IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.ST/11639/2014-DB
Arising out of: OIO No.RAJ-EXCUS-000-COM-182-13-14, dt.31.01.2014
Passed by: Commissioner of Central Excise & Customs, Rajkot
For approval and signature:
Mr.M.V. Ravindran, Hon ble Member (Judicial)
Mr. H.K. Thakur, Hon ble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4.Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s C.J. Shah & Co.
Respondent:
CCE Rajkot
Represented by:
For Assessee: Shri J.C. Patel, Adv.
For Revenue: Shri S.K. Mall, Addl.Commissioner (AR)
CORAM:
MR.M.V. RAVINDRAN, HON BLE MEMBER (JUDICIAL)
MR. H.K. THAKUR, HON BLE MEMBER (TECHNICAL)
Date of Hearing:09.07.14
Date of Decision:31.07.14
Order No. A/11433 / 2014, dt.31.07.2014
Per: M.V. Ravindran
1. This appeal is against order of confirmation of demand for service tax under the category of Business Auxiliary service, interest thereon and imposition of penalties on the Appellants.
2. The facts leading to the present appeal are as follows.
3. The Appellants are engaged in the business of importing and selling Bulk Solvents and Chemicals. Apart from undertaking sales of the imported goods after clearance from customs, the Appellants also effect sales of the imported goods which on import are warehoused in customs bonded warehouse and which are sold by way of transfer of ownership while in the customs bonded warehouse. The present appeal relates to transactions in respect of the warehoused goods which were sold by the Appellants to traders, while the goods were in customs bonded warehouse.
4. The purchasers to whom the goods are sold while in the customs bonded warehouse, place purchase orders on the Appellants indicating therein the quantity and the price or rate at which the goods are agreed to be purchased. For effecting the imports of the goods, the Appellants incur various expenses towards service provided by various service providers to the Appellants such as expenses towards Banking and L/C (letter of credit) charges, wharfage, surveyor s fees, etc. The Appellants while raising the invoices on the purchasers, split the price mentioned in the purchaser orders and issue a separate debit note towards such expenses incurred by the Appellants. To take an illustrative transaction which is at Exhibit A to the Appeal, the Appellants imported a consignment of 286.415 M.Tons of Methyl Ethyl Ketone in May 2008 and filed warehousing bill of entry no.243376 dated 29-5-2008. While the goods were in warehouse, the Appellants sold 16 M.tons out of the said goods to R.A.Nariman & Co P. Ltd who cleared the said 16 M.tons by filing ex-bond bill of entry. The said purchaser, R.A.Nariman & Co. P. Ltd had placed purchase order dated 14-6-2008 on the Appellants, as per which the goods were agreed to be purchased at the rate of Rs.87.50 per kg. . While raising the Invoice, the Appellants split the price into two viz.Rs.9,34,597/- and Rs.3,88,859/- and issued a separate debit note for the amount of Rs.3,88,859/- towards expenses incurred by the Appellants for Banking, L/C charges etc. In other words the said expenses were factored in the said rate of Rs.87.50 per kg and a separate debit note was issued by the Appellants for the same.
5. It is in respect of the said debit notes raised by the Appellants towards the expenses of services such as Banking, L/C, Wharfage, Survey, etc that the department has raised a demand for service tax against the Appellants under the category of Business Auxiliary service under clause (iv) of Section 65 (19) of the Finance Act 1994. It is the case of the department that the Appellants have procured the said services which are inputs for their clients and have thus rendered Business auxiliary service within the meaning of clause (iv) of Section 65 (19) of the Finance Act 1994 which reads as follows:
Business auxiliary service means any service in relation to:
(i) .
(ii) ….
(iii) …
(iv) Procurement of goods or services which are inputs for the client
Explanation-For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, inputs means all goods or services intended for use by the client."
7. Show cause notice dated 18-4-2013 was issued to the Appellants demanding service tax under the category of business auxiliary service on the amounts of the aforesaid debit notes for the period 1-10-2007 to 5-1-2012 by invoking the extended period of limitation of five years prescribed in the Proviso to Section 73 (1) of the Finance Act 1994. The same was contested by the Appellants on the plea of limitation as well as on merits. The Commissioner after considering the reply of the Appellants and after granting personal hearing to the Appellants passed his Order which is impugned in the present appeal.
