TaxTMI 
TaxTMI 
2025 (3) TMI 1186
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.... Appellant had also granted UCT right to promote, market, advertise and distribute such products. Once UCT received definitive order from its customers, purchase order was placed on the Appellant by UCT as per clause 3.3 of the agreement. In consideration for such supply of software and related services by Appellant to UCT, the Appellant received 60% of the total net revenue received by UCT from end user for the sale of such software product by UCT to the end user as provided under clause 3.4 of the agreement. Based on the premise that UCT is acting as an agent for the Appellant for sale of software in overseas market which is a taxable service under the reverse charge under the category of business auxiliary services, a Show Cause Notice was issued demanding Rs. 4,03,47,312, on Reverse Charge basis, by invoking the extended period provisions. Revenue alleged that UCT is undertaking marketing of products, procuring customers, effecting sale of such products and getting commission for same. Another demand of Rs.39,81,736 was made under Reverse Charge Mechanism on alleged import of Management or Business Consultancy Services on the ground that the appellant is using third party softw....
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.... to appreciate that there is difference between granting rights and casting an obligation on someone. That it has been incorrectly held that UCT is carrying out marketing activities and acting as commission agent. It is submitted that no such inference can be drawn as the agreement nowhere mandates marketing activity to be undertaken by UCT and the Appellant has only granted marketing rights to UCT in connection with sale of software (as per clause 2) which cannot be confused with obligation to do marketing activity. In fact, most of the marketing activity is carried out by Appellant himself as per clause 1.3 of 2003 Agreement. * Thus, the terms of the contract are explicit and cannot be interpreted otherwise to fasten liability. Further, intention of the parties to the agreement should be given effect to which is to undertake supply of software and services of installation etc to the other party. * Further, from various clauses, it is evident that UCT is subcontracting the orders received by it to the Appellant. That there exists buyer seller relationship between Appellant and UCT and not Appellant and the end customers. That the end customers are customers of UC....
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....of this Hon'ble Tribunal in CCE v. Agrasen Sponge Pvt. Ltd. (2025) 26 Centax 141 (Tri.-Cal) wherein it was held that demand cannot be based on estimation without any tangible evidence. * The Appellant humbly submits that the fact that right to use the software product has been granted to UCT is evident from the agreement. It is submitted that the right to use software product is deemed sale as held in Quick Heal Technologies Limited v. Commissioner of Service Tax, Delhi, 2020-VIL- 27-CESTAT-DEL-ST affirmed by the Hon'ble Supreme Court in Commissioner of Service Tax, Delhi v. Quick Heal Technologies Limited 2022-VIL-45-SC-ST. * That further, the Appellant uses third party software along with its own software to provide telecommunication billing solutions and for using such third party software, the Appellant was remitting royalty outside India. The issue for consideration is that whether the Appellant has received business management and consultancy services as procurement of third party software and hence, service tax is payable under reverse charge mechanism on the royalty paid by the Appellant. 4. In view of the above submissions, the appellant contends that ....
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.... * Further, in the present case, the Appellant has periodically filed the returns and hence, all the information was available with the Department at all times. Therefore, invocation of extended period is unsustainable and hence, the Impugned Order is liable to be set aside. 6. In view of the above arguments, the Ld Advocate prays the appeal may be allowed on account of time bar also. 7. The Ld AR appearing on behalf of the Revenue, submits that this is not a case where the appellant is selling their software to UCT. That entity is merely acting as an agent of the appellant procuring the orders on their behalf. The appellant is directly despatching the software to the third parties. On the total bill raised by UCT on the third party, the revenue is shared at a proportion of 40 : 60 or 30 : 70. This shows that the consideration received by UCT is nothing but commission for the orders canvassed by them. While the appellant is trying to make out this is only the profit margin on account of trading by UCT, the case is otherwise and is clearly covered by BAS. The appellant has failed to discharge the Service Tax liability by paying the same on Reverse Charge basis. Therefore....
