Case Law Details
HIGH COURT OF GUJARAT
Commissioner of Central Excise & Customs
versus
Patel Vishnubhai Kantilal & Co.
TAX APPEAL NOS. 63 to 73 OF 2006
MAY 3, 2011
JUDGMENT
Harsha Devani, J. – In these appeals under Section 35G of the Central Excise Act, 1944 (the Act), the appellant – Commissioner of Central Excise & Customs, Surat-I has challenged the common order dated 7-4-2005 – Patel Ambalal Hargovanlal & Co. v. CCE [2005] 2 STT 210 (Mum. – CESTAT) passed by the Customs, Excise & Service Tax Appellate Tribunal, West Zonal bench, at Mumbai (the Tribunal).
2. Since common issues are involved in all these appeals and all the appeals arise out of a common order of the Tribunal, the same were taken up for hearing together and are disposed of by this common judgment.
3. While admitting these appeals, this court had vide order dated 14-8-2006 formulated the following substantial question of law :
“Whether the service provided by couriers/angadias for delivery of cash received at one place and handed over at another place is a taxable service covered under the definition of Courier Agency under provisions of Section 65(33) of the Finance Act, 1994?”
4. The assessees are the members of All India Angadia Association and are engaged in providing services for transport of valuable documents like diamond packets and other articles of gold and silver from various branches to their Head Office and from the Head Office to branches, accordingly inter branch transports are effected. Door to door service is also provided whenever and wherever required.
5. Show cause notices came to be issued to members of the association, demanding Service tax under Section 73(a) of the Finance Act, 1994 (hereinafter referred to as “the Act”) for recovery of interest at the appropriate rate under Section 75 of the Act on the amount of demand and for imposing penalty under Sections 76, 77, 78 and 79 of the Act. The show cause notices culminated into an orders-in-original confirming the demand under Section 73(2) read with Section 72 of the Finance Act, 1994 along with interest and penalty.
6. The assessees carried the matter in appeal before the Commissioner (Appeals) who upheld the order-in-original. Being aggrieved, the assessees preferred appeals before the Tribunal, who vide the impugned order dated 7-4-2005, allowed the appeals of the assessees with regard to levy of Service tax on inter-branch transmission of Indian currency being effected on behalf of the clients. Being aggrieved, the appellant has preferred the present appeals challenging the impugned order of the Tribunal to the extent the same holds that the tender of Indian currencies and its transmission and compensatory payment would not be covered by the levy of Service tax under heading “courier agency”.
7. Mr. Gaurang Bhatt, learned Standing Counsel appearing on behalf of the appellant submitted that the respondent assessees are angadias who are engaged in courier/angadia services and are transporting valuable articles and documents from one place to another and paying Service tax in respect of the same. It was submitted that the respondents are also providing services in respect of the cash transactions from one place to another. However, it is claimed that they are not physically transporting the cash from one place to another and the same currency notes are not delivered to the consignee, therefore, they are not covered by the definition of “courier service”. In fact, all the angadias engaged in the service of cash transactions keep sufficient cash at branch level on a particular day to meet the services of cash transaction and only instructions are passed on to the branches for payment/receipt. It was submitted that it is not important that the angadias do not physically transport the cash as it is their internal arrangement. It must be understood that the service receiver has no objection to the above method adopted by the angadias, since the service receiver is usually concerned with the receipt of amount at the destination and he is not interested that the same currency notes, which are delivered by him to the angadias, should be delivered at destination. In case the service receiver, for any reasons, is interested that currency note or notes given by him to the angadia are to be delivered at the destination, the angadia will have no choice but to transport the same to the destination and deliver accordingly. Further, some of the angadias may be involving themselves in the physical transportation of cash, in case they are not able to arrange the amount at destination as is evident from the events cited in the order-in-original.
8. It was submitted that it appears that the word “document” and the word “article” have been used in common parlance and are applicable to any service which a courier agency usually provides or is able to provide for transportation and delivery at the destination. Accordingly, these words also cover cash/currency notes. It was urged that the Tribunal was, therefore, not correct in holding that the tender of Indian currency and its transactions and compensatory payments would not be covered by the levy of Service tax.
