TaxTMI 
TaxTMI 
2025 (6) TMI 520
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....der Section 73(2) of the Finance Act, 1994 (Act) read with proviso to Section 73(1) ibid along with appropriate interest and equivalent penalty imposed under Section 78 of the Act as well as a penalty of Rs.10,000/- imposed under Section 77 of the Finance Act. 2. Briefly stated, the facts are that the appellant is engaged in providing ERP Development services to their associated enterprise M/s Executive Ship Management Pte Singapore (ESM Pte). The appellant is registered with Service Tax department under Service Tax Registration No.AAMCS8626DSD001. Based on Intelligence that the appellant has not paid service tax on the ERP Development services provided by them to their associated enterprise ESM Pte by claiming the same as export of services, Officers of Directorate General of GST Intelligence (DGGI), Chennai commenced their investigation and conducted search proceedings. It was observed that M/s. ESM Pte has entered into contracts with various ships / shipping lines and are engaged in providing ship crew recruitment and management services to these ships/ shipping lines. ESM Pte has entered into Custom Enterprise Resource Planning (ERP) Development Agreement with the appellant ....
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....re provided from taxable territory. The department further held the view that the above facts regarding the non payment of Service Tax on the taxable services provide by the appellant came to the notice of the department only when conducting the investigation and the appellant appears to have suppressed relevant and vital facts from the department with malafide intention to evade service tax. In view of the above, the department issued Show Cause Notice No. 32/2020 dated 29.06.2020 invoking extended period of limitation. The appellant replied contesting the demands and after due process of law, the adjudicating authority passed the aforementioned OIO No.30/2021-JC dated 25-08-2021 confirming the demand of Service Tax along with appropriate interest and equivalent penalty imposed under Section 78 of the Act as well as a penalty of Rs.10,000/- imposed under Section 77 of the Finance Act. Aggrieve by the said OIO, the appellant preferred an appeal before the Appellate Authority who has however, passed the impugned OIA aforementioned. Hence this appeal. 5. Shri Gopal Mundhra, Advocate, appeared and argued for the appellant. The Ld. Counsel submitted that ESM Holdings is the ult....
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.... them. 7. Thus, the Ld. Counsel submits, while both ESS Pte and ESM Pte are engaged in providing technical management and crew management services, the Appellant merely renders one part of only one aspect of such services i.e,ERP Development. 8. In his written submissions, the Ld. Counsel depicted the flow of services and the services performed by each entity as under : 9. The Ld. Counsel submits that from the above it is evident that ESM Pte is in the business of rendition of technical management and crew management services, it had appointed the Appellant to independently provide ERP Development services in terms of the ERP Agreement which are rendered entirely by the Appellant to ESM Pte. The services of the appellant are in the nature of ERP development, installation and maintenance services and not that of rendering or facilitating the services of technical management and crew management rendered by ESM Pte to its clients. It is submitted that considering the nature of services rendered by the appellant reliance is placed on the decision in SNQS International Socks Private Ltd (Trading Division) v Commissioner of GST & Central Excise, Coimbatore Commissionerate, ....
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....ice and its parent Company, who is the recipient of services cannot be said to be merely establishment so as to be distinct persons in accordance with Item (b) explanation 3 of Clause (44) of Section 65B of the Act, 1994." 13. It is submitted that it has been well established inter alia by the below judgements that software development service (such as that in the nature rendered by the Appellant) do not qualify as intermediary services, namely, Firstrand Services Pvt. Ltd. Versus Commissioner of CGST & CX, Mumbai East - 2019 (2) TMI 579 - CESTAT MUMBAI, Infodesk India Pvt. Limited Versus The Union Of India & Ors. - 2025 (1) TMI 583 - Gujarat High Court 14. The Ld. Counsel also pointed out that the services rendered by the Appellant in terms of the ERP Agreement for the Dispute Period under Service Tax regime are identical in nature to those which are now rendered post 1 July, 2017 under the GST regime The GST laws allow refund of accumulated input tax credit pertaining to export of goods/services. In this regard the Appellant had regularly filed refund claims with respect to the services rendered to ESM Pte in terms of the ERP Development Agreement. The GST authorities ....