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....within one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A)." 10.4 In the present case, the SCN was issued under the proviso to Section 73(1) of the Act and therefore, Ld. Respondent was mandatorily required to decide the case and pass an order within one year from the date of issuance of the SCN, as per S. 73(4B)(b) of the Act. However, in the present case, the Impugned Order has been passed on 29.02.2016, which is beyond the time limit prescribed in S. 73(4B)(b) of the Act. Therefore, the Impugned Order has been passed in clear violation of the provisions and hence, is liable to set aside. 10.5 It is submitted that in addition to the present provision under the Finance Act, similar provisions are contained under other indirect tax legislations such as S. 11A(11) of the Central Excise Act, 1944 ("Excise Act") and S. 28(9) of the Customs Act, 1962 ("Customs Act") wherein timeline has been prescribed to pass the order adjudicating the SCN. 10.6 The issue whether such time limit to pass the order is mandatory or directory came up for consideration before various Co....
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....r as possible" and "as far as practicable" are more or less inter-changeable along with the word "feasible"; (ii) Only when circumstances or insurmountable exigencies make it impracticable or not possible for the adjudication to take place within the stipulated period that the authorities may deviate from the time limit prescribed under the Statute; (iii) The mandate of the legislature that the show cause notice should be adjudicated within six months or one year, as the case may be, only provides flexibility for extension of the period when it is not practicable or possible to adjudicate it within the said time limit. The time limit period cannot be extended endlessly without any plausible justification; (iv) The indifference of the Adjudicating Authority to complete the adjudicating process within the statutory time limit cannot be condoned to the detriment of the assessee or detrimental to the interest of the exchequer; (v) There is a definite purpose and intention of the legislature to prescribe such time limit. The legislature has clearly intended to avoid uncertainly, which otherwise can emerge..." 10.9 In the present case, the order has....
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....ws: "28(9) The proper officer shall determine the amount of duty or interest under sub-section (8), - (a) within six months from the date of notice, where it is possible to do so, in respect of case falling under clause (a) of sub- section (1); (b) within one year from the date of notice, where it is possible to do so in respect of cases falling under sub- section (4)" 10.12 That the aforementioned provision of the Customs Act was interpreted by the Hon'ble Delhi High Court in the case of Swatch Group India Pvt. Ltd. vs. Union of India (2023) 10 Centax 5 (Del.) wherein, it was held that the time limit prescribed in the statute to pass an order is mandatory and is required to be adhered to by the Department. Relevant extract of the decision is as follows: "34. The flexibility, at the same time, in our opinion, cannot be equated with the lethargy of the Department or its officers. The Legislature has mandated the show cause notices to be adjudicated within six months or one year as the case may be; it has provided flexibility only to the extent that if the same is not practicable/possible the period can be extended. The phrase 'where it is p....
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....his case due to following reasons: 12.2 In the case of Mis. Kopertek Metals Pvt. Ltd. supra, all the adjudication orders were passed after a considerable period of more than five years. Annexure A of the above order of Hon'ble Tribunal may be referred. Whereas in the present appeal, the Order is passed within a short period after issuing show cause notice. The SCN was issued on 15.10.2014 and the OIO was passed on 29.02.2016, which is within less than 2 years. This shows that inordinate delay has not occurred in respect of most of the above appeals. 12.3 The Hon'ble Beach should have referred the matter in M/s Kopertek Metals Pvt. Ltd to a larger bench only after acknowledging disagreement with their own orders. Accordingly, the decision in Kopertek Metals Pvt. Ltd, passed violating judicial disciplines, is bad in law and cannot be relied upon. 12.4 The present notice was issued on the basis of facts and laws prevailing during the point of time. Moreover, the appellant did not challenge the notices before any judicial forum to make such notices non-est. They participated in the adjudication process and thereby admits the power to issue such notices by a proper offi....
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....e date of notice where it is possible to do so, in respect of cases falling under sub- section (1); (b) within two years from the date of notice, where it is possible to do so, in respect of cases falling under sub- section (4). 9. The show cause notice in this appeal was issued on 28.04.2015 by the Principal Additional Director General. It was adjudicated on 14.06.2022 by the Adjudicating Authority. As the notice was issued on 28.04.2015, it would be governed by the provisions of sub-section (11) of section 11A, as it stood during the period from 28.04.2015 to 13.05.2015. Sub-section (11) of section 11A, as it stood during this period, provided that the Central Excise Officer shall determine the amount of duty within six months from the date of notice, where it was possible to do so, in respect of cases falling under sub-section (1). However, in respect of cases falling under sub-section (4) or sub-section (5), the Central Excise Officer shall determine the amount of duty within one year from the date of notice, where it is possible to do so. The show cause notice in this appeal was issued under sub- section (4) of section 11A. Thus, the Central Excise Officer ha....
