TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 2163
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....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/ ship lines which are been managed by ESM Pte....
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....ing 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 and crew management services for ESS Pte. ESM Pte ....
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....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 orders for approved requisitions on behalf of ESM Pte 7. To follow up with the vendors, the forwarding agents and the port agents....
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.... 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 information pertaining to stores, spares, provisions etc. required. There is also no mechanism whereby the Appellant and ESS Pte/ vessel owners can interac....
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.... 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 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....
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....plicable 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' 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 app....
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....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. 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 ....
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....(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 indeed the main service provider. 27. Ld. AR submits that for intermediary or agent or broker, it is not necessary that the consideration must be directly received from Customer of m....
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.... 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.R. submits that in the case at hand, M/s NKSPLL is an establishment of Shri Balaji Singh Teeka and Smt Sikha Singh in taxable territory and M/s ESM Pte Singapore is an establishment of same ....
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....ly 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 made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "thirty months", the words "five years" had been substituted." ....
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....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 refunded, Central Excise Officer may, within one year 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 amou....
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....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 been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words "one year" and "six Months", the words "five years" were substituted. Explanation. - Where the service of the notice is stayed by an order of a court, the period of such stay s....
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.... : 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 by this Court that for proviso to Section 11A to be invoked, the intention to evade payment of duty must be shown. This has been clearly brought out in Cosmic Dye Chemical case where the Tribunal had held that so far as fraud, suppression or misstatement of facts was concerned the question of intent was immaterial. While disagreeing with the aforesaid interpretation this Court at p. 119 observed as follows: (SCC para 6) 6. Now so far as fraud and collusion are concerned, it is e....
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....ion 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 specified in the notice along with interest payable thereon under Section 11AA and a penalty equivalent to the duty specified in the notice." 24. As noticed in the excerpted portions of the Supreme Court's judgment, the material distinction between the provisos of Section 11A of the Excise Act and Section 28 of the Customs Act was contemplated in Associated Cement Co. Ltd. v. Commissioner of Customs (supra) [2001 (128) E.L.T. 21 (S.C.)]. The only material difference in the language of the two provisions is that the phrase 'with intent to evade payment of duty' i....
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.... 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, 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. ....... 14. In Sarabhai M. Chemicals v. Commissioner of Central Excise, Vadodara [(2005) 2 SCC 168], a three-judge bench of this Court, while referring to the observations extracted above, echoed the following views : "23. Now coming to the question of limitation, at the outset, we wish to clarify that there are two concepts which are required to be kept in mind for the purposes of deciding this case. Reopening....
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....' 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 cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. " 27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word 'suppression' in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. "fraud, collusion, wilful misstatement". As explained in Uniworth (supra), "misstatement or suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for ....
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....(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 was issued on 24-10-2008. The undischarged liability for payment of Service Tax with respect to Mandap Keeper Service and Management, Maintenance and repair services alleged in the SCN is for the period 2004-06 and 2005-08 respectively. Since the proviso to Section 73(1) cannot be invoked the SCN had to be served within one year from the relevant date. Therefore, the SCN with respect to short payment of Service Tax for Mandap Keeper Service for the years 2004-2006 is barred by limitation. The SCN with respect to short payment of Service Tax for Management, Maintenance and Repair Services for the years 2005-2007 is also barred by limitation." (emphases....
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....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. 43. 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 b....
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....lized 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 (S.C.); Anand 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) 44. We are of ....
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....cise, 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 returns filed for the 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 l....
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....ssment 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 any. In the light 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. 48. A feeble attempt has been made by the Adjudicating Authority to attribute deliberate intent on the part of the Appellant on the specious ground that the appellant had deleted any direct reference to/use of the word "vendor" in the agreement dated 1st April, 2016 to escape/avoid duty. However, it is pertinent that the intent is attributed thus in the show ....
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.... 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 cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility." (emphasis supplied) 49. We also find that when the appellant held a bonafide belief that its services were not liable to tax being export of services and had in fact declared the amounts received as towards export of service provided, there cannot be a finding of wilful misstatement or suppression of facts with intent to evade payment of duty attributable to the Appellant. Honourable Supreme Court has often rendered decisions on these lines and apart from those cited in line in the decisions referred supra, the follo....
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....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 from the date of issuance of the SCN which is on 25-06-2020, which could at best have been covered, is only if there was a demand for the period from January 2018 onwards alone. In the present case the service tax returns were all filed well before January 2018 and the period under dispute is also only upto June 2017. Thus, for the reasons we have elucidated supra, the confirmation of the demand of service tax in the instant case, which was for the period from 01.10.2014 to 30.06.2017, was entirely barred by limitation and is therefore wholly unsustainable and is liable to be set aside. 52. Given our findings above that the extended period of limitation was not invokable and that the demand was wholly barred by limitation, we are disinclined to now go into the merits of the dispute for more rea....
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....ed, 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 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 ill....
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....'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 Court in Commissioner of Customs, Central Excise & Service Tax v. M/s. Monsanto Manufacturer Pvt. Ltd., reported in 2014-TIOL-550-HC-ALL-ST, answered the question of law in favour of the assessee. 13. Judgment of the Supreme in State Bank of India's case (cited supra), followed in Commissioner of Customs's case (cited supra), squarely applies to the facts on hand, wherein,....