Brief Facts of the case


Amco Batteries Ltd. Vs CCE 2003(153)ELT 7 (SC)



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Amco Batteries Ltd. Vs CCE 2003(153)ELT 7 (SC)

I find that the issue in the said case is of non-payment of Central Excise duty on waste and scrap sent to the job-workers by suppressing the facts. While deciding the case that there was no suppression on the part of the appellant, it has also been observed by the Hon’ble Supreme Court that since the appellant was entitled to get benefit of MODVAT scheme there was no justifiable reason for the appellant to suppress the facts. I find that the said assessee has drawn its own inference on the above observations with regard to revenue neutrality. The facts and circumstances of the case are different from the one before me where under separate provisions of the Finance Act, 1994 and rules made thereunder payment of service tax is mandatory as per statute and refund of the said service tax is to required to be claimed under different rules, i.e. Rule 5 of the Cenvat Credit Rules,2004. It is required to be understood that the said assessee has to discharge the service tax liability under Rule 2(1)(d)(iv) of Service Tax Rules, 1994 read with Section 66A of the Finance Act,1994 as he being the recipient of service is the person liable to pay service tax under the above said rules. Had the said input services been received from a person in India, the person providing the said services would have paid the service tax and the said assessee after availing the Cenvat credit on such input services would have claimed refund under Rule 5 of the Cenvat Credit Rules,2004. Therefore, the mere act of paying service tax under reverse mechanism will not make any difference to following the procedure of claiming refund which prerequisites the payment of service tax. In view of the above, I find that since the facts and circumstances of the case relied upon by the said assessee are different, the ratio of the said case is not applicable in the case before me. On a similar analogy, the ratio of the following relied upon cases are not found applicable in the case before me.

i) International Auto Ltd. Vs CCE 2005(183)ELT 239 (SC)

ii) CCE Vs Narayan Polyplast Ltd 2005(179) ELT 20 (SC)



    1. CCE Vs Narmada Chematur Pharma 2005(179)ELT 276 (SC)

    2. CCE Vs Textile Corporation 2008(231)ELT 195 (SC)

    3. CCE Vs Jamshedpur Beverages 2007(214)ELT 321(SC)

    4. CCE Vs Coca Cola India P. Ltd. 2007(213)ELT 490 (SC)

19.1 I place reliance on the judgment of Jay Yushin Ltd v/s Commissioner of Central Excise, New Delhi reported at 2000(119) E.L.T. 718 (Tribunal-LB). In the said judgement it is clearly held that Revenue neutrality being a question of fact, the same is to be established in the facts of each case and not merely by showing the availability of an alternate scheme. It is also held therein that where the scheme opted by the assessee is found to be misused, the existence of an alternate scheme would not be an acceptable defence. The said judgment has been relied in the following cases:




  1. 2000(121)ELT 283(Tribunal)

  2. 2001(135)ELT 1342(Tribunal Delhi)

  3. 2001(137)ELT 1098 (Tribunal Delhi)

  4. 2002(139)ELT 101(Tribunal Delhi)

  5. 2002(141)ELT 521(Tribunal Delhi)

  6. 2004(177)ELT 836 (Tribunal Bombay/Mumbai)

  7. 2004(178)ELT 901 (Tribunal Bangalore)

  8. 2007(211)ELT 27 (Tribunal Madras/Chennai)

The said case has also been followed in the following cases:

  1. 2002(139)ELT 709 (Tribunal Calcutta/Kolkata)

  2. 2002(146)ELT 345 (Tribunal Delhi)

20. I now proceed to re-adjudicate the case and discuss other contentions raised by the assessee at the time of original adjudication.


20.1 I find that the issue deals with the applicability of provisions of Section 66A read with Rule 2(1)(d)(iv) of Service Tax Rules, 1994 and the said assessee had contended on the territorial nexus submitting that services rendered outside India were not chargeable to service tax and no separate charging section for services performed outside the territory of India existed. They also relied on various case laws in this regard. Now the issue has been settled and therefore, I find it appropriate to cite the clarification issued by CBEC, vide F.No. 275/7/2010-CX8A dated 30.6.2010 wherein after examining the judgment in the case of Indian National ship-owners Associations V/s. Union of India reported in H.C. 2009(13) S.T.R 235(BOM) and the judgments in the case of M/s Hindustan Zinc Ltd Vs Commissioner of Central Excise, Jaipur by the larger Bench of CESTAT [2008(11) STR 338(T-LB)] and UOI Vs M/s Aditya Cement, by the Hon’ble High Court of Rajasthan, [2008(10) STR 228 (Raj)], the accepted position is given as under:
(i) in case of taxable service provided by a non resident, not having office/establishment in India, and received in India, the service tax liability arises w.e,f 1.1.2005, on reverse charge basis on the recipient of service in India. Therefore, the overall facts and circumstances of each case needs to be taken in to account to determine whether service is received in India or otherwise.

