AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2019 (1) TMI 511
X X X X Extracts X X X X
X X X X Extracts X X X X
.....2012 11-12 46,63,42,800/- 21.02.2014 12-13 46,00,63,920/- 23.01.2015 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 Auxiliar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ived by the dealer/ authorized service station from the assessee for carrying out service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by the appellant is 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 Wo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dit of the service tax paid. The entire case has been made against them in this respect only for the reason that the they had failed to provide the list of the dealers across the country for verification. 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le below: Particulars Show Cause Notice Dated 16.10.09 22.10.10 19.10.11 17.10.12 21.02.14 23.01.16 Value on which service tax demanded as per SCN 885.54 248.63 398.25 452.76 372.22 355.26 Errors in 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs during the warranty period. The relationship between the appellant and the customers is distinct from the relationship between the appellants and their authorized dealers. Payment of service tax by the dealers would be in respect of the services provided by the dealers, as part of their obligation for which consideration has been received by them. The demand is not in 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 la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at he has expressed an intention to have any contractual relation with the buyer of the goods." 3.21 Commissioner has in his order in para 6.24 to 6.26 of the order concluded as follows: "6.24 The noticee is under contractual obligation with their customers, to provide warranty service during the period of warranty as integral part of the sale of vehicles. The noticee has got an 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....warranty and free after sales services provided by the dealers are included in the assessable value of the vehicles manufactured by us" (para 4) "As regards providing the services by authorized service station to the owner of vehicle, the manufacturer is the service provider and owner of vehicle is the beneficiary. The fact that the dealer recovering the amount from us substantiates the 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....service provider and service recipient should be determined, and also the taxable person and the registered person. Without making such a determination no tax liability could be determined. The observations of Commissioner if examined with reference to the observations made by Delhi High Court, referred above, we find, Appellants have a contractual binding to ensure that during the warranty period, 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, therefore, there was no sale involved. In response, learned counsel for the revenue submitted that the transaction between the assessee and the manufacturer was a separate transaction. It is not the case of the assessee that the manufacturer had supplied the goods to the customers. If it had supplied parts to the customers through assessee; the position may have been different. The manufacturer 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 he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts and consumables are sold by the service provider to the service recipient during the course of providing taxable services, Notification No 12/2003-ST dated 20.06.2003 provides for exemption of Service Tax to the extent of value of goods and materials so sold by the service provider to the service recipient, if documentary proof of such sale exists and no credit of excise duty paid on such spares or 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able to the department for demanding the tax short paid if any in respect of Show Cause Notice dated 16.10.2009. In all other show cause notices, the demand has been made within the normal period of limitation as provided for by sub section (1) to Section 73 of Finance Act, 1994, hence they shall in any case not be hit by limitation. 3.26 In respect of the services provided through the Tata Car Service Centre 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 1/4/2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvice, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply: Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....axable services provided from outside India & received in India shall be such services as are received by a recipient located in India for use in relation to business or commerce. In the present case, indisputedly the recipient of services is the appellant located in India. The expression "received by a recipient located in India" in Rule 3(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aries have merged with the appellant. Table: Income to be Taxed under Banking & Financial Service Amount 'Rs Crore Particulars Financial Year 2005-06 2006-07 2007-08 2008-09 Total Tata Motors Limited 432.67 546.52 363.20 275.17 1617.56 Sheba Properties Limited 2.90 3.78 0.00 0.00 6.68 Tata Motors Finance Limited 0.00 122.25 0.00 0.00 122.25 Total 435.57 672.55 363.2 275.17 1746.49 5.2 Appellants 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elow:' "Finance Act, 1994 67. Valuation of taxable services for charging service tax- For the purpose of this chapter, the value of any taxable service shall be the gross amount charged by the service provider for such service provided or to be provided by him. Explanation 1 - For removal of doubts, it is hereby declared that the value of taxable service, as the case may, includes- (a)....... ....... but does not include- .......... (viii) interest on loans. Service Tax (Determination of Value) Rules, 2006 w.e.f 19.04.2006 6(2) Subject to the provisions, contained in sub-rule (1), the value of any taxable service, as the case may, does not include- ......................... (iv) interest on loans. 