8. On behalf of the Appellants, Ld. Counsel submits that the Commissioner erred in applying the larger period of limitation. It is submitted that the Director General of Central Excise (DGCEI) had in November 2009 called upon the Appellants to submit copies of their commercial invoices for the period October 2005 to September 2009 while investigating an inquiry to ascertain facts regarding discharge of Service tax payment initiated against the Appellants. Further in June 2010 the DGCEI also called upon the Appellant to submit Invoice details as well as details in respect of extra charges including charges recovered through debit notes as well as party wise ledger accounts and balance sheets for the period April 2005 to March 2010 in respect of the inquiry regarding service tax. All such documents were submitted to DGCEI who after examining the same, by letter dated 31-8-2010 informed the Appellants that the Additional Director General had ordered closure of the inquiries and the Appellants were accordingly requested to collect from the office of the DGCEI all the records and documents submitted for the inquiry. It is contended that having examined the documents and ascertained the facts and having come to the conclusion that there was no case for demand of service tax and having ordered closure of the inquiry in the year 2010, it is not open to the department in the year 2013 to issue a Show cause notice alleging wilful suppression or mis-statement of facts merely because of change of view on the part of DGCEI. It is further submitted that the Service tax and central excise audit department had from time to time audited the Appellants records for the periods 2004-05 to 2009-10 and at no point of time it was contended that the Appellants were rendering business auxiliary service and in view of such audits undertaken from time to time there cannot be any scope for holding that there was wilful-suppression or mis-statement of facts by the Appellants. On merits, it was submitted that the transactions between the Appellants and the purchasers of the goods in the custom bonded warehouse were one of sale and purchase and merely because the Appellants gave a break-up of the price to separately show the expenses incurred by the Appellants towards banking, L/C charges etc, it cannot mean that the Appellants had rendered business auxiliary service. The representatives of the buyers-traders such as Mansi Chemicals, Noble Resourcesand Trading India P. Ltd and Chemtrade Overseas P. Ltd whose statements had been recorded by the department had in their statements stated that they had purchased chemicals from the Appellants and that the debit notes raised by the Appellants for part of the agreed rate were towards reimbursement of expenses such banking. L/C charges incurred by the Appellants. It was submitted that where the Appellants have rendered service to the buyers for storage of the buyers goods after sale of the goods, the Appellants have paid service tax which is not in dispute and which is also apparent from the statements of the buyers. It was submitted that as clarified by the Central Board of Excise and Customs in para 18.2 of its circular No.80/10/2004-ST dated 17-9-2004, rendering of the service of business auxiliary of procuring services which are inputs for client, contemplates relation of agency as per which the agent procures on behalf of the principal, services which are inputs for the principal. In the present case the transactions between the Appellants and the buyers were on principal to principal basis and there was no agency and the various service providers like the Bank and Port had rendered the services to the Appellants as principals and not as agents for and on behalf of the buyers. It was further submitted that assuming while denying that the Appellants had rendered any service, the debit notes were towards reimbursement of expenses incurred by the Appellants and as held by the Hon ble Delhi High Court in the case of Intercontinental Consultants & Technocrats P. Ltd v UOI 2013 (29) STR 9 service tax cannot be levied on expenses incurred by the service provider.
9. On the other hand it is submitted by Ld. A.R. on behalf of the department, that although the show cause notice was issued on 18-4-2013 it is for the period which is within five years i.e. October 2007 to January 2012 and hence the notice is not barred by time. It is submitted that merely because after holding the inquiry in 2009-10 the DGCEI ordered closure of the same and returned the documents to the Appellants, it would not mean that the DGCEI could not have issued the Notice in 2013 invoking the larger period of limitation. It is further submitted that merely because the Appellants records were audited the same cannot mean that larger period cannot be invoked. It was submitted that in respect of transactions with manufacturers, the Appellants had been paying service tax and reference in this behalf was made to an agreement dated 5-8-2010 (page 121 of the Appeal) made with one such manufacturer viz. Aquapharm Chemicals P. Ltd. as per which the Appellants had been appointed to perform various acts on behalf of the manufacturer and for which the Appellants were paying service tax. It was therefore submitted that service tax was also payable on the debit notes raised on purchasers who were traders. On the question of interpreting the nature of the transactions with the traders, reference was made to para 48 of the judgment of the Apex Court in the case of Bharat Sanchar Nigam Limited v UOI 2006 (2) STR 161 (SC) in which it is held that the seller and purchaser would have to be ad idem as to the subject matter of sale or purchase and the Court has to arrive at the conclusion as to what the parties had intended when they contracted and in arriving at a conclusion the Court would have to approach the matter from the point of view of a reasonable person of average intelligence.
