Brief Facts of the Case
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- Total Amount of Service Tax Short/Not Paid 9,36,431/
- 12. DEFENSE REPLY PERSONAL HEARING.
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Brief Facts of the Case: M/s Dishman Pharmaceutical & Chemical Ltd. (100%EOU), Survey No.47, Village: Lodariyal, Tal. Sanand, Dist. Ahmedabad (hereinafter referred to as “the said noticee”) were engaged in the manufacturing of Bulk Drugs falling under the Chapter 29 of the Central Excise Tariff Act,1985. The said noticee have taken Service Tax Registration Certificate bearing number AAACD4164DST001 under the category of GTA, BAS, Online Data Information Service etc. 2. As per the provision of Rule 2 (1) (d) (iv) of Service Tax Rules, 1994 (hereinafter referred to as the Rules) and as per Section 66A of the Finance Act 1994 (hereinafter referred to as the Act), “in relation to taxable Service provided by any person from a country other than India and received by any person in India, then recipient of such service shall pay the Service Tax. During the course of audit conducted at the premises of said noticee by the officers of Central Excise, Commissionerate, Ahmedabad-II during February 2009, it was noticed that in the process of realization of export proceeds from buyer two banks viz. exporter’s bank in India and nodal bank in foreign country render their services and both of them recovered “Bank Charges” for services rendered by these banks. Whereas exporter’s bank in India was found to be paying Service Tax in all the cases, it appeared that “Bank Charges” charged by foreign bank escapes Service Tax liabilities. The service rendered by Bank was taxable under the category of “Banking and other Financial Services” as per Section 65 (105) (zm) of Act. In the above case since the service provided from outside India, the exporter, being a recipient of service was liable to discharge Service Tax liabilities as per the provision of Rule 2 (1) (d) (iv) of Rules and as per Section 66A of Act. The details of foreign bank charges recovered from the said noticee is detailed below:
3. On going through the above details, it appeared that the noticee had made payment of Rs.80,14,963/- for the above said services for the period from 2004-05 to 2008-09 for which they had not made payment of Service Tax (including 2% Ed. Cess & 1% S&H Cess) amounting to Rs.9,36,431/- . 4. As per the provisions of Section 68 of the Act read with Rule 6 of the Rules, every person providing taxable service to any person shall pay the Service Tax at the rate specified in Section 66 of the Act in such manner and within such period as may be prescribed. In the subject case, the said Noticee had not paid the service tax leviable thereon and thereby contravened the provisions of section 68 of the Act and rendered themselves liable for penalty as provided under section 76 of the Act. 5. As per the provision of Section 70 of the Act read with Rule 7 of the Rules, every person liable to pay Service Tax shall himself assess the tax due on the services provided by them and shall furnish to the Superintendent of Central excise, a return in the prescribed form ST-3 by 25th of the month following the particular half year. In the subject case, the said Noticee had not filed returns for the services received by them during the period under reference and had contravened the provisions of section 70 of the Act and rendered themselves liable to pay late fee as provided under section 70 of the Act. 6. As per the provision of Section 67 of the Act, every person liable to pay Service Tax himself shows the correct value of the services for charging service tax. In the subject case, on being asked by the officers of Central Excise and Service Tax, the year wise details of foreign bank charges for the period from 2004-05 to 2008-09 was given. But the said Noticee did not pay the Service Tax due and as such, the said Noticee had contravened the provisions of section 67 of the Act and rendered themselves liable to penalty as provided under section 78 of the Act. 7. As per the provision of Section 75 of the Act, if any person was required to pay the service tax, did not pay the service tax in time has to pay the interest. In the subject case, the said Noticee had not paid the service tax as provided under Section 68 of the Act and they were required to pay the interest as provided under Section 75 of the Act. 8. It can be seen that the Noticee had not shown the taxable value of Rs.80,14,963/- in the ST-3 returns filed by them though the said taxable value had been shown in their profit & loss account and thereby they had short paid Service Tax to the tune of Rs.9,36,431/-. By this way, the noticee had suppressed the material facts from the department with an intention to evade payment of service tax and hence, the extended period was to be invoked for effecting recovery of non paid/ short paid amount of service