Case Law Details
Arya Logistics Vs C.C.E. & S.T.-Rajkot (CESTAT Ahmedabad)
Introduction: The case of Arya Logistics versus C.C.E. & S.T.-Rajkot has taken the limelight in the context of Service Tax Liability and the applicability of the longer period of limitation. This issue pivots around the knowledge of the revenue department regarding the Service Tax Liability.
Analysis: The heart of the matter is Arya Logistics’ use of Notification No. 1/2006 –ST to pay their service tax, and the subsequent scrutiny by the Commissioner, Central Excise and Customs, Rajkot. While Arya Logistics argues its role as a mere facilitator in transportation, having mistakenly shown gross amounts in ST-3 returns, the Commissioner finds discrepancies in their service tax payments. Critical arguments also arise concerning the limitation period, with the appellant stressing their regular tax payments, return filings, and transparency in transactions.
Legal precedence has been frequently cited by both sides. Arya Logistics emphasizes the absence of suppression or mis-statement on their part, substantiating their claims with various CESTAT rulings. The focus hinges on whether the longer period of limitation is applicable given that all details were transparently shared in the ST-3 returns, and thus, the revenue department had full awareness of the facts.
Conclusion: The crux of the matter, as highlighted by the CESTAT Ahmedabad order, revolves around the limitation period for raising the service tax demand. Given that Arya Logistics had disclosed all pertinent details in their ST-3 returns, and the revenue department had this information, the longer period of limitation may not stand. This emphasizes the significance of transparency in declarations and the bounded responsibility of the revenue department in timely issuing notices when they possess all relevant details.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal has been filed against the impugned Order-In-Original No. RAJ-EXCUS-000-COM-211-13-14 dated 25.03.2014 passed by the Commissioner, Central Excise and Customs, Rajkot.
1.2 Briefly stated facts of the case are that appellant is engaged in the business of container handling services and also procurement of space in the railway rack for their customers. On scrutiny of records, it transpired that the appellant was availing benefit of Notification No. 1/ 2006 –ST and paid the Service tax after availing abatement of 70% under the category of Transport of goods in container by rail. However, at the same time appellant has also availed the Cenvat credit on input services, which was in contravention to the provisions of the Notification ibid. Statements of Shri Chirag P Patel, partner of appellant was recorded. Consequently, it appeared that the Appellant has violated the condition of Notification No. 1/2006 and they are not eligible for availing abatement from the gross value of the service. On scrutiny of documents, it was further revealed that the appellant had received commission income of Rs. 65,873/- for handling railway container rake during the financial year 2010-11. The commission is liable to service tax under the category of “Business Auxiliary Service” under section 65(105)(zzb) of Finance Act, 1994. Accordingly, appellant was issued show cause notice dated 26.02.2013 proposing service tax demand of Rs. 1,79,30,482/- under proviso to Section 73(1) of the Finance Act, 1994 read with Section 68 & 75 of the Finance Act, 1994. It was also proposed for imposition of penalties. The Learned Commissioner, on adjudication, confirmed the demand of Service tax of Rs. 1,68,83,309/- for the period 2008-09 to 2010-2011 under the category of “Transport of Goods by Rail” and Service tax amounting to Rs. 6,785/- on commission amount alongwith interest and penalties. Aggrieved by the said order, the appellant are in appeal before this Tribunal.
2. Shri Abhishek Doshi, Learned Chartered Accountant appearing on behalf of the appellant submits that appellant has acted only as mediator/ facilitator for procurement of space in railway rack on behalf of their clients. Appellant firm has procured space from M/s ETA Engineering Pvt. Ltd. (Authorized agent of Indian Railways) whose charges are unanimous for all parties. The appellant has charged their facilitation /commission charges + transport charges paid to M/s ETA on actual basis to their customers. Therefore appellant is liable for tax only on their facilitation /commission charges. However, appellant has by mistake, shown gross amount (including transportation charges recovered on behalf of M/s ETA) in ST-3 returns and compensated /offset the same by showing Cenvat Credit on amount paid to M/s ETA. The appellant was only required to reflect their facilitation /commission charges and to discharge the service tax liability on the same.
2.1. He argued that appellant has not actually availed any CENVAT credit for the period under consideration. However, the service tax paid on transportation charges paid to M/s ETA has been wrongly reflected as CENVAT in ST-3 returns to neutralize the output service tax wrongly shown in ST-3 returns on transportation charges recovered from the customers.