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....Tri-Ahmd), selling simplified India Pvt Ltd v Commr of CGST, East Delhi, 2022 (9) TMI 522-CESTAT, New Delhi and Vodofone International Holdings BV v UOI, 2012 (6) SCC 613. It is also submitted that the use of the word 'merely' further dilutes condition (f) of Rule 6A and on a conjoint reading of the word 'merely' while interpreting clause (f) of Rule 6A, i.e. "the provider of service and recipient of service are not merely establishments of a distinct person", it is made apparent that the provider of service and the recipient of service are not merely establishment of distinct persons, or no more than what is specified in the statute. Therefore, the term "merely" in the context of the export of service condition implies that the service provider and service recipient must not only be different establishment of the same person, but there must be a cogent relationship between service provider and service recipient and there must be undisputed fact of performance of service. Nevertheless, in the facts of the present case, the Appellant and ESM pte are distinct legal entities therefore the said condition stands fulfilled. 17. The Ld. Counsel also placed reliance on CBIC Circular No.....
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....and if at all, only the normal periods of limitation of 30 months from the date of filling of Service Tax returns should be applicable. The present matter covers the dispute period from October 2014 to June 2017 whereas the SCN was issued only on 29.06.2020. The appellant had filed Service Tax returns for this period on 21.07.2015, 20.10.2015, 22.04.2016, 24.10.2016, 25.04.2017 and 11.08.2017 respectively as is evidenced by the ST-3 returns forming part of the Appeal records. In the present case since the service tax returns were all filed well before January 2018 the entire demand is wholly barred by limitation. 20. It was also submitted that the appellant had made sufficient disclosure in books of account and return to the extent of export claimed. Reliance was placed on the decisions in Good Year India Ltd vs. CCE 024 (10) TMI 287 - CESTAT CHANDIGARH, Orbit Research Associates Private Limited vs. Commissioner Of Service Tax (Appeals I), New Delhi - 2023 (8) TMI 246 - CESTAT New Delhi, Progressive Endeavours Pvt. Ltd. vs. CCE 2024 (10) TMI 1261 - CESTAT KOLKATA and Kamal Auto Finance Ltd. v. Commissioner of Service Tax, Jaipur [2012 (26) S.T.R. 46 (Tri. - Del.) . 21. L....
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....8 - CESTAT CHENNAI, wherein it was observed that the word "on behalf" in the statue connote an agency when one person acts on behalf of the other. The former acts as an agent of the latter. An agency is the relationship of principal and agent in terms of a contract - express or implied. The Ld. AR submits that it is the matter of record that clauses after clauses in the duties of Appellant as per Contract refers to "On behalf of". Ld. A.R. contended that the Appellant is under obligation to act on behalf of, to act on approval of, to act upon request of, to liase on behalf of Main service provider. 26. The Ld. AR submits that the issue of non-fulfilment of condition laid down in Rule 6A(1)(d) has been discussed by the Adjudicating Authority. Place of provision of Intermediary Service is the location of Service Provider and in instant case, service provider is located in India and therefore, place of provision is within India. In view of above, as per Rule 6A of Service Tax Rules,1994, since place of service for such activities being in the nature of intermediary services is not outside India, such services cannot be treated as export of service. The Ld. AR submits that the issue....
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....by limitation as contended by the Appellant? B. If the demand is not barred by limitation, then on merits the issues that arise for consideration are whether the appellant is an intermediary as defined in Rule 2(f) of the Place of Provision of Services Rules, 2012 ( POPS Rules) and also whether the services rendered by the Appellant to M/s. ESM Pte can be treated as Export of Services as per Rule 6A of the Service Tax Rules, 1994 (STR Rules)? 31. When a plea that the demand is wholly barred by limitation is raised, we find it apposite to deal with the said issue first. The question of limitation goes to the root of the matter and involves a question of jurisdiction to raise the demand itself in the first instance. This in turn is premised on the provisions of law that prescribe the situations as well as the attendant ingredients thereto that attract its application. The findings of fact on the question of jurisdiction would be a jurisdictional fact. Such a jurisdictional question therefore needs to be examined and is to be determined having regard to both the facts and law involved therein. To appreciate whether the demand is wholly barred by limitation, it would t....
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..... 34. The "relevant date‟ has been defined in section 73 (6) of the Finance Act as follows: " 73 (6) For the purposes of this section, "relevant date" means, - (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid- (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made there under, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund." (emphasis supplied) 35. The provi....
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....nths or five years, as the case may be." 21. The meaning of the words 'wilful misstatement' and 'suppression of facts' has been a subject matter of judicial scrutiny in various Supreme Court judgments which are necessary to be discussed before proceeding to the merits of this case. However, these words have been interpreted as given in Sections 28 of the Customs Act, 1962 (hereinafter referred to as "the Customs Act") and 11A of the [Central] Excise Act, 1944 (hereinafter referred to as "the Excise Act"). In order to determine if the same interpretation extends to Section 73 of the Act the following decisions of the Supreme Court have to be looked at. In the case of Uniworth Textiles Ltd. v. Commissioner of Central Excise, Raipur [(2013) 9 SCC 753 = 2013 (288) E.L.T. 161 (S.C.)] the Supreme Court discussed its previous judgments to determine the applicability of the proviso to Section 28 of the Customs Act for extension of limitation period for issuing notice for payment of duties that have not been levied, short-levied or erroneously refunded. The relevant paragraphs of the judgment are excerpted below : "9. The show cause notice was issued on 2-8-2001, more than....
