provided by Section 73 of the Finance Act, 1994 are sustainable. Demand of interest - HELD THAT:- Since we have upheld the demand of service tax, the demand of interest under Section 75 is natural corollary. Penalties - HELD THAT:- Since service tax has been demanded invoking extended period of limitation under Section 73 of Finance Act, 1994, penalty under Section 78 will follow - Since appellant have failed to take registration and pay the service tax, penalties under section 77(1)(a) 77 (2) of Finance Act, 1994 to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of service tax amounting to ₹ 19,07,162/- (Rupees Nineteen lakh Seven thousand One hundred and Sixty-two only) confirmed at paras 25.3 above. 27.5) I impose a penalty of ₹ 19,07,162/- (Rupees Nineteen lakh Seven thousand One hundred and Sixty-two only) on the Noticee, under Section 78 of the Act. If the Noticee pays the service tax confirmed, as mentioned in para 25.3 above, along with the interest on delayed payment within 30 (thirty) days from the date of communication of this Order, the amount of penalty liable to be paid by the Noticee under Section 78 of the Act shall be twenty-five percent of the service tax payable/confirmed in para 25.3 above. However, the benefit of reduced penalty under Section 78 of the Act shall be available only if the said service tax confirmed, interest and the penalty, of twenty-five percent of the service tax payable/confirmed, so imposed under the aforesaid Order, has been paid within the period of 30 (thirty) days from the date of communication of this Order. 27.6) I impose the penalty of ₹ 10,000/- (Rupees Ten thousand only) or ₹ 200/- (Rupees Two hundred only) per day during the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1907162 2.2 Show cause also demanded interest under section 75 and proposed penalties under Section 77(1)(a) and 77(2) ibid. 2.3 The Show Cause Notice was adjudicated by the Additional Commissioner as per his order referred in para 1, supra. Aggrieved by the order, Appellants filed the appeal before Commissioner (Appeal) which has been dismissed. 2.4 Aggrieved by the order of Commissioner (Appeals) appellants are in appeal before Tribunal. 3.1 In their appeal, Appellants have assailed the impugned order stating that- i. The order ignores the fact that Show Cause Notice itself admits that they were required to assist the buyer of grey fabrics in getting it processed and that the appellant was not engaged by the buyer of the fabrics. ii. The lower authorities have failed to appreciate that they provided certain services on behalf of grey fabrics manufacturer/seller on irrelevant consideration. The processing of grey fabrics is a post sale activity and should not negate that the appellant s services are hired for providing assistance for processing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded in the show cause notice ii. They have never submitted on records that they were engaged in providing agency service to the buyers of the grey fabrics. Adjudicating authority has predetermined to reject their claim for exemption under notification No 14/2004-ST. iii. They had never claimed exemption in terms of clause a of the Notification but their claim was under clause c of the notification. iv. Trade Notice No 12/2004-ST dated 13.09.2004 also clarifies that 18.3 ..However the services in relation to agriculture, printing, textile processing and education would remain exempt even if provided by such service providers (refer Notification No 14/04-ST dated 10.09.2004). v. Reliance is placed on the decision of Tribunal in case of Arvind A Traders [2016 (44) STR 264 (T-Chennai)], Texyard International [2015 (40) STR 322 (T-Chennai)]. vi. The contention raised by the authorized representative that activities undertaken by them were not in relation to textile processing is not sustainable. The decisions of Tribunal in case of Shree Ranie Gums and Chemicals Pvt Ltd [2017 (4) GSTL 340 (T-Del) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity is exempted from payment of service tax. 5.3 There is also no dispute about the fact that appellants are acting on behalf of the manufacturer of grey fabrics, for affecting the sale of grey fabric to various customers identified by the appellant. For the purpose of affecting such sale, commission is paid by the manufacturer of grey fabric to the appellants. No service is provided by the appellant to the purchaser of the grey fabric for which any consideration is paid by the purchaser. In the present case, undisputedly the commission is paid by manufacturer of grey fabric for effecting the sale of its goods. 5.4 As per Section 65(19) of the Finance Act, 1994, Business Auxiliary Service means any service in relation to- (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or (v) production or processing of goods f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service provided to a client by any person in relation to the business auxiliary service, in so far as it relates to,- (a) procurement of goods or services, which are inputs for the client; (b) production of goods on behalf of the client; (c) provision of service on behalf of the client; or (d) a service incidental or auxiliary to any activity specified in (a) to (c) above, and provided in relation to agriculture, printing, textile processing or education, from the whole of service tax leviable thereon under section 66 of the said Finance Act: 5.7 For determining the eligibility to this exemption notification the first thing to be determined is the service provider and the client of service provider. In the present case the services of commission agent are provided by the appellant to their client i.e. grey fabric manufacturer. As a part of the service provided by the appellant to its client, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept for the two activities at iii) iv) above all other activities at i), ii), v) vi) above are for the benefit of the Grey Fabric manufacturer and not the Grey Fabric buyer. The said two activities at iii) iv) viz. providing information and assistance to the buyer regarding process houses, is undertaken by the Noticee in his own interest for attracting the prospective and inducing him to execute the transaction of buying of grey fabric through him. Noticee has expressly admitted that they are engaged and get paid by the Grey Fabric manufacturer and not the buyers (para 7.2 of Noticee s reply refers). It is pertinent to note here that Noticee gets paid by the Grey Fabric manufacturer for bringing him a buyer where his sale is materialized and not for the transaction of fabric processing that my take place between the buyer and the process house. It is those activities which are directed towards the benefit of the Grey Fabric manufacturer, therefore, are the primary and governing activities which give the essential character to Noticee s all above activities as a whole. 