TMI Blog2020 (7) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... th the service tax may pay the amount of such service tax before service of the 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). The Appellant paid the service tax before service of the show cause notice and informed the Central Excise Officer of the payment in writing - The Commissioner has merely stated that since the extended period of limitation under the proviso to section 73 (1) had been invoked, the benefit of sub-section (3) of section 73 will not be available to the Appellant. The issue as to whether sub-section (4) of section 73 of the Act would apply in the present case can be considered together with the contention raised on behalf of the Appellant that the extended period of limitation provided for under the proviso to section 73(1) of the Act could not have been invoked because the conditions for invocation are identical in both the situation - It is seen that sub-sections (1) (4) of section 73 of the Act do not mention that suppression of facts has to be wilful since wilful precedes only mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistry of Commerce and Industries, Government of India, by order dated 19 December, 2006. Subsequently, the Appellant was also granted a letter of approval as a co-developer of Mundra Port on 27 February, 2009 by the Ministry of Commerce and Industries, Government of India. 3. The Appellant is in the business of generation and transmission of power. It set up a Thermal Plant at Tunda and Siracha. In regard to the service tax paid by the Appellant under reverse charge mechanism as provided for under Section 66A of the Finance Act, 1994, the Act, the Appellant filed refund claims under the notifications issued from time to time since it was situated within SEZ. 4. An enquiry was, however, initiated against the Appellant in regard to External Commercial Borrowings, ECB transactions for setting up the power plant during the period 18 April, 2006 to 31 March, 2010, particularly in regard to ECB of US$ 500 million from Standard Chartered Bank, London, London Bank on 29 January, 2008 and ECB of US$ 99 million from ICICI Bank, Hong Kong Bank, Hong Kong Bank. 5. Ultimately, a show cause notice dated 27 January, 2011 was issued to the Appellant. It was stated that ECB being lendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended by notification No. 15/2009-service tax dated 20-05-2009 the Central Government exempted the taxable services which are provided in relation to the authorised operations in a Special Economic Zone, and received by a developer or units of a Special Economic Zone, whether or not the said taxable services are provided inside the Special Economic Zone, from the whole of the service tax leviable thereon under section 66 of the said Finance Act and the exemption claimed by the developer or units of SEZ shall be provided by way of refund of service tax paid on the specified services used in relation to the authorized operations in the SEZ except for services consumed wholly within the SEZ. This made it clear that from 03-03-2009, developers or units of a SEZ should pay service tax leviable thereon and subsequently may claim refund from the competent authorities irrespective of the position that whether such specified services are consumed within or outside SEZ. 8. In regard to the ECB of US$ 99 million from Hong Kong Bank, the show cause notice mentions : 5.6 It can be seen from the above table that they have made payment of agent fee, upfront fee and legal council fee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Tax Rules, 1994 in as much as they failed to obtain service tax registration under banking and other financial services for the commercial charges paid and under management consultant services for the consultancy charges paid to foreign entities not having office in India for availing ECB; Section 70 of the Finance Act, 1994, read with rule 7 of the Service Tax Rules, 1994, in as much as they had not declared the correct amount of charges paid by them in lieu of taxable services, received by them in the ST-3 returns filed by them. 7.2 The above facts clearly proves that APL have not paid service tax by way of willful suppression of facts and in Contravention to the provisions of Finance Act, 1994 relating to levy and collection of service tax and the Rules made there under with intent to evade payment of service tax. Therefore the service tax is recoverable from them by invoking extended period of five years as per first proviso to sub-section (1) of Section 73 of the Finance Act, 1994. 11. The Appellant filed a detailed reply dated 09 May, 2011 to the aforesaid show cause notice and denied the charges. 12. For the ECB of US$ 500 million, it was stated that app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if the ECB of US$ 500 million was cancelled, service tax should have been paid first and thereafter refund could have been claimed. 