TaxTMI 
TaxTMI 
2024 (2) TMI 306
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.... appropriate the amount of Rs 10 Crores deposited by them. I direct them to pay the balance forthwith. 2. I also direct M/s Sahara India, Sahara Bhawan-1, Kapoorthala Complex, Aliganj, Lucknow to pay interest at applicable rates, in terms of Section 75 of the Finance Act, 1994. 3. I impose a penalty of Rs 80,99,58,723.00 (Rupees Eighty Crore Ninety Nine Lacs Fifty Eight Thousand Seven Hundred and Twenty Three only) under Section 76 Finance Act, 1994. I direct them to pay the penalty forthwith. 4. I impose a penalty of Rs 1000.00 (Rupees One Thousand only) under Section 77 Finance Act, 1994. I direct them to pay the penalty forthwith. 5. I also impose a penalty of Rs 80,99,58,723.00 (Rupees Eighty Crore Ninety Nine Lacs Fifty Eight Thousand Seven Hundred and Twenty Three only) under Section 78 Finance Act, 1994. I direct them to pay the penalty forthwith." 2.1 Appellant is a partnership firm engaged in mobilizing deposits from the public under various deposit schemes of M/s Sahara India Financial Corporation Limited (SIFCL). With effect from 01.011.2005 SIFCL also became a partner in the partnership firm of appellant. 2.2 Appellant entered in MOU with the SIFCL dated ....
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....Penalty should not be imposed upon them in terms of Section 76 and 77 of the Finance Act, 1994. iv) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994. 2.4 The show cause notice was adjudicated as per the impugned order referred in para 1 above. Aggrieved appellants have filed this appeal. 3.1 We have heard Shri B. L. Narasimhan and Shri Prakhar Shukla, Advocates for the appellant and Shri Deepak Kumar Special Counsel for the revenue. 3.2 Arguing for the appellant learned counsel submits that: * Show cause notice and impugned order has classified the activities undertaken by them as business auxiliary service under sub-clause (ii) and (iv) of Section 65 (19) for the period prior to 10.09.2004 and under sub clause (ii), (vi) and (vii) of Section 65 (19) for the period post to 10.09.2004. Same activity could not have been classified under multiple categories during the same period and during the different periods as has been held in following decisions o ESS GEE Real Estate Developers Pvt Ltd [2020 (34) GSTL 486 (T-Del)] affirmed by Hon'ble Supreme Court as reported at [2020 (34) GSTL J 93 (SC)] o CERSAI [2023 (4) TMI 435 (CESTAT-Delhi)] ....
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....ESTAT- Del] affirmed by Hon'ble Supreme Court as reported at [2021-TIOL-06-SC-ST-LB] o Malviya national Institute of Technology [2019 (6) TMI 127-CESTAT NEW DELHI] o Sourav Ganguly [2020-TIOL-1687-CESTAT-KOL] o Global Coal & Mining Pvt Ltd. [2020 (36) GSTL 77 (T- Delhi)] o Capital transport Convoy Contractors [2016 (2) TMI 546 CESTAT NEW DELHI] * Extended period of limitation is not invokable since the appellant was under bonafide belief that the activities performed by them are not taxable under the category of business auxiliary services. * For the same reason the penalty is also not imposable. * They are entitled to claim deduction of the reimbursable expenses from the gross amount charged in view of the decisions as follows: o Intercontinental Consultants and Technocrats Pvt Ltd. [2012-TIOL-966-HC-DEL-ST] affirmed by the Hon'ble Supreme Court at [2018 (10) GSTL 401 (SC)] 3.3 Arguing for the revenue learned special counsel submits that- * Appellant activities are covered under the taxable category of Business Auxiliary Service under clause (ii) and (iv) ibid for the period 01.07.2003 to 09.09.2004. * The word service used in (ii) is service and not t....
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....ion 65 (19) up to 9.10.2004 and with reference to (iv) thereafter. * The contention of the appellant that (vi) is applicable only if SIFCL is rendering any taxable service to its clients namely depositors as it is not the case that accepting of deposit is in the nature of taxable service. It has been stated earlier also that the phrase used in section 65 (19) (vi) is service and not taxable service. Thus this contention is not tenable. * Further the contention that SIFCL is not their client and hence (vi) will not be applicable is also not tenable. Existence of client (service receiver), service provider and payment of service charge are 3 parameters for levy of service tax. The contention of the appellant that SIFCL is not their client is based on the ground that they do not render any professional service to them. Black Law Dictionary defines client and the appellants have been engaged by SIFCL for supporting the professional line of work relating to acceptance deposits under various schemes and loans floated by the SIFCL, which in absence of appellant would have been carried out by the SIFCL. This implies that SIFCL is a client, when all three parameters referred above are s....
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....der Business Support Service. Therefore, we are liable to pay Service Tax under the said category with effect from 1.05.2006." From this it is seen that appellant has taken registration under this category in respect of services which are not in dispute in the present proceedings. Just for the reason that the appellant had obtained registration under the category of BSS will not exclude the applicability of the BAS in respect of activities undertaken prior to it. * Appellants claim for reimbursable expenses has not been denied by the adjudicating authority, it has been disallowed for the reason that the appellants were not able to produce clinching evidence in this regard. The claim made can be allowed subject to production of such evidences before the original authority. * Appellants have not adduced any evidence about the basis on which they entertained bonafide belief that their activities were not taxable as BAS, hence the invocation of extended period to demand this tax for period 2003 to 2006 by invoking extended period of limitation can be faulted with. * Adjudicating authority has in her order recorded that conditions prescribed under Sub Rule 7 (4) have not been fulf....
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....l Excise Act, 1944 (1 of 1944) 4.3 From the definition of Business Auxiliary Service as per Section 65 (19) reproduced as above it is quite evident that for the period up to 09.10.2004, the clause (ii) was with reference to promotion and marketing of services provided by the client and clause (iv) was with reference to the incidental or auxiliary support services provided to the client. The clause (i), (ii), (iii) & (iv) were mutually exclusive and referred to different categories of activity which need not necessarily be in relation to the taxable service provided by the client. Counsel has argued that the client of appellant is in business of accepting deposits, which per-se is not a service hence the clause (ii) and (iv) of section 65 (19) would not be applicable to them, and their services cannot be taxed under this category. On the contrary Commissioner has in the impugned order applied this clause to hold that the services provided by appellant to fall under the category of "business auxiliary services by application of these two clauses. To understand the exact purport of the word 'service' used in this clause we need have no option but to refer to the general understandin....
