Brief Facts of the Case
Citation: 2011-TIOL-95-CESTAT-MUM
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- Discussion and findings
- Rule 9 . Documents and accounts
- misstatement or suppression of facts or contravention of any provisions of the Excise Act, or of the Customs Act, 1962 (52 of 1962) or the rules made there under with intent to evade payment of duty.
- 38. With regard to Suppression of Facts and Penalty:- 38.1.
Citation: 2011-TIOL-95-CESTAT-MUM 76 Issue:- Cenvat credit will be admissible on services utilised by the manufacturer in relation to their business activity. Credit admissible on Outdoor Catering Services availed in guest house, Garden maintenance basis, Housekeeping at Guest House, Housekeeping at factory and jungle cutting service. Penalty cannot be imposed as the issue involved interpretation of statutes. 24.3. It is a well-settled principle of law that where there is no demand of duty, penalty cannot be imposed - Coolade Beverages Limited (2004) 172 ELT 451 (All)
(a) CCE V/s Sarup Tanneries Limited 2005 (184) ELT 217 (T) (b) CCE V/s Explicit Trading 2004 (169) ELT 205 (T) (c) Goyal M. G Gases Ltd V/s CCE 2004 (168) ELT 369 (T) (d) Kanthuria Portfolios V/s CCE 2003 (158) ELT 355 (T) (e) Goenka Woolen Mills V/s CCE 2001 (135) ELT 873 (T) 24.5. In any event, the Noticees submit that they were under bonafide belief that they are not liable to pay service tax for the reasons stated hereinabove. There are various decisions of the Tribunal and High Court supporting the view that no service tax is applicable on services provided beyond the territory of India. Further, the Noticees have paid service tax after introduction of section 66A, wherever applicable. This also establishes the bonafide of the Noticee. The question involved in the present case is purely one of interpretation. This is a reasonable cause for non payment of service tax. Therefore, no penalty can be imposed on the Noticees under section 80 of the Finance act, 1994. 24.6. Section 80 of the Finance Act, 1994 provides that “Notwithstanding anything contained in the provisions of section 76, section 77 or section 78, no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure”. The Noticees submit that Section 80 was introduced in the Finance Act, 1994 keeping in view that service tax was a new levy and there was no clarity regarding the imposition of service tax. It is a benevolent provision specifically inculcated by the Legislature. There is no provision pari materia under the Customs Act, 1962, Central Excise Act, 1944, Income Tax Act, 1961 or the Local VAT Acts. Hence, no penalty at all should be imposed on the Noticee in terms of Section 80. 24.7. It has been observed by the Tribunal in the case of Flyingman Air Courier (P) Ltd. V/s CCE, Jaipur 2004 (170) E.L.T 417 (T) that penalty is not sustainable if the Noticee were under the bonafide belief that they were not liable to service tax. Similarly, in the case of CCE V/s Gamma Consultancy (P) Limited 2006 (4) STR 591 (T), the Hon’ble Tribunal has held that doubt about applicability of service tax is reasonable cause under section 80 for non imposition of penalty. 24.8. The Noticees further submited that the Hon’ble Bombay High Court has held that penalty under section 76, 77 and 78 is not mandatory in view of section 80 of the Finance Act, 1994 in the following cases: a. Vinay Bele & Associates 2008 (9) STR 350 (Bom) b. Ashish Patil 2008 (10) STR 8 (Bom) 24.9. Furthermore, as it is a quasi-criminal proceeding, penalty will not be ordinarily imposed unless and until “mens rea” on the part of the defaulter is proved beyond all reasonable doubts. The above show cause notice has failed to bring out the essential “mens-rea” or guilty mind of the Noticees. In fact, there was no intention to evade payment of service tax on part of the Noticees. 