TaxTMI 
TaxTMI 
2026 (2) TMI 289
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the years September 1999 to March 2004. The Ld. Tribunal, however, remanded the issue of limitation, back to the first authority, in respect of the claim of service tax and penalty imposed for not paying service tax. 3. The appellant herein is Naresh Kumar and Company, a registered partnership firm. The respondent is the Central Commissioner of Service Tax, Kolkata. The appellant is a service provider. The respondent has claimed service tax on the 'Clearing and Forwarding' services provided by the appellant to the said two companies. The tax claimed is for the period September 1999 to March 2004. The tax break-up is set out hereinafter. 4. The undisputed records indicate that the appellant undertook to do following works for the said two companies under the agreements executed between the parties. The terms and conditions of the agreement dated December 21, 2002 between the appellant and the said two companies are summarized below:- I. To receive and unload the materials of the said two companies. II. To thereafter transport the said materials. III. To also arrange for the storage of the materials. IV. To further ensure that the said mater....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce Act. The appellant submitted that the said search and seizure operation is illegal. 9. Within 2 years of the said search and seizure operation, the respondent revenue authority further visited the said office premises of the appellant on January 29, 2004. It found that the appellant had registered itself under the Central Excise Act on May 27, 2002 i.e. 38 days after the aforesaid search and seizure operation. The respondent revenue authority found that the appellant has started to pay services tax on the remuneration received from the said two companies from the financial year 2002-2003. 10. Therefore, it is clearly seen that after the said search and seizure operation conducted on April 19, 2002, the appellant voluntarily registered itself under the Central Excise Act and obtained a certificate of service tax registration. During the said visit, the respondent further found that even after the said registration under the Central Excise Act on May 27, 2002, the appellant is not paying the service taxat the rate mandated under the Central Excise Act as amended by the Finance Act. 11. Accordingly, on June 10, 2004, the Senior Intelligence Officer of the respondent send s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d four hundred and two only. Item no. 5- Clearing and forwarding services provided to the TRIAL for which remuneration received was 7,45, 231(seven lakhs forty-five and two hundred and thirty one. September 27, 2002 to May 10, 2004 Rs. 48,396. (Forty eight thousand and three hundred and ninety six. 15. The appellant sent a reply dated May 20, 2005 to the aforesaid show cause notice dated September 13, 2004. The appellant argued that it is not a Clearing and Forwarding agent. It instead has provided cargo handling services and business support services to the said two companies. Thus, it is not liable to pay any service tax under the head Clearing and Forwarding services. The appellant further filed additional reply dated August 29, 2006 to the said show cause notice. The appellant argued that the claim of service tax is barred by limitation under Section 73 of the Finance Act, 1994. 16. The Central Commissioner of Service Tax, Kolkata, (the first authority) passed the order dated March 22, 2007 upholding the claim of service tax, of the respondents, against the appellants. The first authority upon perusal of the agreement between the parties held that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5G, under which the subject appeal is in fact been filed. The learned counsel seeks to rely on a conjoint reading of Section 35G and 35L of the Central Excise Act in support. I) JURISDICTION 21. Section 35G is set out below:- "35G. Appeal to High Court. - (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law." 22. Section 35G, therefore, excludes an appeal where the rate of excise duty or the value of goods to be taxed is at issue. Clearly, in the present case, we are not called on to decide the rate of service tax on the services provided by the appellant to the said two companies. We are not concerned with the value of the services provided by the appellant. In fact, the appellant herein has provided services and in return has received remuneration. 23. This Court, in this appeal is not concerned with the v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has admitted that the said remuneration received from the said two entities amenable to the service tax under the Central Excise Act. 28. The said registration did not have a rider that the appellant would be liable to pay the service tax from the date of its registration. The event of registration will relate back to the date on and from which the appellant started to provide Clearing and Forwarding services to the TISCO and TRL. The reason is that the appellant got itself specifically registered for payment of service tax, under the Central Excise Act, in connection to its Clearing and Forwarding services provided to TISCO and TRL. 29. The appellant started to provide the said services from September 1999 and not from the date of the said registration. The principle of relating back thus has to be applied to the remuneration of the appellant received from September, 1999 onwards. Any other interpretation will deprive the public exchequer from its entitled dues. 30. Further, the purpose of the said registration would be rendered meaningless if the said registration does not include the period of services provided by the appellant from September 1999 onwards. 31. Notabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts under the tax bracket of Clearing and Forwarding services. The appellant clearly understood the law as it is. 36. The concept of self-assessment will stand defeated if the deliberate inaction of the appellant to register itself under the Central Excise Act and pay service tax from 1999 to 2002 is condoned. 