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....ation with M/s SIFCL to enable them to continue its relationship to promote and manage its business of para banking and the Noticee has agreed to continue its business co-operation with M/s SIFCL and to continue to act as Agent to M/s SIFCL for its para banking related business activities which have been discussed amongst parties and have been mutually agreed among themselves. The Agreements covenant as under: 16.4.1 The noticee shall continue to work as Agent to Sahara India Financial Corporation Limited to conduct, promote, introduce and secure business on behalf of M/s SIFCL under all its scheme which may be changed, varied, suspended and modified from time to time as per the instructions of M/s SIFCL. 16.4.2 The noticee shall collect the requisite amount from the participating members of saving schemes and shall remit it to M/s SIFCL the amount so collected through its branches along with the statements of accounts. Further the receipt shall be issued to the members in the name of M/s SIFCL. The noticee shall also arrange on behalf of M/s SIFCL for payments of maturity/ pre maturity/ secured loan to the depositors against the deposits made by the Depositors under vario....
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....16.4.8 M/S SIFCL will allow the noticee to retain an amount equivalent to the sum required for meeting maturities/pre maturities/ secured loan for the succeeding fortnight, out of collection of deposits under various deposit schemes. The sum so retained with the noticee shall not bear any interest and will be used to meet the requirements of prompt payments of maturities, pre maturities, secured loan, death help etc., as set out in various deposit schemes. 16.4.9 M/S SIFCL has right to appoint at its cost any officer and/ or inspector and/ or firm of Chartered Accountants for verification of deposits liability, maturity/ pre maturity payments, death help, loan to members, and/ or expenses which are borne by M/s SIFCL and incurred by noticee 16.4.10 M/s SIFCL shall have the right to appoint any other Agent/ Agents to promote and secure its business and the noticee shall have no objection to any such appointment. 16.4.11 The staff officer of the noticee shall continue to remain the employees of the noticee and M/s SIFCL shall have no lien on any of employees, assets, tenancy agreements etc. 16.4.12 Any change in the constitution of the noticee following its re-constitutio....
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....and other related works as mentioned in the agreement. The Noticee has submitted that they are providing services in relation to the actionable claim and money which are not goods as per the definition of goods given in the Sales of Good Act, 1930. Due to this fact i.e. goods are not covered under the purview of service tax, the Noticee has not provided any services under the category of BAS. I this regard, it is relevant to mention a circular issued by the Board dt 05.11.03. which is as under: "Circular No. 66/15/2003-ST Nov 5, 2003 (F No 249/4/2003-CX.4) Applicability of service tax on commission income earned on distribution and marketing of units of mutual fund. I am directed to say that some doubts have been raised regarding application of service tax on the activity of Mutual Fund Distribution as to whether 1) the commission received by distributors on mutual fund distribution as liable to Service Tax under the category of Business Auxiliary Services? 2) the services provided is exempt from service tax in terms of Notification No. 13/2003 dated 20.6.2003? In this connection, it is clarified that the services provided as referred above are primarily in nature....
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.... of, exchange, convert, underwrite, subscribe, participate, invest in and hold, whether in its own account or on behalf of any person, body corporate, company, society firm or association of persons, whether incorporated or not, shares, stock, debentures, debenture stocks, promissory notes, bills of exchange, bonds warrants participation certificate, participation units, other money or capital market instrument, securities, issued or guaranteed by any Government, State, Dominion, Commission, Public Body, or Authority, Supreme Local or Municipal, company or body whether incorporated or not or by any person or association. (b) Subject to the permission of statutory authorities wherever required, to buy, sell, hedge or otherwise deal in all kinds of derivatives instruments, foreign currencies, foreign currency options, forward covers, and interest rate swaps in Indian or foreign currencies, interest rate future and options, swaps of all kinds and to transact for itself or to hedge its underlying investments from exchange rate risk, interest rate risk, credit risk and all type of other risks. (c) To buy, sell, invest or otherwise deal in securities, bonds or fixed deposits issued....
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.... debts of the borrower, enforcement of the security as per Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, settlement of the dues of the borrower and taking possession of the assets and do all other acts as may be required to protect/ further the interest of the Company. 6. To carry on and/ or promote the business of mutual funds, asset management company, act as sponsor and undertake other related activities as defined under Securities and Exchange Board of India (Mutual Fund) Regulations, 1996. 7. To carry on business as Depository Participant within the meaning of Securities and Exchange Board Of India Act, 1992 and SEBI (Depositories and Participants) regulations, 1996, as amended or replaced from time to time after obtaining registration from Securities and Exchange Board Of India ("SEBI") 8. To carry on business as Portfolio Managers within the meaning of Securities and Exchange Board Of India (Portfolio Managers) Rules, 1993, as may be amended or replaced from time to time and in pursuant to contracts or arrangements with persons (hereinafter referred to as "clients"), to advise, direct or undertake on behalf of ....
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....ness during the period amounts are held by them. The depositors in turn allow/ permit M/s SIFCL to utilize their deposits for the purpose of business activities of the M/s SIFCL. The permission for use of the deposits by the depositors to the M/s SIFCL for their business activities is a consideration for accepting the deposits made by the depositor. The word "consideration" has a much wider connotation than the money consideration. Section 2(d) of The Indian Contract Act, 1872, defines the word consideration. We reproduce the relevant provisions of the said section below: "2. Interpretation-clause.-In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:- (a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal; (b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise; (c) The person making the proposal is called the "promisor", and the person ac....
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....IR 1473 SC] held as follows: Therefore, it seems to us that there is nothing in the language of S. 10 from which it can be fairly implied that an expenditure or allowance falling within the section must fulfill some other condition before it can be allowed. A similar question arose in England in Hughes v. Bank of New Zealand (21 T.C 472), and all the Judges took the view that interest paid by the Bank on capital borrowed in the course of its business and utilised in buying tax-free securities had to be deducted in arriving at the taxable profits of the business notwithstanding that the interest earned by the Bank on the tax-free securities could not be taxed. Lord Thankerton put the reason shortly thus "It is perhaps enough to say that the Crown are unable to point to any statutory provision in support of their contention, whereas the Respondents find full justification for their resistance in the provisions of Rule 3 of the rules applicable to cases I and II of Schedule D". This rule is similar to s. 10(2) (xv) of the Indian Income Tax Act. After setting out the rule and noticing its effect he says "It seems to me to be incontrovertible that, in the present case, the in....