24.10. Furthermore, in the matter of Hindustan Steel Ltd. V/s The State of Orissa {1969 (2) SCC 627}, the Hon’ble Apex Court has observed as under: “……Penalty will not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose penalty will be justified in refusing to impose penalty, where there is a technical or venial breach of the provisions of the act or where the breach flows form the bonafide belief that the offender is not liable to act in the manner prescribed in the statute.” …(emphasis supplied) 24.11. PENALTY UNDER BOTH SECTION 76 & 78 OF THE FINANCE ACT, 1994 CANNOT BE IMPOSED 24.12. Without prejudice to whatever is discussed hereinabove and in the earlier Without prejudice to whatever discussed hereinabove and in the earlier reply filed with the department on 29.10.09 & 20.05.10 noticee further submits that penalties under section 76 and 78 of the Act cannot be simultaneously imposed. Penalties under section 76 and 78 are mutually exclusive. Section 78 is applicable if the non-payment of service tax is due to reasons specified therein with an intention to evade payment of service tax. Section 76 is applicable in cases other than those covered under section 78 of the Act. Noticee refers and relies on the following judgments:
24.13. Noticee further submits that above view is reinforced by the proviso to Section 78 as is extracted below: “Provided also that if the penalty is payable under this section, the provisions of section 76 shall not apply. [Inserted vide Finance Bill 2008, w.e.f. 16th May, 2008]” Discussion and findings:- 25. I have carefully gone through the content of show cause notice, documents / records available on record, the defence replies submitted by the noticee on various dates and record of personal hearing. 26. The issue in brief is that the noticee was served with show cause notice based on Audit Objection. It was objected by the officers while auditing the record of the noticee that foreign remittances received by them through their bankers in India were received less to the extent of Rs.80,14,963/- during the period 2004-05 to 2008-09. It is the explanation of the noticee that the said less receipt was due to the fact that the bankers at the destination [overseas bankers] had deducted the said amount while remitting the their payment on behalf of their overseas customers into their account with their bankers in India. The service of overseas banker have not been hired by them but by their customers. It is the case of the department that such deduction by the bankers at the destination is towards providing banking and other financial service to the noticee. The said service is taxable service. Further, as the over seas bankers do not have their office in India, in view of the provision of rule 2(1)(d)(iv) of the Finance Act,1994 read with section 66 of the Finance Act, 1994 the noticee had to discharge service tax on such deduction which noticee did not agreed and represented that such amount can not be charged to service tax as they had not received the services of over seas bankers. 27. In this regard, I find that the contention of the noticee is not correct. In fact the remittances in foreign currencies are concerned, the services of bankers are necessary. The exporters in India are claiming their remittances against the export of goods or services, by receiving Letter of credit from their clients. Such letters of credit were being arranged by the foreign customers and send to their vendors in India. The Indian vendor on execution of export order or as per the condition in the LC submits LC in to their bank who will take care for obtaining remittances from over seas customers. The another mode available is by submitting documents such as bill of exchanges etc., to their bankers in India on execution of export orders. The bank will sent such documents for collection of remittances to overseas bank which were appointed and mentioned in the said documents as per the direction of over seas customers. Thus, after understanding aforesaid transaction for bringing foreign remittances, I find that there are two banks Involved one is Indian banker and other is overseas bankers. However, the ultimate out come is that both the banks to gather arrange foreign remittances for the exporters located in India. Therefore, the Indian banker will charge for this service and foreign banker will also charge towards service. The claim of the noticee that for the charges by foreign banker, the Indian Bankers are responsible as they are hiring services of Foreign Bankers. I find that such contention is not at all acceptable. Because, if the noticee does not submit documents for collection of foreign remittances against the goods or services exported, the Indian bank had nothing to do with. It is the cause at