TaxTMI 
TaxTMI 
2018 (2) TMI 2139
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....:- "i) Whether the extended period of five years is invokable under the proviso to Section 73(1) of the Finance Act, 1994 when the service provider, though a Government organization, has suppressed the fact with intent to evade payment of service tax? ii) Whether the penalties under section 76, 77 & 78 of the finance Act, 1994 are imposable on the service provider for non compliance of the provisions of the Finance Act, 1994 and for deliberately suppressing the fact of providing taxable service, irrespective of the fact that it is a Government Organization?" 4. The facts of the case are that Krishi Upaj Mandi Samiti (Anaj), Kota (hereinafter referred to as the 'assessee-respondent) was established by the Rajasthan State Government under the provisions of The Rajasthan Agricultural Produce Markets Act, 1961. The assessee-respondent regulates sale of agricultural produce in the notified markets. The assessee-respondent charges "market fee" for issuing licenses to traders, agents, factory/cold storage owners or other buyers of other agricultural produce. The assessee-respondent also lets out land and shops to traders and collected allotment fee/lease amount for su....
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....in terms of the Rajasthan Agricultural Produce Markets Act, 1961 or the rules made thereunder. In fact, in the written submissions, made by the ld. Counsel for the appellants in Appeal No.ST/50069 of 2017 and ST/51936/2016, it is specifically mentioned that the allotments of land and shops were made by the appellants in terms of the Immovable Property Allotment Rules, 2005 and the fees are received for such allotments. We have examined sample copies of allotment letters and agreements, entered into by the appellants with the traders. The appellants allotted shops/godown/platforms towards a monthly consideration called as allotment fee. The allottee shall pay three months advance of allotment fee, which shall be kpet as a security by the Market Committee. The allottee shall pay the monthly allotment free on or before 5th of every month. We have perused the allotment letter as well as agreements. The agreement clearly mentions that the allotment is made for a consideration of allotment fee/lease amount. The terms of the agreement/allotment letter clearly indicated the arrangement for renting of immovable property for a consideration. The fact5 that the allottee uses the shop/premises....
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....to its use; (v) loading, unloading, packing, storage or warehousing of agricultural produce; (vi) agricultural extension services; (vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce; 16. The appellants also contested the demand wherever issued invoking extended period of time. Proviso to Section 73(1) can be invoked only, where the service tax has not been paid or levied or short paid or short levied, by reason of fraud; or collusion; or willful mis-statement; or suppression of facts; or contravention of any of the provisions of Chapter V of Finance Act, 1994 or rules made thereunder with intent to evade payment of service tax by the persons chargeable with service tax. If any one of the ingredients are present, then the demand for not paid or short paid service tax can be made invoking extended period of limitation of 5 years, from the relevant date. Admittedly, the appellants are a Government Organization; their functions are regulated by the said enactment and the rules. In such situation, it is clear that there will be a rebuttable pre....
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....ax with the government only when the contractors discharged their liability on this account may not have been a proper stand. But, from this, it cannot be deduced that the effort was to evade tax liability. 30. At any rate, given the explanation about poor financial position in which the appellant was placed, possibly on account of highly subsidized transport facilities provided and the dependence on the grants from the government, reasonable cause had been shown for the default in paying service tax within the prescribed time. 31. Thus, the inhibition under Section 80 of the Finance Act, 1994 was attracted and penalty under Section 80 could not have been imposed. 6.2 The aforesaid judgment of Delhi High Court was confirmed by the Supreme Court between the same parties in 2016 (45) S.T.R. J53 (SC) which reads as under:- Heard learned counsel for the petitioner. Delay condoned. The special leave petition is dismissed. The Delhi High Court in its impugned order had held that the assessee could contractually transfer their Service Tax liability to a third party but on account thereof, could not ask the Revenue to recover it from the thir....
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.....L.T. 424 (Tri.- Mumbai), it has been held as under:- 5. We note that payment of duty by the appellants on the M.S. Pipes which they got fabricated from the various job workers, out of the free of cost steel plates supplied by the appellants to the job workers, is not in dispute. We also note that, but for the detailed scrutiny of records by the cost auditor, the non-inclusion of the various changes are enumerated in the cost audit report would not have come to surface. There being no sale and only captive consumption, it was incumbent on the appellants to declare all the details of expense inclined in relation to the activity of manufacture. Failure to do so does amount to misstatement/suppression etc. If a similar act was to be noticed in the case of an assessee who is not a Government agency, the same set of circumstances would lead to the conclusion of evasion. Therefore, on account of the face of the appellants being a State Government Unit should not lead to a different conclusion. 6. Accordingly, we hold that, the Commissioner was correct in holding this case to be covered by the larger period of limitation of duty demand. We also note that on merits the de....