9. On the other hand, Mr. Paresh Dave, learned advocate appearing on behalf of the respondent assessees opposed the appeals. Inviting attention to the definition of “courier agency” as defined under Clause (33) of Section 65 of the Finance Act, 1994, it was submitted that the same contemplates door-to-door transportation of time-sensitive documents, goods or articles utilizing the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles. It was submitted that unless the aforesaid ingredients are satisfied, the services rendered by any person would not fall within the definition of “courier agency”. The learned advocate submitted that on a plain reading of the provisions of clause (33) of Section 65 of the Act, it is apparent that the charging event is door-to-door transportation by utilizing the services of a person. Referring to Clause (105) of Section 65 of the Act, which defines “taxable service, it was submitted that the said definition gives another indication that the charging event is door-to-door transportation. Attention was invited to the provisions of Section 66 of the Act, which provides for charging of Service tax, to submit that the levy of tax under sub-clause (f) of Clause (105) of Section 65 of the Act, namely, service provided to any person, by a courier agency in relation to door-to-door transportation of time sensitive documents, goods or articles, is a levy and as such, the charging section has to be construed strictly and that, there was no room for any intendment. It was submitted that in the circumstances, the Tribunal’s conclusion that there is no transportation insofar as the tender of Indian currency is concerned, is the correct construction of the said provisions.
10. In support of his submissions, the learned counsel placed reliance upon the following decisions :
The decision of the Supreme Court in the case of (a) A.V. Fernandez v. State of Kerala AIR 1957 SC 657, was cited for the proposition that in construing fiscal statutes and in determining the liability of a subject to tax, one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law.
The decision of the Supreme Court in the case of (b) Murarilal Mahabir Prasad v. B.R. Vad AIR 1976 SC 313, was cited for the proposition that in a taxing statute one has to look at what is clearly said. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. In other words, there is no equity about a tax in the sense that a provision by which a tax is imposed has to be construed strictly, regardless of the hardship that such a construction may cause either to the treasury or to the taxpayer. If the subject falls squarely within the letter of law he must be taxed, howsoever inequitable the consequences may appear to the judicial mind. If the Revenue seeking to tax cannot bring the subject within the letter of law, the subject is free no matter that such construction may cause serious prejudice to the Revenue.
The decision of the Supreme Court in the case of (c) Mathuram Agrawal v. State of M.P. [1999] 8 SCC 667, was cited for the proposition that the intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act, it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute.
The decision of the Supreme Court in the case of (d) CWT v. Ellis Bridge Gymkhana [1998] 1 SCC 384, was cited for the proposition that the rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all.
11. Lastly, it was submitted that the language of Clause (33) of Section 65 of the Act is clear and unambiguous. For the purpose of falling within the ambit of the said provision, a person should be engaged in door-to-door transportation of time-sensitive documents, goods or articles utilizing the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles. Unless the requirements of the said provision are satisfied, Service tax cannot be levied under the said clause. It was submitted that insofar as the services relating to cash transactions are concerned, physical transportation of cash normally does not occur in angadia services. Under the circumstances, when there is no door-to-door transportation of such cash, the said transactions would not fall within the purview of “courier agency” so as to attract the provisions of the Act and that the interpretation as adopted by the Tribunal being in consonance with the statutory provisions, no interference is warranted by this Court.
12. Courier services were brought within the Service tax net with effect from 1-11-1996 vide Notification No. 6/96-S.T., dated 31-10-1996. The respondent assessees are engaged in providing courier services and are holding Service tax registration.
13. The controversy involved in the present case pertains to the levy of Service tax on commissions retained on facility provided by the assessees for transfer of money. Under this facility, a client can approach any branch and deposit Indian currency in cash or otherwise with the branch, pay the commission, and that amount is thereafter paid to the named recipient at the other branch in the same city or outside, in cash. Thus, the only issue that arises for determination by this court is whether the service provided by couriers/angadias for delivery of cash received at one place and handed over at another place is a taxable service covered under the definition of “courier agency” under provisions of Clause (33) of Section 65 of the Finance Act, 1994?