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.... 22. Section 28 of the Customs Act like Section 73 of the Act (in this case) relates to notice for payment of duty that has not been levied, short-levied or erroneously refunded. The proviso to Section 28 of the Customs Act and the proviso to Section 73(1) of the Act, both set out conditions for extension of limitation period for issuing of a Show Cause Notice. The difference between the two sections lies in the insertion of conditions of 'fraud' and 'contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of Service Tax' in Section 73 of the Finance Act, 1994. In Uniworth (supra), the Supreme Court discussed the interpretation of the proviso of a similar provision in Section 11A of the Excise Act and held that it is pari materia to the proviso to Section 28 of the Customs Act. The relevant paragraphs are excerpted below : "13. This Court, in Pushpam Pharmaceuticals Co. v. Collector of Central Excise, Bombay [1995 Supp (3) SCC 462], while interpreting the proviso of an analogous provision in Section 11A of The Central Excise Act, 1944, which is pari materia to the proviso to Section 28 discussed above, ma....
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....rpose of the proviso to Section 11A. Misstatement or suppression of fact must be wilful. The aforesaid observations show that the words "with intent to evade payment of duty" were of utmost relevance while construing the earlier expression regarding the misstatement or suppression of facts contained in the proviso. Reading the proviso as a whole the Court held that intent to evade duty was essentially before the proviso could be invoked. 55. Though it was sought to be contended that Section 28 of the Customs Act is in pari materia with Section 11A of the Excise Act, we find there is one material difference in the language of the two provisions and that is the words "with intent to evade payment of duty" occurring in proviso to Section 11A of the Excise Act which are missing in Section 28(1) of the Customs Act and the proviso in particular.... 56. The proviso to Section 28 can inter alia be invoked when any duty has not been levied or has been short-levied by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter, his agent or employee. Even if both the expressions "misstatement" and "suppression of fact....
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....Act were applied in the interpretation of the proviso to Section 28 of the Customs Act. 25. The meaning of the phrase pari materia has been explained in an American case in the following words: "Statutes are in pari materia which relate to the same person or thing, or to the same class of persons or things. The word par must not be confounded with the word simlis. It is used in opposition to it - intimating not likeness merely but identity. It is a phrase applicable to public statutes or general laws made at different times and in reference to the same subject." [United Society v. Eagle Bank, (1829) 7 Connecticut 457, p. 470, as cited in CRAIES, Statute Law, p. 134 (7th Edition)]. The provisos to Sections 11A of the Excise Act, 28 of the Customs Act and Section 73 of the Finance Act, refer to the same class of persons, i.e., persons from whom tax has been not been levied, or has been short-levied or erroneously refunded. The subject matter of these provisos is issuance of a Show Cause Notice in order to collect such tax. Further, there seems to be no difference in language of the proviso to Section 11A of the Excise Act and Section 73(1) of the Finance Act. Since, the....
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....ction 11A(1). Under that proviso, in cases where excise duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded on account of fraud, collusion or wilful misstatement or suppression of facts, or in contravention of any provision of the Act or Rules with the intent to evade payment of duty, demand can be made within five years from the relevant date. In the present case, we are concerned with the proviso to Section 11A(1). 24. In the case of Cosmic Dye Chemical v. Collector of Central Excise, Bombay [(1995) 6 SCC 117], this Court held that intention to evade duty must be proved for invoking the proviso to Section 11A(1) for extended period of limitation. It has been further held that intent to evade duty is built into the expression "fraud and collusion" but misstatement and suppression is qualified by the preceding word "wilful". Therefore, it is not correct to say that there can be suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for invoking the proviso to Section 11A. 25. In case of Pushpam Pharmaceuticals Co. v. C.C.E. [1995 (78) E.L.T. 401 (S.C.)], this Court has held....