tax, as provided under Section 73 of the Act. 9. All these acts of contravention on the part of the said noticee appeared to have been committed by way of suppression of facts with an intend to evade payment of Service Tax and therefore, the said service Tax not paid was required to be demanded and recovered from them under Section 73(1) of Act by invoking extended period of five years. All these acts of contravention of the provisions of Section 66, 67, 68 and 70 of Act read with Rules 5, 6, and 7 of Rules appeared to be punishable under the provisions of Section 76 and 77 of the Act. 10. Moreover, in addition to the contravention, omission and commissions on the part of the said noticee as stated in foregoing paras, it appeared that they had wilfully suppressed the facts, nature and value of service provided by them with an intent to evade the payment of Service Tax, rendering themselves liable for penalty under section 78 of the Act. 11. Therefore, M/s Dishman Pharmaceutical & Chemical Ltd (100% EOU), Survey No.47, Village : Lodariyal, Tal. Sanand, Dist. Ahmedabad was issued a Show Cause Notice bearing F.No. STC-54/O&A/SCN/DP/ADC/R-9/D-II/09 dated 22.09.2009 asking them as to why:-
12. DEFENSE REPLY & PERSONAL HEARING. 12.1 The noticee filed their defence reply vide their letter dated 29.10.2009 received by this office on 04.11.2009. They were called for personal hearing on 06.11.2009, 27.11.2009, 22.01.2010, 15.04.2010, 20.05.2010. Shri Ajay Karia, Chartered Accountant and Shri Jayesh Shah, Manager Excise appeared on 20.05.2010 before the Joint Commissioner, Service Tax, Ahmedabad. Further, they were call for personal hearing on 12.11.2010, 13.03.2012 & 04.05.2012. Shri Ajay Karia, Chartered Accountants appeared on behalf of the said service provider on 04.05.2012 before me. 12.2 During the personal hearing, he submitted defence reply dated 04.05.2012 and reiterated their defence reply dated 04.11.2009, 29.10.2009 & 20.05.2010 and also submitted Board’s letter F.No:276/8/2009-CX8A dtd.26.09.2011. 13. In their defence reply submitted on 29.10.2009, it was, inter-alia, submitted that:- 13.1 The Foreign Bank Charges referred to in the Show Cause Notice are the short payments received by them against export bills. The services in fact are provided by their bank in India to them for which their bank is charging Service Tax on the amount of bank charges collected by them from them. But the deductions made by the foreign banks i.e bankers of the buyer are not charged for services provided by those foreign banks to them. In fact they had no any relation or locus standi with such banks who act and work exclusively for and on behalf of their buyers in foreign countries. They deal only with their banker in India to whom they remit the payment on behalf of their buyers. They remit the payment to their banker on behalf of their clients in those foreign countries and hence they act for and on behalf of their clients i.e their buyers. They have no any control over or relation with those banks and hence, the question of providing of service or existence of a relation of service receiver and service provider does not arise. 13.2. What is chargeable to Service Tax is only the amount charged as bank charges by their bank is evident only from the fact that their bank in India collects bank charges and applicable Service Tax from them. If there is a case of any applicability of Service Tax it would have been the duty of their bank in India to pay Service Tax on whatever amount of Service Tax is applicable on any amount charged by such foreign banks. The intention of department seems to recover the Service Tax from DPCL under reverse charge mechanism but even in case of chargeability of Service Tax, receiver of service is liable to pay Service Tax only if such receiver has effected any payment for services rendered and that too only in case when there is the existence of relationship of service receiver and service provider between the two. Not only this, but even if there is a chance of existence of relationship between service receiver and service provider, it is between their bank in India and foreign banks or between their buyers and foreign banks. These foreign banks are exclusively acting on behalf of their clients in the foreign country and they act exclusively for and under the instructions of their buyers which also is suggestive of the facts that mere is a relationship between their buyer and such foreign bankers and DPCL has no any such relation with or does not have any control on such foreign banks. In addition to this such banks have not provided any service to DPCL nor has DPCL availed or used such services here in India. Hence, alleging chargeability of Service Tax in this case is too much stretching of the provisions of Service Tax which are applicable only within the framework of the chargeability of the Service Tax under Finance Act, 1994. Hence, considering the above they requested to drop the Show Cause Notice. 