TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 511
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....3.01.2015 13-14 43,91,01,360/- 1.2 In the show cause notices demand has been made on various counts as detailed below in table 2: SCN Date Authorized Service Station Service Banking and Other Financial Services Business Auxiliary Services Consulting Engineer Services Total 16.10.09 105,02,81,948 205,65,07,920 4,05,71,259 11,00,37,600 325,73,98,727/- 22.10.10 25,60,88,900 25,60,88,900/- 19.10.11 41,01,97,500 41,01,97,500/- 17.10.12 46,63,42,800 46,63,42,800/- 21.02.14 46,00,63,920 46,00,63,920/- 23.01.15 43,91,01,360 43,91,01,360/- 1.3 Commissioner has adjudicated the matter by his order supra and held as follows in respect of respective Show Cause Notice: i. Show Cause Notice dated 16.10.2009: Confirmed the demand of Rs. 312,45,23,327/- along with interest in respect of Authorized Service Station Services, Banking and Other Financial Services and Business Auxiliary Services. Imposed penalty under section 76 for the period from 1/4/2004 to 17/04/2008 and imposed penalty of Rs. 5000/- under Section 77 of the Finance Act, 1994. He also....
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....s includible in the value of taxable service provided by the appellant. 3.2 The normal practice is that appellants provide certain free services at the service station. The reimbursement towards the consideration for the services rendered by the dealer on account of appellants is made by the Appellants to the dealer. These service charges reimbursed by the Appellant to the dealer for providing free services during the warranty period are includible in the value of taxable services provided by the Appellants. Dealers provide the maintenance service to the customers and such cost is paid by the appellant to the dealers and an debit entry is passed on in the provisions for warranty made. 3.3 Appellants are themselves having Tata Car Service Centre, Worli Mumbai for providing similar services. They have taken registration in respect of the said shop from 1.04.2007 and have been paying service tax in respect of the service provided from there. In view of Appellants, the said car repair shop at Worli is not an Authorized Service Station, and is their own repair shop, hence they were not liable to pay service tax in respect of services provided from the said shop. However in view of the....
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....ation. Since said list have not been provided this demand has been saddled on them. Further during course of adjudication they had provided the list of all their dealers to the Commissioner. Taxable Services under the category of "Authorized Service Station Services" are not covered under the reverse charge mechanism as provided for under Section 68 of Finance Act, 1994 for the period prior to 01.07.2012. 3.7 Further as per explanation to section 67, the value of taxable service will include the "the reimbursement received by the authorized service station from manufacturer for carrying out any service of any motor car {light motor vehicle} or two wheeled motor vehicle manufactured by such manufacturer". Thus the amounts reimbursed by them to the Authorized dealers/ service stations, have been included in the value of the taxable service provided by the said service stations. 3.8 The department has issued the show cause notice only for the reason that they have failed to provide the list of dealers and hence were liable to pay service tax. While adjudicating Commissioner has gone beyond the scope of show cause notice and has confirmed the demand holding that the it was the contra....
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.... picking up the figures from balance sheet. -46.83 -171.40 -138.85 Value attributable to servicing of commercial vehicles for goods transport -658.48 -146.02 -161.12 -147.20 -51.23 -212.61 Value attributable to vehicles exported -38.34 -41.11 -38.18 Value attributable to servicing of commercial; vehicles for good transport applications from July 12 to Mar 13. -130.28 Value attributable to servicing of passenger cars etc. 227.06 55.78 65.73 128.37 149.60 104.47 Value attributable to material included in the reimbursement -193.64 -49.44 -56.79 -94.33 -67.81 Net Value for payment of Service Tax 33.42 6,34 8.94 34.04 81.79 104.47 Recomputed Service Tax demand 3.89 0.65 0.92 3.51 10.11 12.91 3.13 In respect of demand, made for services provided from Tata Car Repair Shop, Worli they stated that in terms of the definition of Authorized Service Station as per Section 65 of the Finance Act, 1994, the service station should be one authorized by the motor vehicle manufacturer to carry out service, repair, reconditioning or restoration of motor car/ light ....
