TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 9
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....in services provided by it and certain services which were received by it (under reverse charge). Show cause notice [SCN] dated 12.06.2013 was issued to the appellant covering period 01.4.2007 to 31.3.2012 (first SCN). This was followed up by two periodical SCNs dated 22.5.2014 (second SCN) and 22.5.2015 (third SCN) covering the financial years 2012-2013 and 2013-2014, respectively. The proposals in these three SCNs were decided by the Commissioner through the impugned order, confirming service tax demand of Rs. 1,85,04,707/- under section 73 Finance Act, 1994 [Act], along with interest under section 75 of the Act. Penalties were also imposed under sections 76, 77 and 78 of the Act on the appellant. 3. The three issues in dispute are: (i) Non-payment of service tax on commission received by the appellant from M/s. Cathay Pacific Airways. (ii) Non-payment of service tax on foreign currency expenditure incurred by the appellant. (iii) Non-payment of service tax on income received in foreign currency by the appellant. 4. The appellant had received commission from M/s. Cathay Pacific Airways for handling cargo including booking cargo, collecting the cargo for transportation to ....
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....cum-tax) along with interest was paid. However, appropriation was made only w.r.t. SCN III. 7. Of the three issues, the appellant does not dispute the demand of service tax on commission received from M/s. Cathay Pacific under 'Business Auxiliary Service' and paid the tax (after claiming cum tax benefit, i.e., treating the commission received by it as inclusive of the tax) along with interest. The amount so paid has been appropriated in the impugned order. 8. The appellant is disputing the second demand of service tax (under reverse charge) on the payments which it had made to the foreign counterparts. 9. The appellant is disputing the third demand of service tax on the amounts which it had received for the services which it rendered to its foreign counterparts on the ground of limitation. 10. Learned counsel for the appellant submits that as far as the demands made in the second and third SCNs on this count are concerned, they were within the normal period of limitation and the appellant is not disputing the taxability and has already paid the service tax. However, in the impugned order, tax of Rs.13,44,315/- paid in respect of the third SCN was not appropriated in the....
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....terparts is concerned, the appellant paid service tax and is not disputing it on merits but is only disputing it on the grounds of limitation insofar as the demand made under the first SCN is concerned. It is not disputing and has already paid service tax demanded in the second and third SCNs. 18. Insofar as the demand of service tax on the amounts which the appellant had paid to its foreign counterparts for their services is concerned, the appellant is disputing both on the taxability and the limitation. 19. The relevant portion of section 73 of the Act reads as follows: SECTION 73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. - (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that wh....
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....cessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. 22. If the assessee does not pay service tax or short pays it, a notice under section 73 can be issued. According to the Revenue, in the first SCN, the extended period of limitation was correctly invoked and according to the appellant, it was not correctly invoked as none of the elements necessary to invoke extended period of limitation viz., fraud or collusion or wilful misstatement or suppression of facts or violation of act or rules with an intent to evade payment of service tax were present in the case. 23. The reasons for invoking extended period of limitation given in the first SCN are that the appellant had violated Sections 69, 70,71A, 73, 66, 66A and 91 of the Act inasmuch as they failed to pay service tax correctly and hence it appears that the appellant had intentionally and wilfully suppres....
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....ts; 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, SCN may be served upon a person chargeable with the service tax within five year from the relevant date ; 4.5.3 Further, as alleged in the impugned SCN No. 1 that, had it not been for the investigation conducted by the Audit Branch of the Service tax Commissionerate, New Delhi, the non-payment of service tax would have gone unnoticed. Therefore, the extended period of five years as provided for in the Section 73 of the Act is invokable in this case for suppressing the material facts from the department. 4.5.4 Section 73 of the Act, ibid, as amended provides that, where any service tax has not been levied or paid or has been short-levied or short-paid by reasons of fraud, collusion, willful misstatement, suppression of facts, or contravention of any of the provisions of this Chapter or of the rules made there-under with intent to evade payment of service tax, the Central Excise Officer may, within a period of 5 years from the relevant date serve notice on the person chargeable with the service tax, which has not been levied or paid. ....