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....In the case in hand, admittedly returned goods did not undergo any process of manufacture. Being so, there cannot be any dispute that the provision of Rule 16(2) were clearly attracted and there was no occasion for the appellants to claim the benefit under sub-rule (1) of Rule 16. The claim of the appellants that they bona fide believed about the applicability of Rule 16(1) is absolutely devoid of substance. 18. As rightly pointed out by the DR in view of clear finding by the adjudicating authority about suppression of fact and consequential invocation of extended period of limitation and failure on the part of the appellants to establish their specific plea of bona fide belief, we are left no alternative than to hold that it is a clear case of suppression of fact leading to evasion of duty warranting penalty in terms of the provisions of Section 11A. In the result, therefore, there is no case for interference in the impugned order on the issue of penalty of equal. The decision of the Apex Court in the matter of Dharamendra Textile Processors and Rajasthan Spinning and Weaving Mills are clearly applicable. 6.7 In Andhra Pradesh State Electricity Board vs. Collector of C....
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....ven where the demand of duty is for the normal period of limitation, mens rea can be found against the assessee, in which event the penal provisions of Section 11AC would get attracted. In other words, according to learned SDR, the appellant is liable to pay penalty equal to the entire amount duty demanded from them inasmuch as the Revenue's allegation of suppression of facts with intent to evade payment of duty stands established for the entire period of dispute including the period coming within the normal period of limitation prescribed under Section 11A(1). In this connection, learned SDR has particularly referred to para 17 to 19 of the Apex Court's judgment in Rajasthan Spinning & Weaving Mills (supra). Unfortunately, today, there is nobody to contest these arguments of the SDR. In the case of Dharamendra Textile Processors the Hon'ble Supreme Court held that, where any of the grounds laid down under Section 11AC for a penalty was established by the Revenue, penalty equal to duty was mandatory. In the subsequent case of Rajasthan Spinning & Weaving Mills, the Apex Court further clarified the above view and also held that payment of any part of the duty amount prior t....
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.... text of the said section. It has been argued that, as in this case, the appellant was found to have suppressed the clearance of 88 pipes with intent to evade payment of duty, penalty equal to duty is liable to be imposed on them under Section 11AC of the Act. The challenge in this appeal against that penalty has been opposed in this manner. The same reasoning has been advanced by the learned SDR vis-a-vis the challenge against the demand of interest under Section 11AB of the Act. 6.9 In Union of India vs. State of Raj. in S.B. CWP No.6947/2005 decided on 31.1.2006 wherein it has been held as under:- Assailing the order dt. 16.7.2005 [Annex.2] the petitioner has submitted that they were under bonafide impression about the nature of transaction that sales tax was not leviable and hence, the same was not deposited. According to the petitioner, after the decision of this Court as affirmed by the Hon'ble Supreme Court, the tax is being deposited and, therefore imposing of penalty and interest in the present case is not just and proper and correct. It has been contended that the application under Section 54 of the Act filed by the petitioner ought to have been properly appre....
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....09) 13 SCC 165 it has been held that it would be permissible for the legislature to remove a defect in earlier legislation and the defect can be removed both retrospectively and prospectively by legislative action and the previous actions can be validated. Parliament, it is well settled, has the plenary power to enact legislation on the fields which are set out in List I and List III of the Seventh Schedule. The plenary power of Parliament to legislate can extend to enacting legislation both with prospective and with retrospective effect. That however, is subject to the mandate of Article 14 of the Constitution, it is also well settled that competent legislature can always clarify or validate a law retrospectively. It cannot be held to be harsh or arbitrary, object of validating law is to rectify the defect in phraseology or lacuna and to effectuate and to carry out the object for which earlier law was enacted. The object of the amendment brought about with retrospective effect was to expressly bring the legislative provision in conformity with the original parliamentary intent. The amendment was clearly clarificatory in nature and Parliament certainly possesses the necessary legis....
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....ervice tax, that was confirmed on the petitioners, was a tax on "renting of immovable property services" which, according to the respondents, was rendered by the petitioners in terms of Exts. P1 and P1(a) executive orders. Although, it is the contention of the petitioner that, by virtue of Entry 35 read with Entry 18 List II of the Constitution of India, leasing of property is a subject under the State List, and therefore, only the State legislature would have the power to legislate in respect of the said subject, I note that the said entries do not deal specifically with levy of a tax on renting of immovable property services. It is not in dispute that the legislative sanction for the levy of a service tax on renting of immovable property services is traceable to Entry 97 of List I of the Constitution of India. That being so, and there being no specific entry dealing with the subject of service tax in any of the other lists in the 7th Schedule to the Constitution of India, the competence of the Parliament to legislate in respect of service tax on renting of immovable property services cannot be called in question. As regards the contention of the petitioners that the State, as a b....
