The assessee was printing PAN cards for the Income Tax Department, Government of India. Service tax was paid on such activity. Sales tax authorities held that it is a works contract liable to VAT. The Tribunal, examining the subject, held that the order passed by the Deputy Commissioner of Sales Tax was non-speaking one and remanded the matter back for examining the claim on merits.
FULL TEXT OF THE JUDGMENT/ORDER OF MAHARASHTRA SALES TAX TRIBUNAL AT MUMBAI
These are appeals filed against orders passed by the Deputy Commissioner of Sales Tax (Appeal), Nodal Div-4, Mumbai dated 11/05/2018 for the period F.Y.2015-2016 under the Maharashtra Value Added Tax Act, 2002 (‘The MVAT Act’) and under the Central Sales Tax Act, 1956 (‘The CST Act’) respectively.
2. The brief facts giving rise to these appeals are as under :-
2.1 M/s NSDL e-Governance Infrastructure Limited (hereinafter referred to as the appellant) is a Public Limited Company duly registered under the Companies Act, 1956. It was incorporated to establish the first Central Securities Depository in India under the provisions of Depositories Act, 1996.
2.2 As a Depository, the appellant established a national infrastructure of international standards that handles most of the trading and settlement in dematerialized form in Indian capital market. Over a period, as a Depository, the appellant developed its expertise in maintenance of very large databases driven by Information & Communication Technologies (ICT).
2.3 Subsequently, the Government of India as well as other public authorities engaged appellant as a service provider for providing various e-Governance Services on behalf of the Government. Thus, in addition to the Depository business, the appellant diversified into e-Governance businesses where it acts as service provider to various authorities, Central and State Governments.
2.4 The appellant is engaged in numerous activities involving setting up of IT infrastructure and e-governance projects for central government, state governments as well as other public authorities. Few to be known nationwide are listed herein, (1) setting up of Tax information Network (TIN’), (ii) issuance of Permanent Account Number (‘PAN’) cards, (iii) registered as Registrar with Unique Identification Authority of India (UIDAI’) the authority for Aadhaar, (iv)setting-up and maintenance of Electronic Accounting System in Excise and Service Tax (EASIEST’), (v) setting up and managing National Judicial Reference System (‘NJRS’) etc. (vi) Central Record Keeping for National Pension System (NPS) for Central & State Government, Central & State Autonomous Bodies, Corporates, employers, unorganised sector and Atal pension yojana for economically weaker individuals.
2.5 Pursuant to the Scheme of Arrangement under Section 391 394 of the Companies Act, 1956, sanctioned by the Hon’ble High Court of Judicature at Bombay which became effective on January 4, 2013, the depository business of the appellant was demerged and transferred to a new company and the name of the appellant was changed from National Securities Depository Limited to NSDL eGovernance Infrastructure Ltd. The appellant continued with all other e-governance businesses after demerger of depository undertaking.
2.6 With effect from May 24, 2004, Income Tax Department (ITD’) also engaged the services of appellant for acceptance and processing of applications for allotment of Tax Deduction and Collection Account Number [TAN] and Permanent Account Number [PAN] and printing and issuance of PAN cards to the applicants on behalf of ITD. The appellant undertakes activity of acceptance and processing of PAN applications and printing PAN cards on behalf of the Income Tax Department to the applicants. The same is pursuant to an agreement entered into with the Income Tax Department, Government of India.
2.7 In terms of the above agreement the appellant has been assigned the job of receiving of PAN applications through TINFacilitation Centres/PAN Centres/Online. The data of applications is forwarded to ITD electronically for allotment of PAN/confirmation of changes. PAN is allotted by ITD and updates in PAN database is carried out by ITD. On allotment of PAN/update of data by ITD, the appellant carries out the job of printing and dispatch of PAN card. The database of all information related to PAN is maintained by ITD. Role of the appellant is limited to acceptance and processing of PAN applications and printing and dispatch of PAN Cards to applicants as per the procedure prescribed by ITD. For the same, a fee is collected by the appellant. The said fee is subject to service tax under the provisions of the Finance Act, 1994.