10. We have considered the submissions made by both sides and perused the records.
11. We find that the Notice is issued on 18-4-2013 and demands service tax for the period 1-10-2007 to 5-1-2012. The same is therefore beyond the normal period of limitation of eighteen months prescribed in Section 73(1) of the Finance Act 1994. The question which arises for consideration is whether the larger period of limitation prescribed in the Proviso to Section 73 (1) is attracted in the present case. The said proviso applies in cases of fraud, collusion, wilful mis-statement or suppression of facts or contravention of the Act or Rules with an intent to evade payment of tax. It has been consistently laid down by the Hon ble Apex Court that to attract the said larger period of limitation of five years there must be some positive and deliberate act of concealment of facts with an intent to evade payment of tax and mere inaction or failure on the part of the assesse would not justify invoking of larger period of limitation. Reference can gainfully be made in this behalf to the decisions of the Hon ble Apex Court in the case of Collector of Central Excise v Chemphar Drugs and Liniments- 1989 (40) ELT 276 and Pushpam Pharmaceuticals Company v Collector of Central Excise- 1995 (78) ELT 401. In the present case the Appellants records have been subjected to scrutiny by the department from time to time. It is not in dispute that as many as four audits have been conducted by the department covering the period 1-10-2007 to 5-1-2012. Apart from such audits, the Director General of Central Excise Intelligence (DGCEI) had in November 2009 called upon the Appellants to submit copies of their commercial invoices for the period October 2005 to September 2009 on an inquiry to ascertain facts regarding Service tax, was initiated against the Appellants. Further in June 2010 the DGCEI also called upon the Appellants to submit Invoice details as well as details in respect of extra charges including charges recovered through debit notes as well as party wise ledger accounts and balance sheets for the period April 2005 to March 2010 in respect of the inquiry regarding service tax. All such documents were submitted to DGCEI who after examining the same, by letter dated 31-8-2010 informed the Appellants that the Additional Director General had ordered closure of the inquiries and the Appellants were accordingly asked to collect from the office of the DGCEI all the records and documents submitted for the inquiry. In these circumstances, in our view there is no scope for invoking the larger period of limitation. The DGCEI having examined the documents and ascertained the facts and having come to the conclusion that there was no case for demand of service tax and having ordered closure of the inquiry in the year 2010, it cannot be held that there was cause for invoking the larger period of limitation by issuing a Notice in the year 2013. Where the documents were examined and a view was formed in 2010 that there is no case for demanding service tax and accordingly closure of inquiry was ordered, merely because the authorities subsequently change their view that does not justify invoking the larger period of limitation. It has been consistently held that a subsequent change of view by the authorities would not justify invoking the larger period of limitation. Reference can usefully be made in this behalf to the decisions in Jolly Electrical Industries v Commissioner of Customs- 2004 (174) ELT 460 (Tri-Mumbai), Gujarat Petrosynthese Ltd v CCE -1998 (102) ELT 293. When the DGCEI itself after examining the documents formed the opinion that there was no liability to service tax and ordered closure of inquiry, it cannot be said that the view held by the Appellants about the recovery of expenses by debit notes not being liable to service tax was not a bona fide one. The view entertained by the Appellants was also the view arrived at by the DGCEI when it ordered closure of the inquiry after examining all documents. We find that the Commissioner while dealing with the issue of larger period of limitation, has completely ignored the fact that apart from the Appellants records being audited by the department on as many as four occasions, the DGCEI itself had after examining the documents arrived at a conclusion that service tax was not payable and ordered closure of the inquiry. There is no basis for the Commissioner s finding that the Appellants were aware that the expenses recovered under the debit notes from the traders-purchasers were liable to service tax under Business auxiliary service. Merely because after commencement of the DGCEI inquiry in November 2009, the Appellants started paying service tax in respect of such debit notes from December 2009 would not in itself be a justification for invoking the larger period of limitation particularly when after such inquiry the DGCEI itself ordered closure of the inquiry in August 2010. In the circumstances the larger period of limitation is not applicable in the present case and on this ground itself the impugned order is liable to be set aside.
