TaxTMI 
TaxTMI 
2025 (5) TMI 2163
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.... marine stores, spares, vendor management and repair services related to ship equipment, 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. AAECN1308BSD001. The appellant and ESM Pte are group companies belonging to ESM Holdings Hong Kong (ESM Holdings). Based on Intelligence that the appellant has not paid service tax on data management, vendor management and procurement of ship stores 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, conducted search proceedings as well as recorded statement from the Head-Finance of the appellant. It was observed that M/s. ESM Pte has entered into contracts with various ships for shipping lines and are engaged in providing ship crew recruitment and management services to these ships/ shipping lines. ESM Pte has appointed the appellant as service provider to provide the services of procurement of ship stores, repair of ship equipment etc. for the various ships/ sh....
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....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. 23/2020 dated 25.06.2020 invoking extended period of limitation. The appellant replied contesting the demands and after due process of law, the adjudicating authority passed the impugned order. Hence this appeal. 5. Shri Gopal Mundhra, Advocate, appeared and argued for the appellant. The Ld. Counsel submitted that ESM Holdings is the ultimate parent entity for the Appellant and other two group companies namely, Executive Shipping Service Pte Ltd, Singapore ("ESS Pte") and Executive Ship Management Pte Ltd, Singapore ("ESM Pte"). ESS Pte based in Singapore provides ship management services to ship owners and shipping lines. The Ship management services, consists of two aspects/limbs, Technical Management and Crew Management. ESS Pte further enters into a back to back agreement with ESM Pte, by which ESM Pte is required to perform the same ship management services, comprising of technical management services an....
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....es rendered by the appellant as governed by Service Agreement of 2013 and service agreement of 2016 were tabulated as under: Particulars Service Agreement between the Appellant and ESM Pte (2013) Service Agreement between the Appellant and ESM Pte (2016) Agreement Service Agreement dt 1st April, 2013 Service Agreement dt. 1st April, 2016 Parties ESM Pte and the Appellant ESM Pte and the Appellant Duties of the Appellant as a Service Provider as per Apndx-1 1. To liaise with the ESM Pte with respect to their requisitions for Store materials, spares, lubricating oils, chemicals, gases, charts & publications, repairs and maintenance services by ESM Pte. 2. To request quotations from the vendors or service providers for goods or services as per the instruction of ESM Pte 3. To arrange for and negotiate for inspection services as and when required as per instruction of ESM Pte 4. To compare the quotations received from the vendors and forward to ESM Pte for approval 5. To make a presentation of such comparison of the quotations to ESM Pte and recommend appropriate vendor 6. To negotiate the terms with the vendors and place/ raise purchase ....
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....Appellant to ESM Pte and do not amount to mere facilitation or arrangement of such services. 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, 2023 (11) TMI 898- CESTAT Chennai, affirmed in Commissioner of GST and Central Excise v. M/s. SNQS International Socks Private Limited, 2024 (388) ELT 530 SC. That in the present facts, the appellant provides a similar bouquet of services to ESM Pte on a principal to principal basis and has no oral or written agreement with the customers and accordingly the services rendered by the appellant cannot be said to be intermediary services. 11. The Ld. Counsel further submits that in order to communicate its requirements pertaining to stores, spares, provisions etc., ESM Pte provides access to the appellant to its software called the phoenix software which has various modules to enable ESM Pte to carry out its business in the most effective manner. It provides access to the appellant of only one such module where the Appellant can merely access the infor....
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....ESM Pte. and the Appellant are two separate legal persons and not establishment of a single legal person. In view of the above extract, it is evident that a subsidiary and a holding company or group companies are not covered by the abovementioned provision and therefore, do not fall under the ambit of 'distinct persons'. 15. In this regard, reliance also placed on Linde Engineering India Pvt. Ltd. vs. Union of India - 2022 (57) G. S. T. L. 358 (Guj.) where the following has been held, "Therefore, the services rendered by the petitioner No. 1-Company outside the territory of India to its parent Company would have to be considered "export of service" as per Rule 6A of the Rules, 1994 and Clause (f) of Rule 6A of the Rules, 1994 would not be applicable in the facts of the case as the petitioner No. 1, who is the provider of service 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." 16. The Ld. Counsel also pointed out that the services rendered by the Appellant in terms of the Service Agreement for the D....
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....udicial precedents wherein it has been undeniably held that even in case of holding and subsidiary companies the explanation (b) to Section 65B(44) would not be applicable for the reason that the two entities are separate companies. That in the present case the appellant and ESM Pte are not even holding and subsidiary companies but are rather group companies, operating independently, with independent management, operations, and decision making and there cannot be any instance of application of explanation (b) to Section 65B(44) to such facts. Reliance is placed on the decisions in Linde Engineering India Pvt Ltd v UOI, 2022 (57) GSTL 358 (Guj), L & T Sargent & Lundy Ltd v CCE & ST, Vadodara-I, 2021 (11) TMI 69-CESTAT Ahmedabad, Zaloni Technologies India Pvt Ltd v CCE, 2022 (10) TMI 878- CESTAT KOLKATA, Celtic Systems Pvt Ltd v CCE & ST Vadodara-I, 2023 (70) GSTL 74 (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. 19. 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'....