2.8 The appellant, during the period of dispute, was accordingly, registered with the Service Tax department, under taxable head of “Business Auxiliary services” as defined under the Finance Act, 1994 and has been filing service tax returns regularly.
2.9 In as much as the appellant is a service provider and not involved in the sale of goods they have not applied for registration under MVAT. However, the works contract compliances have been done as unregistered dealer. The MVAT registration is taken by the appellant only to complete the bid for tender floated by Maharashtra Sales Tax Department for setting up of the system of VAT and GST which involved supply of IT infrastructure (IT hardware networking components and Software). Also, in certain instances IT scrap is sold by the appellant on which VAT is applicable. In order to fulfil the bidding for various IT enabled e-Governance Projects, appellant got registered under Maharashtra Sales Tax Department (MSTD’) with Registration No.27930996451V.
2.10 The background of the case is that, the appellant had initiated correspondence with the Joint Commissioner of Sales Tax (BA) IV with respect to refund of Works Contract Tax pertaining to contractor Sterling Wilson Pvt. Ltd. engaged for the construction of Tier-IV Data Centre at Bangalore. Since the contractor was also registered under Karnataka VAT, where WCT is not required to be deducted by Non-Govt Organisations, the appellant had requested for refund of an amount of Rs.13,35,000 which was deducted as works contract Tax from invoice of the abovesaid contractor and deposited vide challan 020806211908201513948 dated 19.08.2015 and challan no.028062106211711201532032 dated 17.11.2015.
2.11 Thereafter a revised return dated May 26, 2016 and form 501 dated 14.06.2016 was submitted for processing application for refund for an amount of Rs.13,35,000/-. However, instead of appreciating the refund application, during the assessment process the Sales Tax Officer raised the issue of applying MVAT on PAN Services which was entirely different business comprising provision of services.
2.12 However, without considering any submissions made by the appellant, the Sales Tax officer, (C-847), Nodal Division-IV, Mumbai, raised the issue of MVAT on the PAN card business of the appellant without considering the nature and scope of operation of PAN services of the appellant, and unilaterally without seeking any clarification from the appellant, concluded that income from PAN Services of appellant is income from manufacturing and sale of the PAN cards and arbitrarily picked up figures from records produced as sales turnover, which was considered for levy of the tax liability. Thereafter, the AO without issuing any notice/affording any reasonable opportunity of being heard in the matter as aforesaid proceeded to issue Assessment Order taxing the whole PAN revenue and other incomes (even those which do not form a part of PAN business). Vide assessment Order No. ASO/MUM-VAT-C847/1718/9182386 dated 05.04.2017 the Ld. AO raised demand of Rs.22,60,25,562.83/- under provisions of MVAT. The same was followed by the Notice of Demand u/s 32 of the MVAT Act. 2.13 On 12.07.2018 the appellant filed an appeal before the Ld. Deputy Commissioner of Sales Tax (Appeals). However, it is submitted that without considering submissions of the appellant, Ld. DC (Appeals) passed impugned order in Appeal no. DC/E-824/ND4/APP/VAT-619/2017-18/B-685/06.06.2018 Mumbai dated 11.05.2018 and upheld demand in the assessment order. 2.14 Being aggrieved with the impugned order-in-appeal, in so far as it is against the appellants, the appellants have filed the present appeal.
3. Shri.B.B.Raichandani, learned Advocate appeared on behalf of the Appellant and Shri.A.S.Jaiswal, the Deputy Commissioner of Sales Tax appeared on behalf of the respondent/revenue.
ARGUMENTS ON BEHALF OF THE APPELLANT
4. Shi. B.B.Raichandani, Advocate for the appellant submitted that the following grounds are urged without prejudice to one another :-
Grounds of Appeal :-
4.1 The impugned order is a non-speaking one.
The appellants submit that, the impugned order is a nonspeaking one. The Ld. Deputy Commissioner has not at all considered the submissions made by the appellants. The appeal of the appellant has been dismissed without giving any reasoning. No counter to the submissions of the appellant has been poduced by the Ld.DC. The case laws relied upon by the appellants which pointed out the setted position in law have not been considered by the Ld. Deputy Commissioner and Ld. Deputy Commissioner has dismissed the entire appeal and submissions of the appellant by merely making a statement at para 3(c) of the impugned order :-
‘I have inform the dealer during hearing that I am satisified with the assessment order passed by the assessing authoity. In view of this the order passed by the assessing authority is confirmed.’
