TaxTMI 
TaxTMI 
2020 (9) TMI 432
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the said recoverable amount of Service Tax including all cesses under Section 75 of the existing Finance Act, 1994. iii. I impose a penalty of Rs. 21,79,976/- (Rupees Twenty One Lakhs Seventy Nine Thousand Nine Hundred and Seventy Six only) under Section 76 of the existing Finance Act, 1994 upon the noticee for their failure to pay the appropriate Service Tax liability in accordance with the provisions of Section 68 of the existing Act; iv. I also impose a Penalty of Rs. 10,000/- (Rupees Ten Thousand Only) under Section 77 of the existing Finance Act, 1994 upon the noticee for their failure to furnish statutory ST-3 returns in the manner prescribed under Section 70 of the existing Act." 1.2 The appeal No ST/60852/2019-CU(DB) is directed against Order in Original No GST/GGM/COM/Adj/Canon/128/18-19 dated 30th April 2019 of the Commissioner Good and Service Tax, Gurgaon. By the impugned order, Commissioner held as follows: i. I confirm the demand of Rs. 3,04,07,553 (Rupees Three crore Four Lakh Seven Thousand Five Hundred and Fifty Three Only) and order the same to be recovered from the notice under Section 73 of the Finance Act, 1994. ii. I o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent of gross amount (salary) to such expats by them to the Foreign Company situated outside India. Such services received by them were taxable under the category of 'Manpower Recruitment and Supply agency Service' (upto 30/06/2012) and thereafter with effect from 01.07.2012 under 'Service' as defined under Section 65B(4) of the Finance Act, 1994. 2.3 Since appellants had received services from Canon Inc. Japan (referred as Foreign Company) and had not paid Service Tax on same under reverse charge mechanism during the period 01.04.2015 to 30.06.2017 under provisions of Rule 2 (1)(d)(i)(G) of the Service Tax Rules, 1994 read with Notf 30/2012 dated 20.06.2012, show cause notices were issued to them for demanding the service tax along with interest as provided for by the Finance Act, 1994. Penalties were also proposed in the Show Cause Notices. 2.4 These Show Cause Notices have been adjudicated by the Commissioner as per the impugned orders mentioned in para 1, supra. 2.5 Aggrieved by the impugned order, Appellant has filed these appeals 3.1 We have heard Shri Sujit Ghosh Advocate for the Appellant and Shri Rajeev Gupta, Commissioner and Shri Vijay Gupta, Superintendent, A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... [2014 (34) STR 135 (T)] • Nissin Brake India [2019 (24) GSTL 563 (T-Del)] • India Yamaha Motor Pvt Ltd [Final Order No 50890/2019 dated 28.06.2019 of Delhi Bench] • Since the facts in the cases decided by the tribunal as above are identical to the facts in present case and also the parent company was not engaged in providing manpower supply services, the impugned orders are bad in law and need to be set aside. • Departmental Authorities have themselves decided the issue in their favour for the period 2006-07 to 2008-09 and for period 2014-15, holding that the demand of service tax made under the category of manpower supply services cannot be sustained. • In view of above appeals need to be allowed 3.3. Arguing for the revenue, learned authorized representative submitted while reiterating the findings recorded in the impugned order as follows: • W.e.f. 01.07.2012, the service has been defined under section 65 B (44) of the Finance Act, 1994 and by going through various documents viz. Agreement between foreign company, appellants and the expats, it emerges that the services provided by foreign company t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mployee but he remains the employee of the foreign company. Such payments in foreign currency are regulated by Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000. The expats were receiving their salary in Japan from the foreign company in their foreign accounts. Therefore, as per Sub-regulation 8 of Regulation 7 of the said Regulations read with the agreements for payment facility between the companies and expats, it is evident that the expats were foreign citizens, resident in India, employees of foreign company, receiving remuneration as payable to them by the foreign company. As per the provisions of said regulations, they cannot be termed as the employees of the appellants. • Appellants have vigorously submitted that the expats were their own employees as they had deducted TDS on the amounts paid by them as salary to these expats. The deduction of TDS of Income Tax on such amounts is in accordance with the said FEMA notification which provides that "Income Tax is chargeable on the entire salary as accrued in India" and hence, cannot be considered as an evidence to prove that the said expats were the employees of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Tax without any deductions of expenditures on any account. • The judgments relied upon by the ld advocate of the appellants relates to the period prior to 30.06.2012 i.e. the period when services were categorised and it was held that the foreign company does not fall under manpower supply agency. 3.4 After completion of hearing both the sides were given liberty to file written submissions in matter. Appellants while filing the written submissions filed miscellaneous applications ST/Misc/60084/2020 seeking opportunity of hearing in the matter to explain certain points being made by them in written submissions. These applications were heard and allowed on 27.02.2020. Accordingly matter was posted for hearing on 28.02.2020. 3.5 On 28.02.2020, learned counsel for the appellant made following submissions: • During the course of argument in the matter earlier he has not raised the point in relation to issue estoppel which is in appeal memo filed by them, this point should be taken on record as the issue for earlier periods has been adjudicated in their favour. • He has filed the affidavits from the parent company, duly certified by the concer....