37. The definition of clearing and forwarding services is alluded to in the decision in Coal Handlers (P) Ltd. v. CCE, reported in (2015) 11 SCC 683 wherein it was held as follows:- 15. From the reading of the definition contained in the aforesaid provision, together with its dictionary meanings contained in legal and commercial dictionaries, it becomes apparent that in order to qualify as a C and F agent, such a person is to be found to be engaged in providing any service connected with "clearing and forwarding operations". Of course, once it is found that such a person is providing the services which are connected with the clearing and forwarding operations, then whether such services are provided directly or indirectly would be of no significance and such a person would be covered by the definition. Therefore, we have to see as to what would constitute cleari....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mount of service tax along with interest indicated hereinafter. 40. The appellant has dishonestly claimed exemption of service tax of Rs 36,56,555 (thirty-six lakhs, fifty-six thousand and five hundred and fifty-five on the direct expenses of Rs 6,64,45,249 (Six crores, sixty four lakhs, forty-five thousand, and two hundred and forty nine) incurred by it on transportation charges for forwarding the goods to their destination. The transportation charges form part of the remuneration received by the appellant from the said companies. Therefore the appellant cannot claim exemption from service tax on the direct expenses. In fact in Coal Handlers (supra), the Court held that a clearing and forwarding agent has to bear the transport expenses of the goods. We therefore hold that appellant firm is also liable to pay the said amount of service tax on direct expenses along with interest indicated hereinafter. 41. The appellant has also undertaken the work of bending and bundling the goods of the said two companies. This area of work, however, clearly falls outside the scope of clearing and forwarding services. The clearing and forwarding services will only include the incidental works....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is quashed. The revenue will, however, at liberty to tax the said stock verification services of the appellant provided to the said companies under the appropriate tax head in accordance with the law. III. WHETHER THE CLAIM OF DUES OF SERVICE TAX IS BARRED BY LIMITATION UNDER SECTION 73 45. The appellant has argued that the claim of service tax is time-barred. The show cause notice was issued on September 13, 2004. It demanded the payment of service tax for the periods beginning from September 1999. 46. It is thus argued that the show cause notice was issued 4 years after the cause of action for the payment of service tax arose in September, 1999. The un-amended Sec. 73 of the Finance Act, 1994, provides for two different periods of limitation (discussed hereinafter). One was 1 year and other was 5 years. 47. The appellant has argued that it is covered by the un-amended Sec.73. The appellant has argued that the period of limitation of 1 year under Section 73 of the Finance Act applies to the issuance of the said show cause notice. The show cause notice thus ought to have been issued within one year from the September 1999. 48. In Union of India &Ors. v. Rajeev Bansal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al Excise Officer) may, within eighteen 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 of 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 eighteen months), the words "five years" had been substituted. Explanation- Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of "[eighteen months) or five years, as the case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t so paid: Provided that the [Central Excise Officer) may determine the amount of short payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the [Central Excise Officer) shall proceed to recover such amount in the manner specified in this section, and the period of "[thirty months) referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation 1 -For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Central Excise Officer) but for this sub-section Explanation 2-For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service-tax under this sub-section and interest thereon.] (4) Nothing contained in sub-section (3) shall apply to a case where any service tax has not been l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....spect 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 thereunder, 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. 51. Section 73 is lengthy. Its fundamental purpose, however, is that it enables the revenue authority to recover the unpaid service tax by issuing a show cause notice. Section 73 provides periods of limitation for the initiation of recovery proceedings. Sec. 73 contempla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the show cause notice, the penalty will be lesser. Whereas when paid after the issuance of the show causes notice, the penalty will be higher. Clearly therefore, the period of limitation under Sec.73 should be interpreted in a way that encourages the taxpayer to pay the unpaid service tax. 56. Section 73 prescribes two different periods of limitation for the said two situations. A limitation period of 1 year 6 months has been fixed for recovering unpaid service tax in the first situation. Whereas, a limitation period of 5 years is fixed for recovering unpaid tax in the second situation. 57. In the first situation, the service tax has remained unpaid due to the fault of the revenue authority. In the second situation the service tax remained unpaid because the tax payer made misleading statements in its returns. 