13.3. The department before issuance of the Show Cause Notice has failed to verify the possibility of charging service tax from their bankers who infact directly interact and transact through the banking channels with foreign bankers who remit payment on behalf of their customers to their bankers. The only fact that remittance being received belongs to DPCL does not make DPCL the service receiver and accordingly chargeable to service tax under reverse charge mechanism. This is true in view of the fact that if the department's stand is logically and legally correct, all services taking place even after the movement of the cargo outside the Indian territorial waters would become taxable even if the total control on such services or activities is that of the buyer in foreign country and even if such services are exclusively provided by a foreign service provider to a foreign service receiver. 13.4. The department has also alleged suppression of facts by proposing to invoke provisions of section 73 of the Finance Act, 1994 to cover the longer period. But they have to clarify that there is no question of suppression of any fact in view of the fact that no any material fact has been hidden. Non-payment of Service Tax liability by the assessee with the genuine and bonafide belief that the assessee is not liable to such Service Tax cannot be termed as suppression of fact for non-payment with the intention to evade tax. This is evident from the fact that Service Tax on bank charges are collected by the bankers of DPCL which is advised to DPCL by the bank statement and advices of their bankers. And on the basis of such advices the accounting entries are made and accordingly such accounts are submitted to various authorities like income Tax, Central Excise, etc. These accounts are also verified by the Central Excise and Service Tax Audit Department. Hence considering these facts department has not got any evidence on record to prove that suppression was evident to evade tax liability. It is very clear that DPCL genuinely believe that Service Tax in such case is not applicable. And hence, any action on a bonafide belief that such action is not legally incorrect, cannot be termed as suppression effects. The ratio judgments in the cases of
are squarely applicable in the instant case which may please be taken into consideration for deciding this case. Considering the facts above it is clear that the Show Cause Notice deserves to be quashed and accordingly they requested to drop the Show Cause Notice. 13.5. In their defence reply submitted on 20.05.2010, they, inter alia, reiterated what is represented by them in their said letter dated 29.10.2009. In addition to that they have further submitted that:- 13.5.1. The department in the instant case while proposing to demand Service Tax on foreign bank charges have failed to provide any logic establishing any relationship whatsoever between the noticee and the foreign bank i.e. the relationship of Service Receiver and Service Provider. 13.6. In any contract, whether written or oral, involving, providing and receiving of the services, the provider of service receives consideration in money or money`s worth and the receiver of the service receives service which adds to the value in relation to which such services are provided. Since Service Tax is a consumption based value added tax in transaction involved in the instant case, it is difficult to derive
13.7. The department while proposing to levy Service Tax does not appear to have considered the above issue and technical aspects of the basic fundamentals on which Service Tax is charged. 13.8. The contention of the notice that this transaction cannot be termed as providing of service by any person to any other person chargeable to Service Tax U/s 66 of the Finance Act, 1994 holds good in as much as what is collected by the foreign bank is not something which the notice has either paid or was willing to pay in exchange of or in consideration of any service or value addition to be provided by such foreign bank. And hence when the recovery made by the foreign bank is without any service or value addition actually received or in anticipation of such actual receipt, the transaction involved cannot be termed as provision of Service chargeable U/s 66 of the Finance Act, 1994. Further to this, the noticee has no control whatsoever over these transactions and hence the notice cannot be said to be in receipt of any service and hence the deductions made by the notice for the purpose of alleged levy of service tax. 13.9. They further drawn attention to the definition of “Banking & Other Financial Services” U/s 65(12) of the Act, which is reproduced hereunder, “Banking and other financial services”- means – (a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or [commercial concern], namely –
[Explanation- For the purpose of this item, ‘financial leasing’ means a lease transaction where –