2.2 He further submits that appellant was required to make payment at full rate of service tax on commission income. However, appellant has wrongly paid the service tax on commission income on abated value of 30%. In this regards, it is stated that demand has been proposed and confirmed under the Transportation of goods by Rail Services and not under the Business Auxiliary Services. It is well settled legal principle that demand for a particular service can be raised under that category of service only and not other categories of services. He placed reliance on following decisions:
- India Guniting Corporation Vs. Commissioner of Central Excise & Service tax, Nagpur – 2017-TIOL-3230-CESTAT –MUM
- M/s Choudhary Stone Crushing Company Vs. Commissioner of Central Excise & Service tax, Jaipur –II- 2019(3)TMI -38-CESTAT, New Delhi
- M/s Gurjar Construction Vs. Commissioner of Central Excise, Jaipur – II- 2019(5) TMI 717 –CESTAT, New Delhi
2.3 He further submits that the appellant has discharged the entire liability on commission income through cash payment only. The total cash payment for entire period is more than service tax liability on commission income.
2.4 He also submits that just method of presentation in ST-3 returns or issue of invoice cannot change the nature of services. The nature of services has been clearly defined in the agreement and it remains of mediator / facilitator for procurement of space in railway rack on behalf of the client. In the present matter Ld. Commissioner has accepted the facts that Appellant are just facilitator /mediator for procurement of space in railway rack and appellant have not provided services of transportation of goods by rail as alleged in show cause notice. The demand has been confirmed by the Ld. Commissioner only on the ground of Rule 5 of the Service tax Determination of Value Rules, 2006.
2.5 Without prejudice, he also submits that the Hon’ble Supreme Court in the case of UOI Vs. Intercontinental Consultants & Technocrats Pvt. Ltd. – [2018] 91 taxmann.com 67 (SC) has held that Rule 5 of Service tax Determination of Value of Rules, 2006 is ultravires to the Section 67 of the Finance Act, 1994. Accordingly, even if the amount is treated as reimbursement of expenses, the same cannot be subject matter of the Service tax.
2.6. Further on limitation he submits that the appellant firm has been registered with department since 2008-09 and has been regular in payment of taxes and filing of returns. Even if it is presumed that service tax is payable, the appellant has disclosed all the facts relating to availment of CENVAT credit in ST-3 returns filed by them. Appellant has neither suppressed any facts nor mis-stated any facts with an intention to evade payment of taxes. It is mentioned in the show cause notice that the appellant has filed ST-3 returns without mentioning category and hence they have willfully suppressed the facts. In this regards , it is submitted that the Appellant has shown category of Transport of Goods by Rail services in all ST-3 returns and the Appellant has also shown the fact that they were availing CENVAT Credit. Along with ST-3 return they also filed annual working sheet. Therefore, the facts related to category of services and availment of CENVAT credit were very well in the knowledge of the department. The show cause notice does not have any evidence to show that the appellant has suppressed any information with an intention to evade payment of service tax. He placed reliance on following decisions:
- Gujarat State Petronet Ltd. Vs. CCE, Ahmedabad [2013] 38 com 67 (Ahmedabad –CESTAT)
- Tinplate Company of India Ltd. Vs. CCE, Jamshedpur [2013] 33 com 16 (Jharkhand)
- Central Warehousing Corporation Vs. Commissioner of Service tax, Ahmedabad [2015]54 com 29 (Ahmedabad –CESTAT)
2.7. He also submits that appellant has been registered and has been regular in payment of taxes and filing returns. Appellant’s firm has bonafide interpretation that they are acting only as facilitator or mediator for the transportation by rail services. The appellant has relied upon the terms of the agreement with parties and concluded that they were engaged in facilitation activities only. Appellant has bonafide belief that they are liable to pay service tax only on commission income and not entire amount including recovery of transportation expenses. Further, they were under impression that they are eligible for abatement also for commission income on rail freight. The whole case has been adjudicated only on account of wrong reporting in ST-3 return. However such wrong reporting was due to bonafide interpretation and there was no evasion of tax. He placed reliance on the following judgment:
- Hari& Co Vs. Commissioner of Central and Service tax -CESTAT Chennai – order dated 24.04.2023
- M/s Aspinwall and Company Ltd. –Final Order No. 40122 of 2023 dated 07.03.2023 –CESTAT, Chennai