Therefor it is submitted by the Learned Advocate that the order is non-speaking one liable to be dismissed on the ground being passed in violation principles of natural justice.
The appellant relies on the judgment of the Hon’ble Bombay High Court case Velcord Textiles v. union of India reported in 1999(111) ELT 351 (Bom.) wherein similar view has been taken which is followed by the Hon’ble High Court of Madhya Pradesh in the case Ratlam Wires Private Limited reported 2000 (120)ELT 71 (MP).
The appellants submit that ratio laid down in the aforesaid cases is applicable the present case well. Thus, the impugned order, being violative of settled legal position, is liable to be set aside.
4.2 Impugned Order is vague and cryptic
Shi. B.B.Raichandani, Advocate for the appellant further submitted that a mere declaration that “I am satisfied with the assessment order” is a unilateral decision that the appellant is liable to pay VAT. This is only a bald statement without bringing any evidence on record in support of the same. Ld. DC has failed to even state as to why the assessment order has been correctly passed. No reasoning to the same has been given. There is no reason stated in the order as to what is the activity undertaken by the appellant, or how does the activity amount to “Sale” as defined under section 2 of the MVAT Act, 2002, nor it explains how the appellant is liable as a “dealer” under the provisions of the MVAT Act. Hence, the impugned order being wholly unintelligible and vague needs to be set aside and quashed on this count alone. Reliance is placed on judgment of the Hon’ble Supreme Court in the case of CCE V/S Brindavan Beverages (P) Ltd 2007 (213) ELT 487 (SC). It submitted by Shi. B.B.Raichandani, Advocate for the appellant that if such orders were allowed to be passed, provision of appeal would be rendered infructuous. Every appellant authority can pass such orders. It is further opined that the above statement is not even a decision, let alone finding.
4.3 It is asserted on behalf of the Appellant that there is no ‘Sale’ of Goods. The appellant is providing services with respect to acceptance and processing of PAN application and dispatching PAN card to the applicant.
4.4 It is further contended that in any case, PAN card is not “goods” and hence not exigible to VAT. In this connection the learned Advocate has relied on the following judgments.
(a) Escorts Ltd. Commissioner Central Excise [2015 (319) E.L.T. (406) (S.C.)]
(b) Vikas Sales Corporation V/s Commissioner of Commercial Taxes AIR 1996 SC 2082.
4.5 No jurisdiction/ VAT and Service Tax are mutually exclusive
The learned Lawyer has asserted that the Sales Tax department has no jurisdiction to invoke the provisions of the Maharashtra Value Added Tax Act and the rules made there under in as much as no “sale” of goods is undertaken by the Appellant herein.
Therefore, question of levy of does not arise. For this contention he has relied on the following citations :-
(a) Godfrey Phillips India Ltd. Vs. State of UP-2005 (139) STC 537.
(b) Idea Mobile Communication Ltd vs. CCE-2011 (23) STR 433 (SC)
4.6 The learned lawyer has cited the judgment of the Honorable apex court in the matter of Imagic Creative Pvt. Ltd. vs. Commissioner of Commercial Taxes [2008 (9) S.T.R. 337 (S.C.)] where the Hon. Supreme Court was deciding on a question that whether charges. collected towards the service for evolution of prototype conceptual design on which service tax has been paid could be subjected to levy of Karnataka VAT. The Hon’ble Supreme Court, therein, held:
“28. Payments of service tax as also the VAT are mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as contradistinguished from an indivisible contract. It may consist of different elements providing for attracting different nature of levy. It is, therefore, difficult to hold that in a case of this nature, sales tax would be payable on the value of the entire contract; irrespective of the element of service provided. The approach of the assessing authority, to us, thus, appears to be correct.”