the instances of exporters submitting bill for collection for remittances. The foreign bankers are involved as per the direction of the clients/customers to whom the goods/service were exported by the noticee. This is so because the customers would have their account with such banks. Therefore, what I find is that the circle of getting remittances could not be completed without hiring service of foreign bankers by the Indian banker who are actually acting on behalf of the exporters i.e. noticee. Therefore, the cost of services hired by the Indian bank will naturally be passed on the noticee by the bank. So in the instant transactions, I find that the deduction in the remittances by the foreign bankers is finally reflected in their books through the Indian Bankers. Such deduction by the foreign bankers is only on account of arranging foreign currency remittances in to the account of the noticee through Indian bank only against the goods/ services exported by the noticee. Therefore, I find that the noticee had hired services of foreign bankers for receiving remittances into foreign currencies against the goods/services exported by them. Such services does classifiable under the Banking and other financial services as defined under section 65(105)(zm) of the Finance Act, 1994 and would be required to be taxed on the taxable value in the manner as discussed in the show cause notice and discussed herein above under reverse charge mechanism enacted by the government for the purpose. Accordingly, I find that demand of service tax survives on merit, and not vague as submitted by the noticee. 28. As regard the charges of suppression of facts, I find that the foreign exchange deduction by foreign banker through Indian banker is reflected into their books of account as expenditures, however, such expenditures when chargeable to service tax, such transaction are required to be declared in ST-3 returns prescribed under section 70 of the Finance Act, 1994 read with rule 7 of the Service Tax Rules, 1994 which the said noticee failed to declare. Such non-declaration found to be suppression of material fact in the absence of which department can not assess service tax due from the assessee. Such information is found to be available at the instance of audit. Therefore, I find the ingredients of Suppression of material facts does exist in their case. Therefore, the department has rightly issued demand of service tax of the said service under the proviso to section 73(1) of the Finance Act, 1994 . Therefore, I am unable to accept their contention in this regard. Further, the contention of the said noticee that show cause notice is issued beyond time limit prescribed under section 73(1) is not acceptable in view of the decision of Hon’ble Supreme Court of India’s decision delivered in the case of M/s Mehta & Co. which has been discussed at Para 38.02. 25. However, I totally agree with the contention of the noticee regarding applicability of CBEC’s Instruction issued vide F.No. 276/8/2009-CX8A Dated 26.09.2011 the relevant para of the said instructions reproduced hereunder; “ Kind attention is invited to instruction F No. 275/7/2010-CX8A, dated 30.6.2010, wherein the Board had communicated its view that services tax on a taxable service received in India, when provided by a non-resident/person located outside India, would be applicable on reverse charge basis with effect from 1.1.2005, and that the ratio of judgement in M/s Indian National Shipowners Association (INSA) case [2009 (13) STR 235 (Bom)] would not apply to such cases. Further, direction was issued to field formations to defend the levy of service tax on such services for the period on or after 1.1.2005, as post INSA judgment, it has been held by the High Courts/Tribunal in a large number of cases, applying ratio thereof, that service tax on such services is leviable only w.e.f. 18.4.2006. However, the appeals filed by the department before the Hon’ble Supreme Court, for defending the levy of service tax on such services w.e.f. 1.1.2005, have been dismissed recently (subsequent to the issuance of said instruction dated 30.6.2010) in the following cases.
Further, Review Petition No. 1686 of 2011 filed in the case of Bhandari Hosiery has also been dismissed by the Hon’ble Supreme Court videorder dated 18/8/2011.