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....on or mere failure to pay duty or take out a license without the presence of such intention. 28. In the present case, the Revenue argues that appellant wilfully suppressed the value of taxable services and thus did not discharge its liability of paying the Service Tax on same. The contention of the appellant is that the appellant was under a bona fide belief that the appellant was not liable for payment of Service Tax for the Mandap Keeping and Management, Maintenance and Repair Services. The appellant has supported the non-payment of Service Tax for Mandap Keeper Services by Notification No. 12/2003-S.T. It also states that, during the enquiry itself, it paid Service Tax on the sale of the above-mentioned items for the periods 2004-05 and 2005-06 with interest and had also started paying Service Tax on these items regularly from April, 2006. The same has been also acknowledged by the DGCEI in the SCN. 29. As regards management, maintenance and repair services the appellant claimed that it was unaware of the development under Section 65(105)(zzg) of the Finance Act and that when the same came to the knowledge of the appellant, the appellant promptly got itself reg....
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....para 9 of the impugned Order in Appeal, as under: "9. The appellant has contended against invocation of extended period of limitation stating that the matter involves legal interpretation, bonafide belief, etc. The transactions of the appellant being of such nature giving scope to more than one view has not been taken up at all for resolution with advance ruling authority or with the Department by the Appellant. Service tax law clearly casts a responsibility of self-assessment on the assessee/appellant. Further by declaring the services rendered as "export of service.", the appellant escaped scrutiny as well. Whether the appellant has acted in error or ignorance, it could not be an excuse as held in the case of D. Cowasji [1978 (2) ELT J154 (SC)] that "We are not quite sure that if the maxim that everyone is presumed to know the law is applied, there will be any case of payment under a mistake of law unless that presumption is rebutted in the first instance, for, the moment it is assumed that everyone is presumed to know the law, it is clear that no one can make a mistake as to the law. It is sometimes said that every man is presumed to know the law, but th....
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.... 39. At this juncture, it would be apposite to notice the decision of a coordinate bench of the tribunal in Accurate Chemical Industries v CCE, Noida, reported in 2014(300) ELT 451 (Tri-Del), wherein, the question of the effect of non-scrutiny of the returns filed by the assessee upon self-assessment was examined in detail. The relevant portions are as under: " 7.1 Though with effect from 1-10-1996, self-assessment has been introduced and the monthly ER-1 return filed by an assessee are not required to be assessed by the Range Superintendent (RO), in terms of the following instructions issued by the Central Board of Excise & Customs (CBEC) not only every ER-1 return filed by an assessee is required to be scrutinized by the RO for correctness of rate of duty applied to the goods cleared, arithmetical accuracy of duties/amounts dues and payable; Cenvat credit availment, valuation etc., this scrutiny must be completed within 3 months and the returns of the units whose annual duty payment is Rs. 1 crore to Rs. 5 crores and more than Rs. 5 crores, are also to be cross checked by the Assistant Commissioner and Additional Commissioner, respectively. (1) Circular No....
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....d Nishikawa Co. Ltd. v. CCE, Meerut reported in 2005 (188) E.L.T. 149 (S.C.); Continental Foundation Jt. Venture v. CCE, Chandigarh reported in 2007 (216) E.L.T. 177 (S.C.) has held that something positive other than mere inaction or non-payment of duty is required for invoking extended period under proviso to Section 11A(1) and that suppression means failure to disclose full information with intent to evade the payment of duty and mere omission to give certain information is not suppression of fact unless it is deliberate with intention to evade the payment of duty. The above condition for invoking extended period prescribed in these judgments is not satisfied in this case." (emphasis supplied) 40. We are of the view that allowing the assessee to self-assess the tax is a mere facility extended to the assessee. That in no way detracts or dilutes the statutory responsibility of the jurisdictional central excise officers to ensure correctness of the assessment, exemptions claimed and duty payments made. In the instant case, on a perusal of the ST-3 returns available as part of the Appeal records, we find that in the ST-3 returns filed regularly, the Appellan....
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....he relevant period, have simply shown the quantum of credit availed on inputs without specifying the service on which the said credit was availed, and that therefore this would amount to suppression from the department with intent to avail wrongful credit, a co-ordinate bench of this Tribunal in its decision in CCE, Indore v Medicaps Ltd, reported in 2011(24) STR 572 (Tri-Del) has held as under: 4. We find no merits in the above contention of the revenue. Admittedly the credit availed by the assessee was reflected in the monthly returns. If there is no column in the monthly return to show the nature of service on which the credit was availed, the assessee cannot be blamed for not disclosing the said fact. For invoking the longer period of limitation, there has to be a suppression or mis-statement with an intent to evade payment of duty. When the respondents have reflected the amount of credit availed by them in their monthly returns, it cannot be said that there was any positive act of suppression on misstatement on their part. As such, we are of the view that Commissioner (Appeals) has rightly held a part of the demands as barred by limitation. 42. There is a cate....