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....respect of the dealers service tax liability, but is in respect of taxable services agreed to be provided by the appellant for which the consideration has been received by them from the recipient of service. 3.17 If appellants can show that dealers have paid service tax on the amount of re-imbursement made by them to the dealers by producing necessary evidence they can be absolved of the demand. For such verification matter should be remanded for consideration of the adjudicating authority. 3.18 The contentions of the appellant in respect of Tata Car Service Centre Worli Mumbai are without any justifiable basis or reason. Appellants have themselves started paying the service tax, in respect of the services provided from the said service centre, with effect from 1.04.2007, without any change in the facts or law expanding the scope of definition of taxable services. Thus there is no justifiable reason why they should not have discharged the service tax for the prior period. 3.19 We have considered the submissions made by both the sides. The issue for the purpose of levy any tax is correct identification of the taxable person. In the present case the crux of dispute is in respect o....
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.... option to provide the Service required to be provided to their customers either wholly or partly on their own and also either directly or through an agent appointed by him. The noticee has also got an option to out-source part of services required to be provided under the warranty obligation. The Noticee can also outsource the labour component. What is relevant is that the Noticee is under obligation to provide the greed services to their customers during the warranty period. 6.25 The question is who is the service provider who is liable to pay Service Tax. Payment otherwise of Service Tax by dealers is of no relevance or consequence for the issue under consideration. As such the Noticees claim that the demand has been made from them merely because of the reason that they did not provide the list of dealers during the investigation, is skirting the issue. The payment of Service Tax, if any made by the dealers, would be in respect of services provided, as part of the obligation, for which the consideration has been received by them. The show cause notice have not sought to shift the dealer's service tax liability on the noticee. The show cause notices only seek to demand Service ....
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.... same" (para 7) 6.28 Assuming but without accepting that the services are provided through dealers, the law protects third parties dealing with agents. In the present case, the customer is protected by law as if they receive the services directly from the principal and they are legally entitled to deal only with the principal and not the agent. The Noticee himself categorically and un-ambiguously affirmed this view in their letter dated 22.06.2009. The law does not even compel the customer to recognize the agent appointed by the Noticee to provide the service. The customer is in fact dealing only with the principal and not with his agent though the agent may be a complete substitute for the principal. Dealer is not under obligation to take care of manufacturing defects, if any. Deale's role in providing the service is only limited. Appointment of any agent does not prevent the principal from acting himself doing the business of the agency unless there is an express prohibition to the above effect. It is also not the contention of the Noticee that Service Tax has been paid on the entire amount attributable to warranty. 6.30 The contract specifically mentions that the service of ....
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....iod, warranty services are provided to the buyers of the TATA vehicles free of any cost. The contractual obligation cannot mean that appellant is responsible for providing the warranty services himself. The Contractual obligation is to ensure that service is provided free. Once that service is provided free of cost, the contractual obligation is discharged. The appellants are free to organize the manner of provision of the service in the manner they desire, i.e. it can be by themselves, or by arranging the same through some other person. In case where the appellants themselves provide the free warranty services they should be held liable for providing the said services to the consumer of the said service and in case the same is provided through some third person that person becomes liable for providing the service. A contractual obligation, or collection of consideration for the same cannot be equated to the providing the service, as has been held by the Commissioner. For levy of service tax it is essential to identify the person who has provided the taxable service and the person who has received the service. In the case under consideration appellants have provided the warranty se....
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....rer was obligated to make the replacement. If it did not possess the parts to meet the contractual obligation, it would have purchased the parts from any seller of the parts and would have paid the sales tax. In the instant case, the assessee had supplied the goods for which it received the consideration by way of credit notes and/or other mode of payment. That being the position, the High Court was justified in its view about the taxability of the transactions. The decision in Premier Automobiles case (supra) is really of no assistance to the assessee. The fact situation there was different. The issues in the said case were different. One of the issues was whether the expenses on account of warranty and statutory bonus were to be excludable while working out the ex-work cost. It was held by this Court that manufacturers furnish warranty covering the cars sold. Under the warranty all defects on account of faulty manufacture have to be set right and the defective parts have to be replaced free of costs by the manufacturer or his dealer within the specified period or given distance travelled by the car. The car manufacturers enter into an agreement with the manufacturers of compone....
