TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 1105
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.... demand of service tax on the partners of the firm M/s. Lakshmi Travels, Karaikal, for renting the cabs for the reason that marking of copies of the show-cause notice to the three partners along with the firm, without raising any demand in the notice for recovery from the partners is not sufficient/a substitute for show-cause notice ? (2) Whether a demand of service tax could not be confirmed on the partners of the dissolved firm M/s. Lakshmi Travels, Karaikal, when the said firm was found by the adjudicating authority to be liable forpayment of service tax on renting the cabs and the partners duly availed of the opportunity to make their submission before the adjudicating authority admitting the service tax liability of the firm ? (3) Whether the honourable CESTAT was correct in holding that the demand for the period from April, 2000 to October, 2003 is hit by limitation since extended period for issuing show-cause notice is not available to the Department, while in fact the demand was raised under the erstwhile section 73(1)(a) of the Finance Act, 1994, which is applicable to the period of demand and in terms of which mere omission or failure on the part of the assessee to ma....
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....ax despite showing the details for the purpose of income-tax consequent to deduction of TDS. Accordingly, the following charges were levelled against Lakshmi Travels and, consequently, demand was made: "9. Whereas it appears that Lakshmi Travels- (i) Have wilfully not paid service tax for the services rendered by them with an intention to evade payment of tax; (ii) Have intentionally failed to file the statutory ST3 returns though they have been providing taxable service during the said period; (iii) Have contravened the provisions of- (a) Section 68 of Chapter V of the Finance Act, 1994 read with rule 6 of the Service Tax Rules, 1994 inasmuch as they have wilfully not paid service tax on the charges received by them for the services rendered to ONGC and CPCL; (b) Section 69 of Chapter V of the Finance Act, 1994 read with rule 4 of the Service Tax Rules, 1994, inasmuch as they have wilfully not registered with the Department; (c) Section 70 of Chapter V of the Finance Act, 1994 read with rule 7 of the Service Tax Rules, 1994, inasmuch as they have intentionally failed to file the statutory ST3 returns for the period from April, 2000 onwards on the due dates; (iv) Ar....
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.... Lakshmi Travels, 36/1, First Floor, Kennadiar Street, Karaikal. (4) Ledger extract of Lakshmi Travels in the books of CPCL. (5) Letter No. ONG/KKL/F&A/01/2005/02, dated September 21, 2005 of ONGC, Karaikal enclosing copies of TDS Certificates for the years 2000-01 (xerox copies) containing details of payments made to Lakshmi Travels. (6) Statement of Shri N. Muruganantham, Partner of Lakshmi Travels dated October 21, 2005." A copy of the show-cause notice was also marked to N. Muruganantham and G. Sanjeevi and in the order-in-original, there is also a reference to another show-cause notice dated October 16, 2006. The assessees do not dispute the said show-cause notice. On the contrary, we find reference to the same in internal page 5 of the order-in-original that notice dated Octo ber 16, 2006 was issued to Govindaraj, one other partner of Lakshmi Travels. Despite series of notices given, no reply was filed and, therefore, a personal hearing was fixed on November 8, 2006, which was adjourned to November 17, 2006 and finally to November 23, 2006. The hearing was conducted and it has been recorded that the assessees admitted their share of tax liability of one-third ea....
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....contributed equal amount of Rs. 50,000 as capital and partners have spared vehicles for the purpose of running the business. The other two partners S/Shri N. Muruganantham and G. Govindaraj were also entitled for 1/3 of the share in the business and have got equal right in day-to-day administration, financial matters of the business. When all the three partners have the equal rights to decide the financial matters and are having equal share and has spared their vehicles for conduct of business all the three partners have equal right to adhere to the legal formalities to be observed and payment of Government dues in time. Hence plea of Shri N. Muruganandam and G. Govindaraj that they have not aware that Shri G. Sanjeevi has not taken out service tax registration and not paid the service tax to the Department and where their vehicles were sent for hiring, etc., is not acceptable. This is nothing but an after-thought and to get out of their moral responsibilities. But as a managing partner Shri G. Sanjeevi carries more responsibilities in payment of service tax at appropriate time itself. When the partnership deed itself provides for equal share of 1/3 among partners, proceeding again....
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....he Finance Act, 1994 under the head "rent-a-cab services". In the order, strangely, the adjudicating authority withdrew the show-cause notice issued insofar as the firm, Lakshmi Travels is concerned, primarily on the ground that the firm was no more in existence, but, however, confirmed the demand on the basis of the undertaking given by the partners to pay the duty demand and passed the following order: "(1) Show-cause notice in the name of M/s. Lakshmi Travels is treated as withdrawn. (2) I demand service tax of Rs. 3,87,881 under section 73(1)(a) erstwhile section 73 of Chapter V of the Finance Act, 1994 on all three partners of M/s. Lakshmi Travels. (3) I demand service tax amount Rs. 1,29,294 being 1/3 share of Shri G. Sanjeevi. (4) I demand service tax amount Rs. 1,29,294 being 1/3 share of N. Muruganantham. (5) I demand service tax amount Rs. 1,29,294 being 1/3 share of G. Govindaraj. (6) I do not propose to impose any penalty under sections 76 and 77 of the Finance Act, 1994 in view of the power conferred under section 80 of the Finance Act, 1994. (7) I impose a penalty of Rs. 1,00,000 (rupees one lakh only) under sect....