(ii) in case of taxable service received outside India by a person, who is resident in India or has place of business/business establishment in India, the service tax liability arises w.e.f 18.4.2006, as held in the case of INSA, where services were received outside India for use in the ships and vessels located outside India.


20.1.1 In view of the above settled position, I donot find it necessary to discuss the contentions made by the assessee in this regard at the time of original adjudication proceeding. Also, no discussion is required on the case laws cited by the said assessee in this regard. I observe that Circulars issued by the Board are binding on the departmental officers as has been held by the Hon’ble Supreme Court in the case of Ranadey Micronutrients Vs 1996(87)ELT19(SC) and Paper Products Ltd Vs CCE 1996(112)ELT 765(SC).
20.1.2 Therefore, I hold that the service tax liability to be discharged by the said assessee under the reverse charge mechanism arises w.e.f. 01/04/2006 in this case. I have no option other than to hold the entire amount of Rs. 9,64,25,631/- as liable to service tax.
20.2 It has also been the contention of the said assessee that the show cause notice is vague as mere payment made in foreign currency does not make them liable to pay service tax. The said assessee also contended that the show cause notice fails to make any case for levying service tax under any particular category of service. I find that in view of the above settled position the contention of the said assessee with regard to the taxability on payments made in foreign currency does not sustain now. I Further find that the show cause notice clearly categorizes the service provided by the said assessee as “Business Auxiliary Service” and “Business Support Service” and the assessee in their written submission has not challenged the said classification. I therefore, find the said contention of the assessee as unacceptable.
20.3 Now, I look into the said assesseee’s contention that in case service tax is to be levied, it should be levied on cum tax value of the services and not on the entire value. Contending the value taken for the purpose of Service tax it is submitted by the said assesse that the Show Cause Notice is bad in law in as much as it has not considered and extended the benefit of cum tax value. In this regard they placed reliance on the following judgments:-
(1) Maruti Udyog Limited reported in 2002 (141) ELT 3 (SC).

(2) Sri Chakra Tyres reported in 1999(108) ELT 361

(3) Rajmahal Hotel V/s CCE reported in 2006(4) STR 370(Tri.-Del)

(4) Gemstar Enterprises Pvt Ltd V/s CCE reported in 2007(7) STR 342.



(5) Panther Detective Services V/s. CCE reported in 2006(4) STR 116(Tri.-Del)
20.3.1 I observe that in the case before me the said assessee is liable to pay service tax under the reverse charge mechanism. Therefore, the value on which tax is to be paid is not the amount earned by the said assessee but it is the amount that he has paid to companies located outside. The said assessee has not produced any evidence on record to show that the contract or invoices specifically indicate that the gross amount charged included the amount of service tax. As per Section 67(2) ibid, this benefit can be given only where the gross amount charged (paid in this case) is inclusive of the service tax payable which is not the case before me. Therefore, the ratio of case laws relied upon by the said assessee can not be applied in the case before me.
20.3.2 I place reliance on the judgment of M/s Shakti Motors reported at 2008(12) STR 710(Tri. Ahmd.) wherein, it has been observed as under:
“I am unable to agree with the advocate that the amount realized has to be treated as cum-tax value in view of the provision of Section 67(2) of Finance Act, 1994, which is reproduced below for ready reference:-
Section 67(2). Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged”.
In terms of the above provision if the invoice does not specifically say that the gross amount charged includes service tax, it cannot be treated as cum-service tax price. Therefore, in the absence of any evidence to show that invoices had indeed been prepared in this manner, cum-tax value benefit cannot be extended.”
20.3.3 Accordingly, I find that claim made by the said assessee in this regard is not correct and hold that benefit of Cum-Tax value is not allowable to the assessee.
21. Therefore, in view of the above discussion, I conclude that Service tax of Rs. 1,18,34,666/-is recoverable from the said assessee under proviso to Section 73(1) of the Finance Act, 1994 along with interest as applicable under Section 75 ibid.
22. As regards the suppression of facts, I find that consequent upon the issuance of Notification No. 36/2004-ST dated 31.12.2004, under Section 68(2) of the Act read with Rule 2(1)(d)(iv) of the Service Tax Rules,1994 levy of service tax on taxable services received in India from a non-resident, not having any office in India, arises on reverse charge basis w.e.f 1.1.2005. Section 66A has also been introduced in the Finance Act w.e.f. 18/04/2006. Therefore, Government’s view on the taxability of the services and the person liable for paying service tax was well within the knowledge of the said assessee. I find that, eventhough the assessee may disagree and not pay service tax, the onus to declare the value of such services in the ST-3 returns was on the assessee which they failed to do. Therefore, I do not find merit in the contention of the said assessee with regard to the bar of limitation. The said assessee has contended that in revenue neutral cases the charge of suppression of information with intention to evade payment of service tax is not sustainable and the extended period of limitation cannot be invoked. They relied on the judgment of Jay Yushin Ltd v/s Commissioner of Central Excise, New Delhi reported at 2000(119) E.L.T. 718 (Tribunal-LB) in this regard. I have already discussed the issue of revenue neutrality in para 16 to 19 above and while relying on the above judgment, found that the plea of revenue neutrality in the present case raised by the assessee has no merit. As regards, invoking of the extended period is concerned, the said assessee has wrongly relied on this case law as it has been observed by the Hon’ble CESTAT that “Fact that the differential duty was subsequently debited (albeit voluntarily) by the assessee before the issue of SCN will not debar the issuance of SCN in relation to the short payment occurring on the relevant date.---We are therefore satisfied that there will be no illegality in invoking the extended period of limitation under Section 11A(1) in a case like this”.