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....t of the ratio of the decisions stated supra, when the knowledge of the fact that the appellant has been claiming the said amounts received as towards export of service duly reflecting them in the returns, was already known to the Department, we are of the view that the learned adjudicating authority has egregiously erred in finding that the invoking of the extended period of limitation was tenable. 44. We find that the Bonafide belief of the appellant that has manifested as the appellant's declaration of the amounts received as towards export of service provided in the ST-3 returns filed with the Department, was also averred by the Company in their letter dated 25-06-2020 addressed to the Senior Intelligence Officer, DGGI (CZU), Chennai, wherein in response to the Department's queries during investigation, it was stated that " The taxable services exported outside India are not leviable to service tax and therefore exempt. Service Tax is a destination based tax therefore if the services are consumed abroad, they are covered under export and are not leviable to service tax. Since M/s. SNSSPL is exporter of software outside India, service tax is exempted." For reasons best known ....
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.... transactions of the appellant is of a nature that gives scope to more than one view, yet he has chosen to uphold the invocation of extended period on the ground that the appellant ought to have approached the Department seeking resolution. What the appellate authority has failed to appreciate is that evidently the appellant never harboured any doubt that its service was not an export of service, and it is apparently for that reason, that the appellant has declared the amounts received as towards export of service provided in its returns. Be that as it may, this Tribunal has in its decision in Smart Finance Vs. Commissioner of Central Excise, Jaipur [2014-TIOL-1555-CESTAT-DEL], 2015(37)STR 313 (Tri-Del) held as under: "5. The appellate authority in para 13 of the order observes that a doubt on the part of the appellant regarding its taxability to Service Tax is not relevant; in case the appellant has a doubt about taxability of the service "the appellant should have approached the department for clarification" but failed to do so and therefore the appellant had deliberately avoided payment of Service Tax, suppressed the fact of non-payment of Service Tax and therefore impo....
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....2015, 20.10.2015, 22.04.2016, 24.10.2016, 25.04.2017 and 11.08.2017 respectively as is evidenced by the ST-3 returns. As per Section 73(6)(i) (a), where a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed, is the relevant date. Therefore, given that the returns for the relevant period under dispute is from October 2014 to June 2017, when the date of filing of the last return for the said period is 11.08.2017, the normal period of thirty months would come to an end by February 2020. In the aforesaid circumstances when the invoking of extended period of limitation was not available to the Department considering the fact that the appellant had declared the amounts received as towards export of service in the ST 3 returns and the said fact was in the knowledge of the department, therefore, the SCN issued on 29-06-2020 is beyond the normal period of limitation and the entire demand is barred by limitation. The normal period of thirty months when calculated in the reverse from the date of issuance of the SCN which is on 29-06-2020, which could at best....
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...., 1994 and that the period of five years could not have been invoked. That part of the judgment of the Tribunal has been confirmed in the companion appeal. Once that be the position and the Tribunal having come to the conclusion that the extended period of limitation could not have been validly applied, the Tribunal, in our view, acted outside its jurisdiction in entering upon the merits of the dispute on whether the demand for duty should be confirmed. Once it is held that the demand is time barred, there would be no occasion for the Tribunal to enquire into the merits of the issues raised by the Revenue. 23. In State Bank of India v. B.S. Agricultural Industries (I)- (2009) 5 SCC 121, the Supreme Court dealt with a situation where the consumer forum had held that the complaint was barred by limitation but had nonetheless proceeded to decide the issue on merits. Holding that this would amount to an illegality, the Supreme Court observed : "12. As a matter of law, the consumer forum must deal with the complaint on merits only if the complaint has been filed within two years from the date of accrual of cause of action and if beyond the said period, the suffici....
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....ssed into service, wherein, the Hon'ble Supreme Court had an occasion to deal with a situation, where the consumer forum held that the complaint was barred by limitation, but nonetheless had proceeded to decide the issue on merits. Dealing with the issue, which is similar to the case on hand, at Paragraph 12, the Hon'ble Supreme Court in State Bank of India's case (cited supra), held as follows :- "12. As a matter of law, the consumer forum must deal with the complaint on merits only if the complaint has been filed within two years from the date of accrual of cause of action and if beyond the said period, the sufficient cause has been shown and delay condoned for the reasons recorded in writing. In other words, it is the duty of the consumer forum to take notice of Section 24A and give effect to it. If the complaint is barred by time and yet, the consumer forum decides the complaint on merits, the forum would be committing an illegality and, therefore, the aggrieved party would be entitled to have such order set aside." Applying the ratio of the Supreme Court in State Bank of India v. B.S. Agricultural Industries reported in (2009) 5 SCC 121, the Allahabad High Co....