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.... the order dated November 30, 2006 passed by the Assistant Commissioner is not legal insofar as it withdrew the show- cause notice issued in the name of Lakshmi Travels and to that extent it should be modified and, consequently, the demand of service tax on Lakshmi Travels should be restored with interest and penalty. The show-cause notice was issued invoking section 84 of the Finance Act on November 2, 2007 and was served on all the three partners and they responded to the notice and there again the Commissioner passed an order in Revision No. 5/08, dated February 22, 2008 confirming the demand of Rs. 3,87,881 on Lakshmi Travels and also held that the tax liability should be shared among the three partners equally against which appeals appears to have been filed and the details of the appeals are as follows: (a) Against Order-in-Appeal No. 25/00 dated April 2, 2007 dismissing individual partners appeal, the partners filed Appeal ST Nos. 76, 77 and 139 of 2007; (b) Against Order-in-Revision No. 5/08, dated February 22, 2008; three appeals, viz., ST Nos. 110, 111/2008 and 354/2009 were filed.From the cause title of the order of the Tribunal, we find that the appellants are ....
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....Travels, had neither registered himself with the Central Excise Department nor paid the appropriate service tax and, therefore, the appellants cannot be held guilty of suppression so as to apply the larger period of limitation against them, has merit. As the Department was in the knowledge of non-registration and non-payment of service tax by M/s. Lakshmi Travels (partnership firm), the demand is hit by time-bar and is accordingly set aside. 5. Order-in-Revision No. 05/2008 is set aside and Appeal Nos. ST/ 110 and 111/2008 and ST/354/2009 are allowed." Aggrieved by the order of the Tribunal, the appellant/Department is before this court by filing the above appeals, primarily contending that section 25 of the Partnership Act fastens liability on every partner, jointly and severally, liable for all the acts of the firm while he is a partner. To buttress this argument, reliance is placed on the decision of this court in Sinnaraju Chettiar v. Union of India [2000] 126 ELT 522 (Mad). The learned counsel for the Department pleaded that the original show- cause notice was issued on the firm in terms of section 25 of the Partnership Act as the ....
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....f the appeals, the National Litigation Policy of the Government issued by the Ministry of Finance, Department of Revenue, Central Board of Excise and Customs vide Instructions dated October 20, 2010 in F. No. 390/Misc./163/ 2010-JC, mandates that no appeal shall be filed to the High Court against the order of the Tribunal where the tax demand is below Rs. 2 lakhs. In the case on hand, the tax demand on the firm, viz., Lakshmi Travels is to the tune of Rs. 3,87,881, which is above the threshold limit of Rs. 2 lakhs fixed for filing the appeal. The tax demand clearly falls outside the purview of the said notification. The only question is by splitting up the liability between the partners of the firm, whether the said notification would apply to the facts of this case. For better appreciation, the relevant portion of the notification is extracted hereunder: "5. The Board has decided that appeals in the Tribunal shall not be filed where the duty involved or the total revenue including fine and penalty is Rs. 1 lakh and below. Similarly, in the case of High Courts, appeals should not be filed in cases where the duty involved or total revenue including fine or penalty is Rs. 2 lakhs a....
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....e partners have agreed to share the liability. However, that error came to be corrected by the Commissioner in the suo motu revision order dated February 22, 2008 restoring the proceedings and demand made on the firm. The Tribunal having misread the provisions of section 25 of the Partnership Act, fell in error in holding that the show-cause notice should be issued on each one of the individuals. In this connection useful reference can be made to the decision of this court in Sinnaraju Chettiar v. Union of India [2000] 126 ELT 522 (Mad) wherein this court held as under: "5. The general rule as to a person's liability as a partner laid down in section 25 of the Partnership Act confines that liability to all acts of the firm done while he is a partner. This is on the principle of agency. The various grounds on which a person may incur liability as a partner are: (i) A partner may become liable for an act done by another partner or an agent on behalf of the firm but not binding on it if the act has subsequently been ratified by all the partners; (ii) A partner is liable for all the acts of the firm done while he is a partner. This would include liability arising from contract....
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....l Excise [1962] II M.L.J. 499 the principle laid down is that the penal provision in the Sea Customs Act should be construed strictly and that the authorities issuing a show-cause notice should comply strictly not only with the letter of the law but also with the spirit of it. In that case, the notice merely mentioned the statutory provision without mentioning the facts on the basis of which certain contravention was sought to be made out. It was held that the person was entitled to be told that he should show cause against the imposition of such penalty. In Devichand v. Collector, Central Excise [1965] 11 A.W.R. 102 the principle laid down is that before passing the order of confiscation of the goods or imposition of penalty, a reasonable opportunity of being heard to the person concerned should be given. There is no controversy about this principle in the instant case, because all the prescribed notices were given tothe firm and were acknowledged by the managing partner and were also replied to. The decision in Collector of Customs v. Sitaram [1999] 110 ELT 292 (SC); [1966] 2 SCR I was concerned with the meaning of the expression 'in any way concerned in or in any manner deal....