22.1 So far as ‘suppression of facts’ is concerned, the phrase implies that withholding of information is suppression of facts. P. Ramanatha Aiyar’s Concise Law Dictionary [1997 Edition Reprint 2003 – page 822] defines the phrase lucidly and accurately as – Where there is an obligation to speak, a failure to speak will constitute the “suppression of fact” but where there is no obligation to speak, silence cannot be termed “suppression”. It is manifestly clear from this that intention to evade payment of duty is implied in the suppression of facts. Since the said assessee is liable to self assess the liability to pay service tax, they had an obligation to furnish the correct and complete information and the value of services whether taxable or otherwise.

22.2 It is needless to recapitulate that the present show cause notice has arisen out of the audit conducted by the CERA Audit Party. Had the same not been done, the evasion of service tax would have remained unnoticed.

22.3 As regards the said assessee’s reliance on various other judgment I find that in the present system of self-assessment the documents like invoices and other transaction details are not supplied to the Department. Moreover, as the said assessee did not furnish the required details of receipt of amount of taxable value to the Department, the intention will have to be believed as that of evasion. Once the details are not submitted to the Department, mis-declaration 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. In view of the above discussion and findings, the ratio of other cases relied upon by the said assessee can not be applied in the case before me.


23. As regards their contention for invoking Section 80 of the Finance Act, 1994 for waiver of penalty, I find that they haven’t produced any reasonable cause for the failure to pay service tax. I have already discussed the issue of taxability of the services provided by the said assessee in the foregoing paras and arrived at the findings that the said services are taxable and the said assessee is liable to pay service tax as per the provisions of Section 66A read with Rule 2(1)(d)(iv) of Service Tax Rules, 1994 under reverse charge mechanism. I observe that if the said assessee had any doubt regarding the taxability of the services provided by them, then being a registered service tax assessee and a registered Central Excise assessee they should have approached the service tax authorities for clarification of doubt to ascertain the taxability of the service. I find that the said assesee has failed to establish bona-fide belief for non payment of service tax. Therefore, I consider it appropriate not to invoke the provisions of Section 80 of the Finance Act, 1994. In view of the factual position as discussed, the ratio of the case laws relied upon by the said assessee cannot be applied in the case before me.
24. I now take up the issue of imposition of penalty under section 76, 77 and 78 of the Act.
24.1 As regards the issue of imposition of penalty under Section 76 of the Finance Act, 1994, I find that the penalty under Section 76 of the said Act is a penalty for failure to pay service tax. I find in view of the above discussion that the said assessee was liable to pay service tax of Rs. 1,18,34,666/- on the amount of Rs. 9,64,25,631/- paid by them to the companies located outside India within the stipulated time period as prescribed under Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994. However, the said assessee has failed to pay tax as prescribed. Therefore, I hold them liable to penalty under Section 76 of the Finance Act, 1994.
24.2 As regards imposition of penalty under Section 78 of the Finance Act, 1994, I find that as the said assessee has suppressed the facts with intention to evade payment of service tax, penalty under Section 78 is mandatorily imposable as has been held by the Apex court in the case of Dharmendra Textile Mills Ltd-2008 (231) ELT 3 (SC) and Rajasthan Spinning & Weaving Mills Ltd-2009 (238) ELT 3 (SC). Therefore, penalty is imposable on the said assessee under Section 78 of the Finance Act, 1994.
24.3 As regards imposition of simultaneous penalty, I place my reliance on the judgment of Hon’ble High Court of Kerala in the case of Assistant Commissioner of Central Excise v. Krishna Poduval as reported at [2006] 3 STT 96 (KER) which is aptly applicable to the present case. I find that the imposition of penalty under sections 76 and 78 of the Act is for non payment of service tax and suppression of value of taxable service respectively which are two distinct and separate offences attracting separate penalties. I find that the said assessee has committed both the offences and therefore penalties under section 76 and 78 of the Finance Act, 1994 are imposable on the said assessee. In view of this, ratio of the judgments relied upon by the said assessee can not be applied in the case before me.