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....f the Act or Rules, can it be presumed that the violation was with the intent to evade or the intent has to be established. A plain reading of the proviso to section 73 and numerous decisions make it clear as crystal that the intent has to be established. Any assessee can make mistakes in self-assessment of service tax. The assessee has to file returns and the remedy against any incorrect self-assessment of service tax is the best judgment assessment under section 72. While it is the duty of the assessee to file the returns, it is the duty of the officer receiving the return to scrutinise them and it is his prerogative to call for any records and accounts to check if the service tax is correctly paid. If it is not correctly assessed or paid, he can raise a demand under section 73. 28. In other words, what the audit much later, should have been done by the officer receiving the returns. If he failed to do so and in the process, the demand gets time-barred, the responsibility for it rests at his doorstep. The failure of the officer to scrutinise the returns and call for records in time and raise a demand does not establish the intent of the appellant to evade. We proceed to examine....
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....e proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different than what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." (emphasis supplied) 31. This decision was relied upon by the Supreme Court in Anand Nishikawa Company Ltd. versus Commissioner of Central Excise [2005 (188) E.L.T. 149 (S.C.)] and the observations are as follows: "26. This Court in the case of Pushpam Pharmaceutical Company versus Collector....
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....udgment is reproduced below: "12. We have heard both sides, Mr. R.P. Batt, learned Senior Counsel, appearing on behalf of the appellant, and Mr. Mukul Gupta, learned Senior Counsel appearing on behalf of the Revenue. We are not convinced by the reasoning of the Tribunal. The conclusion that mere non-payment of duties is equivalent to collusion or willful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of nonpayment would amount to ordinary default? Construing mere non- payment as any of the three categories contemplated by the proviso would leave no situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso." (emphasis supplied) 35. The Supreme Court in Continental Foundation Joint Venture versus Commissioner of Central Excise, Chand....
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....y suppression of mention facts. In fact itis clear that the Appellant did not have any such intention and was acting under a bonafide belief." (emphasis supplied) 37. It would also be appropriate to refer the decision of the Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and others [WP (C) 7542 of 2018 decided on 6.4.2023]. The Delhi High Court observed that merely because MTNL had not declared the receipt of compensation as payment for taxable service, does not establish that it had willfully suppressed any material fact. The Delhi High Court further observed that the contention of MTNL that receipt was not taxable under the Act is a substantial one and no intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return. The relevant portion of the observations are: "28. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, or collusion, or wilful misstatement, or suppression of facts, or contravention of any provisions of the Act or ....
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....this connection, it may be pertinent to refer to the decision of the Supreme Court in Commissioner of C. Ex. & Customs versus Reliance Industries Ltd. [2023 (385) E.L.T. 481 (S.C.)] The Supreme Court held that if an assessee bonafide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be mala fide. If a dispute relates to interpretation of legal provisions, the department would be totally unjustified in invoking the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it is the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bona fide manner. The relevant portion of the judgment is reproduced below: "23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was correctly discharging its duty liability. The mere fact that the belief was ultimately found to be wrong by the judgment of this Court does not render such belief....
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....a in respect of the appellant's clients and paid its foreign counterparts. The case of the Revenue is that this service is 'business auxiliary service' covered by section 65(19) and 65(105) (zzb) of the Act. Since the service provider is outside India, the appellant, as the service recipient, is liable to tax under reverse charge as per Section 66A. 42. Learned counsel for the appellant submits that the appellant and its foreign counterparts are acting on principal to principal basis for rendering services to the client and there is no principal to agent relationship. The foreign counterparts are not rendering the services on behalf of the appellant but are rendering the services in their individual capacity. He further submits that the entire service is rendered outside India because the packets are picked up, or, as the case may be, delivered outside India. He further submitted that before the Place of Provision of Service Rules, 2012 were framed, as per Rule 3(1) (ii) of the Taxation of Services Rules, 2006, since the services were rendered outside India, no tax was chargeable. Therefore, the appellant is not liable to pay service tax under reverse charge mechanism on the ....
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....availed CENVAT credit of the amounts so paid and this would have reduced the service tax liability of the appellant. Therefore, the entire exercise is Revenue neutral. We find that Revenue neutrality does not remove any charge of tax. It is not part of any section or Rule. This concept evolved through judicial pronouncements only to determine if it can be presumed that the assessee had an intent to evade payment of tax and invoke extended period of limitation. The logic is if the assessee is entitled to CENVAT credit, there could not have been any intention to evade payment of tax and hence extended period of limitation could not invoked. As we have already held in favour of the appellant on the question of limitation, Revenue neutrality is irrelevant to this case as the demand is being upheld only within the normal period. Non-appropriation of the amounts paid by the appellant on the foreign income received in respect of the second SCN. 45. The appellant submits that the service tax which it had paid was not appropriated in the impugned order. We find that this fact must be verified by the Commissioner and if any tax has been paid, it must be appropriated. Demand of interest....