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....ious instances through GST refund orders and the Additional Commissioner of GST & Central Excise, Chennai vide Order in Original No. 21/2025-DGGI (ADC) dated 17.01.2025 has in case of one of the other group entities, i.e. BHAS, held that accounting and payroll services provided by it would not qualify as 'intermediary' service and would be treated as export of service under GST and all the ruling had inter-alia also relied upon the ruling in SNQS International Socks Private limited (Trading Division) cited supra. 22. The Ld. Counsel submits that the appellants were filing their ST3 returns regularly and duly indicating therein the amounts charged against export of service provided and that thus the recovery of the entire tax demanded is barred by limitation and is unsustainable. He submits that when they have shown the amount charged against export of service provided, extended period of limitation cannot be invoked, 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 25.06.2020. Th....
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....E vs. Bajaj Auto Ltd. [2010 (260) E.LT. 17 (S.C.)], Hindustan Steel Ltd vs. State of Orissa [1978 (2) E.L.T. J159 (S.C.)], Akbar Badruddin Jiwani us. Collector of Customs (1990 (47) E.L.T. 161 (S.C.). Tata Engineering and Locomotive Company Ltd. vs. Collector of Customs (1991 (56) E.L.T. 812 (Tribunal)), Nestle India Ltd. vs. CCE, Goa (2004 (163) E.L.T. 249 (Tri. Mumbai)) and N.D. Metal Industries Ltd. us. Commissioner of Customs (Import)., Nhava Sheva (2007 (220) E.L.T. 807 (Tri.- Mumbai)]. 26. Per contra, Shri Anoop Singh, Ld. AR for the department while reiterating the rationale reflected in the impugned OIO, submits that the service rendered by the appellant fall under definition of intermediary as discussed in the OIO with specific reference to clauses of agreement, definition of Intermediary in statutory rules. He submitted that without facilitation done by the Appellant the main services cannot be rendered. It is evident that the Ship owners or vendors are paying for the requisition of goods or services. Consideration for the Appellant for activities rendered in respect of Ship owners/vendors is in the form of consideration from their foreign service recipient who is inde....
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....lishment of a distinct person. From the facts and findings discussed, it is evident that these companies are guided by the same Head and Brain. The Ld. AR submits that the argument of the counsel that the expression 'establishments of distinct persons' should be establishment of the same person, i.e. the same legal entity, placing reliance on in the case of M/s Linde Engg and GST Circular is not correct. 31. The Ld. AR draws attention to the definition of person in Section 65B(37), rule 6A and submits that the definition of 'person' does not mean company alone the definition of person for the purpose of Service Tax includes natural persons/'individuals. It is the Ld. AR submission that as per Rule 6A (1) of STR 1994 provision of any service provided or agreed to be provided shall be treated as export of service when the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act. It is his submission that interpretation given by the assessee as mentioned in certain words in statutory rules and definition of person in statute completely redundant. 32. Ld. A....
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.... be appropriate to reproduce section 73(1) of the Finance Act, 1994 as it stood at the relevant time. This section deals with recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. It is as follows: "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 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 ma....
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....ave for a variation in the normal period, when it was one year as opposed to thirty months in the provision as reproduced above, came up for consideration before the Honourable Delhi High Court in Bharat Hotels Ltd v. Commissioner of C.Ex (Adjudication), 2018 (12) GSTL 368 (Del.), and was analysed in detail. The relevant portions of the judgement are under: "20. The only question of law that arises in the present appeal is whether the [Customs,] Excise and [Service] Tax Appellate Tribunal (CESTAT) fell into error in holding that the eviction of the extended period under proviso to Section 73(1) of the Finance Act in respect of two services, i.e. management, maintenance and repair services and Mandap Keeper services is justified in the facts and circumstances of the case. At the outset, the relevant section in question, i.e., Section 73 of the Finance Act (as applicable in 2008) needs to be stated. The section is reproduced below for reference - "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 re....
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....ed furnace oil on behalf of Uniworth Ltd. in January, 2001. This time period of more than six months is significant due to the proviso to Section 28 of the Act. The Section, at the relevant time, read as follows : 28. Notice for payment of duties, interest, etc. - (1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may, - (a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year; (b) in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has bee....
