2025 (9) TMI 191 - AT - Service Tax

Authority upholds extended limitation for service tax non-deposit but orders return of unrelied seized documents

M/s. R.P. Labour Supply & Security Service Versus Commissioner of CGST & Central Excise, Indore (M.P.)

CESTAT upheld invocation of extended limitation, finding deliberate collection but non-deposit of service tax and noting departmental reliance on books ... Failure to discharge service tax liability - Manpower Recruitment and Supply Agency Service - Security Agency Service - the un-relied documents requested by appellants were not provided - cross examination of the person whose statements are relied upon has not been allowed - violation of principles of natural justice - invocation of extended period of limitation - HELD THAT:- From the perusal of the impugned order, it is found that the Adjudicating Authority has very categorically noted that the show cause notice was served on 23.04.2014 alongwith all the documents relied upon therein, however, pursuant to the direction of the Tribunal, the documents were once again supplied on 13.02.2020. The appellant is now emphasising on returning of the unrelied documents which were recovered at the time of investigation - Taking note of the Circular dated 13th June, 1988, issued by Department of Revenue, Ministry of Finance, Government of India, where directions have been issued to the concerned officers in relation to the seized documents to be returned, the Court observed that un-relied documents may not be relevant for the purposes of revenue, but may be of some relevance to the affected party in preparation of the reply to the show cause notice and therefore, the request made by the petitioner to return the un-relied documents to enable them to prepare their reply to the show cause notice was not frivolous. It is found that it is on the scrutiny of the balance sheet, invoices bills unearthed during investigation that the Department could ascertain that the taxable amount including service tax collected by the appellant from the service receivers, but he has never ever disclosed the correct taxable amount to the Department nor discharged the true liability of service tax within the prescribed time limit. The factum of collecting service tax, but not depositing clearly shows the intention to evade payment of service tax to the government exchequer. Had the Department not initiated the enquiry, the appellant would have never disclosed the activity of providing taxable service and collecting actual amount including service tax. It is not a case of mere omission or careless mistake on the part of the appellant - The fact also cannot loose sight that the appellant even evaded the response to the show cause notice or to cause appearance before the Adjudicating Authority, which led to the passing of an ex-parte order. In the facts and circumstances of the present case, the provisions of invoking the extended period of limitation has been correctly applied. The matter is remanded on the limited issue to consider the case of services rendered by the appellant to M/s Cyano Pharma Pvt. Ltd, M/s Endolabs Ltd., M/s IPCA Laboratories Ltd., M/s Indore Sahakari Dugdh Sangh Maryadit, M/s Plethico Pharmaceuticals Ltd., M/s Simfa Labs (P) Ltd., M/s Berwerff Org. India Pvt. Ltd., and M/s Suncity Dhoot Colonizers Pvt. Ltd., once all the documents seized are returned by the Department - appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether statements recorded under Section 14 of the Central Excise Act can be relied upon in adjudication without compliance with Section 9D(1)(b) of the CEA (opportunity for examination/cross-examination before the Adjudicating Authority) and related provisions of the Customs Act. 2. Whether documentary evidence recovered during investigation (balance-sheets, invoices, bills, bank cheques) suffices to prove collection of taxable amounts and non-deposit of service tax in the absence of admissible Section 14 statements. 3. Whether activities performed on a lump-sum contract basis (loading, unloading, stacking, bagging, de-stacking) constitute 'Manpower Recruitment and Supply Agency Service' or are excluded from the taxable category. 4. Whether un-relied seized documents must be returned/supplied to the assessee for effective defense and whether failure to return such documents vitiates adjudication. 5. Whether invocation of the extended period of limitation is justified on facts showing collection of service tax but non-deposit and evasive conduct (non-disclosure/non-appearance), i.e., whether there is suppression/fraud/wilful misstatement to attract extended limitation. ISSUE-WISE DETAILED ANALYSIS Issue 1: Admissibility of Section 14 statements without compliance with Section 9D(1)(b) of the CEA Legal framework: Section 14 (CEA) permits recording statements during search/inspection; Section 9D(1)(b) makes such statements relevant only if the person is examined as a witness before the Adjudicating Authority and the authority forms an opinion to admit it, after affording opportunity for cross-examination. Parallel provision in Customs Act (Section 108/138B) mirrors this safeguard. Precedent treatment: Tribunal and various High Courts have treated Section 9D(1)(b) as mandatory; earlier decisions cited (including Surya Wires and High Court authorities) require compliance and cross-examination opportunity before reliance. Interpretation and reasoning: The Tribunal adopts the line of authority holding the provision mandatory: if the conditions of Section 9D(1)(b) are not satisfied, statements recorded under Section 14 cannot be relied upon. The Adjudicating Authority's reliance on such statements without offering cross-examination was impermissible. The Tribunal notes that no statutory requirement exists for the person to give specific reasons for seeking cross-examination; once the procedure in 9D is triggered, cross-examination must be afforded before admitting the statement. Ratio vs. Obiter: Ratio - Failure to comply with Section 9D(1)(b) renders Section 14 statements inadmissible for proving allegations; such statements cannot be relied upon in adjudication. (This forms a binding/legal principle for the facts.) Conclusion: Statements recorded under Section 14 were excluded from consideration for lack of compliance with Section 9D; the Adjudicating Authority erred in relying upon them. Issue 2: Sufficiency of documentary evidence (balance-sheets, invoices, bills, cheque payments) to prove collection and non-deposit of service tax absent Section 14 statements Legal framework: Documentary records are admissible and can independently establish receipt of taxable amounts and obligation to deposit tax. Revenue may compute liability by reconciling accounts of service provider and service recipients. Precedent treatment: Authorities permit reliance on contemporaneous business records and receiver accounts where they