Case Law Details
Upshot Utility Services Vs Commissioner of CGST & Central Excise (CESTAT Chennai)
Introduction: The CESTAT Chennai Order in the case between Upshot Utility Services and the Commissioner of Central Goods and Services Tax (CGST) & Central Excise (CE) centers around a critical issue of service tax exemption notifications. The dispute arose from the application of new service tax exemption rules that replaced previous ones in relation to services rendered to Special Economic Zone (SEZ) units. This article delves into the legal proceedings, arguments presented, and the final order passed by CESTAT.
Analysis:
1. The Dispute: Upshot Utility Services, registered for providing Manpower Recruitment Agency Services, had availed exemption under Notification No. 4/2004-ST but was liable to pay service tax following the supersession by Notification No. 9/2009-ST. The difference led to a short-paid service tax demand.
2. Appellant’s Arguments: The appellant contended that the service rendered to SEZ is still exempted under the amended Notification, the demand is barred by Limitation, and the penalty is not sustainable.
3. Respondent’s Stance: The department upheld the earlier findings and supported the impugned order.
4. Tribunal’s Findings: The Tribunal agreed with the replacement of the old notification, asserting that exemption under the new notification is by way of a refund and subject to conditions. The Tribunal also considered the appellant’s plea regarding time bar and penalty, deciding to remand the time-bar issue to the Original Authority and setting aside the penalty.
Conclusion – Upshot: The CESTAT Chennai Order elucidates the statutory interpretation of notifications and the proper application of service tax exemptions. While upholding the demand for duty and interest, the Tribunal set aside the penalty and remanded the issue of time bar. The case reinforces the legal principles in tax matters and underscores the necessity to align with updated rules and notifications. It further highlights the complexity of service tax exemptions related to SEZ and the importance of compliance with evolving regulatory norms.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This appeal is filed by the appellant against Order in Appeal No. 3/2014 dated 1.1.2014 passed by the Commissioner of Central Excise (Appeals), Chennai.
2. Brief facts of the case are that the appellants who are registered with the Service Tax Department for providing Manpower Recruitment Agency Services had filed half-yearly ST-3 return for the period October 2008 to March 2009 on 24.4.2009 for the aforesaid services. During the scrutiny of the said ST-3 returns, it was found that the appellant had availed the benefit of exemption Notification No. 4/2004-ST dated 31.3.2004 for the services rendered to units located inside the Special Economic Zone (SEZ) for the month of March 2009. However, the aforesaid exemption Notification was superseded by Notification No. 9/2009-ST dated 3.3.2009. Accordingly, all providers providing services to units located inside SEZ were liable to pay appropriate service tax from 3.3.2009. The appellants have availed exemption to an extent of Rs.43,12,932/- from the gross amount received towards the services rendered by them to the units located inside the SEZ and have short-paid service tax demand of Rs.4,44,232/- for the month of March 2009. Hence Show Cause Notice was issued to the appellant proposing to demand the short-paid service tax amount of Rs.4,44,232/- for the month of March 2009 along with appropriate interest and also to impose penalties. After due process of law, the adjudicating authority confirmed the proposals in the Show Cause Notice and demanded an amount of Rs.4,44,232/- towards short-paid service tax demand for the month of March 2009 along with appropriate interest. The adjudicating authority appropriated an amount of Rs.1,65,458/- already paid by the appellant towards service tax demand and Rs.4,772/- towards interest. The adjudicating authority also imposed penalty under section 77 of the Finance Act, 1994. Assailing the aforesaid findings and the order of the adjudicating authority, the appellants preferred appeal before Commissioner (Appeals) who vide the impugned order has upheld the order passed by the adjudicating authority. Hence the appellants are before the Tribunal.
3. No cross-objections have been filed by the respondent department.
4. The learned counsel Shri T. Ramesh appeared for the appellant and learned AR Shri Harinder Singh Pal, Assistant Commissioner for the department.