16. The contention of the Appellant that it was entitled to exemption from payment of service tax under the notification dated 31 March, 2004 since the services were to be consumed within SEZ was not accepted. The Commissioner observed as follows : 26. I find that M/s APL are having their registered office at 7th Floor, Sambhav Building, Judges Bunglow Road, Bodakdev, Ahmedabad. Services are intangible in nature and therefore their consumption can be anywhere unlike goods which can be consumed in a factory during the manufacturing process. Thus, even though M/s APL may be an approved Developer of power project in Sector specific SEZ, it cannot be said-that the Banking and financial services received by them were wholly consumed within the Special Economic Zone as they have their -registered office outside the Special Economic Zone. This view also finds support from the fact that with regard to the availment of ECB facility of US$ 99 million from ICICI, Bank Hongkong (which is discussed in detail below) they had made payment of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of the Act in the case before me is fully justified. 38. I find that in the present system of self-assessment, documents like invoices and other transaction details are not supplied to the Department. Moreover, M/s APL did not furnish the required details of payment of upfront fee/agency fee/other commercial charges/legal counsel fee amount either in the ST-3 returns or in any other way to the Department. Since, they even did not consult the Department in case of any doubt, the intention will have to be believed as that of evasion. Once the details are not submitted to the Department, misdeclaration or suppression is rightly invoked. I, therefore, conclude that the element of suppression with intent to evade payment of service tax is conspicuous by the peculiar facts and circumstances of the case as discussed above and, therefore, the extended period of limitation under Section 73(1) of the Finance Act, 1994 is rightly invokable for recovery of service tax demanded in the impugned show cause notice. In view of the above discussion and findings, the ratio of cases relied upon by M/s APL cannot be applied in the case before me. (emphasis supplied) 19. The Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, as the Appellant had deposited the amount of service tax with interest before the service of the show cause notice in regard to the ECB facility of US$ 99 million, the show cause notice could not have been issued to the Appellant in view of the provisions of section 73(3) of the Act and the provisions of section 73(4) of the Act could not have been resorted to as there was no wilful mis-statement or suppression of facts or fraud on the part of the Appellant, more particularly when service tax, if paid, would in any event have been refunded to the Appellant under the notification dated 3 March, 2009; (v) The Commissioner committed an error in holding that the extended period of limitation provided for under the proviso to section 73 (1) of the Act was correctly invoked in the show cause notice. In the present case there was no willful mis-statement or suppression of facts with an intention to evade payment of service tax as the service tax, if deposited by the Appellant, would have been refunded to the Appellant; and (vi) The Commissioner also committed an error in imposing penalties under sections 77 and 78 of the Act. 21. Shri Gobind Jha, learned Authorized Represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paid ₹ 13,94,81,875/- as upfront fee on 25 June, 2008 but as the said facility was later cancelled, the London Bank refunded the fees on 19 November, 2009 and credited it in the bank account of the Appellant. The Appellant, therefore, contends that since no service was provided, no liability to pay service tax could have arisen and even otherwise, there is no liability to pay service tax in view of the provisions of the SEZ Act and the Rules framed thereunder and the notification dated 31 March, 2004. In regard to the ECB facility of US$ 99 million granted by the Hong Kong Bank, the Appellant contends that initially the Appellant was under a belief that since ICICI Bank had a registered office in India, it would not be required to pay service tax on a reverse charge mechanism, but when summons were received from the Department, legal opinion was sought pursuant to which the Appellant deposited the service tax with interest and intimated the Department before the service of the show cause notice. Thus, the show cause notice proposing tax on this facility could not have been issued in view of the provisions of sections 73 (3) of the Act and section 73 (4) of the Act could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner or Board of Approvals, as the case may be, to establish the unit in the Special Economic Zone; (iii) the developer or unit of a Special Economic Zone shall maintain proper account of receipt and utilisation of the said taxable services. Explanation .