20.6) Getting buyers for the Grey Fabric manufacturer and ensuring payments, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in case of Dilip Kumar Company, supra. Further the services which were being provided were in relation to the procurement of orders from overseas buyers, for manufacture and processing of textiles. The facts in the present case are entirely distinguishable. The case was in respect of demand of service tax on reverse charge basis from the textile manufacturers in respect of the services provided by the overseas commission agent. The bench held as follows: 6.2 The lower authorities denied the exemption merely on the ground that the said services are not used for textile processing. On careful reading of the above notification, it is evident that service tax was exempted during the relevant period for the services provided under Business Auxiliary Service if it relates to agriculture, printing, textile processing or education. The appellants are Textile manufacturer and exporters. The word textile processing referred in the notification is to be understood in a broader sense. The dictionary meaning of textile processing means sequence of operations or changes undergone and the definition of textile includes fabrics, fibre, yarn suitable for wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . TFL paid them for the services so provided to them. The Appellants had no agreement of any type with the potential loan seekers. There is no basis or evidence whatsoever to uphold the contention of the Appellants that they were providing services on behalf of the client (M/s. TFL). Thus, their services cannot be covered under the scope of the expression provision of services on behalf of the client . The Appellants claimed exemption under Notification 14/2004-S.T., dated 10-9-2004/25/2004-S.T., dated 10-9- 2004 by claiming their services to be covered under the scope of provision of services on behalf of the client . Thus in the case under consideration Commission Agents were procuring the orders as per which the textile materials was to be manufactured and supplied hence bench concluded that the activities undertaken were incidental and auxiliary to the auxiliary to the activity of production. In the present case appellants do not provide any service in relation to textile processing to their clients and hence we do not find any support in favour of the appellants from the said decision of Tribunal. 5.13 In respect of the services, provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ape [2006 (198) E.L.T. 275], it was held that bona fide belief is not blind belief and a belief can be said to be bona fide only when it is formed after all the reasonable considerations are taken into account . Further in case of Continental Drugs Company Pvt Ltd. [2015 (39) STR 154 (T-Mum)] tribunal has held- 5.2 .. As regards the claim of the appellant that they had not suppressed any facts and therefore, extended period time cannot be invoked, the appellant has not brought on record any evidence to prove their bona fides. Bona fide belief is not blind belief but has to be based on reasonable measures taken to entertain such belief. There is nothing in the records to show that the appellant consulted either the department or obtained any legal opinion as their liability towards service tax. In the absence of any such evidence, it is difficult to accept this contention. Inasmuch as the appellant did not obtain any registration nor did they follow any of the statutory procedures, the appellant had clearly suppressed the facts from the department with an intent to evade service tax. In these circumstances, the confirmation of duty de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 (256) E.L.T. 369 (Guj.)] [quoted by learned Member (Technical)] has held as follows :- The termini from which the period of one year or five years has to be computed is the relevant date which has been defined in sub-section (3)(ii) of Section 11A of the Act. A plain reading of the said definition shows that the concept of knowledge by the departmental authority is entirely absent. Hence, if one imports such concept in subsection (1) of Section 11A of the Act or the proviso thereunder it would tantamount to rewriting the statutory provision and no canon of interpretation permits such an exercise by any Court. If it is not open to the superior court to either add or substitute words in a statute such right cannot be available to a statutory Tribunal. The above observation of the Hon ble High Court is with reference to the knowledge of the department. However, I find the similar thing would be applicable not only to the knowledge to the department but to the bona fide belief or interpretation of statute or to the revenue neutrality. All the four concepts are not mentioned in the proviso to Section 73 and, therefore, as observed by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide belief. In fact, conduct only indicates wilful intention. As far as their contention relating to interpretation of statute, the first contention is that initially the department raised the demand on the said activity on various assessees under interior decorator service and later on under commercial or industrial construction service . Thus, there was difference of opinion within the department itself. I find that this argument is not correct. Interior decorator service was introduced in 1998 much before the introduction of commercial or industrial construction service (in 2005). There are entities who only provide the advice consultancy relating to interior decoration. There are also entities which not only provide the advice consultancy but also execute such advice consultancy. Therefore, it was natural that the department in the initial phases was also trying to cover both types of entities under the interior decorator service. However, after the introduction of commercial or industrial construction service , the executory activity was specifically listed therein and this dispute vanished. The period under dispute is after the introduction of commercial or industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered as bona fide. Thus in view of the above decisions we hold that demands made by invoking the extended period of limitation as provided by Section 73 of the Finance Act, 1994 are sustainable. 5.15 Since we have upheld the demand of service tax, the demand of interest under Section 75 is natural corollary. While demanding the interest adjudicating authority has relied upon the provisions of Section 75 and also the following decisions: i. Kanhai Ram Thakedar [2005 (185) ELT 3 (SC)] ii. TCP Limited [2006 (1) STR 134 (T-Ahd)] iii. Pepsi Cola Marketing Co [2007 (8) STR 246 (T-Ahd)] iv. Ballarpur Industries Limited [2007 (5) STR 197 (TMum)] Thus we do not have any reason to differ with the findings recorded in respect of demand of interest. 5.16 Since service tax has been demanded invoking extended period of limitation under Section 73 of Finance Act, 1994, penalty under Section 78 will follow as has been held by the Hon ble Apex Court in case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] and Dharmendra Textile Processors [2008 (23 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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