5. The learned counsel for the appellant submitted that even after the amendment to the Notification 4 of 2004-ST, the Service rendered to SEZ is exempted from any levy of Service Tax as per the amended Notification 9 of 2009-ST. The main portion of the Notification exempts the levy itself and proviso only contemplates that if tax or duty is paid, the exemption is available in the form of refund. The above said submission is supported by the Clause 3 of the Notification, 9 of 2009-ST, dated, 03.03.2009. He further stated that the demand is barred by Limitation. Though the show cause notice was dated, 11.09.2009. the same was received by the appellant on 04.05.2010. It is well settled that the date of service of the show cause notice is the determining factor to compute the period of limitation to issue show cause notice under Service Tax Provisions (Finance Act, 1994). The Commissioner (Appeals), has rendered an erroneous finding in this regard. Though the Appellant’s plea regarding the date of receipt of the show cause notice on 04.05.2010 only, was recorded at paragraph 3(b) of the impugned order, at Paragraph 7 of the impugned order, the Commissioner (Appeals) recorded the finding regarding receipt of the Order In original. The department has not produced any evidence to show that the appellant had received the show cause notice immediately after, 11.09.2009 or within 1 year from the disputed period. The appellant also placed reliance on the decision of Hon’ble Tribunal in the case of Krisons Electronic Systems Ltd., Vs. CC, reported in 1996 (87) ELT, 514 (Tri) to submit that the imposition of the penalty in this case is not sustainable. The issue involved in the present case is regarding the interpretation of the exemption notification. Further, even assuming without admitting that the exemption can be availed only by way of refund, the appellant is otherwise eligible for the exemption. Therefore, the appellant was under the bona fide belief that the Appellant was entitled for the exemption during the disputed period as well and appellant need not pay any Service Tax as per notification 4 of 2004 read with Notification 9 of 2009-ST. There is no intention to evade payment of tax warranting exorbitant penalty. Without prejudice to the above, the appellant is entitled for the Cum-Tax benefit. He prayed that the impugned order be set aside.
6. The learned AR Shri Harinder Singh Pal supported the findings in the impugned order.
7. Heard both sides. We find that Notification No. 9/2009-ST dated 3 March 2009 supersedes the older notification No.4/2004 by providing for exemption from the levy of service tax in respect of the taxable services rendered to SEZ Developers and SEZ Units by way of a refund. Notification 9/2009 has in a change of policy modified the earlier procedure of automatic exemption from payment of service tax provided in relation to the authorised operations in a SEZ under the SEZ Act. Exemption of service tax under the new notification is by way of a refund and is subject to the various conditions enumerated therein. The appellant is of the view that the main portion of the Notification exempts the levy itself and that the ‘proviso’ contemplates that even if tax or duty is paid, the exemption is available in the form of Refund. This is not a proper reading of the notification. The exemption provided by the notification is circumscribed by the proviso. There is no scope for intendment. Plain words of the notification must be given meaning to. It cannot be read disjointedly in different parts. In Commissioner of Central Excise, Chandigarh vs. Bhalla Enterprises [2004 (173) ELT 225 (SC)], it was held;
“The basic rule in interpretation of any statutory provision is that the plain words of the statute must be given effect to”
The same basic rule of interpretation applies to a notification too. It is within the remit of Government to change a policy keeping in view the economic conditions, financial constraints and many other administrative and other attending circumstances. Hence when an exemption of service tax is made under a new notification which replaces an old notification, the grant of exemption/ refund is subject to the various conditions enumerated therein. The contention of the appellant is hence devoid of merit.
8. The second plea of the appellant is that though the show cause notice was dated, 11.09.2009. the same was received only on 04.05.2010. They have not taken up the issue of time bar of the SCN before the Original Authority. In fact, they did not attend the personal hearing given by him. We find that the impugned order also only examines the date of receipt of OIO, which is not relevant to determine the question of time bar. Hence this matter which was not brought for consideration to the Original Authority by the appellant needs to be examined by him along with the available evidence.
9. As regards the imposition of penalty, we find that the appellant was earlier availing exemption under Notification No. 4/2004-ST dated 31.3.2004 which got superseded by Notification No. 9/2009-ST dated 3.3.2009. The exemption availed was reflected in the ST-3 returns and the demand is also only for the period of March 2009. The short-payment was noticed during the scrutiny of the ST-3 returns and was a genuine mistake. Hence no penalty is imposable in this case.
10. Having regard to the facts as discussed, we find that the demand of duty and interest made in the impugned order is as per law. We have also set aside the penalty for reasons stated. However, with regard to the issue of time bar as per the normal time limit i.e. the matter regarding the receipt of Show Cause Notice by the appellant within normal time or whether time-barred alone is remanded to the Original Authority to be decided after giving sufficient opportunity to the appellant to state his case both in writing and orally as per law. The impugned order is modified accordingly. The appeal is disposed of on the above terms.
(Pronounced in open court on 10.08.2023)