- For the purposes of this notification,- (1) Board of Approvals means the combined Board of Approvals for export oriented unit and Special Economic Zone units, as notified in the Official Gazette, from time to time by the Government of India in the Ministry of Commerce and Industry; (2) developer means a person engaged in development or operation or maintenance of Special Economic Zone, and also includes any person authorised for such purpose by any such developer; (3) Special Economic Zone means a zone specified as Special Economic Zone by the Central Government in the notification issued under clause (iii) of Explanation 2 to the proviso to sub-section (1) of section 3 of the Central Excise Act, 1944 (1 of 1944). 28. The notification dated 31 March, 2004 was superseded by notification dated 03 March, 2009 and the relevant portion is reproduced below:- NOTIFICATION NO. 09/2009-SERVICE TAX, DA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all not be claimed except under this notification. (g) the developer or unit of a Special Economic Zone shall maintain proper account of receipt and utilisation of the taxable services for which exemption is claimed. 2. The exemption contained in this notification, except for services consumed wholly within the Special Economic Zone, shall be subject to the following conditions namely:- Xxxxxxxx xxxxxxxx xxxxxxxx [emphasis supplied] 29. The notification dated 03 March, 2009 grants exemption to the taxable services specified in section 65 (105) of the Act provided in relation to the authorized operations in the SEZ and received by a developer or units of a SEZ, whether or not the said taxable services are provided inside the SEZ, from the whole of the service tax leviable thereunder under section 66 of the Finance Act. The proviso, however, stipulates that the exemption claimed by the developer or units or SEZ shall be provided by way of refund of service tax paid on the specified services used in relation to the authorized operations in the SEZ. 30. Proviso (c) to the aforesaid notification dated 03 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable services provided to the Appellant under the notification dated 31 March, 2004. 34. The impugned order confirming the demand made in regard to the two ECB facilities of US$ 500 million from London Bank and US$ 99 million from Hong Kong Bank shall be separately considered. ECB facility of US$ 500 million from London Bank 35. It is stated that the Appellant entered into an agreement with London Bank on 29 January, 2008 for ECB facility of US$ 500 million in relation to the power project in the SEZ and an upfront fee was paid to the bank on 25 June, 2008. This fee was subsequently refunded by the bank on 19 November, 2009 to the Appellant since the facility was later cancelled. It has also been stated that the refund amount was deposited in the bank account of the Appellant. In the first instance, it has been contended that under the notification dated 31 March, 2004, exemption was granted to the taxable services of any description provided to a developer of SEZ to any service provider for consumption of the services within such SEZ, from the whole of service tax leviable thereon under section 66 of the Act, subject to certain terms and conditions. The Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arifications subsequent to the issuance of the notification dated 1 March, 2011. This notification dated 1 March, 2011 is also in connection with exemption to the taxable services received by units or developer of SEZ. Clause (2) of the said notification provides that the exemption contained in the notification shall be subject to certain conditions, one of which contained in (a) is that exemption shall be provided by way of refund of service tax on the specified services received for the authorized operations in SEZ. The Explanation is as follows:- Explanation.- For the purposes of this notification, the expression wholly consumed refer to following taxable services, received by a Developer or Unit of a SEZ, for the authorised operations, namely:- (i) xxxxxxxxxx (ii) xxxxxxxxxx (iii) services other than those falling under (i) and (ii) above, provided to a Developer or Unit of SEZ, who does not own or carry on any business other than the operations in the SEZ; 40. It is in this context that question number 3 and its clarification contained in the Circular dated 18 May, 2011 have to be appreciated. The said question and the clarification are reproduced below:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May, 2009 that amended proviso (c) contained in the notification dated 3 March, 2009 to the extent that the exemption claimed by the developer of SEZ would be provided by way of refund of service tax paid on the specified services used in relation to the authorized operations in the SEZ except for services consumed wholly within the SEZ. Thus, if services were to be consumed wholly within SEZ, there was a complete exemption and there was no necessity of first depositing the service tax and then filing a refund. It is for this reason that the Commissioner has observed that the Appellant should not have deposited the service tax for the ECB facility of US$ 99 million, if the services were to be consumed wholly within SEZ and, thereafter, claimed refund. 