24.4 As regards imposition of penalty under section 77 of the Finance Act, 1994, I observe that the show cause notice alleges that the said assessee has failed to properly comply with the provisions of the Act and rules made thereunder. I find that penalty under Section 77 as it existed at the material time was for contravention of any provision for which no penalty is prescribed. The said assessee has failed to file prescribed service tax returns within the stipulated time. Therefore, I hold them liable to penalty under Section 77 of the Act.


25. In view of the above discussion and findings and the directions given by the Hon’ble CESTAT vide Order No. A/332/WZB/AHD/2011 & S/86/WZB/AHD/2011 dated 21.2.2011, I pass the following order :
O R D E R


  1. I order to consider amount of Rs. 9,64,25,631/- (Rupees Nine crore sixty four lakh twenty five thousand six hundred and thirty one only) paid by the said assessee to the companies located outside India during the years 2006-07 and 2007-08 as taxable value under the category of “Business Auxiliary Service” and “Business Support Service”;




  1. I confirm the demand of service tax (inclusive of Edu.Cess and Higher Edu. Cess) amounting to Rs 1,18,34,666/- (Rupees One crore eighteen lakh thirty four thousand six hundred and sixty six only) on the above taxable value for the years 2006-07 and 2007-08, and order to recover the same from the said assessee under proviso to Section 73(1) of the Finance Act,1994;




  1. I order to recover interest on Rs 1,18,34,666/- (Rupees One crore eighteen lakh thirty four thousand six hundred and sixty six only) at the prescribed rate from the said service provider under Section 75 of the Finance Act, 1994;




  1. I impose penalty of Rs.200/- (Rupees Two hundred only) per day for the period during which failure to pay the tax continued, or at the rate of 2% of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax upon the said assessee under Section 76 of the Finance Act, 1994, provided the total amount of penalty payable in terms of this section shall not exceed the amount of service tax of Rs 1,18,34,666/- (Rupees One crore eighteen lakh thirty four thousand six hundred and sixty six only) recoverable from the said assessee for the years 2006-07 and 2007-08;




  1. I impose penalty of Rs 1,18,34,666/- (Rupees One crore eighteen lakh thirty four thousand six hundred and sixty six only) on the said assessee under section 78 of the Finance Act, 1994. In the event of the said assessee opting to pay the amount of service tax along with all other dues as confirmed and ordered to be recovered, within thirty days from the date of communication of this order, the amount of penalty liable to be paid by them under Section 78 of the Finance Act, 1994 shall be 25% of the said amount. However, the benefit of reduced penalty shall be available only if the amount of penalty is also paid within the period of thirty days from the communication of this order, otherwise full penalty shall be paid as imposed in the above order.




  1. I impose penalty of Rs. 5000/- (Rupees Five thousand) on the said assessee under Section 77 of the Finance Act,1994.

.
-sd/- 19.09.11

( A.K.Gupta)

Commissioner

Service Tax,

Ahmedabad.
F.No.STC/4-29/O&A-Denovo/11-12 Date:19/09/2011.
REGD.POST.AD.

To,


M/s Motif India Infotech Pvt. Ltd (STP Unit).

1-A, Wall Street-2, Near Gujarat College,

Ellisbridge,

Ahmedabad-380006


Copy to:

  1. The Chief Commissioner, Central Excise & Service Tax, Ahmedabad Zone, Ahmedabad.

  2. The Assistant Commissioner, Service Tax, Division-III, Ahmedabad.

  3. The Superintendent, Service Tax, Range-13, Division-III, Ahmedabad.

  4. The Assistant Commissioner (RRA), Service Tax, Ahmedabad.

  5. Guard File



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