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....he same as an appeal filed by the petitioner in accordance with the provisions of the Finance Act, 1994, as it stood prior to its amendment on 16.08.2014, and the Appellate Tribunal shall number the appeal, and proceed to consider the application for waiver of pre-deposit and stay, and thereafter, proceed to hear the appeal itself on merits. To enable the petitioner to do so, I stay further proceedings for recovery of the amounts confirmed against the petitioner by Ext. P7 order, for a period of one month, making it clear that on expiry of the period of one month, the stay granted by this judgment will cease to operate. 7.4 He also relied on the decision of Allahabad High Court in N.K.G. Infrastructure Ltd. vs. Union of India reported in 2017 (346) E.L.T. 109 (All.) wherein it has been held as under:- 8. Prima facie we do not find that the filing of returns including balance sheet, profit and loss account and the ledgers would amount to declaration and will not fall within the meaning of suppression of information, if the particular contract covering the taxable service was not specifically disclosed. The calculation of the total profits in the balance sheet made by the....
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..... I further find that the Service Tax is paid on self assessment system as per the self assessment system it is the responsibility of the Service Provider to comply with the provisions of the Finance Act, 1994 and if the noticee had any dbout they should have approached the department for clarification so that they could not be alleged to be involved in suppression of facts with intent to evade tax, but they chose not to do so. Thus, it was evident that the noticee had suppressed the facts from the department with intent to evade payment of Service Tax and have contravened the provisions of Section 67, 68, 69 & 70 of the Act read with Rule 4,5,6 & 7 of the Service Tax Rules, 1994. This clearly proves that they deliberately indulged in suppression of facts with an intention to evade payment of service tax. In the case of Union of India vs. Rajasthan Spinning & Weaving Mills [2009 (238) ELT 3 (S.C.)], the Hon'ble Supreme Court observed that in case the non-payment of duty is international and by adopting any means as indicated in the proviso then the period of notice and a priory the period for which duty can be demanded gets extended to five years. In case of Magnum International vs....
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....effect, as if for the words "Central Excise Officer", the words "Collector of Central Excise" and for the words "six months", the words "five years" were substituted. A bare reading of the proviso indicates that it is in nature of an exception to the principal clause. Therefore, its exercise is hedged on one hand with existence of such situations as have been visualised by the proviso by using such strong expression as fraud, conclusion etc. and on the other hand it should have been with intention to evade payment of duty. Both must concur to enable the Excise Officer to proceed under this proviso and invoke the exceptional power. Since the proviso extends the period of limitation from six months to five years it has to be construed strictly. The initial burden is on the Department to prove that the situations visualised by the proviso existed. But once the Department is able to bring on record material to show that the appellant was guilty of any of those situations which are visualised by the Section, the burden shifts and then applicability of the proviso has to be construed liberally. When the law requires an intention to evade payment of duty then it is not mere failu....
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....mic Dye Chemical vs. Collector of Central Excise, Bombay [1995 6 SCC 117], it has been held as under :- 8. Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word "wilful" preceding the words "misstatement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be wilful. 8.4 In Surat Municipal Corpn. vs. Commissioner of C. Ex. 2006 (4) STR 44, it has been held as under :- 7. In respect of the imposition of penalty, the same is imposed Under Section 76 of the Customs Act. The Commissioner (Appeals) in the impugned order held that the appellant is a S....
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.... pay the service tax, being a statutory Government body and on this ground in this case the Tribunal set aside the penalty. Following the above judgments of the Tribunal, we hold that in view of the provisions of Section 80, no penalty is imposable under Section 76, 77 or 78 of the Finance Act, 1994. 8.6 He contended that in view of the aforesaid decisions, since there is no willful default, the tribunal has rightly held as under:- "(I) The appellants are liable to pay service tax under the category of "renting of immovable property service" for the period upto 30.6.2012. (II) For the period from 1.7.2012 (Negative List Regime), the appellants are not liable to pay service tax under the said tax entry in respect of shed/shop/premises leased out to the traders/others for storage of agricultural produce in the marketing area. The Negative List will not cover the activities of renting of immovable property for other than agricultural produce. (III) The demands, wherever raised invoking extended period, shall be restricted to the normal period. Penalties imposed on the appellants are set aside. (IV) The threshold exemption available to the small s....