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.... consumables have been taken. The circular further goes on to note that for availing such exemption, the goods must be sold and consequently they must be available (whether independently or as a part used for repair of a vehicle) for sale. In other words, the exemption would not be available to such consumables which have been consumed during the process of providing service and are not available for sale. 6.36 In the instant case, the Noticee has not come up with any evidence regarding "sale" of any goods or materials used while providing taxable service during the warranty period, nor has the Noticee made a categorical submission that they were not taking CENVAT credit of Central Excise duty paid on such materials. The other circular dated 23.08.2007 relied upon by the Notice also stresses the same aspects. It is clarified that whether a given transaction is sale or not, is to be determined taking into account the surrounding circumstances, real nature and the material facts of the transaction. Payment of VAT/ Sales Tax may be treated as an indication of sale of goods. However, where goods are used in the course of providing service, they are to be treated as inputs used for pr....
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....entre Worli, the appellants have themselves by taking registration with effect from 1.04.2007 have admitted that service tax was payable in respect of the services provided from the said Service Centre. It is also a fact that with effect from 1.04.2007 onwards they have been service tax on the services provided from the said service centre, and have been filing the service tax returns in form ST-3, we are of the view that appellants should have paid the Service Tax for the period prior to 01.04.2007. Since the demand cannot be made for the period beyond five years by invoking the extended period of limitation as per proviso to sub section (1) to Section 73 of Finance Act, 1994, the demand has to be limited accordingly. Thus we uphold the demand of service tax for the period 1/4/2004 to 31/3/2007 in respect of the services provided from the said service centre. 4.0 Business Auxiliary Services 4.1 As per the Section 66A the services provided by a person having established business/ fixed establishment legally constituted/ incorporated outside India and such service is received by a person having established business/ fixed establishment legally constituted/ incorporated in India, ....
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.... where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1.--A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2.--Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted.';" 4.4 Section 66A clearly and unambiguously provides that, the services provided by the person (person A) having any fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India to any person (person B....
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...., 2006 matches the expression "received by a person who has his place of business, fixed establishment, permanent address or usual place of residence, in India" in clause (b) of Section 66A of the Finance Act, 1994. Harmonious reading of the provisions of clause (b) of Section 66A of the Finance Act, 1994 and the provisions of Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 makes it clear that the recipient located in India is liable to pay tax on the taxable services received for use in relation to business or commerce. In this case, money was received by the appellant. The fact that this money was used abroad to acquire certain assets will not make any difference. Location of assets, procured as a result of receiving the money which in turn was consequent to the receipt of the said service, is immaterial. 16. In the present case, there is no dispute that the appellant is located in India. There is also no dispute that the services of the MLAs and the agent bank were received and consumed by the appellant. There is also no dispute that the appellant has remitted fees to the MLAs and the Agent Bank for their services. It is, how....
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....ts contended the income in respect of Banking and Financial Service, comprise of various components and in respect of certain components they have paid the service tax. The details (as stated in table below) of the income and service tax already discharged where made available by them to the adjudicating authority during the personal hearing and also by the letter dated 28.09.2012. However adjudicating authority has not given any findings in this regard and have gone ahead to confirm the demand made in respect of the entire income. Particular Financial Year 2005-06 2006-07 2007-08 2008-09 Total Interest on Loan Contract 272.55 429.48 307.70 267.28 1277.01 Securitization (P & L) 84.17 60.16 -1.61 -55.51 87.21 Provision for expenses no longer required 6.74 0 0 0 6.74 Interest Investments 3.80 0 0 0 3.80 Dealer Subvention (Interests) 3.53 7.55 4.20 1.18 16.46 Credit Card Recoveries 0.11 -0.01 0 0.01 0.11 Lease Income 14.47 7.16 5.10 4.74 31.47 Late Payment Charges 0 0 18.20 39.59 57.79 Total Not Leviable to Service Tax (A) 385.37 504.34 333.59 257.29 1480.59 Late Payment Charges 23.19 18.19 10.31 0 51.69 Hire Purcha....