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....use the business which was being taxed was the business at Madras and not the business at Ipoh. No exception can be taken to the decision but it does not advance the appellant's case because we are concerned with one indivisible business. In Provident Investment Co. Ltd. v. C.I.T. Bombay (6 I.T.C. 21), the assessee, an Indian Finance Company, borrowed some money in India and purchased sterling securities out of it and retained them in India. The Bombay High Court held that interest on the borrowed money could not be deducted because "qua the capital which it (the company) is using outside British India and retaining for that length of time outside British India, is not carrying on business in respect of which profits assessable to Indian Income, tax can be earned so that allowance can be claimed for interest on capital borrowed within the meaning of S. 10(2) (iii). It appears to us that the Bombay High Court divided the business in two separate businesses. But the business of the present assessee cannot be divided into two separate businesses. It is one and indivisible. In Chellappa Chettiar v. Commissioner of Income Tax Madras((1937) 5 I.T.R. 97), the assessee carrying o....
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.... s. 14 (2) (c) and s. 4(1)(a) and (c) existed at the relevant time that the words 'profits and gains' in s. 24 were limited to such profits and gains as would have been assessable in British India or the taxable territories. This is apparent from the judgment and from the following observations of Das J. "Reading the provisions in section 24 with the provision in section 4 (1) (a) and (c) and section 14 (2) (c) it seems clear to us that section 24 (1) when it talks of profits or gains has reference to taxable profits and gains; in other words, it has reference to such profits and gains as would have been assessable in British India or the taxable territories. It has no reference to income accruing or arising without British India or without taxable territories which were not liable to be assessed in the case of non-residents." We cannot imply from this judgment that there is a general principle that if a part of the income of a business is tax- free, expenditure incurred for the purpose of earning this income is outside the purview of s. 10." 4.9 From the above it is quite evident that activities of the appellant are not limited to accepting deposit. They generate f....
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....educted at Source 947411209 Other Current Assets 9 1662429730 678041048 5329390623 20930766904 Sub Total 13301605705 11465740306 22008826176 38426727820 Current Laiblities & Provisions -530436546 -481759340 -658626147 -3471256150 Net current assets 12771169159 10983980966 21350200029 34955471670 Total 95108977260 122569017051 163066476041 188705257596 SCHEDULE 3 Liablity Toward Depositors As per last balance Sheet 72936347833 85106396262 110427525150 148237792325 Collection during the year 58818457487 63916457889 79226393605 69158971003 Maturity during the year -46648409058 -38595329001 -41416126430 -46808537903 Net deposits (a) 85106396262 110427525150 148237792325 170588225425 Interest accrued on above As per last balance Sheet 3467354679 2929161650 ....
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....113 411610088 177494850 Surplus in Profit & Loss Account 147557466 402138969 415884732 557031552 Dividend on Preference Share 135000000 150000000 165000000 0 Corporate Dividend Tax 17296875 19603125 23141250 0 Transfer to Special Reserve u/s 45 IC of RBI Act 101719595 45837225 82322018 35498970 Surplus in Profit & Loss Account c/f 402138969 415884732 557031552 699027432 Schedule 11 INTEREST On securities 5326750813 5564025007 6596335020 8410381283 On Loans & Advances 1166158682 854502147 797685179 1162091738 On Fixed Deposits 104613278 179605790 1297582145 1790194238 On Certificate of Deposits 384802481 189018925 108864386 192349964 On Others 515025277 401464927 435224610 449846 Total 7497350531 7188616796 9235691340 11555467069 Schedule 15 INTEREST ....
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....CL for earning profits by application of those deposits. This transfer of right to use the funds of depositors in terms of various definitions referred above is consideration. 4.12 Mumbai Bench had categorically agreed to the submission of similar nature as made in the present case that the accepting deposits is without consideration and hence cannot be termed as service. In case of ICICI Bank Ltd [2019 TIOL 589 CESTAT Mumbai] following was observed: "37. It is a common knowledge that the customers deposit their money in the Banks and in turn receive interest as consideration from the Banks. The money received by the Bank from the customers is not kept idle but further invested by them in various manners in furtherance to their Banking business, one such way is by providing loans or advances, for which the Banks receive consideration as interest. The deposits kept in the Bank are in different forms like, saving bank deposit, current deposit, fixed deposit etc. The consideration received by the customers, in the form of interest, and such deposit per se is not a taxable service, since the consideration, in the form of interest, does not come under the Service Tax net. Thus, the i....
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....irect nexus with the "lending" activity of the banks. The services under the aforesaid two categories have been stated by the banks to be as follows : (i) Direct nexus with the activity of accepting deposits. a. Charges towards issuance of Cheque book; b. Charges to maintain minimum balance; c. Debit Card charges; d. Duplicate Pass Book/Bank Statement charges. e. Stop payment charges f. Cheque return charges g. Demand Draft charges h. Charges for providing bank guarantee i. Safe deposit locker facilities; etc. (ii) Direct nexus with the lending activity. a. Processing fee towards obtaining necessary sanctions/ approvals for lending money to customers; b. Documentation charges towards completing loan sanction with respect to preparing, printing and executing the various documents required post appropriate sanctions/approvals being taken. c. Inspection charges towards compensation for the time spent in visiting and inspecting the factory/godown/other assets of the borrowers. 44. The basic activity of a banking company, as contemplated under the definition of "banking", either under the Deposit Insurance Act or the Banking Regulation Act, i....
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....he activity of accepting deposits would be an activity where the banks receive deposits from the customers in the form of savings account, recurring deposits, for which the banks pay interest to the customers. On the other hand, the extending of deposits would be an activity of a bank giving its surplus money in the form of deposit to another person, where the consideration received would be in the form of interest. This would be a case where in the course of banking activities, one bank makes a deposit with another bank for which it receives consideration in the form of interest. It is this consideration received by the banks in the form of interest which has been specified under Section 66D(n) of the Finance Act in the negative list of services. Thus, in case of accepting deposits, the banks have to pay interest to the customers, whereas while extending deposits, the banks receive interest from other banks. It is for this reason that inter-bank deposits are not included in the returns filed by the banks with the Deposit Insurance Corporation for calculating the premium payable. The banks cannot avail credit of service tax on any amount of interest earned on extending of deposits.....
