Case Law Details
Punjab State Grains Procurement Corporation Ltd. Vs Commissioner of Central Excise And Service Tax (CESTAT Chandigarh)
Introduction: The case between Punjab State Grains Procurement Corporation Ltd. and the Commissioner of Central Excise and Service Tax (CESTAT Chandigarh) revolves around a service tax show-cause notice (SCN) issued to the appellant. The notice alleged non-payment of service tax on transportation services, specifically related to the procurement and supply of paddy to FCI from 2005 to 2008.
Detailed Analysis:
1. The show-cause notice lacked specificity on how transportation charges were calculated, raising concerns about its validity under legal scrutiny.
2. The appellant argued that, being a government corporation, confusion about taxability during that period existed, and suppression of facts with intent to evade payment cannot be alleged.
3. The Department claimed the appellant was aware of its obligations, emphasizing registration under Goods Transport Service. However, the appellant contended that the transporters were not Goods Transport Agencies (GTA), shifting the responsibility to them.
4. The CESTAT Chandigarh order highlighted the absence of concrete evidence in the show-cause notice, rendering it vague and unsubstantiated.
5. The court found the Department failed to establish the appellant’s obligation to discharge duty under Reverse Charge Mechanism, rejecting the show-cause notice.
6. Regarding limitation, the order emphasized that the show-cause notice lacked evidence of intentional evasion, especially considering the confusion prevalent during the relevant period.
Conclusion: On 03/11/2023, the CESTAT Chandigarh pronounced its decision, allowing the appeal. The court upheld that the vague and unsubstantiated show-cause notice couldn’t withstand legal scrutiny. It emphasized the lack of evidence and clarity in the notice and highlighted the confusion prevailing during the relevant period. Additionally, the court ruled that the extended period couldn’t be invoked, benefiting the appellants on the limitation aspect. This case exemplifies the importance of concrete evidence and legal clarity in service tax disputes.
The appellants, M/s Punjab State Grains Procurement Corporation Limited, are registered with Service Tax in the category of “Transport of Goods by Road Services”; during the course of the audit of records of the appellants, it was noticed that during the period April 2005 to March 2008, they have incurred expenditure on account of amounts, paid to Rice millers, which included payment towards transportation, from the premises of millers to the godowns of FCI, @Rs.5 per quintal and that they have not discharged service tax on Reverse Charge Mechanism. It was also noticed that there was a difference in the amounts incurred on Transportation Services between the ST-3 Returns and Trial balance. Thus, a show-cause notice dated 13.10.2010 was issued to the appellants seeking to recover service tax amounting to Rs.5,37,036/- along with interest and penalty; the proposal in the show-cause notice dated was confirmed vide OIO dated 31.01.2011. On an appeal filed by the appellants, learned Commissioner (Appeals) vide impugned order dated 24.05.2013 confirmed the duty demanded and dropped the penalties. Hence, this appeal.
2. Shri Sudhir Malhotra assisted by Shri G.S. Dhillon, learned Counsel for the appellant, submits that the appellants are a Corporation under Government of Punjab and have been procuring paddy from the farmers and supplying the same to FCI after getting the same milled by various millers. They paid Rs.15 per quintal to the millers. The millers transported the goods after milling to FCI vide their own trucks. He submits that as the services are not provided by goods transport operators, the obligation to pay service tax does not arise; if at all the same arises, it must be payable by the millers who got the milled rice transported to various godowns of FCI. Learned Counsel further submits that the appellants being a Government Corporation and there being confusion regarding the provisions of law during the relevant time, suppression etc. cannot be alleged and extended period cannot be invoked.
3. Shri Raman Mittal, learned Authorized Representative for the Department, on the other hand submits that the appellants are aware of their obligation to pay the applicable service tax and have registered themselves for payment of service tax under Goods Transport Service under Reverse Charge Mechanism. He also submits that the contention that the individual transporters are not GTA is not substantiated as the sample receipts/ bills submitted by the appellant do not bear the dates or complete details of the transporters; moreover, whatever be the capacity of the goods transport operators, the obligation to pay duty was on the appellants; they have not submitted any other proof including the contract, if any, with the millers to substantiate their claim. He further submits that the facts became known to the Department only after conducting of an audit and therefore, extended period has been rightly invoked.
4. Heard both sides and perused the records of the case. We find that the show-cause notice does not specify as to how the transportation charges have been arrived at for the purpose of show-cause notice. It is seen from the Chart given under Para 2 of the show-cause notice that 33.33% of the payment, @ Rs.15 per quintal made to the millers, has been assumed to be charges towards transportation; no basis for the same has been given. Moreover, the difference between figures indicated in the Trial Balance was compared with the figures given in ST-3 Returns and service tax is sought to be levied on the differential figures. We are of the considered opinion that such a vague and unsubstantiated show-cause notice cannot stand the scrutiny of law. Allegations in the show-cause notice should be based on concrete evidence of the services rendered or availed and the consideration paid or received for the same. In the absence of the same, the allegation will not survive. Moreover, the certificates given by the rice mills have been sought to be discarded during the course of hearing before us stating that the same do not bear date etc. However, no investigation appears to have been done to verify the authenticity or otherwise of such documents. Under these circumstances, we find that Department has not established that the services have been rendered by a taxable service provider and that the appellants are under obligation to discharge duty on Reverse Charge Mechanism.
5. Coming to the issue of limitation, the show-cause notice other than stating that the noticee has suppressed the material facts, from the Department with the intent to evade payment of service tax and that had the matter being not detected by the audit from the records of the noticee taxable value would have escaped assessment, no positive act of omission or commission on the part of the appellants with intent to evade payment of duty has been either mentioned or evidenced or discussed in the show-cause notice or in the impugned order. Under the circumstances, the appellants, moreover, being a Government Corporation cannot be alleged to have suppressed material fact with intent to evade payment of tax. We find that Courts and Tribunal have been consistently holding that in respect of Government Corporations, Companies etc. intent to evade payment of service tax cannot be alleged. Moreover, we find that during the relevant period, there was lot of confusion in the minds of the assessee regarding the taxability of goods transport operators; therefore, we find that extended period cannot be invoked and to that extent, the appellants succeed on limitation.
6. In view of the above, the appeal is allowed.
(Pronounced on 03/11/2023)