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....ssed in the adjudication order the issue is not whether the income from interest on loans is subject to service tax or not but the issue is whether the agreements/ contracts entered into by the appellants are loan contracts/ agreement or they are something else which fall under the category "Banking and Financial Services". Further the contention of appellants that interest on loans are not subjected to service tax may not be tenable in every case. The reference made by the appellants is to the provisions relating to the Valuation of Taxable Services, and it is provided for the purpose of determining the value of taxable service interest on loans may not be included in the value of taxable services. However said provision do not perse exempt the income earned against loan contract from the levy of service tax, if the same is classifiable under category of taxable services specified under the Finance Act, 1994. In this case revenue has contended that if the income from loan contract, is in classifiable under the category of Banking and Financial Services, then the same do not get exempted in view of the provisions relating to determination of value of taxable services. 5.6 Commissi....
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....e and payable by the purchaser of the vehicle to the Noticee shall also be paid from time to time. The same is determined not by market or prevailing rate of interest. Consequently the periodical instalments is fixed by the Noticee unilaterally. An ordinary loan agreement would be based on prevailing rate(s) of interest. * The part of the loan taken by the purchaser of vehicle for such purchase shall be repaid in instalments as set out in the agreement. Thus, the period for which the amount is lent and the manner of repayment is pre-determined by the Noticee and not as per the requirement of the borrower as would be the case in respect of a plain loan agreement. The expected date of delivery of the vehicle by the seller to the prospective purchaser of the vehicle forms a relevant part of the agreement. In case the prospective purchaser requests the Noticee to cancel the loan because of non-delivery of the vehicle by the seller, then the prospective purchaser is bound to pay to the Noticee, in addition to any other charge, payable by him under the agreement, cancellation charges as set out in the agreement. This condition is not generally seen in an ordinary loan agreement. ....
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....be reimbursed by the purchaser on demand by the Noticee. * The purchaser of the vehicle shall utilize the loan only for the purpose permitted under this agreement. * The movable asset hypothecated to the Noticee shall be comprehensively insured. Further, the Noticee's lien shall be marked on the insurance. * In the event of any damage rendering the vehicle totally road unworthy or beyond any further use, the compensation payable by the purchaser of the vehicle shall be the value of entire outstanding as on date of the realization of the entire dues. As and when insurance claim is received, the Noticee will arrange to refund to the purchaser of the vehicle the said claim only if the purchaser has repaid in full the outstanding principal and interest when the Noticee receives the above referred claim cheque. * The movable asset shall be hypothecated and charged in favour of the Noticee by the purchaser. The charge/hypothecation so created shall continue in full force so long as all the amounts due under the agreement have been paid by the purchaser of the movable asset to the Noticee. * The Noticee may at his absolute discretion, require the vehicle purchaser to deposi....
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....er the Deed. * In consideration of HDFC Bank Limited having paid this Purchase Consideration, the Noticee has unconditionally and irrevocably transferred all his rights, title, benefits and interests and the entire ownership in such Receivables (Assigned Receivables) to the said HDFC Bank Limited. 7.13 As can be seen from the above, the series of financial transaction(s) between the Noticee and the purchasers of the vehicles and also between the Noticee and HDFC Bank/IL&FS, as reflected in the aforediscussed Agreement and Deed of Assignment of Loans with underlying Securities, cannot be treated merely as a plain and straightforward loan transaction. Material facts on record and the surrounding circumstances indicate that there are number of transactions, all constitute an integral part of the single composite transaction, intended to be carried through as a whole to achieve the specific objective. 7.14 The money stated to be money loaned in the so called Loan Agreement was not for any general purpose. It was specifically given for purchase of a vehicle or other movable assets mentioned therein. It is subject to the condition that the vehicle shall be hypothecated in favour o....