5.5 From the facts as discussed 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....movable assets. • The purchaser of the asset shall utilize the purchased asset only in the manner mentioned in this agreement. The so called loan is given subject to this condition. • The details of the seller from whom the purchaser shall acquire the vehicle forms part of the agreement. • The Noticee may at his discretion disburse the amounts directly to seller. In case the seller has availed of any facility from its bankers/financiers the disbursement may be made directly to such bankers/financiers of the seller. Such disbursement shall be deemed to be a disbursement to the purchaser of the asset. • The purchaser of the asset shall repay to the Noticee this amount, together with interest by way of periodical instalments as computed by the Noticee. Other amounts due 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ain the movable asset in marketable condition at his own expenses and replace broker/damaged parts for normal maintenance of the asset. The purchaser agrees to engage mechanics, dealers, service facilities expressly authorized by the manufacturer of the Asset to effect repairs and to service the Asset. Thus, the purchase, maintenance, etc., of the movable asset is tagged with the so called loan arrangement which is normally the case in respect of a straightforward loan transaction. • The purchaser agrees that the Noticee shall not be responsible for any delay of delivery, non-delivery, theft, accident, etc. of the vehicle. If the purchaser fails to comply with any of the terms of the agreement, the Noticee may - without having the obligation to do so and without prejudice to his rights - takes such steps as he may deem fit to keep and maintain the vehicle at the purchaser's cost, charges and expenses which shall 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 comprehensivel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to acquire the same as per the terms of the agreement and for this it is agreed that the Noticee shall execute and deliver to HDFC their (the Noticee's) rights, title, interest, claims and benefits in the said Assigned Receivables. • The Assigned Receivables means the receivables in respect of the Loan Agreements, discussed above. Further, for the purpose of this Deed, the "Amounts Due" means the amount due and payable by the purchaser(s) of the vehicle(s) to the Noticee in respect of the said Assigned Receivables. The purchaser of vehicle who has acquire the vehicle upon the terms and conditions set forth in the relevant Loan Agreement, is referred to in this Deed as "Borrower". • This Assigned Receivables is agreed to be transferred and assigned by the Noticee to HDFC Bank. • Vide this Deed of Assignment of Receivables, the Noticee has agreed to sell, transfer and assign to HDFC Bank Limited, such Assigned Receivables (along with Securities) at a price or consideration agreed upon under the Deed. • In consideration of HDFC Bank Limited having paid this Purchase Consideration, the Noticee has unconditionally and irrevocably trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....supreme Court has in case of Association of Leasing and Financial Service Companies Vs Union of India [2010 (20) STR 417 (SC) held as follows: "37. Applying the above decisions to the present case, on examination of the impugned legislation in its entirety, we are of the view that the impugned levy relates to or is with respect to the particular topic of "banking and other financial services" which includes within it one of the several enumerated services, viz., financial leasing services. These include long time financing by banks and other financial institutions (including NBFCs). These are services rendered to their customers which comes within the meaning of the expression "taxable services" as defined in Section 65(105)(zm). The taxable event under the impugned law is the rendition of service. The impugned tax is not on material or sale. It is on activity/ service rendered by the service provider to its customer. Equipment Leasing/ Hire- Purchase finance are long term financing activities undertaken as their business by NBFCs. As far as the taxable value in case of financial leasing including equipment leasing and hire-purchase is concerned, the amount received as principal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....purchase and leasing is constitutionally characterized as a sale (deemed sale) by the Constitution (Forty-sixth Amendment) Act, the said subject matter can be taxed only under Entry 54, List II and it cannot be taxed under Entry 97, List I. According to the learned counsel, the object behind enactment of the Constitution (Forty-sixth Amendment) Act was to reserve the exclusive competence to tax hire-purchase transactions with the State Legislature and exclude the Parliament from the legislative sphere. In support of the above contentions, learned counsel placed reliance on para 44 of the judgment of this Court in the