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....ct shall observe and follow such orders, instructions and directions of the said Board : PROVIDED that no such orders, instructions or directions shall be issued- (a) so as to require any Central Excise Officer to make particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the [Commissioner of Central Excise (Appeals)] in the exercise of his appellate functions." 8. If the circular is read along with clause (a) to proviso to Section 37B, it becomes abundantly clear that if circular is applied, the matters have to be decided in accordance with the directions given in the circular. 9. For these reasons, we feel that the circular is illegal, contrary to the proviso to Section 37B(a) of the Act and is accordingly quashed. Writ Petition is allowed. By allowing the writ petition, we have not expressed any opinion about the notification and applicability of it in a particular case or cases shall have to be determined by the appropriate authorities. No costs." Affirming the above order Hon'ble Supreme Court as reported at [2015 (39) STR 705 (SC)] has observed as follows: "The undisputed facts ....
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....ce in relation to 'promoting and marketing of the business of client' is with reference to sub clause (ii) of Clues 19 of Section 65 of the FA'94 which inter alis is 'promotion and marketing of service provided by the client'. In this connection it is observed that M/s SIFCL are not dealing with goods which implies that they are engaged in providing services i.e. their business comes under the purview of service sector. Therefore the term "promoting and marketing of business" of M/s SIFCL by the noticee shall be construed accordingly i.e. promoting and marketing of service. Hence the contention of the Noticee is not acceptable and the service provided by the Noticee is well covered under clause (ii) of the definition of "BAS" w.e.f 01.07.2003. From the perusal of the Show Cause Notice it is seen that the notice proposes that the activities of the noticee is very much covered under sub-clause (ii) and (iv) of clause 19 of Section 65 of the FA'94 and further, since 10.9.04, in sub clause (vi) of Clause 19 of Section 65 of the FA 94. The SCN, nowhere alleges the noticee of providing services as defined in sub-clause (1) and () of the Clause 19 of Section 65 of the FA'94 and....
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.... held that ordinarily statute had to be literally construed and same cannot be denied merely because consequences of such interpretation may lead to penalty. (iv) In the case of Commissioner of Central Excise, Chandigarh-Il Vs. Bhalla Enterprises,2004(173) ELT 225 (S.C), it was held that the principle of strict/liberal interpretation applies only in case of ambiguity, otherwise plain words of the statute must be given effect. In all the pronouncements it is, therefore, clearly held that the taxing statute has to be implemented literally in the plain words as mentioned in the statute. There is no ambiguity in the words used in the aforesaid provisions of Service Tax Laws regarding the definition of "BAS" and the plea of the noticee that they were not providing "BAS" during 01.07.03 to 09.09.04 is not acceptable. The name of the service itself suggests that all auxiliary activities which support business must be brought into the ambit of BAS. After 10.9.04, the noticee is covered under sub- clause (vi) of Clause 19 of Section 65 of the FA'94. The submission of the noticee is that SIFCL (Principal) is not providing any taxable service, accordingly noticee would not be cov....
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....y of service. The word "Service" as defined in Legal Glossary of Government of India (2001) means "the action of serving, helping or befitting, conduct tending to the welfare or advantage of another......... The dictionary (Oxford Modern English Dictionary) meaning of word 'Service' is the act of helping or doing the work for another. Hence the definition of Business Auxiliary Services as provided under Section 65 of Finance Act, 1994 has to be construed in much wider sense encompassing other activities under the clause of 'service incidental or auxiliary similar to the nature of define services in other different clauses of the definition. It is seen that the noticee is acting as agent of M/s SIFCL as per clause (1) of MOU effective from 1.4.2001 and they are paid commission for provision of services as mentioned in the MOU between both the commercial concerns. The nature of work performed by the noticee is purely incidental or auxiliary service on commission basis to M/S SIFCL provided to customer, issuing receipt of payments from the depositors under various scheme of SIFCL, accountal of the money received and the payments on maturity for M/S SIFCL. In th....
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...., Service provider and payment for the service are three parameters for levy Service Tax. In their case there is no client and they are not liable to pay service tax. However the noticee has understood the meaning of the word 'client' in a very narrow sense on the basis of the meanings given in different dictionaries. In Service Tax law it is receiver of the service who is referred different names i.e. client, subscriber, person etc. as per the Section 65 of FA'94 covering the definitions of different terms which ultimately demote the service receiver. The three parameters to quality to cover under service tax law or (i) Service recipient, (ii) service provider & (iii) payments made (consideration) which are satisfied in the present case. On the basis of the facts of the case, the inference drawn is that all three prerequisite for coverage under Service Tax, namely, event of provision of service tax, presence of taxable service provider and service receiver and the act of rendering taxable services against commission are present in the instant case. In the present case, SIFCL (entity) have employed noticee (professional) for supporting in their "para banking op....
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....'such as' are reproduced. Concise Oxford Dictionary, Such as means for example or of a kind that; Chambers Dictionary, such as means for example : In Good Year India Ltd. v. Collector of Customs - 1997 (95) E.L.T. 450 the Supreme Court observed as under: .... The words such as therefore are illustrative and not exhaustive. In the context of business, those are services, related to the business. They may not be exhaustive, but are illustrative. 25. The expression Business is an integrated/continuous activity and is not confined restricted to mere manufacture of the product. Therefore, activities in relation to business can cover all the activities that are related to the functioning of a business. The term business therefore, in our opinion cannot be given a restricted definition to say that business of a manufacturer is to manufacture final products only. In a case like the present, business of assessee being an integrated activity comprising of manufacture of concentrate, entering in to franchise agreement with bottlers permitting use of brand name by bottlers promotion of brand name, etc. the expression will have to be seen in that context See (i) Pepsi Foods Ltd. v. ....
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....vices used in the business of manufacturing the final products. There is nothing in the definition of 'input service' to suggest that the Legislature intended to define that expression restrictively. Therefore, in the absence of any intention of the Legislature to restrict the definition of 'input service' to any particular class or category of services used in the business, it would be reasonable to construe that the expression 'such as' in the inclusive part of the definition of input service is only illustrative and not exhaustive. Accordingly, we hold that all services used in relation to the business of manufacturing the final product are covered under the definition of 'input service' and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal. 36. The argument of the Revenue that the expression "such as" in Rule 2(l) of 2004 Rules is restricted to the categories specified therein, runs counter to the C.B.E.C. Circular No. 97, dated 23rd August, 2007. In that Circular the C.B.E.C. (vide para 8.3) has held that th....