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....ar as the taxable value in case of financial leasing including equipment leasing and hire-purchase is concerned, the amount received as principal is not the consideration for services rendered. Such amount is credited to the capital account of the lessor/ hire-purchase service provider. It is the interest/ finance charge which is treated as income or revenue and which is credited to the revenue account. Such interest or finance charges together with the lease management fee/ processing fee/ documentation charges are treated as considerations for the services rendered and accordingly they constitute the value of taxable services on which service tax is made payable. In fact, the Government has given exemption from payment of service tax to financial leasing services including equipment leasing and hire-purchase on that portion of taxable value comprising of 90% of the amount representing as interest, i.e., the difference between the installment paid towards repayment of the lease amount and the principal amount in such installments paid (See Notification No. 4/2006 - Service Tax dated 1.3.2006). In other words, service tax is leviable only on 10% of the interest portion. (See also C....
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.... time." 39. Emphasizing the underlined words, the learned counsel contended that a hire-purchase does not involve a sale and service at the same time and, therefore, service tax cannot be levied on the interest/ finance charges which is sought to be done in the present case. In our view, the judgment in Bharat Sanchar Nigam Limited's case has no application to the present case. As stated above, what is challenged in this case is the service tax imposed by Section 66 of the Finance Act, 1994 (as amended) on the value of taxable services referred to in Section 65(105)(zm) read with Section 65(12) of the said Act, insofar as it relates to financial leasing services including equipment leasing and hire-purchase as beyond the legislative competence of Parliament by virtue of Article 366(29A) of the Constitution. In short, legislative competence of the Parliament to impose service tax on financial leasing services including equipment leasing and hire-purchase is the subject matter of challenge. Legislative competence was not the issue before this Court in the Bharat Sanchar Nigam Limited's case. In that case, the principal question which arose for determination was in respect o....
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....994 seeks to tax financial services rendered by the appellant(s) with reference to the income which the appellant(s) earns by way of interest/ finance charges. In the circumstances and for the reasons given hereinabove, the question of splitting up of transactions, as contended on behalf of the appellant(s), does not arise. As held hereinabove, equipment leasing and hire-purchase finance constitute long term financing activity. Such an activity was not the subject matter of the discussion in the Bharat Sanchar Nigam Limited's case. The service tax in the present case is neither on the material nor on sale. It is on the activity of financing/funding of equipment/ asset within the meaning of the words "financial leasing services" in Section 65(12)(a)(i). Lastly, we may state that this Court has on three different occasions upheld the levy of service with reference to Entry 97 of List I in the face of challenges to the competence of the Parliament based on the entries in List II and on all the three occasions, this Court has held that the levy of service tax falls within Entry 97 of List I. The decisions are in the case of T.N. Kalayana Mandapam Association (supra), Gujarat Ambuja....
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....se is not exempted by the application of Section 66A/ Rule 6(2) but where the legislature intended exemption the same has been granted by way of exemption notification. Secondly this exemption notification is applicable only in respect of the financial leasing services including equipment leasing and hire-purchase as defined in item (i) of subclause (a) of clause (12) of section 65 of the Finance Act, 1994. For claiming the benefit of the said Notification appellants need to show that the contracts entered by them with the borrowers are in respect the services covered by the notification. In view of the decision of the Apex Court in case of Commissioner of Customs (Import) Vs M/s Dilip Kumar and Company & Others [2018 (361) ELT 577 (SC)] the exemption notification needs to be construed strictly and person claiming the exemption has to show that he falls within the purview of the Notification. Relevant excerpts from the said decision are reproduced below: "27. Now coming to the other aspect, as we presently discuss, even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exe....
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.... in the exemption clause then it being in nature of exception is to be construed strictly and against the subject, but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction..." (emphasis supplied) 41.After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statue including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State. 43.There is abundant jurisprudential justification for this. In the governance of rule of law by a written Constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so ....