12. Moreover, while allowing the appeal on limitation, in our view, it is noted from the purchase orders placed by the purchasers that the transaction between the parties may be one of sale and purchase. The purchase orders indicated the price at which the goods were sold. Merely because the Appellants while issuing the invoices, split the price and raised debit notes towards the expenses incurred by the Appellants for Banking, L/C charges, etc, it may not convert part of the transaction into one of service.
One of the view may be, even if it were to be held that any service was rendered by the Appellants to the traders-buyers, indisputably the debit notes were towards reimbursement of expenses incurred by the Appellants and as held by the Hon ble Delhi High Court in the case of Intercontinental Consultants & Technocrats P. Ltd v UOI 2013 (29) STR 9 service tax cannot be levied on expenses incurred by the service provider.
13. The ld. AR has contended that the Commissioner has dropped the demand for denial of Cenvat Credit and this part of the Order would not be sustainable if the demand for service tax is set aside. Our findings in respect of notice being barred by time would equally apply in the context of demand for cenvat credit also and hence interference with the Commissioner s order relating to Cenvat credit is not called for.
14. Accordingly, the impugned order demanding service tax and interest and imposing penalties on the Appellants is set aside on the ground of limitation with consequential relief.
(Pronounced in Court on 31.07.2014)
(H.K. Thakur) (M.V. Ravindran)
Member (Technical) Member (Judicial)
WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.ST/11639/2014-DB
Arising out of: OIO No.RAJ-EXCUS-000-COM-182-13-14, dt.31.01.2014
Passed by: Commissioner of Central Excise & Customs, Rajkot
For approval and signature:
Mr.M.V. Ravindran, Hon ble Member (Judicial)
Mr. H.K. Thakur, Hon ble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4.Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s C.J. Shah & Co.
Respondent:
CCE Rajkot
Represented by:
For Assessee: Shri J.C. Patel, Adv.
For Revenue: Shri S.K. Mall, Addl.Commissioner (AR)
CORAM:
MR.M.V. RAVINDRAN, HON BLE MEMBER (JUDICIAL)
MR. H.K. THAKUR, HON BLE MEMBER (TECHNICAL)
Date of Hearing:09.07.14
Date of Decision:31.07.14
Order No. A/11433 / 2014, dt.31.07.2014
Per: M.V. Ravindran
1. This appeal is against order of confirmation of demand for service tax under the category of Business Auxiliary service, interest thereon and imposition of penalties on the Appellants.
2. The facts leading to the present appeal are as follows.
3. The Appellants are engaged in the business of importing and selling Bulk Solvents and Chemicals. Apart from undertaking sales of the imported goods after clearance from customs, the Appellants also effect sales of the imported goods which on import are warehoused in customs bonded warehouse and which are sold by way of transfer of ownership while in the customs bonded warehouse. The present appeal relates to transactions in respect of the warehoused goods which were sold by the Appellants to traders, while the goods were in customs bonded warehouse.