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....tion 104(c) was inserted in the Section 65 of the Finance Act, 1994 defining the business support services as follows: "support services of business or commerce" means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation.-For the purposes of this clause, the expression "infrastructural support services" includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security;'; As they are covered by the definition as introduced by the Finance Act, 2006 they took the registration under this category and started paying service tax under this category. It is the submission of the appellant thus that ....
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....y the appellant before the lower authorities and have also not been raised in the grounds of appeal before us, therefore, the same cannot allowed to be raised at the time of final hearing before CESTAT for the first time." 4.19 Appellant have relied upon the decision of tribunal in case of Jetlite (India) Ltd [2011 (21) STR 119 (T-Del)] and Steria India Limited [2017-TIOL-3837-CESTAT-ALL to argue that for holding the services rendered by them to the service recipient, to be taxable under these clauses of Section 65 (19), it is necessary to show that the service recipient was providing taxable services to the third party. However on perusal we do not find any such averment made in any of these orders. In case of Jetlite, tribunal has observed: "61. The Finance Act, 1994 does not define the term "Service". It merely describes the expression "Taxable Service". As far as the matter in hand is concerned the liability of the appellants is said to be in terms of Section 65(19)(ii) read with Section 65(105)(zzb) of the said Act. 62. Section 65(19) of the said Act defines the "Business Auxiliary Services" and under clause (ii) thereof it provides that Business Auxiliary Service means....
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.... is the one which relates to service rendered by the service recipient. It may be taxable service or may not be so. However, the situation invariably contemplates existence of two entities in order to bring the case within the scope of definition of business auxiliary service. One entity which provides service to others is called a service recipient. Another entity is one which provides service to the service recipient in relation to the service rendered by such service recipient to others, and such entity is called the service provider. 77. The discussion on the point in issue would be incomplete without reference to some more decisions of the Apex Court, and they are Tamilnadu Kalyan Mandapam Association v. Union of India reported in 2006 (3) S.T.R. 260 = 2004 (167) E.L.T. 3, Fakir Chand Gulati v. Uppal Agencies Private Limited reported in 2008 (12) S.T.R. 401, Home Solutions Retail India Limited v. Union of India reported in 2009 (14) S.T.R. 433 = 2009 (237) E.L.T. 209 58 Service Tax Appeal No.979 of 2009 (Del.), Association of Leasing & Financial Service Companies (supra), All India Federation of Tax Practitioners v. Union of India reported in 2007-TIOL-149- SC-ST = 2007 (7)....
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....r more floors. Apart from consideration flowing from the land owner to the builder in the form of sale of undivided share in the land and permission to construct and sell other floors of the building is to adjust the value to the extent of land to be transferred to the builder, the important aspect is the availment of services of the builder by the land owner for house construction for a consideration. To that extent, the land owner would be a consumer and the builder to be a service provider. 80. In Home Solution case, the point for consideration before the Apex Court was whether the Finance Act, 1994 envisages the levy of Service tax on letting out/renting out of immovable property per se. The Apex Court after referring to various relevant provisions of the said Act as well as taking into consideration the various reported decisions including Kalyan Mandapam Association case held that the Supreme Court in Kalyan Mandapam case had held that the service of a Mandap Keeper does not involve transfer of movable property nor does it involve a transfer of any immovable property of any kind known to law either under the Transfer of Property Act or otherwise and therefore, the said act....
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....he RBI Act deals with the provision relating to non-banking financial companies and financial institutions. Section 45-I(c) of RBI Act treats financing as an activity. Those activities are regulated by Reserve Bank of India. The expression financial institution means any non banking institution which carries on as its business and activity inter alia of financing, whether by way of making loans or advances or otherwise. Under notification dated 2-1-1998, the deposit taking activities of non-banking financial companies were also sought to be regulated. Similarly, under RBI guidelines dealing with the accounting for investments, the non-banking financial companies having not less than 60% of the total assets in lease and higher purchase and deriving not less than 60% of their total income from such activities can be classified as higher purchase/equipment leasing companies. The Apex Court further observed that the significance of the said circulars and guidelines is to show that the activities undertaken by non-banking financial companies of equipment leasing and hire-purchase finance are facilities extended by non- banking financial companies to their customers. They are financial s....
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.... is a value added tax. The value addition is on account of the activity which provides value addition, for example, an activity undertaken by a Chartered Accountant or a broker is an activity undertaken by him based on his performance and skill. This is from the point of view of the professional. However, from the point of view of his client, the Chartered Accountant/broker is his service provider. The value addition comes in on account of the activity undertaken by the professional like tax planning, advising, consultation etc. It gives value addition to the goods manufactured or produced or sold. Thus, Service tax is imposed every time service is rendered to the customer/client". The Apex Court further held that "every tax may be levied on an object or on the event of taxation. Service tax is, thus, a tax on activity whereas sales tax is a tax on sale of a thing or goods". Having held so, it was also ruled that : "A contract of sale is different from an agreement to sell and unlike other contracts, operates by itself and without delivery to transfer the property in the goods sold. The word "sale" connotes both a contract and a conveyance or transfer of property. The law ....
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.... are not delivered, stored or possessed. Nor are they marketable. They are merely the medium of communication, what is transmitted is not an electromagnetic wave but the signal through such means. The signals are generated by the subscribers themselves. In telecommunication what is transmitted is the message by means of the telegraph. No part of the telegraph itself is transferable or deliverable to the subscribers. It was ruled that "the electromagnetic waves are not 'goods' within the meaning of the word either in Article 366(12) or in the State Legislation". It was further observed that "it is not in the circumstances necessary for us to determine whether telephone system including the telephone exchange was not goods but immovable property as contended by some of the petitioners". It was further held that "a telephone service is nothing but a service. There is no sale element apart from obvious one relating to the hand set if any. That and any other accessory supplied by the service provider in our opinion remain to be taxed under the State Sales Tax Laws". It was also held that the nature of the transaction involved in providing the telephone connection may be a composite cont....
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....d only then it could be said that the service provider had provided Business Auxiliary Service by promoting or marketing such services of the service recipient. Needless to say that to establish such facts, it is primarily necessary to have a clear charge in that regard with the factual foundation in the show cause notice to give proper and fair opportunity to the assessee to meet the case of the department and thereupon to establish such charge in the course of adjudication proceedings. As far as the case in hand is concerned, as already seen above in relation to the service aspect is concerned, the allegation or charge in that regard relates to the sale of immovable properties or the developed properties or the constructed project by Sahara Corporation. It does not relate to any service rendered by Sahara Corporation to others in relation to the sale of such properties or projects." 4.20 From the observations made in the said decision it is quite evident that the issue under consideration of the tribunal in this case was making distinction between sale and service. Tribunal has in the above decision nowhere concluded that the service rendered by the service recipient should hav....