13.10. From the above it is difficult to classify the charges recovered by the foreign bank under any of these categories specified in the definition of “Banking & Other Financial Services”. This argument of the noticee carries weight in view of the fact that what is charged by the foreign bank or short paid by such foreign bank have never been named to be charges for any services and as per the prevailing traditions amongst the Indian exporters, such short payment or charge is also being termed as or accounted as short payment of the export proceeds. Such short payment is not objected or is capable of being objected to by any authority whatsoever in India including Reserve Bank of India. The point here, the noticee wants to drive is that such short payments should and cannot be given the colour of being the charge of service of any sort by such foreign bank attracting any of the provisions of Service Tax under the Finance Act, 1994. 13.11. They further submitted that the definition given at Sub- Para 2 of Para vii of the main Para 1 of the Ministry’s letter no. B11/I/2000-TRU dated 09.07.2001 (copy enclosed). The said Para is being reproduced hereunder for the kind perusal of your honor. “The definitions of ‘banking’, ‘banking company’, ‘financial institution’ and ‘non-banking financial company’ as per the Banking Regulation Act, 1949 and Reserve Bank if India act, 1934 are given below – “Banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise. “Banking company” means any company which transacts the business of banking in India. “Financial institution” means any non-banking institution, which carries on as its business or part of its business any of the following activities, namely The financing, whether by way of making loans or advances or otherwise, of any activity other than its own,
(aa) industrial activity, or
“Non-banking financial company” means
13.12. In addition to the above, they clarify that basically this is the case of revenue neutrality since had the Service Tax been applicable in this case, the noticee could have availed the Cenvat Credit of Service Tax so applicable meaning thereby the entire transaction is revenue neutral and it has whatsoever no impact on the revenue of the Government. 13.13. In support of their arguments made hereinabove as in the reply to show cause notice dated 29.10.2009 they rely upon the following decision of the Honorable Tribunal of Delhi reported as per the citation mentioned below the copy of which is also attached herewith. 2009(14) S.T.R. 505 (Tri. – Del.) IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI [COURT NO. III] S/Shri M. Veeraiyan, Member(T) and P.K.Das, Member(J) GREEN PLY INDUA\STRIES LTD. Versus COMMISSIONER OF C. EX., JAIPUR-I View above the noticee prays to drop the Show Cause Notice. 14. In their defence reply dated 04.05.2012, they, inter alia, submitted that: 14.1. They re-iterate what is stated by them in their reply dated 29.10.2009 & 20.05.2010. In addition to this, they hereby make following further submission. 14.2. The Noticee filed a detailed reply to the above show cause notice vide letter dated 29.10.2009 & further submission vide their letter dated 20.05.2010, inter alia, submitting that they have no relation or locus standi with their banker of their buyers in foreign countries. They deal only with their banker in India to whom they remit the payment on behalf of their buyers. They remit the payment to their banker on behalf of their clients in those foreign countries and hence they act for and on behalf of their clients i.e. their buyers. Noticee has no any control over or relation with those banks and hence the question of providing of service or existence of a relation of service receiver and service provider does not arise. As it is clear from the contents of the impugned SCN Service Tax is proposed to be levied on foreign bank charges recovered or deducted by the foreign bank from the export remittance of the noticee, on which the noticee has no control whatsoever since the noticee has neither entered into any contract nor any agreement, oral or written with such bank nor has carried out any correspondence or transaction with such foreign bank. And hence this transaction cannot be termed as provision of service. SHOW CAUSE NOTICE IS VAGUE 14.3. Noticee submited that without prejudice to whatever is discussed hereinabove and in the earlier reply filed with the department on 29.10.2009 & 20.05.2010, the impugned SCN is vague. Noticee further submied that SCN is basic foundation of proceedings which may give rise to different consequences of law. Composite SCN issued left the matter in dark. 14.4. To further elaborate, it is further submitted that the impugned SCN fails to point out as to under which sub-clause of section 65(105)(zm) Banking and Financial Service the alleged short payment of export proceeds received by the noticee falls. Noticee submits that