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....xxxxxx 18. We are in complete agreement with the principle enunciated in the above decisions, in light of the proviso to Section 11A of the Central Excise Act, 1944. However, before extending it to the Act, we would like to point out the niceties that separate the analogous provisions of the two, an issue which received the indulgence of this Court in Associated Cement Co. Ltd. v. Commissioner of Customs [(2001) 4 SCC 59] 3, at page 619 in the following words : 53. ... Our attention was drawn to the cases of CCE v. Chemphar Drugs and Liniments [(1989) 2 SCC 12], Cosmic Dye Chemical v. CCE [(1995) 6 SCC 117], Padmini Products v. CCE [(1989) 4 SCC 275], T.N. Housing Board v. CCE [1995 Supp (1) SCC 50] and CCE v. H.M.M. Ltd. (supra). In all these cases the Court was concerned with the applicability of the proviso to Section 11A of the Central Excise Act which, like in the case of the Customs Act, contemplated the increase in the period of limitation for issuing a show cause notice in the case of non-levy or short-levy to five years from a normal period of six months.... 54. While interpreting the said provision in each of the aforesaid cases, it was observed....
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....mic Dye Chemical case while construing the proviso to Section 11A, the making of such a wilful misstatement or suppression of facts would attract the provisions of Section 28 of the Customs Act. In each of these appeals it will have to be seen as a fact whether there has been a non-levy or short-levy and whether that has been by reason of collusion or any wilful misstatement or suppression of facts by the importer or his agent or employee. (Emphasis supplied)" 23. It is important to note the proviso to Section 11A of the Excise Act at this stage. It states that : "Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by the reason of - (a) fraud; or (b) collusion; or (c) any wilful misstatement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specifi....
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....f the Supreme Court discussing the interpretation of proviso to Section 11A of the Excise Act can be extended to interpret Section 73(1) of the Finance Act. Further, since proviso to Section 28 of the Customs Act is pari materia to proviso to Section 11A of the Excise Act (as held in Uniworth), the interpretation of proviso to Section 28 may also be extended to interpret the proviso to Section 73 of the Finance Act. Uniworth (supra) is also authority on the meaning of 'wilful misstatement' and 'suppression of facts'; the Court held that : "... 12. ... The conclusion that mere non-payment of duties is equivalent to collusion or wilful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of non-payment 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, sp....
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....le just for any omission on the part of the assessee, unless it is a deliberate attempt 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 constitute suppression of fact." 26. Again, the Supreme Court in Continental Foundation Joint Venture Holding v. Commissioner of Central Excise, Chandigarh-I [(2007) 10 SCC 337 = 2007 (216) E.L.T. 177 (S.C.)], held that : "10. The expression "suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or 'collusion' and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cann....
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.... to the said service from financial year 2006-07, and also paid Service Tax for the financial year 2005-06. The same has again been also acknowledged by the DGCEI in the SCN. The absence of any material disclosing intent to evade payment of Service Tax by the appellant is evident by the fact that it promptly made all the payments pertaining to Service Tax liability with respect to Mandap Keeper Service and Management, Maintenance and Repair Service as soon as the appellant became aware of the same (during the enquiry) and continued to pay Service Tax thereafter. The authorities are unanimous that to invoke the extended period under cognate provisions (such as Section 11A of the Excise Act or Section 28A of the Customs Act) the burden is cast upon it to prove suppression of fact. The Revenue has not been able to prove an intention on the part of the appellant to evade tax by suppression of material facts. In fact, it is clear that the appellant did not have any such intention and was acting under bona fide beliefs. For these reasons, it is held that the Revenue cannot invoke the proviso to Section 73(1) of the Finance Act to extend the limitation period for issuing of SCN. The SCN w....
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.... come to light. Therefore, extended period under proviso to sub-section (1) of Section 73 of Chapter V of the Finance Act, 1994 is rightly invoked in the present case." 41. We also find that the adjudicating authority itself has conceded at para 21 that the appellant has filed the ST3 returns regularly, by recording as under: "Further, I find that M/s. Noble King have filed the ST3 returns regularly and has mostly complied with the Service tax provisions, I am of the considered view that imposition of penalty under Section 77 is not required." 42. It is also pertinent that the SCN itself under the heading in para 11 "Invocation of Extended Period", thereafter in para 11.1 states that the appellant has not discharged appropriate service tax on the services provided by them to ESM Pte and have erroneously claimed that they have exported the said services thereby resulting in non payment of service tax. To our mind, an erroneous claim is a claim made by mistake, and cannot be equated with a deliberate claim with intent to evade payment duty, which alone would then prove mens-rea, which is essential and required to be proved, to invoke the extended period of limitation. ....