case of Bharat Sanchar Nigam Limited (supra), the relevant portion of which is quoted hereinbelow: "44. Of all the different kinds of composite transactions, the drafters of the Forty-Sixth Amendment chose three specifications, a works contract, a hire- purchase contract and a catering contract to bring them within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time." 39. Emphasizing the underlined words, the learned counsel contended that a hire-purchase does not involve a sale and service at the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted above, we are concerned with "financial leasing services" which are sought to be taxed under Section 65(12)(a)(i). The taxable event is indicated in Section 65(105)(zm). As stated above, the impugned provision operates qua an activity of funding/ financing of equipment/ asset under equipment leasing under which a lessee is free to select, order, take delivery and maintain the asset. The lessor (NBFC) arranges the finances. It accepts the invoice from the vendor (supplier) and pays him. Thus, the lessor (NBFC) renders financial services to its customer(s) and what is taxed under the impugned provision is the income, by way of finance/ interest charges in addition to management fees/ documentation charges, which is earned by the financier (lessor). The taxable event is the service which is rendered by the finance company to its customer(s). The value of taxable service under Section 67 is income by way of interest/finance charges (measure of tax) which is not determinative of the character of the levy. Thus, Section 67 of the Finance Act, 1994 seeks to tax financial services rendered by the appellant(s) with reference to the income which the appellant(s) earns by way of interest/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pment leasing and hire-purchase as defined in item (i) of sub-clause (a) of clause (12) of section 65 of the Finance Act, provided or to be provided to any person, from so much of the service tax leviable thereon under section 66 of the said Finance Act, as is equivalent to the service tax calculated on ninety per cent. of an amount, forming or representing as interest, i.e. the difference between the installment paid towards repayment of the lease amount and the principal amount contained in such installment paid. Explanation.- This exemption shall not apply to any amount, other than an amount forming or representing as interest, charged by the service provider such as lease management fee, processing fee, documentation charges and administration fee." 5.10 The said notification exempts only the amount representing the interest part in the installment paid towards the repayment of lease amount and the principal amount contained in such installment to the extent of ninety percent. This exemption notification itself shows that the interest per se is not exempted by the application of Section 66A/ Rule 6(2) but where the legislature intended exemption the same has been granted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ound in para 4 of Wood Papers Ltd. Case (supra), which reads"... Literally exemption is freedom from liability, tax or duty. Fiscally, it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principles requires it to be construed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject, but once ambigu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w to guide the interpreter to decide the liability to tax ignoring any amount of hardship and eschewing equity in taxation. Thus, we may emphatically reiterate that if in the event of ambiguity in a taxation liability statute, the benefit should go to the subject/assessee. But, in a situation where the tax exemption has to be interpreted, the benefit of doubt should go in favour of the revenue, the aforesaid conclusions are expounded only as a prelude to better understand jurisprudential basis for our conclusion. We may now consider the decisions which support our view. 52.To sum up, we answer the reference holding as under - (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s that these pertain to some past period not covered by the show cause notice. Appellants have not substantiated the said claim. Further in terms of the law service tax is payable on the realization basis and not on the accrual basis. 5.17. It is contended that the term "or any other Body Corporate' as appearing in section 65(12) has to be read ejusdem generis with the preceding words, namely, Banking Company or a Financial Institution including a Non-Banking Financial company. In effect, only a Body Corporate which is in the nature of the aforesaid Banking Company, etc. will be covered under the taxable head. of Banking and other Financial Services. In the result, they would not get covered as a provider of taxable service in respect of the aforesaid services. Even assuming that they are not engaged in any banking/non-banking financial services, they would still come within the ambit of "body corporate". Since the words "or any other" precede the words, "Other Body Corporate", it is made explicitly clear that such body corporate can be somebody "Other" than the specially mentioned bankers, financial/non-financial bodies. Therefore, the above contention of the appellant is d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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, value of the assets is shown as receivables but in the present case, the Noticee sold, transferred and assigned their receivables entirely to the assignee as per