2.8. He also submits that if it is presumed that some of the details were not reported in ST-3 returns as alleged in the show cause notice and order-in-original, just omission of such reporting would not amount to suppression, fraud, willful misstatement etc. For invocation of extended period, mere omission or non-disclosure would not be sufficient. There should be any positive action which suggest that there is any fraud, collusion, suppression, willful misstatement etc., with an intent to evade the payment of taxes. The show cause notice and order in original fails to prove any such action on the part of the appellant which suggest fraud, collusion, suppression, willful misstatement etc. with an intent to evade the payment of taxes. The expression „suppression‟ has been used in the section accompanied by very strong words as „fraud‟ or „collusion‟ and therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of taxes. Suppression means failure to disclose full information with intent to evade payment of taxes. When the facts are known to both the parties omission by one party to do what he might have done would not render it suppression. The burden is cast upon the revenue to prove suppression of facts. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that statement was not correct. As far as fraud and collusion are concerned, it is evident that the intent to evade of tax is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word „wilful‟, preceding the words “ mis-statement or suppression of facts” which means with intent to evade tax. Therefore, there cannot be suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the invocation of extended period. Mis-statement of must be wilful. He placed reliance on the following judgments:
- Continental Foundation Joint Venture Vs. Commissioner of Central Excise, Chandigarh-I
- M/s Ceeyes Metal Reclamation P. Ltd. Vs. Commissioner of GS & Central Excise, Coimbatore – Final Order 40411/2019 –CESTAT-Chennai.
- M/s Turret Industrial Security Pvt. Ltd. Vs. Commissioner of Central Excise & Service tax, Jamshedpur – Final Order No. 76385/2019 dtd. 22.10.2019 –CESTAT –Kolkata.
3. The Learned Commissioner Authorized Representative Shri G. Kirupanandan, appearing for the Revenue opposed the contention of the appellant and reiterated the findings made in the impugned order by the Ld. Commissioner.
4. We have carefully considered the submissions made from both the
sides and perused the records. On going through the entire facts of the case we are of the view that the case can be disposed of on the ground of limitation itself.
4.1 We find that the issue involved in this case is regarding the demand of service tax for the period April 2008 to March 2011 on the ground that the appellant has availed in-eligible benefit of notification No. 1/2006-ST dated 01.03.2006 by discharging the service tax liability by availing Cenvat Credit and paid service tax after availing abatement of 70% of the gross amount. We find from the records and copy of ST-3 produced before us that appellant had been filing the ST-3 returns regularly to the Jurisdictional Range officers. It is on record that the appellant shown all the details in ST-3 returns. We find that Appellant has shown the category of Transport of Goods by Rail services in all the ST-3 returns and has also shown the fact that they were availing Cenvat Credit. In the said ST-3 return, admittedly against the “Column A1 –Name of Taxable Service” Appellant have shown name of service as Goods Transport Agency and Transport of Goods in Container by Rail Service. Further in column 5B appellant have shown the details of Cenvat Credit Taken and utilized.
4.2 It becomes clear from the ST-3 return that the fact that appellant were discharging Service tax on Transport of Goods in container by Rail service and availing Cenvat credit and utilized the Cenvat credit was in the knowledge of the Revenue. However show cause notice to the Appellant was issued on 26.02.2013. Inasmuch as the entire information was in the knowledge of the Revenue, the longer period of limitation is not available. In view of these facts the show cause notice should have been issued within the normal period of one year as prescribed under Section 73(1), whereas the show cause notice for the period April 2008 to March 2009 was issued on 26.02.2013 i.e. after prescribed limit of one year. As per the above fact, there is no suppression of fact on the part of the appellant. We also find that it is admitted fact that the appellant have taken service tax registration and are filing the periodical returns regularly. The appellant have maintained proper books of accounts in the normal course of business. It is pertinent to note that the entire case of the department on merit is that since appellant have availed Cenvat Credit, they violated the condition of abatement notification No. 01/2006-ST. As discussed above the facts that availment of Cenvat Credit and payment of Service Tax on the abated value were declared in the ST-3 return. Hence, having all the facts were disclosed to the department, nothing prevented department from issue of show cause notice within normal period of one year. Therefore, the demand raised in the show cause notice is clearly time-barred.
4.3 Since the demand is not sustainable on limitation alone, we refrain from giving finding on merit of the case and the same is left open.
5. We, therefore, set aside the impugned order and allow the appeal of appellant with consequential relief, if any as per law.
(Pronounced in the open court on 17.08.2023)