58. The fixation of different limitation periods has a purpose. The Legislature has indeed taken note of the situation at ground zero and genuine difficulties faced by the revenue authority to trace unpaid service tax. In a case where the taxpayer has suppressed facts to evade tax, the revenue authority may not be able to immediately call out the said action of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from the above passage that an acknowledgment of debt merely renews the debt and does not create a new right of action. It is further essential that the acknowledgment must relate to a subsisting liability and must indicate the jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. It was also held that such intention can be inferred by implication from the nature of the admission and need not be expressed in words. It has also been held that in construing the words used in the statements, surrounding circumstances can always be considered and that Courts lean in favour of a liberal construction of such statements, though intention cannot be fastened by an involved or far-fetched process of reasoning. 64. The said payment has established the jural relationship between the appellant and revenue authority i.e. relationship between the taxpayer and tax-collector. The jural relationship was with regard to 'Clearing and Forwarding' services provided by the appellant to the said two companies. The amount of the said payment by the appellant, however, did not cover al....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... there is no such requirement, the invoices recorded by the assesse in the books of account shall be considered as the specified records. 67. Sub section 4A of Section 73 covers a situation where the tax payer has cleared the past service tax dues upon the investigation or verification conducted by the revenue authority. On January 29th, 2004, the revenue authority visited the office premises of the appellant. The said visit thus falls within the scope of investigation or verification under sub-section 4A of Sec.73. 68. During the said visit, the revenue authority came to learn about the deficit payment of service tax by the appellant. Admittedly, the revenue authority has issued the said show cause notice based on the information revealed during the office visit of the appellant and from the invoices produced by the general manager of the appellant during interrogation. Thus, the information has been fetched from the specified records adverted to under Subsection 4A of Section 73. Subsection 4A is unique in the sense that it says that the taxpayer may have suppressed information, but the taxpayer has properly maintained his business records in its custody. It has brought all....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 73 is thus attracted. It says that the relevant date for periodical filing of a return is the date on which the same is actually filed. Since on January 29 2004, the said payment was made, the 5-year time period will begin from that date. 73. Thus, the show cause notice was issued in terms of sub section 4A to Section 73. The cause of action under the said sub section 4A arose on January 29, 2004 when the appellant made payments to the past service tax dues. Subsection 4A also provides for the penalty to be imposed on the taxpayer. 74. Sub section 1A and 3 of Section 73 are inapplicable to the appellant firm. Sub-section 1A provides when the past service tax dues has been paid after the issuance of the show cause notice. In the present case, the appellant made the payment towards the past dues before the issuance of the show cause notice. Sub-section 3 is also not applicable since the same is applicable to the payment of past service tax which is to be paid after May, 2004. In the present case the appellant ought to have paid the service tax from September, 1999. 75. We are conscious of the fact that the services of the appellant came under the radar of the author....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ence in this regard may be made to the decision in M/s. Stemcyte India Therapeutics Pvt. Ltd. V. Commissioner of Central Excise And Service Tax, Ahmedabad - III reported in 2025 INSC 841, wherein it was held as follows:- 9.3. It is a settled principle of law that, for the department to invoke the extended period of limitation, there must be an active and deliberate act on the part of the assessee to evade payment of tax. Mere non-payment of tax, without any element of intent or suppression, is not sufficient to attract the extended limitation period.... 9.4. Therefore, in the absence of fraud, collusion, wilful misstatement, or suppression of facts with an intent to evade payment of service tax, the invocation of the extended period of limitation under Section 73 of the Finance Act, 1994 is wholly unwarranted. Mere non-payment of service tax, by itself, does not justify the invocation of the extended limitation period. Accordingly, the show cause notice issued by the department is clearly time-barred. On this ground alone, the impugned order deserves to be set aside. CONCLUSIONS- 82. In view of the above, it is ruled that the appellant firm has provided clea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 49,27,918 (Rupees forty-nine lakhs, twenty seven thousand, and nine hundred and eighty only). The said total amount thus shall be broken up month-wise. The said service tax is raised for the period September 1st, 1999 to 31st, March, 2002. C. The appellant shall pay 15% penalty on the on the amount of service tax to be computed on monthly basis from the total service tax of Rs. 36,56,555 (thirty-six lakhs, fifty-six thousand and five hundred and fifty-five). The said amount shall be broken up month-wise. The said amount is raised for the period September, 1999-March 2004. D. The appellant shall finally pay 15% penalty on the amount of service tax to be computed on monthly basis from the total service tax of Rs 48,396 (Forty eight thousand and three hundred and ninety six). The said amount shall be broken up month-wise. The said amount is raised for the period September 27, 2002 to May 10, 2004. 88. Since the appellant has voluntarily registered itself under the Central Excise Act after the search and seizure operation conducted by the revenue authority, the court has leaned in favour of a reduction of penalty. The conduct of the revenue authority in not imme....