the deed of the assignment of loan with underlying securities. It is pertinent to note that the assignee, as per the deed may also transfer the receivables to a subsequent assignee or assessee in part or full. Therefore, the material facts and the documents on record clearly show that the noticee is not in the business of giving "loan" on interest and consequently consideration received for the various services provided does not qualify as interest on loan." 5.19 The real context of the above observations is not understood or clear. The observations of Commissioner do not deal with the issue of classification of certain incomes claimed as appellant "interest on loan". Commissioner has made reference to all irrelevant and extraneous issues to skirt the issue on hand. It is question of common understanding that the Banking and Financial services are not service simplic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what is intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of s. 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mensrea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by Statute proceeds on the assumption that society suffers injury by and the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under s. 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is signif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te passes and to disclose the particulars of clearances in the RT 12 returns. These submissions were not controverted by the appellants before us. The suppression of material particulars in respect of the production and clearance of T.O. for consumption outside the factory and white oil for consumption within the factory could not, in the facts and circumstances of the case, be said to be through inadvertence." 10.So, we have no hesitation to hold on facts of this case in view of finding recorded by the statutory authorities concurrently, that proviso to Section 11A would be attracted, as it stood at the material time and the demand was, therefore, within time as recorded above. This finding has been recorded consistently by all the authorities below and we do not find any error to interfere with the same. 11.Then, learned Counsel for the appellant referred to the following decisions of this Court regarding interpretation of Section 11 of the Act. In the case of Lubri-Chem Industries Ltd. v. Collector of Central Excise, Bombay [1994 (73) E.L.T. 257 (S.C.) = 1994 (2) Supp. III 258], this Court while interpreting proviso to Section 11A held that extension of limitation period b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e could be no other inference if it was not by inadvertence, then deliberate, then it is not in the realm of inaction of the assessee but with the objective of a gain, which in other words would be conscious withholding of the information. Thus unhesitantly we conclude, on the facts of this case, proviso to Section 11 would be applicable, hence, show cause notice is held to be within time." 6.4 Also accordingly penalty to justified under section 78, in view of decision of Apex Court in case of Dharmender Textile Processor [2008 (231) E.L.T. 3 (S.C)] and Rajasthan Spinning and Weaving Mills [2009 (238) E.L.T. 3(SC)] case. 19. From the aforesaid discussion it is clear that penalty under section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section. 20. At this stage, we need to examine the recent decision of this Court in Dharamendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Act was introduced. It has made the position clear that there is no scope for any discretion. In para 136 of the Union Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar indication has been given. "27. Above being the position, the plea that the Rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff's case (supra) was not correctly decided but Chairman, SEBI's case (supra) has analysed the legal position in the correct perspectives. The reference is answered.........". 21. From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. 22. There is another very strong reason for holding that Dharamendra Textile could not have interpreted section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. In paragraph 5 of the decision the court noted the submission made on behalf of the revenue as fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the several other statutory provisions that came up for consideration in that decision." 6.4 Penalty under Section 76 imposed in respect of the said show cause notice for the period prior to amendment barring imposition of penalty both under section 76 and 78 too cannot be faulted with. 6.5 However since the matter are being remanded the quantum of penalties too need to be determined after determination of duty demand. 6.6 Interest is payable as statutory liability in case of short payment of service tax by the due date. Thus Demand for interest under Section 75 of Finance Act, 1994 is also upheld in view of the Apex Court decision in case of Kerala State Electricity Board [2008 (9) STR 3 (SC)] "16. Submissions of Mr. Iyer that the payment of interest was the statutory liability of the service provider must be considered in the aforementioned context. If Appellant itself was liable for payment of tax, it was also liable for payment of statutory interest thereupon, if the same had not been deposited within the time stipulated by the statute. The liability to pay tax was not on the foreign company. Only on default on the part of the appellant the interest was leviable. ....