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....vident that the appellant is providing the service of accepting deposit on the behalf of his client. We have also held that the activity of accepting deposits is a service. From the perusal of the definition of the clauses as above we find that the word used in clauses (iv), (v) (vi) and (vii) is "service‟ and not taxable service. It is settled principle in law that the taxing statute need to be considered on the basis of the words used by the legislature and there is no room for intendment etc. reliance is placed on the decisions of the Hon'ble apex Court in the case of Dilip Kumar & Company [2019 (361) ELT 577 (SC)] wherein following has been held: 18. It is well accepted that a statute must be construed according to the intention of the Legislature and the Courts should act upon the true intention of the legislation while applying law and while interpreting law. If a statutory provision is open to more than one meaning, the Court has to choose the interpretation which represents the intention of the Legislature. In this connection, the following observations made by this Court in District Mining Officer v. Tata Iron and Steel Co., (2001) 7 SCC 358, may be noticed : ....
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....irrespective of consequences. If the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the Legislature. In Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if the words used are capable of one construction only then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act. 20. In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose [Assistant Commissioner, Gadag Sub-Division, Gadag v. Mathapathi Basavannewwa, 1995 (6) SCC 355]. Not only that, if the plain construction leads to anomaly and absurdity, the Court having regard to the hardship and consequences that flow from such....
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....c) 1. An interpretation according to the narrowest, most literal meaning of the words without regard for context and other permissible meanings. 2. An interpretation according to what the interpreter narrowly believes to have been the specific intentions or understandings of the text's authors or ratifiers, and no more. - Also termed (in senses 1 & 2) strict construction, literal interpretation; literal construction; restricted interpretation; interpretatio stricta; interpretatio restricta; interpretatio verbalis. 3. The philosophy underlying strict interpretation of statutes. - Also termed as close interpretation; interpretatio restrictive. See strict constructionism under constructionism. Cf. large interpretation; liberal interpretation (2). "Strict construction of a statute is that which refuses to expand the law by implications or equitable considerations, but confines its operation to cases which are clearly within the letter of the statute, as well as within its spirit or reason, not so as to defeat the manifest purpose of the legislature, but so as to resolve all reasonable doubts against the applicability of the statute to the particular case.' Wiliam M. Lile et al., ....
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....he strict interpretation nor one should ignore to ascertain the interplay between 'strict interpretation' and 'literal interpretation'. We may reiterate at the cost of repetition that strict interpretation of a statute certainly involves literal or plain meaning test. The other tools of interpretation, namely contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well-settled that in a taxation statute, there is no room for any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be read into nor should anything be implied other than essential inferences while considering a taxation statute. 26. Justice G.P. Singh, in his treatise 'Principles of Statutory Interpretation' (14th ed. 2016 p.-879) after referring to Re, Micklethwait, (1885) 11 Ex 452; Partington v. A.G., (1869) ....
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....ruction to their language without leaning to one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible [Ormond Investment Co. v. Betts, (1928) AC 143]. Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity [Mapp v. Oram, (1969) 3 All ER 215]. It has also been said that if taxing provision is "so wanting in clarity that no meaning is reasonably clear, the Courts will be unable to regard it as of any effect [IRC v. Ross and Coutler, (1948) 1 All ER 616]." Further elaborating on this aspect, the Learned author stated as follows : "Therefore, if the words used are ambiguous and reasonable open to two interpretations benefit of interpretation is given to the subject [Express Mill v. Municipal Committee, Wardha, AIR 1958 SC 341]. If the Legislature fails to express itself clearly and the taxpayer escapes by not being brought within the letter of the law, no question of unjustness as such arises [CIT v. Jalgaon Electric Supply Co., AIR 1960 SC 1182]. But equit....
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....Process [2022 (67) G.S.T.L. 514 (Mad.)] held as follows: 9. Prior to the aforesaid period, the appellant was liable to pay tax service provider as "Business Auxiliary Service" as defined under Section 65(19) of the Finance Act, 1994, which reads as under: "(iii) for clause (19) the following clauses shall be substituted, namely :- (19) "business auxiliary service" means any service in relation to - (i) ......" 10. The appellant was liable to pay tax, as the service provided by the appellant squarely falls within the ambit of Clause (iii) of Section 65(19) of Finance Act, 1994, which reads as under : (iii) any customer care service provided on behalf of the client. 11. For the period after 1-7-2012, the service provided by the appellant fall within the definition of 'service' as under Section 65(b)(44) of the Finance Act, 1994 w.e.f. 1- 7-2012, which reads as follows : ....... 12. The reliance placed on Section 99 of the Finance Act, 2013 by the appellant in this appeal, at this stage, is of no relevance as it applies only to taxable service provided by the Indian Railways. The service provided by the appellant to the Railways cannot be construed as the ser....
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.... the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case is not correct and all the decisions which took similar view as in Sun Export Case stands overruled." 14. Once the language in taxing statute is clear, there is no scope in interpreting the same as the tax provisions has to be read as it is and nothing is to be intended. In this connection, the decision of the Privy Council in Cape Brandy Syndicate v. Inland Revenue Commissioner [(1921) 1KB 64] wherein it is held as follows : "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only took fairly at the language used." 15. This view has also been followed by the Hon'ble Supreme Court repeatedly in several cases dealing with taxing enactment. Therefore, we are not inclined to interfere with the order passed by the Central Excise Service Tax Appellate Tribunal. Accordingly, these Civil Miscellaneous Appeals are dismissed. We, however, give liberty to the appellant to work out their remedy in ter....
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.... been received by them as reimbursement on actual basis and hence should be outside the service tax net." From the above it is evident that impugned order in no way disputes that reimbursable expenses need to be deducted from the gross amount for determining the taxable value. However have denied the same only for the reason that appellant has failed to provide the documents and evidence in respect of these expenses. We are inclined to accept the submissions made by the appellant relying on the decision of Hon'ble Delhi High Court in the case of Intercontinental Consultants and Technocrats P ltd [2012-TIOL-966-HC-ST-Del] and affirmed by the Hon‟ble Apex Court as reported at [2018 (10) GSTL 401 (SC)], subject to production of documents and evidences in this regard before the adjudicating authority for re-determination of the taxable value. Thus matter to this extent needs to be remanded to the adjudicating authority. 4.26 On the claim of CENVAT Credit, Commissioner has observed as follows: "22.4 Whether CENVAT Credit to the noticee was admissible during the period of demand: It has been pleaded by the noticee that in the case of confirmation of demand in respect of bus....