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....nsion of the period when it is not practicable or possible to adjudicate it within the said time limit. The time limit period cannot be extended endlessly without any plausible justification; (iv) The indifference of the Adjudicating Authority to complete the adjudicating process within the statutory time limit cannot be condoned to the detriment of the assessee or detrimental to the interest of the exchequer; (v) There is a definite purpose and intention of the legislature to prescribe such time limit. The legislature has clearly intended to avoid uncertainly, which otherwise can emerge; and (vi) Even if no time limit is prescribed for adjudication of a show cause notice, then too the adjudication has to be done within a reasonable period. However, what would be a reasonable period would depend upon the nature of the Statute, rights and liabilities thereunder and other relevant factors. 27. The show cause notice, in the present case, was issued on 28.04.2015. It called upon the noticees to show cause within thirty days from the date of receipt of notice, failing which it was specifically provided that the matter would be adjudicated ex parte wit....
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....the potential of casting financial liabilities or penal consequences cannot be kept pending for years and decades together. A statute enabling an authority to conclude proceedings within a stipulated period of time "where it is possible to do so" cannot be countenanced as a license to keep matters unresolved for years. The flexibility which the statute confers is not liable to be construed as sanctioning lethargy or indolence. Ultimately it is incumbent upon the authority to establish that it was genuinely hindered and impeded in resolving the dispute with reasonable speed and dispatch. A statutory authority when faced with such a challenge would be obligated to prove that it was either impracticable to proceed or it was constricted by factors beyond its control which prevented it from moving with reasonable expedition. This principle would apply equally to cases falling either under the Customs Act, the 1994 Act or the CGST Act. 86. When we revert to the facts that obtain in this batch, we find that the respondents have clearly failed to establish the existence of an insurmountable constraint which operated and which could be acknowledged in law as impeding their power to....
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....termine the amount of service tax due under section 73(2), which in clause (a) thereof provides for the timelines, namely, within six months from the date of notice where it is possible to do so, in respect of cases falling under section 73(1); and secondly, when it provides that such determination be made within one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to Section 73(1) or the proviso to Section 73(4A). 16. We may observe that the legislature providing that the determination be made within six months from the date of the notice as provided for in clause (a) of sub-section (4B) is concerned, cannot be read to nullify or attaching no weightage to the timelines so prescribed. It can however, be acceptable that a reasonable/plausible delay beyond six months may in a given case be justified depending on the facts and circumstances of the case, for reasons which do not make it possible for the adjudicating officer to conclude the proceedings of the show cause notice. This can be for reasons which are acceptable in law which a reasonable body of persons would accept to be absolutely justifiable, considering the....
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....sed by the Supreme Court; in CMA-CGM Agencies (India) Pvt. Ltd. v. Union of India & Ors. Writ Petition No. 1313 of 2021; in Shreenathji Logistics v. Union of India & Ors. Writ Petition No. 540 of 2020; in Sushitex Exports (India) Ltd. & Ors. v. Union of India & Anr. 2022 SCC Online Bom. 191; in Sanghvi Reconditioners Pvt. Ltd. v. Union of India, through the Secretary, Department of Revenue & Ors. 2017 SCC Online Bom 9781; in Reliance Industries Ltd. v. Union of India 2019 (368) E.L.T. 854 (Bom.); in Parle International Ltd. v. Union of India 2021 (375) E.L.T. 633 (Bom.) and in Bombay Dyeing and Manufacturing Company Limited v. Deputy Commissioner of CGST and CX, DIV- IX, Mumbai Central GST Commissionerate 2022 (382) E.L.T. 206(Bom.). 19. The importance and significance of these words have been extensively dealt by the Delhi High Court in the case of Swatch India - 2023 (386) E.L.T. 356 (Del.). It may be useful to go through the relevant portion, which is extracted below : 32. The unamended Section 28(9) of the Customs Act, specifically provides that the proper officer "shall‟ determine the amount of duty within six months or within one year, as the case may be, fr....