14. In this regard, it may be germane to refer to the provisions of Clause (33) of Section 65 of the Act, which reads thus :
“courier agency” means any ”(33) person engaged in the door-to-door transportation of time-sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles.”
15. Thus, for a person to fall within the ambit of “courier agency” as defined under Clause (33) of Section 65 of the Act, the following ingredients would be required to be satisfied :
(i) Such person should be engaged in door-to-door transportation;
(ii) the transportation should be of time-sensitive documents, goods or articles;
(iii) such transportation should be carried out by utilising the services of a person, either directly or indirectly;
(iv) the person whose services are so utilised should carry or accompany such documents, goods or articles.
16. On a plain reading of Clause (33) of Section 65 of the Act, it is apparent that the same envisages actual transportation of time-sensitive documents, goods or articles by a person, who utilises the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles. In the facts of the present case, the assessees are handed over cash in the form of Indian currency at the recipient branch, which issues instructions to the delivery branch, which, in turn, makes payment from the corpus available with it. Thus, there is no actual transportation of cash from the recipient branch to the delivery branch. What moves is only instructions to the delivery branch through various methods of communication and not the currency. Thus, there is no transportation of the cash amount as envisaged under Clause (33) of Section 65 nor does any person whose services are utilised by the assessee carry or accompany the cash amount. The ingredients of Clause (33) of Section 65 are, therefore, clearly not satisfied. Under the circumstance, such a service involving receipt of cash at one end and providing cash at the other end, does not involve any transportation of time-sensitive documents, goods or articles and as such, does not fall within the ambit of “courier agency” as defined under Clause (33) of Section 65 of the Act.
17. However, as observed by the Tribunal and admitted by the respondent assessees, in case the cash which is to be delivered at the other end is actually transported from the recipient branch to the delivery branch by a person who either carries or accompanies such cash, the same would fall within the ambit of “courier agency” so as to attract the levy of Service tax.
18. On behalf of the revenue, it has been contended that whether the cash is actually transported or not, the service does amount to transfer of the cash from the recipient branch to the delivery branch and as such, the logical construction of the definition of “courier service” would also include transfer of cash through instructions. It was urged that whether it is the same cash which is transferred or cash is directly given at the delivery point, does not change the nature of the transaction so as to take it out of the purview of “courier agency”.
19. In this regard, it may be relevant to refer to the decisions on which reliance has been placed on behalf of the respondents. In A.V. Fernandez case (supra), the Supreme Court held as follows :
“27. The answer given by the learned counsel for the appellant to the above reasoning was that in fiscal statutes what you have got to look to is not the spirit of the statute but the letter of the law; and if you could not bring a particular tax within the letter of the law, the subject could not be made liable for the same. Our attention was drawn in this connection to the observations of Lord Russell of Killowen in Inland Revenue Commissioners v. Duke of Westminster,
“I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a Court’s view of what it considers the substance of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case.” As Lord Cairns said many years ago in Partington v. Attorney-General : “As I understand the principle of all fiscal legislation it is this: if the person sought to be taxed, comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be.” (Emphasis supplied)
28. This passage was quoted with approval by the Privy Council in the Bank of Chettinad v. Income Tax Commissioner and the Privy Council registered its protest against the suggestion that in revenue cases “the substance of the matter” may be regarded as distinguished from the strict legal position.
It is no doubt, true that in construing fiscal statutes and 29. in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. We must of necessity, therefore, have regard to the actual provisions of the Act and the rules made thereunder before we can come to the conclusion that the appellant was liable to assessment as contended by the Sales Tax Authorities.” (Emphasis supplied)
20. The Supreme Court in Murarilal Mahabir Prasad case (supra), held as follows :
“27. The construction which we have placed on these provisions of the 1953 Act does no violence to the familiar principle which in Cape Brandy Syndicate v. Commissioner of Inland Revenue was expressed thus by Rowlatt, J. :
“In a taxing statute one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
This principle was approved and adopted by this Court in several decisions : (A.V. Fernandez (supra); Provident Investment Co. Ltd. (supra); Ajax Products Ltd. (supra); B.N. Kharwar (supra); Vegetables Products Ltd. (supra)). The principle is variously expressed by saying that in fiscal statutes one must have regard to the letter of the law and not to the spirit of the law, that the subject cannot be taxed by inference or analogy, that in a taxing Act there is no governing principle to look at and one has simply to go on the Act itself to see whether the tax claimed is that which the statute imposes, that while construing taxing Acts it is not the function of the court to give to the words used a strained and unnatural meaning and that the subject can be taxed only if the Revenue satisfies the court that the case falls strictly within the provisions of the law.
