Case Law Details
Guru Shipping & Clearing Pvt Ltd Vs Commissioner of Service Tax (CESTAT Kolkata)
Introduction: In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Kolkata addressed the issue of penalty waiver under Section 80 in the absence of evidence establishing the suppression of facts with the intent to evade tax. The case revolves around M/s Guru Shipping & Clearing Pvt. Ltd., a company engaged in providing Cargo Handling Services and registered under Service Tax. This article provides a detailed analysis of the case, including the background, submissions, and CESTAT’s decision.
Background of the Case: During a scrutiny of service tax-related records for the Financial Year 2009-10, it was discovered that M/s Guru Shipping & Clearing Pvt. Ltd. had neither paid service tax nor filed service tax returns. In response to this, a Show Cause Notice was issued to the company on 20.04.2011, demanding service tax, including Education Cess, totaling Rs. 96,80,867, along with interest and penalty. The Notice led to an adjudication, resulting in an Order-in-Original dated 27.03.2012, confirming service tax of Rs. 1,08,13,836, along with interest and an equal amount imposed as a penalty under Section 78 of the Finance Act, 1994. Dissatisfied with this order, M/s Guru Shipping & Clearing Pvt. Ltd. filed an appeal.
Submissions by the Appellant: In their submissions, the appellant contended that the Show Cause Notice was issued for an amount of Rs. 96,80,867, but the adjudicating authority had exceeded the scope of the Notice by confirming an amount of Rs. 1,08,13,836. They argued that this deviation from the Notice was legally flawed and rendered the impugned order null and void. The appellant cited Section 73(2) of the Finance Act, 1994, which, in their view, did not permit the confirmation of any amount beyond the demand specified in the Notice. To support their argument, they referred to a decision by the Hon’ble Supreme Court in the case of UOI vs. Mohit Minerals (2022(61)GSTL.257 (S.C.)), emphasizing that exceeding the scope of authority invalidates actions taken.
Regarding the merits of the case, the appellant acknowledged the delay in paying service tax and filing returns, attributing it to financial difficulties. They argued that they voluntarily declared a higher tax liability of Rs. 1,08,13,836, compared to the Rs. 96,80,867 demanded in the Notice. The additional amount, according to them, was paid along with interest. They contended that there was no intention to evade service tax, and no allegation of suppression of facts with such intent was made in the Show Cause Notice. Furthermore, they pointed out that they could not avail of the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) due to illness and the passing of one of their working partners. Consequently, they requested a waiver of the penalty under Section 80 of the Finance Act, 1994.
CESTAT’s Decision: CESTAT Kolkata carefully considered the appellant’s arguments and reviewed the case records. It noted that the Notice issued to the appellant specified a demand of Rs. 96,80,867, while the adjudicating authority confirmed an amount of Rs. 1,08,13,836, exceeding the Notice’s scope. CESTAT found merit in the appellant’s contention that Section 73(2) of the Finance Act, 1994, did not permit confirmation of amounts beyond the Notice’s demand. The correct approach, if an excess amount was admitted, would have been to issue a corrigendum to include the additional amount in the Notice before confirmation. Consequently, CESTAT upheld the confirmation of service tax at Rs. 96,80,867, as demanded in the Notice.
The primary point of contention was the penalty imposed under Section 78 of the Finance Act, 1994, which equaled the service tax amount. The appellant argued that there was no intent to evade tax, as they had voluntarily declared a higher tax liability and paid it along with interest. They also highlighted the absence of allegations of suppression of facts in the Show Cause Notice. CESTAT agreed with the appellant’s position, stating that no evidence had been presented to establish suppression of facts with an intent to evade tax. Therefore, CESTAT invoked the provisions of Section 80 of the Finance Act, 1994, and waived the penalty.
Conclusion: In this case involving M/s Guru Shipping & Clearing Pvt. Ltd. and the Commissioner of Service Tax, CESTAT Kolkata upheld the demand for service tax at Rs. 96,80,867, as specified in the Show Cause Notice. Notably, CESTAT also waived the penalty imposed under Section 78 due to a lack of evidence establishing the suppression of facts with an intent to evade tax. This decision emphasizes the importance of adhering to the scope of demand specified in a notice and the need for evidence in establishing tax evasion allegations.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The Appellant, M/s Guru Shipping & Clearing Pvt. Ltd. are engaged in providing Cargo Handling Service and registered under Service Tax. During the course of scrutiny of service tax related records of the Appellant, it was noticed that during the Financial Year 2009-10, the Appellant has neither paid service tax nor filed service tax returns. Accordingly, Show Cause Notice dated 20.04.2011 was issued to the Appellant demanding service tax including Education Cess, totally amounting to Rs.96,80,867/-along with interest and penalty. The Notice was adjudicated vide Order-in-Original dated 27.03.2012, wherein service tax of Rs.1,08,13,836/- was confirmed along with interest and equal amount of tax was also imposed as penalty under Section 78 of the Finance Act, 1994. Aggrieved against the impugned order, the Appellant has filed the present appeal.