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....t of service tax due under subsection (2) (c) within six months from the date of notice where it is possible to do so, inrespect of cases whose limitation is specified as eighteen months in sub-section (1); (d) within one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A).‖ 21. We find that the Section 73 (4B) provision of the Finance Act 1994, is para materia with the provisions of Section 11A (11) of Central Excise Act 1944 and Section 128 (9) under Customs Act 1962. Under all these Acts, the words used are "Shall" and "Where it is possible to do so" and in the Manual "as far as possible". The importance and significance of these words as well as to whether these are directory or mandatory in nature, have already been interpreted in the case laws cited above 22. In the Kopertek Metals Pvt Ltd.[Kopertek for short], decided by the Principal Bench - Delhi Tribunal, it has been held that non adjudication of the order, with no reason being given to the effect that the order could not be passed on time due to circumstance beyond the control of the ....
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....st Delhi [2024(2) TMI 1160-CESTAT-New Delhi] and M/s Citicorp Finance India Limited Vs Commissioner of Service Tax, Delhi-11 [2023 (11) TMI 891- CESTAT NEW Delhi, wherein the Tribunal has refused to entertain the request of the appellant to consider the delay in passing the Order in Original for setting aside the Order. As per Revenue, the Tribunal should have referred the matter to the Larger Bench rather than passing a different order on the same issue. 26. On going through the Picasso case, we find that the issue therein was Service Tax demand for the period April 2006 to March 2011 for which show cause notice dated 21.10.2011 was issued and the Order in Original dated 02.05.2022 was passed. We find that only by of amendment brought by Finance Act 2014 (with effect from 6.8.2014), the Section 73 (4B), was inserted to specify the time- frame for adjudication of the Service Tax matters. Hence, there was no time-frame applicable for Adjudication of the SCN issued in 2011. The appellant had only made a normal reference towards the delay without citing any statutory provisions or the case laws. In that context the decision was rendered by the Tribunal. 27. In the case of Citico....
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.... last but one para of the SCN dated 15.10.2014, reads " If no cause is shown within 30 days of receipt of this notice and the assessee or through authorized representative to do not appear before the adjudicating authority, when the case is posted for hearing, the case will be decided ex-parte on the basis of available records without making further reference to them." In the Kopertek case also the issue was identical, as can be seen from Para 27 of the Final Order of the Tribunal : 27. The show cause notice, in the present case, was issued on 28.04.2015. It called upon the noticees to show cause within thirty days from the date of receipt of notice, failing which it was specifically provided that the matter would be adjudicated ex parte without any further communication. It is seen that the period one year from 28.04.2015 expired on 27.04.2016. Even if cause was not shown by the noticees to the said notice, the Adjudicating Authority should have proceeded to decide the matter ex parte, but what is seen is that the Adjudicating Authority even let this statutory time limit of one year pass without even adhering to the stipulation contained in the show cause notice that the ....
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....t. The quantification of the demand has been derived from these records only. Hence, the appellants have not suppressed any data but all the issues are properly reflected in the books of records. 35. We find force in the argument of the appellant. It is not in dispute that both the services in question, which the Revenue is alleging as being imported, are input services for the appellant for providing their output service. The Mumbai Tribunal in the case of Jet Airways (I) Ltd Vs CST Mumbai - 2016 (44) STR 465 (Tri-Mum) has held as under : 10.4 In our considered view the appellant could have availed Cenvat credit of the service tax paid on reverse charge mechanism asthey are liable to pay tax on output service hence, Revenue neutral situation arises wherein appellant pays the tax and takes the credit. We note that the issue as to confirmation of service tax liability arose on the payment made to CRS Company, as decided by majority decisions, in three cases namely British Airways, Thai International Public Co. Ltd. and Austrian Airways wherein the question of revenue neutrality arose, which was answered in favour of assesses therein. It is trait law that question of Reve....