28. The principle thus stated has hardly ever been doubted but it is necessary in the application of that principle to remember that though the benefit of an ambiguity in a taxing provision must go to the subject and the taxing provision must receive a strict construction, “that is not the same thing as saying that a taxing provision should not receive a reasonable construction”. If the statute contains a lacuna or a loophole, it is not the function of the court to plug it by a strained construction in reference to the supposed intention of the Legislature. The Legislature must then step in to resolve the ambiguity and so long as it does not do so, the taxpayer will get the benefit of that ambiguity. But, equally, courts ought not to be astute to hunt out ambiguities by an unnatural construction of a taxing section. Whether the statute, even a taxing statute, contains an ambiguity has to be determined by applying normal rules of construction for interpretation of statutes. As observed by Lord Cairns in Pryce v. Monmouthshire Canal & Railway Companies cases which have decided that taxing Acts are to be construed with strictness, and that no payment is to be exacted from the subject which is not clearly and unequivocally required by Act of Parliament to be made, probably meant little more than this, that, inasmuch as there was not any a priori liability in a subject to pay any particular tax, nor any antecedent relationship between the taxpayer and the taxing authority, no reasoning founded upon any supposed relationship of the taxpayer and the taxing authority could be brought to bear upon the construction of the Act and therefore, the taxpayer had a right to stand upon a literal construction of the words used, whatever might be the consequences.
29. The true implication of the principle that a taxing statute must be construed strictly is often misunderstood and the principle is unjustifiably extended beyond the legitimate field of its operation. Indeed, the more well-expressed the principle as in the Cape Brandy case, greater the reluctance to see its limitations. In that famous passage marked by a happy turn of phrase, Rowlatt, J. said, “there is no equity about a tax. There is no presumption as to a tax.” There is no equity about a tax in the sense that a provision by which a tax is imposed has to be construed strictly, regardless of the hardship that such a construction may cause either to the treasury or to the taxpayer. If the subject falls squarely within the letter of law he must be taxed, howsoever inequitable the consequences may appear to the judicial mind. If the Revenue seeking to tax cannot bring the subject within the letter of law, the subject is free no matter that such a construction may cause serious prejudice to the Revenue. In other words, though what is called equitable construction may be admissible in relation to other statutes or other provisions of a taxing statute, such a construction is not admissible in the interpretation of a charging or taxing provision of a taxing statute. Speaking for the Court in CIT v. Ajax Products Ltd., Subba Rao, J., after citing the passage from the judgment of Rowlatt, J. in the Cape Brandy case said : “To put it in other words, the subject is not to be taxed unless the charging provision clearly imposes the obligation”.”
21. In Mathuram Agrawal case (supra), the Supreme Court held thus :
“12. Another question that arises for consideration in this connection is whether sub-section (1) of Section 127A and the proviso to sub-section (2)(b) should be construed together and the annual letting values of all the buildings owned by a person to be taken together for determining the amount to be paid as tax in respect of each building. In our considered view this position cannot be accepted. The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act, it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter.
13. In the case of Bank of Chettinad Ltd. v. CIT the Privy Council quoted with approval the following passage from the opinion of Lord Russell of Killowen in IRC v. Duke of Westminster :
“I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a court’s view of what it considers the substance of the transaction, the court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case. As Lord Cairns said many years ago in Partington v. Attorney General at p. 122 : ‘As I understand the principle of all fiscal legislation, it is this; if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax cannot bring the subject within the letter of the law, the subject is free, however, apparently within the spirit of the law the case might otherwise appear to be”.”
22. The Supreme Court in Ellis Bridge Gymkhana case (supra), held that the rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all.