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....ntioned them as a unit of Accurate Transformers Ltd., and in all the documents of the appellant, the transfer of goods from the appellant to Accurate Transformer Ltd. had been reflected as inter unit transfer. Neither there is any allegation nor evidence to prove that there was some collusion between the appellant and the Jurisdictional Central Excise officers. The short payment was detected when during visit by the audit team, the records maintained by the appellant and made available by them to the audit officers were examined by them, - something which should have been done by the Jurisdictional Range Officers and Divisional Assistant Commissioner/Deputy Commissioner much earlier. The assessee cannot be penalized by invoking extended period under proviso to Section 11A(1) for demand of duty and penal provisions of Section 11AC for indolence on the part of the jurisdictional Central Excise officers. Moreover Apex Court in a series of judgments - CCE v. Chemphar Drugs & Liniments reported in 1989 (40) E.L.T. 276 (S.C.); Padmini Products v. Collector reported in 1989 (43) E.L.T. 195 (S.C.); Pushpam Pharmaceuticals v. CCE reported in 1995 (78) E.L.T. 401 (....
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....culars, they cannot abdicate responsibility, more so when there is complete absence of any evidence that they have indeed embarked on such a scrutiny and called for the necessary information and that the assessee has not responded to their letters seeking such information. In the show cause notice too, there is no whisper of any finding that the returns that the appellant has so regularly filed have been scrutinized and a subsequent allegation that the appellant had not furnished any information that has been sought for consequent to such scrutiny. The mandate of the statute, as laid down in Section 14 of the Central Excise Act, 1944, made applicable under Section 83 of the Finance Act, 1994 in relation to service tax as they apply in relation to a duty of excise, empowers the jurisdictional range officers to issue summons requiring any person to give evidence or produce records etc., and can be resorted to by the said officers in the course of performance of their official duties as per extant Departmental instructions, if it so becomes necessary. 45. Likewise, we find that in a case where revenue had preferred the appeals on the ground that the respondents in their monthly ER ....
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....ffice. 47. We are of the view that when the appellant has duly provided all the information sought in the mandatory returns prescribed, it would be all the more reason for a jurisdictional range officer entrusted with the duty to safe guard Government Revenue by verifying and scrutinizing the information being furnished in the returns by the assessee, to be diligent and inquire into the details of such amounts charged against export of service. The very fact that the appellant has claimed and stated that it has made export of service, is reason enough for any officer to then promptly embark on the requisite inquiry within the mandated period prescribed for such scrutiny as laid down in the Department circulars and instructions in order to ensure correctness of the assessment and ensure complete remittance of the requisite duty. In the instant case, the extended period sought to be invoked is from October 2014 to June 2017 and hence, even before the present SCN issued on 25-06-2020 pursuant to investigations commenced on 09-05-2019, there was ample opportunity for the jurisdictional range officers to carry out their mandated responsibility and detect any irregularities, if at all....
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.... to embark on any inquiry within the normal period so as to raise a tenable demand, if any, on the appellant. When it is the responsibility of the jurisdictional departmental officers to scrutinize the returns filed reflecting the information of amounts towards export service provided and service tax payable indicated by the appellant, any failure on their part to take up the information for scrutiny can neither be condoned to the detriment of the appellant, nor would it then justify invoking of the extended period of limitation by the Department. It is also pertinent to note that the Honourable Apex Court in Uniworth Textiles Ltd v CCE, Raipur, 2013 (288) ELT 161 (SC), has held as under: "24. Further, we are not convinced with the finding of the Tribunal which placed the onus of providing evidence in support of bona fide conduct, by observing that "the appellants had not brought anything on record" to prove their claim of bona fide conduct, on the appellant. It is a cardinal postulate of law that the burden of proving any form of mala fide lies on the shoulders of the one alleging it. This Court observed in Union of India v. Ashok Kumar & Ors. - (2005) 8 SCC 760 that "it ....
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.... 25.06.2020. The appellant had filed Service Tax returns for this period on 20.04.2015, 21.10.2012, 22.04.2016, 24.10.2016, 25.04.2017 and 14.08.2017 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 14.08.2017, 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 25-06-2020 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 fro....
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....gs were barred by limitation and proceedings were liable to be quashed on the ground of limitation, the Tribunal committed an illegality in deciding the question on merits. Hence is the finding of Tribunal on merits liable to be set aside?" 21. The appeal is admitted on the following question of law and is by consent taken up for final hearing. 22. The Tribunal came to the conclusion that the demand by the Revenue was beyond the period of limitation of one year prescribed under Section 73(1) of the Finance Act, 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. Agricultu....
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....Before the Allahabad High Court, one of the substantial questions of law raised by the assessee, was when the Tribunal having held that proceedings were barred by limitation, has committed any illegality in deciding the question on merits. Whether the finding of the Tribunal on merits, is liable to be set aside?" 12. While addressing the above said substantial question of law, decision of the Hon'ble Supreme Court in State Bank of India v. B.S. Agricultural Industries reported in (2009) 5 SCC 121, has been pressed 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....