2. In their submissions, the Appellant stated that the show cause notice was issued for an amount of Rs.96,80,867/- whereas the adjudicating authority has gone beyond the Notice and confirmed an amount of Rs.1,08,13,836/-which is bad in law and hence the impugned order is to be construed as non-est. They cited Section 73(2) of the Finance Act, 1994 and contended that the law does not provide confirmation of any amount in excess of the demand made in the Notice. In support of his contention he cited the decision of the Hon’ble Supreme Court in the case of UOI vs Mohit Minerals reported in 2022(61)GSTL.257 (S.C.) , wherein it has been held that when a source of power exists, any power exercised in excess of that power is invalid and without jurisdiction. Accordingly, he argued that this O-i-O is to be construed as non-est and the demand confirmed is liable to be set aside on this ground alone.
3. Regarding the merits of the case, he admitted that there was a delay in payment of service tax and consequently they could not file the return also in time. He contended that the Appellant themselves declared their liability and the CERA Audit party arrived at the demand based on the records submitted by them. Out of the total demand of Rs.96,80,867/- made in the Notice, Rs.86,00,867/- was paid before issue of the Notice. As per their calculation, they themselves admitted a higher liability of Rs.1,08,13,836/- as against the demand of Rs.96,80,867/- made in the Notice. The balance amount was also paid subsequently along with interest. Thus, they contended that there was no intention to evade payment of service tax. The delay in payment was only due to financial crisis. In the show cause notice also there was no allegation of suppression of fact with intention to evade payment of service tax. Further, they stated that as they have paid the entire amount of service tax confirmed along with interest, they could have availed the SVLDRS Scheme, but could not do so due to illness and demise of one of the working partners. Accordingly, they requested for waiver of penalty under Section 80 of the Finance Act, 1994.
4. The Ld.A.R. submitted that the adjudicating Authority confirmed the demand in excess of the demand made in the Notice because the same was admitted by the Appellant and the excess liability was not disputed. He stated that but for the scrutiny of the records of the Appellant by CERA Audit, the service tax payable would have escaped. Thus, he contended that the extended period has been rightly invoked. Accordingly, he prayed for upholding the order passed by the adjudicating authority.
5. Heard both sides and perused the appeal records.
6. We observe that the Notice was issued to the Appellant for a demand of Rs. amount of Rs.96,80,867/-,whereas the adjudicating authority has gone beyond the Notice and confirmed an amount of Rs.1,08,13,836/-. The Appellant cited Section 73(2) of the Finance Act, 1994 and contended that the law does not provide confirmation of any amount in excess of the demand made in the Notice. The Ld.A.R. submitted that the adjudicating Authority has confirmed the demand in excess of the demand made in the Notice because the same was admitted by the Appellant and the excess liability was not disputed. We observe that even if an excess amount of service tax was admitted by the Appellant, the right course of action would be to issue a Corrigendum to the demand and include the excess amount to the Notice before confirmation. Thus, we hold that confirmation of duty in excess of the demand made in the notice is not sustainable. Accordingly, we uphold the confirmation of Service Tax of Rs.96,80,867/- as demanded in the Notice.
7. The Appellant mainly contests the penalty equal to the service tax imposed in the impugned order under Section 78 of the Finance Act, 1994. They contended that there was no intention to evade payment of service tax. They themselves declared their liability and the CERA Audit party arrived at the demand based on the records submitted by them. Out of the total demand of Rs.96,80,867/- made in the Notice, Rs.86,00,867/- was paid before issue of the Notice. As per their calculation, they themselves admitted a higher liability of Rs.1,08,13,836/- as against the demand of Rs.96,80,867/- made in the Notice. The balance amount was also paid subsequently along with interest. The delay in payment was only due to financial crisis. In the show cause notice also there was no allegation of suppression of fact with intention to evade payment of service tax. Further, they stated that as they have paid the entire amount of service tax confirmed along with interest, they could have availed the SVLDRS Scheme, but could not do so due to illness and demise of one of the working partners. Accordingly, they requested for waiver of penalty under Section 80 of the Finance Act, 1994. We find merit in the submissions of the Appellant. We perused the Notice issued to the Appellant. Notice only says that ‘had the scrutiny of records not been conducted by the Audit, the nonpayment of service tax could have gone undetected’. There is no other evidence brought on record to allege suppression of fact on the part of the Appellant with an intention to evade payment of tax. Further, if the Appellant has any intention to evade payment of tax, they could not have declared more tax liability than what was demanded in the Notice, on their own volition. Thus, we hold that there is suppression of fact with an intention to evade payment of tax has been not established in this case. Accordingly, we observe that it is a fit case to invoke the provisions of Section 80 of the Finance Act, 1994 and waive the penalty and we do the same.
8. In view of the above discussion, we uphold the demand of service tax of Rs.96,80,867/- along with interest as demanded in the Notice. Penalty imposed under Section 78 of the Finance Act, 1994 is set aside by invoking the provisions of Section 80 of the Finance Act, 1994. The appeal is disposed of in the above terms.
(Pronounced in the open court on…13.09.2023….)