establish receipt of consideration inclusive of service tax and non-deposit. Interpretation and reasoning: Even after excluding Section 14 statements, the Tribunal found documentary evidence - invoices showing charge/collection of service tax, balance-sheets indicating receipts, and bank cheques - sufficient to prove that taxable amounts including service tax were collected and not deposited. Reconciliation charts prepared by the Department comparing amounts in annexures and receiver accounts demonstrated differential receipts. Where invoices expressly recorded tax collected or bills included tax, liability to deposit arose and documentary proof established non-deposit beyond reasonable doubt. Ratio vs. Obiter: Ratio - Documentary evidence recovered during investigation can independently establish collection of taxable amounts and non-deposit of service tax; exclusion of Section 14 statements does not defeat a demand where such documentary proof exists. Conclusion: Department's charge was proved on documentary evidence notwithstanding exclusion of Section 14 statements; demand for service tax was sustainable for those recipients where invoices/accounts established collection. Issue 3: Taxability of lump-sum contracts for loading/unloading/stacking vis-à-vis 'Manpower Recruitment and Supply Agency Service' Legal framework: Taxability hinges on whether the activity falls within the statutory definition of manpower recruitment/supply agency (supply of manpower) or whether it is a contract for execution of a lump-sum job/work which is not covered by that service description. Precedent treatment: Tribunal decisions (Divya Enterprises; S.S. Associates) have held that contracts for lump-sum execution of loading/unloading, bagging, stacking, de-stacking are not covered by manpower supply services and therefore not leviable as such services. Interpretation and reasoning: The Tribunal reviewed agreements and invoices on a recipient-wise basis. Where the agreement/contract indicated execution of a lump-sum job and payments were on a lumpsum basis, the Adjudicating Authority correctly held such supplies outside the definition of manpower supply and exempt from service tax. Conversely, where documentation showed monthly payments for deployed workmen or the agreement reflected labour supply, the services fell within manpower supply and were taxable. The Adjudicating Authority's divergent treatment stemmed from differing documentary records across recipients; Tribunal found this recipient-specific approach fair and warranted. Ratio vs. Obiter: Ratio - Characterisation depends on the contractual terms and payment structure; lump-sum contractual jobs of loading/unloading etc. are not manpower supply services, while monthly/periodic payments for deployment constitute manpower supply. Conclusion: The Adjudicating Authority correctly differentiated recipients based on agreements and invoices; lump-sum contracts were not taxable as manpower supply, whereas labour-supply arrangements were taxable. Issue 4: Return/supply of un-relied seized documents and effect on adjudication Legal framework: Departmental circulars and judicial decisions recognise the relevance of returning un-relied seized documents to affected parties for preparing defense; supply of documents relied upon is mandatory, and return of un-relied documents may be appropriate where not required for revenue adjudication. Precedent treatment: Decisions (Silicon Graphics; Shree Wood Products) direct return/supply of un-relied documents to enable effective defense; refusal may vitiate adjudication and merit remand. Interpretation and reasoning: The Tribunal examined the record and noted that relied-upon documents were supplied with the show cause and again on remand, but certain seized un-relied documents remained with the Department. Given precedent and the Department's circular, the Tribunal held that where the Adjudicating Authority's adverse finding was for want of documents, the seized un-relied documents should be returned/supplied and an opportunity afforded to the appellant to meet those specific allegations. Rather than quashing the entire demand, a limited remand was ordered for specified service recipients to allow adjudication afresh after return/supply. Ratio vs. Obiter: Ratio - Where un-relied seized documents are necessary for effective defense, failure to return/supply them requires remand for fresh adjudication limited to affected recipients; remand is the appropriate remedy rather than wholesale reversal where other evidence supports the demand. Conclusion: A limited remand was directed: un-relied seized documents to be returned/supplied and cases relating to specified recipients to be decided afresh with opportunity to the assessee. Issue 5: Invocation of extended period of limitation based on collection of service tax but non-deposit and evasive conduct Legal framework: Extended limitation is invokable where there is suppression, fraud or wilful misstatement that prevented proper disclosure; mere omission may not suffice, but deliberate collection and non-deposit with intent to evade can attract extended time-bar. Precedent treatment: Courts have denied extended period where suppression/fraud not substantiated; conversely, extended period upheld where deliberate concealment and evasive conduct are demonstrated. Interpretation and reasoning: The Tribunal found documentary evidence showed collection of consideration inclusive of service tax which was not disclosed or deposited. Coupled with non-appearance and failure to respond to show cause leading to ex-parte order, the facts evidenced intention to evade rather than inadvertent omission. Therefore, extended limitation was properly invoked in the circumstances and precedents cited by appellant were inapplicable on the facts. Ratio vs. Obiter: Ratio - Where documentary proof establishes collection of tax and non-deposit together with evasive conduct/non-disclosure, invocation of the extended period of limitation is justified. Conclusion: Extended period of limitation was correctly applied on the facts showing collection, concealment and evasive conduct by the appellant. Outcome and Cross-References On the cumulative analysis: (a) Section 14 statements were excluded for want of Section 9D compliance (Issue 1); (b) documentary records nevertheless established liability against several service recipients (Issue 2); (c) lump-sum contracts were correctly held non-taxable where agreements showed lump-sum work, and taxable where agreements evidenced labour supply (Issue 3); (d) failure to return/supply certain un-relied seized documents required limited remand for specified recipients to enable effective defense (Issue 4); (e) extended limitation was rightly invoked given collection and concealment (Issue 5). Remand ordered accordingly for fresh adjudication on limited issues after return/supply of seized un-relied documents.