44. It is correct that in case the services were to be consumed wholly within SEZ, the Appellant should not have deposited the service tax in terms of the amended provision (c) of the notification dated 3 March, 2009. It is, however, seen that the Appellant had deposited the service tax and thereafter claimed refund of the tax deposited under proviso (c) of the notification dated 3 March, 2009. It appears that the Appellant wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of learned Counsel for the Appellant that since, as contemplated under section 73 (1) of the Act, the service tax was paid before service of the show cause notice, the show cause notice should not have been issued to the Appellant in view of the provisions of sections 73(3) of the Act. 48. To appreciate this contention, it would be appropriate to reproduce the relevant provisions of sub-sections (1), (3) and (4) of section 73 of the Act and they are as follows:- 73(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 erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ECB facility as the ICICI Bank had a registered office in India. The Appellant has stated that it is only when summons were received from the Department that a legal opinion was sought after which the Appellant deposited the entire service tax with interest before the service of the show cause notice. To substantiate that there was no wilful suppression of facts, the Appellant has contended that any service tax paid by the Appellant would have been refunded to the Appellant in terms of the notification dated 3 March, 2009 since the services were provided to the Appellant in relation to the authorized operations within the SEZ and so the Appellant could not possibly have had any intention of evading payment of service tax. 51. Though sub-section (1) of section 73 of the Act provides that where service tax has not been paid, the Central Excise Officer may serve notice on the person chargeable with the service tax requiring him to show cause why he should not pay the amount specified in the notice, but sub-section (3) of section 73 also provides that where any service tax has not been paid, the person chargeable with the service tax may pay the amount of such service tax before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Central Excise (Adjudication) 2018 (12) GSTL 368 (Del.) and they are as follows: 11A: Where any duty of excise has not been levied or paid or has been short-levied or short-pain 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 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 dated, 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. 55. In Pushpam Pharmaceuticals Co., the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Act carved out an exception to the provisions that permitted the Department to reopen procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uppression of facts ) can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression. 27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], 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 willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. xxxxx The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief. 60. It is, therefore, clear that even when an assessee has suppressed facts, the extended period of limitation can be invoked only when suppression is wilful with an intent to evade payment of service tax. 61. The Commissioner has denied the benefit of sub-section (3) of section 73 to the Appellant for the reason that the provisions of sub-section (4) of section 73 were applicable. The findings are as follows:- I find that service tax has been demanded in the show cause notice by alleging suppression of facts thereby invoking the extended period under proviso to section 73(1) of the Finance Act, 1994. Therefore, the provisions of section 73(3) of the said Act cannot be applied in this case in view of section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk had a registered office in India, the Appellant would not be required to pay service tax on a reverse charge mechanism. It is also seen that as soon as legal advice was tendered to the Appellant it immediately deposited the service tax before the issuance of the show cause notice. The contention advanced by the learned Counsel for the Appellant, therefore, deserves to be accepted. 65. Thus, the show cause notice could not have been issued as the Appellant had paid the service tax with interest before the service of the show cause notice and had also informed the Department of this fact. 66. This apart, if the dispute is revenue neutral there can be no intention to evade payment of duty and consequently the extended period of limitation could not have been invoked. In this connection reference can be made to a Division Bench decision of the Tribunal in Reliance Industries Ltd. v/s Commissioner of Central Excise and Service Tax, LTC, Mumbai [2016] 72 taxman.com 6 (Mumbai-CESTAT). Paragraph 12 of the decision is reproduced below:- 12. We also note that the entire dispute being revenue neutral, there could have been no intention to evade payment of duty and consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X
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