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....evenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands overruled." 5.11 Thus appellants are required to make a justifiable claim, claiming the benefit of exemption if applicable in their case, and then adjudicating authority needs to examine or reject the said claim after considering all the relevant aspects in a judicial manner. 5.12 Further in their submissions appellants have claimed the income that has been sought to be taxed under the category of banking and financial service to classified under various heads (refer para 5.2). They have in their submissions admitted that service tax is payable in respect of certain incomes and have also stated that certain incomes would not form the part of taxable service under the category of Banking and Financial Services. The banking and financial services have been defined in very wide manner and appellants need to show specifically how the incomes they have claimed under various heads do not get classified under the said definition for the purpose of levy of service tax. 5.13 In respect of dealer subvention income, the appellant states that ....
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....ially mentioned bankers, financial/non-financial bodies. Therefore, the above contention of the appellant is devoid of any merit. 5.18 The agreement titled as "Loan-cum-hypothecationcum guarantee agreement" does not have the character of the 'loan' agreement. In fact, number of charges are collected from the persons and delayed payment charges are @ 36% per annum. In a typical financial and hire purchase agreement the value of asset is shown as receivables but in the present case, the assessee sold, transferred and assigned their receivables entirely to the assignee as per the Deed of assignment of loan with underlying securities. Therefore the material facts and the documents on record clearly show that the assessee is not in the business of giving 'loan' on interest and consequently, the consideration received for the various services provided does not qualify as 'interest on loan'. The aforesaid services provided by the assessee would appropriately fall under the category of 'Banking and Other Financial Services'. 5.18 Commissioner has in para 7.50 and 7.51 of his order stated as follows: "7.50 "Loan" means a sum of money advanced on interest. ....
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....It is question of common understanding that the Banking and Financial services are not service simplicitor as loan, deposit or advances but are Financial Products, designed with combination of various isolated services so that adequate finance is made available to consumer/ buyer at competitive prices. How these products are organized is not relevant, but whether these products get classified under the category of taxable services specified under Banking and Financial Services needs to be examined Commissioner have concluded on the basis of extraneous or irrelevant considerations and concluded that the transactions are not of extending the loan. In such a situation we are not in position to uphold the order of Commissioner to this extent and remand the matter for consideration of the issues afresh in light of observations made in previous paras. 6.1 In respect of all the show cause notices other than notice dated 16.09.2009, demands have been made within the normal period of limitation, and penalties imposed under Section 76 and 77 of the Finance Act, 1994. We uphold the penalties imposed under the said sections for the reason that these penalties are vis a vis the contravention o....
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....t in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need of establish the element of mensrea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in s. 271(1)(a) which requires that mensrea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum, volume 85, page 580, paragraph 1023: "A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws." Accordingly, we hold that the element of mensrea was not required to be proved in the proceedings taken by the Income tax Officer under s. 271(1)(a) of the Income-tax Act against the assessee for the assessment years 1965-66 and 1966-67." 6.2 However since we are remanding the matter for determination of service tax short paid, the quantum of penalty needs to be redetermined accordingly. 6.3 I....
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....urt while interpreting proviso to Section 11A held that extension of limitation period beyond six months up to five years for making a demand for excise duty, there has to be conscious or deliberate withholding of information by assessee and mere inaction is not enough. The relevant portion relied is read as under: "........under the proviso to Section 11A of the Central Excises and Salt Act (earlier Rule 10 of the Rules made under the said Act), it has to be established that the excise duty had not been levied or paid or short levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or the Rules with intent to evade payment. Something more positive than mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information when the assessee knew otherwise was required before the assessee could be saddled with any liability beyond the period of six months."" 12.Learned Counsel further referred to the decision of this Court in the case of Collector of Central Excise, Hyderabad v. M/s. Chemphar Drugs & Liniments, Hyderabad [....
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.... case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam,J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner. In Dharamendra Textile the court framed the issues before it, in paragraph 2 of the decision, as follows: "2. A Division Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007 (8) SCALE 304]. The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the `Act') inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority impos....
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....ecision the court noted the submission made on behalf of the revenue as follows: "5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is no reference to any mens rea as in section 11AC where mens rea is prescribed statutorily. This is clear from the extended period of limitation permissible under Section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. I....