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Para 10 at 675." In case of Pefco Foundary Chemicals Ltd [1993 SCC (Suppl 1) 74] again Supreme Court held as follows: "Once the tribunal found that cylinder liner ceased to be cast iron it is obvious that the department could not be precluded from levying duty on it subject to the law of limitation. Since show cause notice which resulted in these proceedings was for a period other than for which proceedings had been dropped, it was not reviewed as urged by the learned counsel for appellant. In Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise, AIR 1991 SC 999 it was held by court, of which one of us (R. M. Sahai, J.) was a member, that if an item was found dutiable then the department could not be prevented from levying duty on it because it had earlier approved classification as there is no estoppel against statute." 4.4 In view of the above decisions we are not in position to agree with the submissions made by the Appellants invoking the principle of estoppel. 4.5 We also not that in case of U R Malpani [1999 (110) ELT 317 (SC)+, Hon'ble Supreme Court has refused to apply the principle of "issue estoppel" to the criminal prosecution of accused, even ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as persons concerned in the act of unauthorized importation, they escape on a benefit of doubt." 7. .......... 8. We shall not take up the contention that the finding of the Collector of Customs referred to earlier operated as an issue estoppel in the present prosecution. The issue estoppel rule is but a facet of the doctrine of autrefois acquit. In Sambasivan v. Public Prosecutor, Federation of Malaya - (1950) AC 458 at p. 479, Lord MacDermott enunciated the said rule thus : "The effect of a verdict of acquittal pronounced by a competent court on a lawful charge and after a lawful trial is not completely stated by saying that the person acquitted cannot be tried again for the same offence. To that it must be added that the verdict is binding and conclusive in all subsequent proceedings between the parties of the adjudication. The maxim "Res judicata pro veritate accipitur" is no less applicable to criminal than to civil proceedings. Here, the appellant having been acquitted at the first trial on the charge of having ammunition in his possession, the prosecution was bound to accept the correctness of that verdict and was precluded from taking any step to challenge it at t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y services. 4.8 The issue in similar circumstances and facts have been decided holding that the services do not qualify as Manpower Supply Services as defined by Section 65 (105)(k) of the Finance Act, 1994 and hence following the precedents the impugned order needs to be set aside. (Refer to para 3.2, supra for the decisions relied upon by the appellants in their support). In all the cases relied upon by the Appellant the period involved is prior to July 2012, when the service tax was levied on those services which fall under the taxable categories as defined by Section 65 (105)(k) of the Finance Act, 1994. Instead of referring to each decision separately we refer to the decision of Hon'ble High Court in case of Computer Science Corporation *2014 (52) taxmann.com 256 (Allahabad)+, Hon'ble Allahabad High Court has held as follows: "8. In the present case, the Commissioner clearly missed the requirement that the service which is provided or to be provided, must be by a manpower recruitment or supply agency. Moreover, such a service has to be in relation to the supply of manpower. The assessee obtained from its group companies directly or by transfer of the employees, the servi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lve per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed." 4.9 Hence with effect from 01.07.2012, the law as introduced by the way of above amendments had changed the concepts of taxation of services. Whereas prior to this date tax was levied on the services defined to be taxable services, and Manpower Supply Services as defined by Section 65 (105)(k) was one of such taxable services. Since we are concerned with the period post 01.07.2012, the decisions which have held that the services provided by the appellant parent company were not covered by the definition of Manpower Supply Services, under Section 65 (105)(k) as it existed then will have no application to the facts of this case. Hence the submission made by the appellants counsel, by referring to various decisions deciding the issue for period prior to 01.07.2012, that the issue is no longer res-integra, cannot be agreed to. Nature of transaction between Appellant and its Parent Company 4.10 As per Section 65 B (44) inserted in Finance Act, 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xtending from one to all. The other word 'potential' is again very wide. In Oxford Dictionary it is defined as 'capable of coming into being, possibility'. In Black's Law Dictionary it is defined as "existing in possibility but not in act. Naturally and probably expected to come into existence at some future time, though not now existing; for example, the future product of grain or trees already planted, or the successive future installments or payments on a contract or engagement already made." In other words service which is not only extended to actual users but those who are capable of using it are covered in the definition. The clause is thus very wide and extends to any or all actual or potential users. But the legislature did not stop there. It expanded the meaning of the word further in modem sense by extending it to even such facilities as are available to a consumer in connection with banking, financing etc. Each of these are wide-ranging activities in day to day life. .........." 4.11 In U K, VAT Legislation, also defines supply of service in very manner stating as follow: "(b) anything which is not a supply of goods but is done for a considerati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as alimony for divorce would be examples in this category. However a reward given for an activity performed explicitly on the understanding that the winner will receive the specified amount in reciprocity for a service to be rendered by the winner would be a consideration for such service. Thus amount paid in cases where people at large are invited to contribute to open software development (e.g. Linux) and getting an amount if their contribution is finally accepted will be examples of activities for consideration." 