4.7 Without prejudice to the other submissions, the Learned Lawyer Shri Raichandani contended that the PAN related service undertaken by the appellant is a sovereign function.
He asserted that the Income Tax department is engaged in the sovereign function of levy and collection of income tax. Issue of PAN Cards on behalf of the Income Tax department is in relation to such sovereign function and cannot be construed to be any sale or purchase. He has relied on the following citations to support his say.
(a) Bhaktawar Singh Balkishan v. Union of India & Others (1988) 2 SCC 293.
(b) UTI Technology Services Ltd. v. Commr. of Service Tax, Mumbai 2012 (26) S.T.R. 147 (Tri.-Mumbai),
4.8 No double Taxation
The Learned Lawyer Shri Raichandani submitted that the levy of VAT on the services rendered by the appellant on which service tax is being paid would amount to double taxation.
Adani Power Limited V/s Union of India 2015 (330) ELT 883 (Guj)
4.9 Quantification of demand is incorrect
It is also submitted that while arriving at the total value of Rs.308,1564192/- as mentioned at Para 1.2 of the assessment order thereof, the sales tax officer has wrongly included the revenue consideration which the appellants have received with respect to all the above mentioned services.
4.10 Without Prejudice to above, the appellant submits that VAT liability if any must be adjusted from the service tax erroneously paid.
(a) BHEL V/s Union of India 1996 (102) STC 373 and Union of India V/s K. G. Khosla & Co. Ltd 1979 (43) STC 457.
(b) Idea Cellular Limited vs. Union of India reported In 2016 (42) S.T.R. 823 (P & H).
4.11 Continuing the submission, it is asserted that the appellants are not liable to pay Value Added Tax. Hence, there is no question of imposing penalty on the appellants. Similarly, no interest can be demanded from the appellant for it is a well-settled principle of law that where there is no demand of duty, penalty cannot be imposed –
Coolade Beverages Limited (2004) 172 ELT 451 (All).
Secondly, the appellants submit that in any case the matter involves interpretation of the statutory provisions and it is well settled that in a case involving interpretation of law, no penalty can be imposed. The appellants rely upon the following decisions in support of the above submission:
(a) CCE V/S Sarup Tanneries Limited 2005 (184) ELT 217 (T)
(b) CCE V/s Explicit Trading 2004 (169) ELT 205 (T)
(c) Goyal M. G Gases Ltd V/s CCE 2004 (168) ELT 369 (T)
(d) Kanthuria Portfolios V/s CCE 2003 (158) ELT 355 (T)
(e) GoenkaWoolen Mills V/s CCE 2001 (135) ELT 873 (T)
Hindustan Steel Ltd. V/s The State of Orissa (1969 (2) SCC (627),the Hon’ble Apex Court has observed as under: “…… Penalty will not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose penalty will be justified in refusing to impose penalty, where there is a technical or venial breach of the provisions of the act or where the breach flows form the bonafide belief that the offender is not liable to act in the manner prescribed in the statute.”
4.12 In view of the above submissions, on behalf of the appellant it is submitted that no penalty can be imposed on the appellant.
In conclusion in view of the foregoing, it is respectfully prayed that this Hon’ble Tribunal may be pleased to: –
a) set aside the Order-In-Appeal No.DC/E-824/ND-4/APP/ VAT-619/2017-18/B 685/06.06.2017 Mumbai dated 11.05.2018 passed by the Ld. Deputy Commissioner of Sales Tax (Appeals – II), Nodal IV, quash and set aside demand of Rs.25, 00,40,775/-, and allow the present appeal in full with consequential relief to the appellants;
(b) grant a personal hearing/ grant an out of turn hearing; and
(c) pass such other order or orders as may be deemed fit and proper in the facts and circumstances of the case.