23. In the facts of the present case, the charging section is Section 66 which provides for charge of Service tax and lays down that there shall be levied a tax at the rate of twelve per cent of the value of taxable services referred to in sub-clause (f) of Clause (105) of Section 65 and collected in such manner as may be prescribed. Sub-clause (f) of Clause (105) of Section 65 of the Act provides that “taxable service” means any service provided or to be provided to any person, by a courier agency in relation to door-to-door transportation of time sensitive documents, goods or articles. Thus, for the purpose of being chargeable to Service tax under Section 66 of the Act, taxable services of the nature provided under Clause (105) of Section 65 would be required to be provided by such person. Insofar as sub-clause (f) of Clause (105) of Section 65 of the Act is concerned, the taxable services should be provided to any person by a courier agency in relation to door-to-door transportation of time sensitive documents, goods or articles. Thus, for the purpose of falling within the ambit of charging section, the taxable service should satisfy the ingredients of sub-clause (f) of Clause (105) of Section 65 of the Act.
24. On a conjoint reading of the definition of “courier agency” as defined under Clause (33) of Section 65 of the Act with sub-clause (f) of Clause (105) of Section 65 of the Act, it is apparent that it is only if a courier agency provides services in relation to door-to-door transportation of time-sensitive documents, goods or articles that the taxable event would take place. In the present case, the service receiver hands over cash in Indian currency at a recipient branch, which transfers instructions to the delivery branch, where payment is made from the corpus available at the delivery branch. Thus, there is no movement of the cash from the recipient branch to the delivery branch. There is no transportation of such cash as contemplated under Clause (33) of Section 65 or sub-clause (f) of Clause (105) of Section 65 of the Act. In the aforesaid premises, the transfer of cash by the assessees in the manner aforesaid, does not fall within the ambit of “courier agency” as envisaged under Clause (33) or “taxable service” as contemplated under Clause (105)(f) of Section 65 of the Act and as such would not be exigible to Service tax.
25. As held by the Supreme Court in Murarilal Mahabir Prasad case (supra), there is no equity about a tax in the sense that a provision by which a tax is imposed has to be construed strictly, regardless of the hardship that such a construction may cause either to the treasury or to the taxpayer. If the subject falls squarely within the letter of law he must be taxed, howsoever inequitable the consequences may appear to the judicial mind. If the Revenue seeking to tax cannot bring the subject within the letter of law, the subject is free no matter that such a construction may cause serious prejudice to the Revenue. As held by the Apex Court in the case of Ellis Bridge Gymkhana case (supra), no one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all. In the present case, insofar as the facility for transfer of money as provided by the assessees is concerned, the same has not been brought within the ambit of charging section by clear words and as such, the assessees cannot be taxed in respect of the same. The view taken by the Tribunal, therefore, is in consonance with the statutory provisions and as such, the Tribunal was justified in holding that the tender of Indian currencies and its transmission and compensatory payment would not be covered by the levy of Service tax under heading “courier agency”.
26. It may also be pertinent to note that insofar as the actual transportation of currency notes is concerned, the Tribunal held that the same would fall within the ambit of “courier agency” as defined under Clause (33) of Section 65 of the Act. Thus, any transaction which involves transportation of time-sensitive documents, goods or articles would fall within the ambit of Clause (33) of Section 65 of the Act.
27. In the light of the aforesaid discussion, the question is, accordingly, answered in the negative, that is, in favour of the assessees and against the revenue. The service provided by couriers/angadias for delivery of cash received at one place and handed over at another place is not a taxable service covered under the definition of “courier agency” under the provisions of clause (33) of Section 65 of the Finance Act, 1994. However, it is clarified that if the very same cash which is provided to the courier/angadia for delivery is transported to the place of delivery, in other words, when there is actual transportation of the cash by a person as envisaged under Clause (33) of Section 65 of the Act, such transaction would attract the provisions of Clause (33) of Section 65 of the Act and would amount to taxable service as defined under Clause (105)(f) of Section 65 of the Act.
28. For the foregoing reasons, the appeals fail and are, accordingly, dismissed with no order as to costs.