(emphasis supplied….) 30. From the aforesaid Instruction, it is now crystal clear that service tax liability on any taxable service provided by a non resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.4.2006, i.e., the date of enactment of section 66A of the Finance Act, 1994 and hence in the instant case the demand pertaining to period prior to 18.04.2006 deserves to be dropped forthwith. 31. Therefore, I am inclined to reduce the demand of service tax prior to 18.04.2006 is included in the impugned show cause notice. Accordingly, demand of service tax for the period 2004-05 to 2005-06 involving Rs.2,32,093/- is required to be dropped and balance amount of Rs.7,04,338/- is required to be confirmed under proviso to section 73(2) of the Finance Act, 1994. 32. The claim of the noticee with regard to revenue neutrally, I find that the same is not acceptable in view of rule 9(b) of Cenvat Credit Rules, 2004. The said rule stipulates as under. Rule 9. Documents and accounts.- (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :-
(emphasis provided) 33. In the instant case the service tax not paid is being confirmed on the ground of suppression of facts, therefore rule 9(b) of Cenvat Credit Rules, 2004 clearly prohibits availability of such cenvat credit. Therefore, their claim of revenue neutrality is not acceptable. The decision relied by the said noticee in this regard are not acceptable on the ground mentioned above. Further, the plea of revenue neutrality is mis-understand and mis-placed in this case. For neutrality there must be something on one side, which is required to be neutralized by other side with the same weight / volume / amount, as the case may be. Secondly, the contention of revenue neutrality can not be accepted on the premise of tax-evasion. The government must set its due tax from the assesses, whether the payment of tax provides credit to the tax-payer is secondary. Hence, the plea of revenue-neutrality is grossly mis-understood by the notice, hence, rejected. 34. As regard the Cum tax benefit claimed by the said assesses, I do not agree with their contention in view of the fact that, it is not evident from the details incorporated in the journal entries that the apportionment of expenses was inclusive of service tax or not. In this regard, I rely on the decision of Honble CESTAT delivered in the case of M/s Shakti Motors reported at (2008 (12) S.T.R. 710 (Tri.-Ahmd.), wherein, it was held that :- “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 mariner, cum-tax value benefit cannot be extended. However, I find considerable force in the argument advanced by the ld. Advocate that the benefit of provisions of Section 80 should have been extended to them. Section 80 of Finance Act provides that notwithstanding anything contained in the provisions of Section 76, Section 77 or 78, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure. I am inclined to agree with the assessee that there was confusion after the Budget, 2005 regarding leviability of service tax on labour charges and valuation in respect of authorized service stations and also applicability of exemption. I can also understand and appreciate that the appellants may not be clear about their liability for business auxiliary service. Therefore as claimed by them, the fact that the tax was paid by them immediately after the departmental officers took up the issue, goes in their favour. In view of the above, I feel that the benefit of Section 80 should be extended to them and accordingly I extend the same. However, the liability for interest cannot be set aside and if the appellants lave not paid the same they should pay the interest as applicable. The appeal is allowed to the extent as mentioned above. 35. As regard to imposition of penalty under section 76, I find that in view of the provision inserted in section 78 with effect from 10.5.2008 in the Finance Act,2008 which state that ““ Provided also that if the penalty is payable under this section, the provisions of section 76 shall not apply”’ 36. In the instant case the show cause notice is issued on 22.9.2009 i.e. after introduction of aforesaid provision in section 78 I find that the proposal of penalty under section 76 of the Finance Act,1994 was not required to be incorporated w.e.f. 10.5.2008 particularly when proposal for imposition of penalty under section 78 was made in the impugned show cause notice. 37. In view of aforesaid discussion, I hold that demand of service tax of Rs.2,32,093/- is liable to be dropped and Rs.7,04,338/- is liable to be confirmed under section 73(2) along with Interest as prescribed under section 75 of the Finance Act,1994. As the demand is being confirmed after invoking extended period under the proviso to section 73(1) of the Finance Act, 1994, I hold them liable to penalty as proposed under section 78 of the Finance Act,1994. Further, contravention of the provisions of section 70 and 69 of the Finance act, 1994 is evident in as much as they failed to declare the details as discussed above and non inclusion of Banking and other Financial service in their registration. Accordingly I hold them liable to penalty under section 77 of the Finance Act, 1994. 38. With regard to Suppression of Facts and Penalty:- 38.1. Based on my above findings as discussed, I find that M/s Dishman Pharmaceutical & Chemical Ltd. have not disclosed aforesaid “Income” of Rs.80,14,963/- in their ST-3 and the same is accounted for in their profit and loss account. This act on their part is with an intent to evade service tax on the said Income. Further, I find that though it was claimed by them that they have obtained Service Tax Registration, however, not declared such income in any returns in this regard, and not paid service tax on the aforesaid Income. I have also gone through various decisions cited by the said service provider in their submissions, however, I find that facts and circumstances as discussed above is different then what are mentioned in the citations relied upon by them. Yüklə 190,73 Kb. Dostları ilə paylaş:
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