4. The purchasers to whom the goods are sold while in the customs bonded warehouse, place purchase orders on the Appellants indicating therein the quantity and the price or rate at which the goods are agreed to be purchased. For effecting the imports of the goods, the Appellants incur various expenses towards service provided by various service providers to the Appellants such as expenses towards Banking and L/C (letter of credit) charges, wharfage, surveyor s fees, etc. The Appellants while raising the invoices on the purchasers, split the price mentioned in the purchaser orders and issue a separate debit note towards such expenses incurred by the Appellants. To take an illustrative transaction which is at Exhibit A to the Appeal, the Appellants imported a consignment of 286.415 M.Tons of Methyl Ethyl Ketone in May 2008 and filed warehousing bill of entry no.243376 dated 29-5-2008. While the goods were in warehouse, the Appellants sold 16 M.tons out of the said goods to R.A.Nariman & Co P. Ltd who cleared the said 16 M.tons by filing ex-bond bill of entry. The said purchaser, R.A.Nariman & Co. P. Ltd had placed purchase order dated 14-6-2008 on the Appellants, as per which the goods were agreed to be purchased at the rate of Rs.87.50 per kg. . While raising the Invoice, the Appellants split the price into two viz.Rs.9,34,597/- and Rs.3,88,859/- and issued a separate debit note for the amount of Rs.3,88,859/- towards expenses incurred by the Appellants for Banking, L/C charges etc. In other words the said expenses were factored in the said rate of Rs.87.50 per kg and a separate debit note was issued by the Appellants for the same.
5. It is in respect of the said debit notes raised by the Appellants towards the expenses of services such as Banking, L/C, Wharfage, Survey, etc that the department has raised a demand for service tax against the Appellants under the category of Business Auxiliary service under clause (iv) of Section 65 (19) of the Finance Act 1994. It is the case of the department that the Appellants have procured the said services which are inputs for their clients and have thus rendered Business auxiliary service within the meaning of clause (iv) of Section 65 (19) of the Finance Act 1994 which reads as follows:
Business auxiliary service means any service in relation to:
(i) .
(ii) ….
(iii) …
(iv) Procurement of goods or services which are inputs for the client
Explanation-For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, inputs means all goods or services intended for use by the client."
7. Show cause notice dated 18-4-2013 was issued to the Appellants demanding service tax under the category of business auxiliary service on the amounts of the aforesaid debit notes for the period 1-10-2007 to 5-1-2012 by invoking the extended period of limitation of five years prescribed in the Proviso to Section 73 (1) of the Finance Act 1994. The same was contested by the Appellants on the plea of limitation as well as on merits. The Commissioner after considering the reply of the Appellants and after granting personal hearing to the Appellants passed his Order which is impugned in the present appeal.
8. On behalf of the Appellants, Ld. Counsel submits that the Commissioner erred in applying the larger period of limitation. It is submitted that the Director General of Central Excise (DGCEI) had in November 2009 called upon the Appellants to submit copies of their commercial invoices for the period October 2005 to September 2009 while investigating an inquiry to ascertain facts regarding discharge of Service tax payment initiated against the Appellants. Further in June 2010 the DGCEI also called upon the Appellant to submit Invoice details as well as details in respect of extra charges including charges recovered through debit notes as well as party wise ledger accounts and balance sheets for the period April 2005 to March 2010 in respect of the inquiry regarding service tax. All such documents were submitted to DGCEI who after examining the same, by letter dated 31-8-2010 informed the Appellants that the Additional Director General had ordered closure of the inquiries and the Appellants were accordingly requested to collect from the office of the DGCEI all the records and documents submitted for the inquiry. It is contended that having examined the documents and ascertained the facts and having come to the conclusion that there was no case for demand of service tax and having ordered closure of the inquiry in the year 2010, it is not open to the department in the year 2013 to issue a Show cause notice alleging wilful suppression or mis-statement of facts merely because of change of view on the part of DGCEI. It is further submitted that the Service tax and central excise audit department had from time to time audited the Appellants records for the periods 2004-05 to 2009-10 and at no point of time it was contended that the Appellants were rendering business auxiliary service and in view of such audits undertaken from time to time there cannot be any scope for holding that there was wilful-suppression or mis-statement of facts by the Appellants. On merits, it was submitted that the transactions between the Appellants and the purchasers of the goods in the custom bonded warehouse were one of sale and