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.... and Penalties: 4.27 On the issue of limitation and imposition of penalties, adjudicating authority has in the impugned order observed as follows: "22.2.2 The noticee had contended that they had enquired vide their letter dt 19.07.03 to Superintendent, Central Range -II, Lal Imli, Kanpur mentioning therein that they had been providing service to M/s SIFCL in promotion of their work as an agent. They have pleaded that because all the facts had been brought to in the notice of the department about their activities and therefore the extended period therefore the extended period invoked in the show cause notice was not proper. I have perused the referred letter dt 19.07.03 by the noticee. It is addressed to Superintendent, Central Range -II, Lal Imli, Kanpur and signed by Regional Manager of M/s Sahara India located at Kanpur. The question of relying of this letter does not arise even if was in fact sent to some officer in Kanpur in light of Hon'ble High Court's judgment in the case of Commissioner of Customs and Central Excise, Meerut Vs Kushal Fertilizers (P) Ltd [2008 (229) ELT 652 (Uttarakhand)] wherein it has been held that information given to Inspector of range with regar....
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....the noticee did not obtain registration from the Central Excise Department for which they were statutorily required. 22.2.5 The noticee under the provision of Section 70 of the Finance Act was under statutory obligation to file service tax return. The relevant extract of Section 70 is as under: "Section 70: - Furnishing of returns: a) Every person liable to pay the service tax shall himself assess the tax due on the services provided by him and shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency and with such late fee not exceeding twenty thousand rupees, for delayed furnishing of return, as may be prescribed. It is evident from the ace records that the noticee had not furnished any return to the Superintendent of Central Excise during the relevant period. 22.2.6 It is evident from the Para 20.2.3 and para 20.2.4 that the noticee did not obtain any registration from the department under the provisions of Section 69 of the Act, ibid, did not furnish any return to the department under the provisions for the provision of Section 70 of the Act, ibid; they did not pay any Service tax. It simply implies that....
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....vant period. d) The noticee deliberately with intent to evade service tax did not supply correct and true information and suppress material facts during the relevant period from the Department and the investigating officers of DGCEI. The noticee has relied upon the following decisions of the Hon'ble Tribunal in their defence that penalty is not impossible: In the instant case, the noticee has never approached the department for taking registration and discharging its service tax liability. The noticee by action of omission or failure to make a return under Section 70 for the period 1.7.03 to 31.7.06 to disclose wholly or truly all material facts viz, nature of a service provided by them and the gross amount of pay out/ commission received by them, necessary for their assessment for the sad period, the value of taxable service had escaped assessment. The noticee did so with intent to evade payment of service tax. Thus Noticee has rendered themselves liable to penal action under Section 76, 77 and 78 of FA' 94". 4.28 The sole reliance for arguing against invocation of the extended period of limitation by the appellant in the present case is on the letter dated 19.07.2003 2....
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....n Strips v. CCE, Ahmedabad - 2004 (173) E.L.T. 265 took note of the Chapter Note 4 of Chapter 72 for holding that cold-rolling process on flat rolled product would amount to manufacture. This decision was rendered after considering the decision of Hon. Supreme Court in Steel Strips Ltd. - 1995 (77) E.L.T. 248 (S.C.), which was rendered prior to the enactment of the said Chapter Note 4 which had the effect of including the process of hardening or tempering in relation to flat-rolled products in the definition of 'manufacture'. The subsequent decision in Lalit Engineering Works v. CCE, Ahmedabad could not have taken a view contrary to the earlier binding decision in Indian Strips v. CCE, Aurangabad (supra) is required to be followed in a subsequent decision of the Division Bench. The assessee M/s. Gujarat Industries removed the goods without any cover of excise invoices and the other assessees received the cold-worked goods without cover of such excise invoices." 4.29 In the case of L.R. Brothers Indo Flora Ltd [2020 (373) E.L.T. 721 (S.C.)] Hon‟ble Supreme Court has held as follows: "34. In the fact situation of the present case, the appellant was issued a show cause notic....
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....991.66 lakhs and at that stage only the department came to know that the work order was to carry out the job for furniture also. A bare perusal of the records shows that the aforesaid reply was sent by the respondent on receipt of a letter issued by the Commissioner of Central Excise on 27-2-1997. If the period of limitation of five years is computed from the aforesaid date, the show cause notice having been issued on 15-5-2000, the demand made was clearly within the period of limitation as prescribed, which is five years." 4.31 In case of Bombay Dyeing & Mfg Co Pvt Ltd [1999 (113) ELT 331 (T)] following has been held: "9. Where this situation prevails, the assessee who is in the knowledge that the inputs so received are less than those shown in the covering documents, it is for him to voluntarily take the less credit. Where the assessee is in such knowledge and where the department have no knowledge of the situation, the department can allege suppression of facts. Weighment sheets are not the documents prescribed in the legislature. The assessee was working under the self removal procedure and therefore, there is no reason or cause for the jurisdictional officer to know about ....
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....bed, which is five years." In our considered view, the ratio of the aforesaid decision squarely applies to the facts of the present case. Since the copy of the agreement and relevant information were provided to the department only in 2011 the show cause notice issued in April, 2011 is clearly within the period of limitation and therefore, the demands confirmed as above for the period on or after 18-4-2006 cannot be said to be time-barred at all." 4.34 In case of Usha Rectifier Corpn (I) Ltd [2011 (263) E.L.T. 655 (S.C.)] where appellant had failed to take registration and discharge the duty liablity, Hon‟ble Supreme Court has held as follows: "12. Submission was also made regarding use of the extended period limitation contending inter alia that such extended period of limitation could not have been used by the respondent. The aforesaid contention is also found to be without any merit as the appellant has not obtained L-4 licence nor they had disclosed the fact of manufacturing of the aforesaid goods to the department. The aforesaid knowledge of manufacture came to be acquired by the department only subsequently and in view of non- disclosure of such information by th....