ARGUMENTS ON BEHALF OF THE REVENUE
5. Shri. A.S.Jaiswal, Deputy Commissioner of Sales Tax (Legal) for the Respondent on hearing the oral , written submissions made on behalf of the appellant could not offer any arguments to support the one line order passed by the First Appellate Authority. He fairly conceded that there is no objection on behalf of Revenue if the order passed by FAA is quashed and set aside and the matter is remanded back to FAA for fresh order to be passed.
6. We have heard both the parties. We have also perused the appeal order and record. We have come to the conclusion that the First Appellate Authority has dealt with the issues involved in a very casual manner. On behalf of the Appellant the following citation is made to the contention that the appeal order is without reasons and is a non-speaking one.
7. In the case of BLUE STAR LTD V/s. THE COMMISSIONER OF STATE TAX AND ORS., The assessee had preferred petition against the order passed by the Joint Commissioner of State Tax (A) rejecting the assessee’s appeal u/s 26(5) MVAT Act for the AY 2011- 2012.The issue raised in the petition was that order passed by the Joint Commissioner (A) is a non-speaking order and it does not consider the various submissions made by the assessee after having recorded it elaborately in the order. Thus, the assessee sought to invoke High Court’s extraordinary writ jurisdiction and did not avail of the alternative remedy available under the MVAT Act.
8. Deciding the Writ Petition, The Hon’ble High Court of Bombay in Writ Petition No. 1799 of 2019 in the case of BLUE STAR LTD V/s. THE COMMISSIONER OF STATE TAX AND ORS., MS Sanklecha & S C Gupte, JJ, Dt.8th August, 2019, observed as under :-
“……disposal of the appeal without addressing the various issues raised before the authority is not a manner in which a quasi- judicial order should be passed. The necessity for giving reasons to reach a particular conclusion is not only to make the parties concerned aware of the reasons why their appeal has been allowed or disallowed, but also gives an opportunity to the appellate authority to know the reasons which led the lower authority to reach a particular conclusion. Observing thus, the Hon. Bombay High Court found that the order is without any reasons and hence, set aside the order passed u/s 9(2) of the CST Act and restored the assessee’s appeal from the order of the Deputy Commissioner of State Tax to the Joint Commissioner (A) for a fresh consideration and disposal after following the principles of natural justice.”
9. In addition, we have come across the remarks of the Hon. Apex Court in the case of Steel Authority of India V/s STO Rourkela (16VT181(SC) 2008 which are reproduced below :-
“10 Reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same it becomes lifeless. (See Raj Kishore Jha v. State of Bihar 2003 (11) SCC 519).
Even in respect of administrative orders Lord Denning, M.R. in Breen v. Amalgamated Engg. Union (1971) 1 All ER 1148, observed: “The giving of reasons is one of the fundamentals of good administration.” In Alexander Machinery (Dudley) Ltd. v. Crabtree 1974 ICR 120 (NIRC) it was observed: “Failure to give reasons amounts to denial of justice.” “Reasons are live links between the mind of the decision-taker to the controversy in question and the decision or conclusion arrived at.” Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the “inscrutable face of the sphinx”, it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made; in other words, a speaking-out. The “inscrutable face of the sphinx” is ordinarily incongruous with a judicial or quasi-judicial performance.”
11. A bare reading of the order shows complete non- application of mind. As rightly pointed out by learned counsel for the appellant, this is not the way a statutory appeal is to be disposed of. Various important questions of law were raised. Unfortunately, even they were not dealt by the first appellate authority
12. Therefore, we are inclined to set aside the impugned order of the FAA and remand the matter to him for a fresh consideration of the appeal. Needless to say, he has to dispose of the appeal by areasoned order dealing with all the points of challenge highlighted by the appellant.
13. We make it clear that we have not expressed any opinion on the merits of the case. Accordingly, we proceed to pass the following order :-
1. VAT Second Appeal No.981 and 982 of 2018 are allowed.
2. The appeal order passed by the FAA is quashed and set aside.
3. The FAA is directed to pass fresh appeal order de novo dealing with all the issues raised by the appellant and pass speaking and reasoned order with proper application of mind.
Accordingly, abovesaid VAT Second Appeal is disposed of. No order as to costs.