purchase and merely because the Appellants gave a break-up of the price to separately show the expenses incurred by the Appellants towards banking, L/C charges etc, it cannot mean that the Appellants had rendered business auxiliary service. The representatives of the buyers-traders such as Mansi Chemicals, Noble Resourcesand Trading India P. Ltd and Chemtrade Overseas P. Ltd whose statements had been recorded by the department had in their statements stated that they had purchased chemicals from the Appellants and that the debit notes raised by the Appellants for part of the agreed rate were towards reimbursement of expenses such banking. L/C charges incurred by the Appellants. It was submitted that where the Appellants have rendered service to the buyers for storage of the buyers goods after sale of the goods, the Appellants have paid service tax which is not in dispute and which is also apparent from the statements of the buyers. It was submitted that as clarified by the Central Board of Excise and Customs in para 18.2 of its circular No.80/10/2004-ST dated 17-9-2004, rendering of the service of business auxiliary of procuring services which are inputs for client, contemplates relation of agency as per which the agent procures on behalf of the principal, services which are inputs for the principal. In the present case the transactions between the Appellants and the buyers were on principal to principal basis and there was no agency and the various service providers like the Bank and Port had rendered the services to the Appellants as principals and not as agents for and on behalf of the buyers. It was further submitted that assuming while denying that the Appellants had rendered any service, the debit notes were towards reimbursement of expenses incurred by the Appellants and as held by the Hon ble Delhi High Court in the case of Intercontinental Consultants & Technocrats P. Ltd v UOI 2013 (29) STR 9 service tax cannot be levied on expenses incurred by the service provider.
9. On the other hand it is submitted by Ld. A.R. on behalf of the department, that although the show cause notice was issued on 18-4-2013 it is for the period which is within five years i.e. October 2007 to January 2012 and hence the notice is not barred by time. It is submitted that merely because after holding the inquiry in 2009-10 the DGCEI ordered closure of the same and returned the documents to the Appellants, it would not mean that the DGCEI could not have issued the Notice in 2013 invoking the larger period of limitation. It is further submitted that merely because the Appellants records were audited the same cannot mean that larger period cannot be invoked. It was submitted that in respect of transactions with manufacturers, the Appellants had been paying service tax and reference in this behalf was made to an agreement dated 5-8-2010 (page 121 of the Appeal) made with one such manufacturer viz. Aquapharm Chemicals P. Ltd. as per which the Appellants had been appointed to perform various acts on behalf of the manufacturer and for which the Appellants were paying service tax. It was therefore submitted that service tax was also payable on the debit notes raised on purchasers who were traders. On the question of interpreting the nature of the transactions with the traders, reference was made to para 48 of the judgment of the Apex Court in the case of Bharat Sanchar Nigam Limited v UOI 2006 (2) STR 161 (SC) in which it is held that the seller and purchaser would have to be ad idem as to the subject matter of sale or purchase and the Court has to arrive at the conclusion as to what the parties had intended when they contracted and in arriving at a conclusion the Court would have to approach the matter from the point of view of a reasonable person of average intelligence.
10. We have considered the submissions made by both sides and perused the records.
11. We find that the Notice is issued on 18-4-2013 and demands service tax for the period 1-10-2007 to 5-1-2012. The same is therefore beyond the normal period of limitation of eighteen months prescribed in Section 73(1) of the Finance Act 1994. The question which arises for consideration is whether the larger period of limitation prescribed in the Proviso to Section 73 (1) is attracted in the present case. The said proviso applies in cases of fraud, collusion, wilful mis-statement or suppression of facts or contravention of the Act or Rules with an intent to evade payment of tax. It has been consistently laid down by the Hon ble Apex Court that to attract the said larger period of limitation of five years there must be some positive and deliberate act of concealment of facts with an intent to evade payment of tax and mere inaction or failure on the part of the assesse would not justify invoking of larger period of limitation. Reference can gainfully be made in this behalf to the decisions of the Hon ble Apex Court in the case of Collector of Central Excise v Chemphar Drugs and Liniments- 1989 (40) ELT 276 and Pushpam Pharmaceuticals Company v Collector of Central Excise- 1995 (78) ELT 401. In the present case the Appellants records have been subjected to scrutiny by the department from time to time. It is not in dispute that as many as four audits have been conducted by the department