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....e service tax payable." "78. Penalty for suppressing value of taxable service : [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 mis-statement; 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. the person, liable, to pay such service tax or erroneous refund, as determined under sub-section (2) of Section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon; if any, payable by him, which shall not be less than, but which shall not exceed twice, the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded] [Provided that where such service tax as determined under sub-section (2) of Section 73, and the interest payable thereon under Section 75 is paid within thirty days from the date of communication of order of the [Central Excise Officer] determining such service tax, the amount of penalty liable to be paid by such person under this sec....
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....lusion etc. is made out but it is also established that the defaulter did not pay or short-paid or got refund of the tax paid with intent to evade the payment of service tax. In such a case, the person who is liable to pay such service tax or is erroneously refunded the tax can be levied the penalty which shall not be less than the amount of service tax evaded/refunded subject to maximum of the twice the said amount of the non-levy/non-payment/short-levied/ short- payment/erroneous refund. However, in case the service tax as determined under Section 72(2) of the Act is paid along with the interest payable under Section 75, within 30 days from the date of communication of the order, this penalty is to be reduced to 25% of the service tax so determined. 15. By their very nature, Sections 76 and 78 of the Act operate in two different fields. In the case of Assistant Commissioner of Central Excise v. Krishna Poduval - (2005) 199 CTR 58 = 2006 (1) S.T.R. 185 (Ker.) the Kerala High Court has categorically held that instances of imposition of penalty under Section 76 and 78 of the Act are distinct and separate under two provisions and even if the offences are committed in the course of....
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....in Krishna Poduval (supra), the appellant cannot contend that once penalty is imposed under Section 78, there should not have been any penalty under Section 76 of the Finance Act. 18. We, thus, answer question no. 3 against the assessee and in favour of the Revenue holding that the aforesaid amendment to Section 78 by Finance Act, 2008 shall operate prospectively. 19. Coming to questions Nos. 1 & 2, the case of the appellant is that having regard to the provisions of Section 80, there was no reason to impose the penalty under Section 76 and 78 of the Finance Act. Section 80 is couched in the following language :- "80. Penalty not to be imposed in certain cases: Notwithstanding anything contained in the provisions of Section 76 {Section 77 or Section 78}, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure." 20. The facts narrated above, clearly disclose, and there is no dispute about the same, that there was failure on the part of the appellant to pay full service tax. It was argued by the learned counsel for the appellant that this provision....
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....r suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub- section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined : [Provided that where such duty as determined under sub- section (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the duty so determined : Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso : Provided also that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purpose of this section, the duty as reduced or increased, as the case may be, shall be ....
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....f the penalty provision in Section 11AC of the Act. On behalf of the assessees it was also submitted that Sections 11A and 11AC not only operate in different fields but the two provisions are also separated by time. The penalty provision of Section 11AC would come into play only after an order is passed under Section 11A(2) with the finding that the escaped duty was the result of deception by the assessee by adopting a means as indicated in Section 11AC. 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 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 u....
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.... 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 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 statutoril....
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....has held as follow: "4. Learned Counsel for the assessee has addressed an exhaustive argument before us on the question whether a penalty imposed under Section 271(1)(a) of the Act involves the element of mens rea and in support of his submission that it does he has placed before us several cases decided by this Court and the High Courts in order to demonstrate that the proceedings by way of penalty under Section 271(1)(a) of the Act are quasi criminal in nature and that, therefore, the element of mens rea is a mandatory requirement before a penalty can be imposed under Section 271(1)(a). We are relieved of the necessity of referring to all those decisions. Indeed, many of them were considered by the High Court and are referred to in the judgment under appeal. It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a....
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....serving as follows: "4. The facts of this case, in the opinion of this court, notes that the assessee was aware about its service tax liability; despite this knowledge, it filed its returns claiming that no liabilities were attracted. When it smelt investigation and adverse orders, it apparently approached the service tax authorities and deposited the amounts which they were admittedly liable to pay. Such being the case of foreknowledge, in the opinion of the court, itself is an important factor that ought to have been and was taken into account by the lower revenue authorities. Hence, foreknowledge lead to the imposition of recovery of dues assessed as well as imposition of the penalty under Section 78. The court is of the opinion that the invocation of Section 78 cannot be faulted with having regard to the facts of this case. Depositing the amount due, by the appellant, before issuance of show cause notice per se does not absolve the appellant of its responsibility to file the returns, since the option of imposing other penalty under Section 76 was exercised. Being a matter of discretion, its judicious exercise, is all that is in question. Having regard to the fact of concurren....
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....ection (2B), we are unable to accept the interpretation as tried to be attributed by the learned Counsel for one simple reason that an explanation ought to be therefore the purpose of explaining the main provision, it cannot nullify the effect of main provision. If Explanation (2) interprets as attempted by learned Counsel due to the phrase with which it ends "but for this sub-section", the explanation will have to be ignored being in conflict with sub-section (2B), which it explains. However, the meaning of this clause "but for this sub-section" can be enlightened when we refer to Section 11AB (1), we have reproduced two portions of this provision (in parts) in the earlier part of this judgment and for the sake of convenience, now we are quoting entire sub-section (1) of Section 11AB, which reads: "11AB. Interest on delayed payment of duty (1) where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under sub- section (2), or has paid the duty under sub-section (2B) of Section 11A, shall in addition to duty be liable to pay interest at such rate, not below 10% ....fro....
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....d that during the relevant period the Noticee had provided BAS of taxable value Rs.9,18,01,58,795 inclusive of service tax but the service tax payable thereon has not been paid. The liability of Service Tax is to be calculated hereunder in the light of various decisions of the Cour/Tribunal given in GOl Vs. MRF Ltd. 1995(97)ELT 433(SC) and K.R. Choksey and Company vs Commissioner of Central Excise, Mumbai-I 1996 (88) ELT S66. The value of taxable service shall be calculated as under: Assessable value = (Cum duty price - Permissible deductions)/ (1+ R/100). Here in the instant case, the formula will be as under: Assessable Value = Gross amount inclusive of Service Tax/ (1+R/100) Sl. No Period Assessable Value (In Rs. ) Service Tax (ln Rs. ) Ed. Cess (ln Rs...) As per SCN Revised As per SCN Revised As per SCN Revised 1 01.07.03 to 09.09.04 3234886034 2995264846 258790883 (@ 8%) 239621188 Nil 0 2 10.09.04 to 17.04.06 4729661669 4291889010 472966169 (@10%) 429188900 9459323 (@2%) 8583778 3 18.04.06 to 31.07.06 1215611072 1083046215 145873329 (@ 12%) 129965546 2917466 1 (@2%) 2599311 9180158775 8370200071 877630381 79877....