4.12 Also what is meant by "provision of service by an employee to employer", which falls in exception/ exclusion clause of Section 65B(44) has been explained as follows: "2.9.1 Are all services provided by an employer to the employee outside the ambit of services? No. Only services that are provided by the employee to the employer in the course of employment are outside the ambit of services. Services provided outside the ambit of employment for a consideration would be a service. For example, if an employee provides his services on contract basis to an associate company of the employer, then this would be treated as provision of service. 2.9.2 Would servic....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../10/2014) in as much as that the foreign company has allowed additional benefit of "Return ticket of Economy class to Japan once in One Year". 4.14 From the documents as discussed above undisputedly it can be said that Expats were providing certain specific and specialized services to the Appellants. For the services provided by the Expats remuneration was agreed and paid by the Appellants in the manner agreed. The services provided by the Expats cannot be considered to be provided by the employee to the employer, to be covered under the exclusion clause 'b' in Section 65 B (44) of the Finance Act, 1994 as amended from 01.07.2012. Even the Education Guide issued by the Central Board of Excise and Customs, in 2012 at 2.9.1 & 2.9.2 (refer para 4.13 above) clarifies so. Post 01.07.2012, all the activities, carried out for a consideration except those covered under exclusion clause, negative list or specifically exempted are subjected to service tax. It is not the case of the Appellant, that the services provided by the Expats fall under the negative list or are exempted by way of an exemption notification under Section 93 of Finance Act, 1994. Since we do not find that the services....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erved and held as follows: "8. xxx xxx xxx The Court must always remember that "legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry"; "that exact wisdom and nice adaption of remedy are not always possible" and that "judgment is largely a prophecy based on meagre and uninterpreted experience". Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig Refining Company [94 L Ed 381 : 338 US 604 (1950)] be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has earlier been referred to by us. The nature of service referred by the NRC, can be said with certainty would come within the ambit and sweep of the term 'consultancy service' and, therefore, it has been rightly held that the tax at source should have been deducted as the amount paid as fee could be taxable under the head 'fee for technical service'. Once the tax is payable paid the grant of 'No Objection Certificate' was not legally permissible. Ergo, the judgment and order passed by the High Court are absolutely impregnable." Liability to income tax, and consequently deduction of TDS under Section 194, dependent on the source rule. If the income is incurred by the Non Resident, in lieu of the services provided in India, then the same is liable to Income Tax in India and accordingly TDS needs to be deducted as per Section 194 of the Income Tax Act, 1961. However, just deduction of TDS cannot be conclusive proof for establishing employer employee relationship. Also the deduction of TDS was as per Sub-regulation 8 of Regulation 7 Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000 and FEMA notification....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ants have also not argued limitation before us. Hence we uphold the demand of service tax made as per the impugned orders. Interest 4.20 Since the demand of tax has been upheld the demand for interest will follow. It is now settled law that interest under Section 75, is for delay in the payment of tax from the date when it was due. Since appellants have failed to pay the said Service Tax by the due date interest demanded cannot be faulted. In view of the decisions as follows:- • P V Vikhe Patil SSK [2007 (215) ELT 23 (Bom)] • Kanhai Ram Thakedar [2005 (185) ELT 3 (SC)] • TCP Limited [2006 (1) STR 134 (T-Ahd)] • Pepsi Cola Marketing Co [2007 (8) STR 246 (T-Ahd)] • Ballarpur Industries Limited [2007 (5) STR 197 (T-Mum)] Penalty Under Section 76 and 77 of Finance Act, 1994 4.21 Penalty has been imposed by the Commissioner under Section 77 for various infractions noticed in complying with provision of law. Penalty under Section 77 is civil in nature and are imposed for infractions noticed. Hon'ble Supreme Court has in case of Gujarat Travancore Agency vs. Commissioner of Income Tax [1989 (42) ELT 350 (SC)]....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n or arises out of the same act, the penalty is imposable for ingredients of both the offences. There can be a situation where even without suppressing the value of taxable service, the person liable to pay service tax fails to pay. Therefore, penalty can certainly be imposed on erring persons under both the above Sections, especially since the ingredients of the two offences are distinct and separate. Perhaps invoking powers under S. 80 of the Finance Act, the appropriate authority could have decided not to impose penalty on the assessee if the assessee proved that there was reasonable cause for the said failure in respect of 42 ST/85354,85355/2015 one or both of the offences. However, no circumstances are either pleaded or proved for invocation of the said Section also. In any event we are not satisfied that an assessee who is guilty of suppression deserves such sympathy. As such, we are of opinion that the learned Single Judge was not correct in directing the 1st appellant to modify the demand withdrawing penalty under S. 76. Therefore, the judgment of the learned Single Judge, to the extent it directs the first appellant to modify Ext. P1 by withdrawing penalty levied under S. ....