In this appeal filed by the assessee, the challenge is against a demand raised on the appellant in terms of Rule 6(3) of the CENVAT Credit Rules 2004 for the period from July to December 2008. During the said period, the appellant (a unit in the domestic tariff area) had cleared their products to SEZ developers/units. During the same period they had also cleared their products to the DTA on payment of duty. The department treated the clearances to SEZ developers/units as clearance of exempted goods and, having found no maintenance of separate accounts in terms of rule 6(1) of the CCR 2004, chose to demand 10% of the sale price (taxes excluded) of the goods cleared to SEZ developers (units) during the above period.
One important question survives for consideration and the same is whether the legal mistake committed by the Department can be corrected to ensure that the offender does not escape punishment under the Central Excise law. There is a clear distinction between a mistake of fact and a mistake of law. The former cannot be rectified at later stage but the latter is rectifiable subject, of course, to legal constraints. In the present case, the show-cause notice was issued to the appellant for the sole purpose of penalizing them for the offence alleged therein.
The appellants have undisputedly undertaken booking of tickets during the period 2004-05 for other service providers who are similarly placed as tour operators. They have received consideration from the said tour operators towards the services rendered. This is clearly towards ‘promotion or marketing of services provided by the client’ which is included under the definition of ‘Business Auxiliary Services’ in terms of section 65(105)(zzb).
The appellants shall be eligible for the credit of rent-a-cab service provided, they are able to satisfy that the rent-a-cab service has been utilized for transport of employees/officials or business related visitors to their factory/office. These submissions have not been specifically made before the authorities below, as rightly pointed by the learned Superintendent (AR). Under these circumstances, I deem it appropriate to set aside the order of the Commissioner (Appeals) and remand the matter to the original authority for fresh consideration after granting opportunity to the assessee to produce additional evidence and granting them reasonable opportunity of hearing. All the issues are kept open.
After considering the submissions, we note that the impugned demand of service tax and education cess is not under any determinate head of taxable service. No breakup of the gross value for different categories mentioned in the impugned order is forthcoming. Apparently, the appropriate taxable service was not identified either in the show-cause notice or in the impugned order. A demand of service tax without correct classification of the taxable service is alien to the scheme of service tax levy.
On a perusal of the definition of franchise given under Section 65(47) under the Finance Act, 1994, we note that it refers to an agreement by which the franchisee is granted representational right to provide service identified with the franchisor whether or not any ‘service mark’ is involved. Prima facie, in the absence of such an agreement, the appellant themselves would have provided the service to the people/State Government in respect of the bridge under the BOT agreement.
Similarly, if the air travels were undertaken by the company’s executives for business purposes, the necessary nexus between the service and the business activities of the appellant does exist. The show-cause notice did not even attempt to make out a case to the contra. Therefore, the case of the appellant is liable to be accepted.
Prima facie, the institute was facilitating campus recruitment of its students by various companies from year to year and collecting charges/fees from such companies as a consideration for the same. Prima facie, this transaction squarely fell within the ambit of the definition of “Manpower Recruitment or Supply Agency’ as amended w.e.f. 1-5-2006. The circular relied on by the learned counsel is of no relevance inasmuch as the question discussed therein was whether an activity which would fall within the scope of the above definition w.e.f. 1-5-2006 could also be held taxable prior to that date. The decision cited by the learned counsel is also prima facie inapplicable inasmuch as that was a decision touching the scope of “Manpower Recruitment [or Supply] Agency Service” prior to 1-5-2006.
It is evident from the above account of the conduct of the two officials that they chose not to take proper steps at appropriate stage for filing the appeal even though they knew that it was their duty to do so. We have also noted that Mr. Prasad is totally remorseless in his affidavit. If the company loses this case it is because of his inaction. We nave already borne on record that we are not satisfied with the explanation offered in the COD application and the accompanying affidavits. Heavy delay of the appeal cannot be said to have been satisfactorily explained, particularly the delay from the first week of April 2012. The COD application is dismissed.
It is not in dispute that the show-cause notice invoked the extended period of limitation on the ground of suppression of facts with intent to avail undue CENVAT credit. The assessee did not choose to contest the demand on the ground of limitation, thereby virtually accepting the allegation of suppression. Their only grievance is against the penalty. The grounds for invoking the extended period of limitation are Indisputably identical to the grounds for invoking the section 11 AC. If that be so, where the demand has not been contested on the ground of limitation, it is not open to the assessee to oppose the section 11 AC penalty. In other words, where mens rea stands accepted in relation to the demand of duty, it has to be accepted by the assessee vis-a-vis the proposal for imposition of penalty under section 11AC. In the result, the penalty is unquestionable in this case.