the SCN must be clear in terms of what action it proposes to take, if the show cause notice is not clear in terms of what it proposes, then adjudication based on such SCN shall be against the violation of natural justice. Hence, in the instant case it is not possible for the noticee to submit their defence against the proposed proceedings covered under the impugned SCN. 14.5. In support of their contention, they draw attention on the decision in the case of [a] CCE vs. Shemco India Transport 2011 (24) STR 409 (Tri-Del.) wherein it is clarified that the SCN did not show how a “carrier” without seats could be considered as a “cab” or for what purpose – transportation of goods or passengers were the vehicles used, the Tribunal set aside the demand observing that an ill founded show cause notice not giving rise to specific charge neatly is fatal to adjudication. In the instant case also, the impugned SCN has failed to establish the relationship of service provider and service receiver and if at all the service is provided the SCN fails to specifically point out the nature of service provider. On this count the SCN is evidently vague. [b] Amrit Food vs. CC 2005 (190) ELT 433 (SC) wherein it was held that no penalty is imposable where neither the show cause notice nor the order specifies which particular clause of Rule 173Q of erstwhile Central Excise Rules, 1994 had been alleged contravened by the assessee. TIME BARRED 14.6. Without prejudice to what is discussed hereinabove and in the earlier reply filed with the department on 29.10.09 & 20.05.10 Noticee submited that impugned SCN was issued on Dt. 22.09.2009 and received by the noticee on Dt. 30.09.2009. Noticee drawn attention to Sub Section 1 of Section 73 of the Finance Act, 1994, the same is reproduced below; “ Where any service tax has not been paid or levied or paid or has been short levied or short paid or erroneously refunded the central excise officer may, within one year from the relevant date serve notice on the person chargeable with 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 –
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. Explanation – Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five year, as the case may be. ” 14.7. Noticee further drawn attention to Sub Section 6 of Section 73 of The Finance Act, 1994, which defines the word “Relevant Date” the same is reproduces below; “ For the purposes of this section, “relevant date” means, — (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid — (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.] 14.8. Noticee drawn attention to the definition of relevant date for the issue of impugned show cause notice covering the period of 01.04.2004 to 31.03.2009 shall be reckoned from said relevant date i.e. the due date of filling the return for the period 01.04.2004 to 31.03.2009. The impugned SCN was received on 30.09.2009, hence the time limit for issuance of impugned show cause notice under section 73(1) for the period 01.04.2004 to 31.03.2008 has already expired meaning thereby that the demand was barred by limitation of time and without any evidence to be suppression of fact invoking of Section 78 of Finance Act 1994 is unlawful and the demand deserves to be set aside. 14.9. Without prejudice to whatever is discussed hereinabove and in the earlier reply filed with the department on 29.10.09 & 20.05.10, Noticee submitted that impugned SCN at para 8, 9 & 10 has expressed that the noticee has suppressed the material facts from the department with an intention to evade payment of service tax and hence the extended period is to be invoked for effecting recovery of non paid/short paid amount of service tax, as provided under Section 73 of the Act. 14.10. Noticee further submitted that the instant case covered under the impugned SCN alleging payment of service tax on the foreign bank charges is a revenue neutral transaction. Thus when the alleged transactions is a revenue neutral, it cannot be the intention of the noticee to suppress the information or to make willful misstatement with intent to evade payment of service tax as alleged by the department to be payable. 14.11. Noticee further submited that since there was no suppression in the instant case as covered by the impugned SCN and hence the extended period of limitation cannot be invoked and consequently demand is barred by limitation of time as explained above and also the proposed penal proceedings under section 78 of the Finance Act, 1994 is without jurisdiction and bad in law hence it cannot be invoked. 14.12. The department, without any application of mind, has stated that the Noticee has suppressed facts due to which extended period of limitation is applicable. Further, the Noticee was entitled to entertain a belief that service tax is not payable on alleged foreign bank charges. That cannot be wilful misstatement or suppression. Noticee refers and relies on the following decisions.
