TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 216
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....tion dated 10.02.2015 conferring jurisdiction on the Principal Director General, Directorate General of Central Excise Intelligence to assign show cause notices to Principal Commissioners Service Tax, Commissioners Service Tax, Principal Commissioners, and Commissioners of Central Excise to adjudicate the show cause notices issued by the Directorate General of Central Excise Intelligence. 3. MTNL is, essentially, aggrieved by the impugned show cause notice issued by respondent no.3 (Additional Director General, Director General of GST Intelligence) calling upon MTNL to show cause why service tax amounting to Rs.56,61,37,440/- (Rupees Fifty-six Crores Sixty-one Lacs Thirty-seven Thousand Four Hundred Forty Only) inclusive of cess, should not be recovered from it along with interest under Section 73(1) of the Act. Further, MTNL was also called upon to show cause why penalty not be imposed under Sections 76 to 78 of the Act. 4. The principal controversy involved in the present case is whether MTNL is liable to pay service tax on the compensation of Rs.458.04 crores received by it from the Government of India on surrender of spectrum - 800 MHz CDMA. The impugned show cause notice pro....
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.... MTNL's entire spectrum holding in the 800 MHz band, and requested it to provide its comments, if any, regarding this recommendation. In response to the aforesaid communication, MTNL furnished its comments to the DoT on 21.04.2014, inter alia, stating that the spectrum was allotted to it up to 09.10.2017 and the said period had not expired. The spectrum was used for carrying CDMA services and it had made significant capital investment for providing such services. MTNL claimed that if the allocated spectrum is prematurely surrendered, it must be reimbursed/compensated with an amount equal to the value of the spectrum for the remaining period of the license at a value determined at the auction rate of 800 MHz. 12. On 18.08.2015, the DoT issued a letter stating that the Union Cabinet, in a meeting held on 05.08.2015, had approved financial support to Bharat Sanchar Nigam Limited (BSNL) and MTNL in lieu of surrender of the 800 MHz CDMA carriers. An amount of Rs.458.04 crores was approved to be given to MTNL in this regard. 13. On 28.03.2016, the DoT issued an order informing the sanction of the competent authority for payment of an amount of Rs.4,28,95,00,000/- as financial support t....
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....service. Reasons & Conclusion 20. The first and foremost question to be addressed is whether the impugned show cause notice was issued beyond the period stipulated under Section 73(1) of the Act. The impugned show cause notice refers to a note prepared by MTNL on 16.04.2014 in the context of the DoT taking back the entire spectrum holding in 800 MHz by way of surrender of carriers allotted to MTNL. The said note indicates that in the year 1998-99, MTNL was allowed to deploy CDMA services under basic service license issued by the Government of India in the service areas of Delhi and Mumbai. MTNL was allotted CDMA carriers/spectrum (800 MHz, two carriers in each service area) for rolling out its services. 21. The DoT, by its letter dated 18.06.2013, indicated that CDMA spectrum was not part of the basic service license as it was included in Cellular Mobile Telephone Service (CMTS) License under dual technology. 22. Thereafter, on the recommendation of TRAI, MTNL constituted a committee to suggest further course of action to protect its interest in the evolving technological landscape and regulatory regime. The said Committee recommended that CDMA services be discontinued; the CDM....
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....rvice, and the receipt of consideration. 27. At this stage, it would be relevant to refer to Section 73(1) of the Act as was applicable at the material time: "Section 73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded.- (1) Where any Service Tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the Service Tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any Service Tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful misstatement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of Service Tax, by the person chargeable with the Service Tax or his agent, the provisions....
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.... 30. The conclusion that MTNL had suppressed material facts or had contravened the provisions of the Act with an intent to evade service tax is not supported by any material on record. The statements of the officials of MTNL - which are relied upon by the respondents - clearly indicate that it was their understanding that service tax was not chargeable on compensation or financial support received for surrendering the spectrum. 31. Indisputably, the contention that service tax is not chargeable on the compensation received is not without substance. Since it was MTNL's understanding that the compensation received was not a consideration for any taxable service but for the surrender of spectrum, MTNL could not be expected to disclose the compensation as consideration for service in its Service Tax Returns. Plainly, there was no requirement for MTNL to do so. 32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification. The respondents have surmised that this would have been the normal course for any person acting with common prudence. However, it is apparent from the statements ....
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.... levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or willful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." (emphasis supplied) 36. The aforesaid decisio....
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....ement of facts was concerned the question of intent was immaterial. While disagreeing with the aforesaid interpretation this Court at p. 119 observed as follows: (SCC para 6) '6. Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word "wilful" preceding the words "misstatement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or Rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11- A. Misstatement or suppression of fact must be wilful.' The aforesaid observations show that the words 'with intent to evade payment of duty' were of utmost relevance while construing the earlier expression regarding the misstatement or suppression of facts contained in the provi....
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....tement or suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid paying excise duty. The terms "mis-statement" and "suppression of facts" are preceded by the expression "willful". The meaning which has to be ascribed is, deliberate action (or omission) and the presence of an intention. Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention." 41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to evade the service tax, which it was aware would be leviable, suppressed the fact of receipt of consideration for rendering any taxable service. On the contrary, the statements of the officials of MTNL, relied upon by the respondents, clearly indicate that they were under the belief that the receipt of compensation/financ....
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....x is leviable under Section 66B. Further, in terms of Section 65B(44) of the Act, 'service' means any activity carried out by a person for another for consideration and includes a declared service. From this, it appears that 'service' has the following ingredients:- (a) It means any activity carried out by any person (b) The activity shall be carried out by one person for another person (c) The activity shall be carried out for a consideration. In terms of common understanding, activity would include an act done, a work done, a deed done, an operation carried out, execution of an act, provision of a facility etc. It is a term with wide connotations. Activity could be active or passive and would include forbearance to an act. Under the sub-section (e) of Section 66E of the Finance Act, the "agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" constitutes specifically listed declared service. (i) accordingly, it appears that the act of agreeing to surrender/ surrendering of the spectrum by MTNL, inter alia, meant that MTNL had to forbear using the CDMA platform, leading to opportunity cost and to making alternative arrang....
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....utes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1.-For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,- (A) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (C) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State....
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.... the Act. It is relevant to refer to said clause and the same is set out below: "66-E. Declared services. - The following shall constitute declared services, namely- *** *** *** (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;" 50. The first limb of Clause (e) of Section 66E of the Act relates to an obligation to refrain from an act or tolerate an act or a situation or to do any act. It is difficult to accept that MTNL had agreed to forbade doing any act as is contended on behalf of the respondents; it had merely agreed to surrender allocation of an asset. It did not agree to tolerate an act. The spectrum is a public asset and its allocation is controlled by the Government of India. A specific band was allocated to MTNL for providing telecommunication service. Since MTNL had made investments for rendering services using the allocated spectrum, the Government of India had decided to provide financial support on MTNL vacating the spectrum. It would be a stretch to construe this as forbearance of an act or tolerating an act. 51. It is also relevant to refer to Clause (j) of Section 66E of the Act, as introduced by th....