covering the period 1-10-2007 to 5-1-2012. Apart from such audits, the Director General of Central Excise Intelligence (DGCEI) had in November 2009 called upon the Appellants to submit copies of their commercial invoices for the period October 2005 to September 2009 on an inquiry to ascertain facts regarding Service tax, was initiated against the Appellants. Further in June 2010 the DGCEI also called upon the Appellants to submit Invoice details as well as details in respect of extra charges including charges recovered through debit notes as well as party wise ledger accounts and balance sheets for the period April 2005 to March 2010 in respect of the inquiry regarding service tax. All such documents were submitted to DGCEI who after examining the same, by letter dated 31-8-2010 informed the Appellants that the Additional Director General had ordered closure of the inquiries and the Appellants were accordingly asked to collect from the office of the DGCEI all the records and documents submitted for the inquiry. In these circumstances, in our view there is no scope for invoking the larger period of limitation. The DGCEI having examined the documents and ascertained the facts and having come to the conclusion that there was no case for demand of service tax and having ordered closure of the inquiry in the year 2010, it cannot be held that there was cause for invoking the larger period of limitation by issuing a Notice in the year 2013. Where the documents were examined and a view was formed in 2010 that there is no case for demanding service tax and accordingly closure of inquiry was ordered, merely because the authorities subsequently change their view that does not justify invoking the larger period of limitation. It has been consistently held that a subsequent change of view by the authorities would not justify invoking the larger period of limitation. Reference can usefully be made in this behalf to the decisions in Jolly Electrical Industries v Commissioner of Customs- 2004 (174) ELT 460 (Tri-Mumbai), Gujarat Petrosynthese Ltd v CCE -1998 (102) ELT 293. When the DGCEI itself after examining the documents formed the opinion that there was no liability to service tax and ordered closure of inquiry, it cannot be said that the view held by the Appellants about the recovery of expenses by debit notes not being liable to service tax was not a bona fide one. The view entertained by the Appellants was also the view arrived at by the DGCEI when it ordered closure of the inquiry after examining all documents. We find that the Commissioner while dealing with the issue of larger period of limitation, has completely ignored the fact that apart from the Appellants records being audited by the department on as many as four occasions, the DGCEI itself had after examining the documents arrived at a conclusion that service tax was not payable and ordered closure of the inquiry. There is no basis for the Commissioner s finding that the Appellants were aware that the expenses recovered under the debit notes from the traders-purchasers were liable to service tax under Business auxiliary service. Merely because after commencement of the DGCEI inquiry in November 2009, the Appellants started paying service tax in respect of such debit notes from December 2009 would not in itself be a justification for invoking the larger period of limitation particularly when after such inquiry the DGCEI itself ordered closure of the inquiry in August 2010. In the circumstances the larger period of limitation is not applicable in the present case and on this ground itself the impugned order is liable to be set aside.
12. Moreover, while allowing the appeal on limitation, in our view, it is noted from the purchase orders placed by the purchasers that the transaction between the parties may be one of sale and purchase. The purchase orders indicated the price at which the goods were sold. Merely because the Appellants while issuing the invoices, split the price and raised debit notes towards the expenses incurred by the Appellants for Banking, L/C charges, etc, it may not convert part of the transaction into one of service.
One of the view may be, even if it were to be held that any service was rendered by the Appellants to the traders-buyers, indisputably the debit notes were towards reimbursement of expenses incurred by the Appellants and as held by the Hon ble Delhi High Court in the case of Intercontinental Consultants & Technocrats P. Ltd v UOI 2013 (29) STR 9 service tax cannot be levied on expenses incurred by the service provider.
13. The ld. AR has contended that the Commissioner has dropped the demand for denial of Cenvat Credit and this part of the Order would not be sustainable if the demand for service tax is set aside. Our findings in respect of notice being barred by time would equally apply in the context of demand for cenvat credit also and hence interference with the Commissioner s order relating to Cenvat credit is not called for.
14. Accordingly, the impugned order demanding service tax and interest and imposing penalties on the Appellants is set aside on the ground of limitation with consequential relief.
(Pronounced in Court on 31.07.2014)
(H.K. Thakur) (M.V. Ravindran)
Member (Technical) Member (Judicial)
No comments:
Post a Comment