15. In view of above, it is not possible to allege or conclude that the noticee had acted or taken any action to evade tax. Since, this is the case of interpretations of provisions contained in The Finance Act, 1994 regarding service tax and in a case where issue involved is the question of interpretation of law, any action taken by the assessee in the bonafide belief of the action being correct and genuine cannot be termed as the action taken with intent to evade tax. In the instant case, the noticee has not paid the service tax on the alleged foreign bank charges on the bonafide belief that the noticee is not liable to service tax on the alleged foreign bank charges. And hence allegation of suppression with intent to evade the tax and it proposed only to cover the extended period since the notice is issued after the expiry of the limitation period. 15.1. The noticee would further submitted that the para 8 of the impugned SCN, is reproduced as under; “Para.8 ; It can be seen that the Noticee has not shown the taxable value of Rs. 80,14,963/- in the ST-3 returns filed by them though the said taxable value has been shown in their Profit & Loss Account and thereby they have short paid Service Tax to the tune of Rs. 9,36,431/-. By this way the noticee has suppressed the material facts from the department with an intention to evade payment of service tax and hence the extended period is to be invoked for effecting recovery of non paid / short paid amount of service tax, as provided under Section 73 of the Act.” 15.2. Noticee further submitted that going through the wordings of the para.8 of the impugned SCN it is very clear and undisputed fact and even admitted by the department as evidenced from the para.8 of the impugned SCN that noticee has disclosed the details of the short payment of export proceeds alleged by the department as foreign bank charges in the Profit & Loss A/c. 15.3. Noticee submitted that on one hand the department admited that the noticee has disclosed the details of the short payment of export proceeds alleged by the department as foreign bank charges in the Profit & Loss A/c and on the other hand the department itself contending that the noticee has suppressed the material facts from the department with an intention to evade payment of service tax. 15.4. Noticee further submitted that impugned SCN fails to provide any evidence as to how the noticee has suppressed the material information from the department with an intention to evade payment of service tax. 15.5. Noticee further submited that the impugned SCN is also vague in the sense that it fails to provide proper justification for the action proposed in the impugned SCN and thus liable to be set aside. 15.6. In support of their argument made herein above regarding the issue of ‘suppression of facts’, they also rely upon the following judgements, [1] 1989 (43) E.L.T. 195 (S.C.) IN THE SUPREME COURT OF INDIA Sabyasachi Mukharji and B.C. Ray, JJ. PADMINI PRODUCTS
COLLECTOR OF C. EX. Civil Appeal No. 4080 of 1988, decided on 18-8-19891 [2] 1989 (40) E.L.T. 276 (S.C.) IN THE SUPREME COURT OF INDIA Sabyasachi Mukharji and S. Ranganathan, JJ. COLLECTOR OF CENTRAL EXCISE
CHEMPHAR DRUGS & LINIMENTS Civil Appeal No. 1632 of 1988, dated 14-2-1989[1] STATUTORY PROVISION 16. Without prejudice to whatever is discussed hereinabove and in the earlier reply filed with the department on 29.10.09 & 20.05.10 Noticee reproduced hereunder the provisions of Rule 2(1)(d)(iv) of Service Tax Rules, 1994 as well as provisions of Section 66A of The Finance Act, 1994 for the sake of proper understanding of the issue involved since the entire SCN has taken the support of these two provisions to be able to recover the alleged Service Tax liability under reverse charge mechanism. 16.1. “Rule 2(1)(d)(iv) of the Service Tax Rules, 1994.” In these rules unless the context otherwise requires, - (d) “person liable for paying the Service Tax” means,- (iv) in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under section 66A of the Act, the recipient of such service. Yüklə 190,73 Kb. Dostları ilə paylaş:
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