M/S CHENTA INC. and ANR. V. THE UNION OF INDIA and 4 ORS

WP(C)/791/2014

AI Insights

The case involves M/s Chenta Inc., a company with multiple service tax registrations, facing an investigation for service tax evasion under one registration while seeking benefits under the VCES for others. The central issue was whether the ongoing investigation into one business unit precluded the company from availing the scheme for its other units. The court examined the applicability of the VCES, considering the separate registrations and the specific provisions of the Finance Act of 2013, along with relevant circulars from the Ministry of Finance.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 731630 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 11-12-2018
• Assessment Year: misc
• Laws Referred To: Central Excise Act of 1944, Finance Act of 1994, Finance Act of 2013
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SC CENTRAL EXCISE
• Assessee Lawyers: K N CHOUDHURY
• Keywords: Evasion of Service Tax; Separate registration; Service tax; Voluntary Compliance Encouragement Scheme; Distinct Assessees
• Section: 14; 83; 106(2); 106(1)

Judgement Text

"Page No.# 1/10 GAHC010122822014 THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) Case No. : WP(C) 791/2014 1:M/S CHENTA INC. and ANR. 1 M.G. ROD, UZAN BAZAR, GUWAHATI-, ASSAM- 781001. 2: SRI RAJNISH GOSWAMI PROP. OF M/S CHETNA INCORPORATION GROUND FLOOR UCO BANK BUILDING G.N.B. ROAD SILPUKHURI KAMRUP GUWAHATI-3 VERSUS 1:THE UNION OF INDIA and 4 ORS REP. BY THE COMMISSIONER AND SECRETARY TO THE GOVT. OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NEW DELHI. 2:THE COMMISSIONER OF CENTRAL EXCISE and SERVICE TAX GUWAHATI DIVISION SETHI TRUST BUILDING 4TH FLOOR G.S. ROAD BHANGAGARH GUWAHATI - 781005. 3:THE ASSISTANT COMMISSIONER OF CENTRAL EXCISE and SERVICE TAX Q GUWAHATI DIVISION SETHI TRUST BUILDING 4TH FLOOR G.S. ROAD BHANGAGARH GUWAHATI- 781005. Page No.# 2/10 4:THE DEPUTY COMMISSIONER OF CENTRAL EXCISE and SERVICE TAX GUWAHATI DIVISION SETHI TRUST BUILDING 4TH FLOOR G.S. ROAD BHANGAGARH GUWAHATI - 781005. 5:THE SUPERINTENDENT DGCEI GUWAHATI REGIONAL UNIT HOUSE NO. 04 BYE LANE NO. 02 RAJGARH MAIN ROAD P.O. SILPUKHURI CHANDMARI GUWAHATI-3 Advocate for the Petitioner : MR.K N CHOUDHURY Advocate for the Respondent : SC, CENTRAL EXCISE BEFORE HON’BLE MR. JUSTICE ACHINTYA MALLA BUJOR BARUA Date : 11-12-2018 JUDGMENT & ORDER (ORAL) Heard Mr. K.N. Choudhury, learned senior counsel for the petitioners and Mr. B. Sharma, learned Standing Counsel for the Central Excise Department. 2. The petitioner No.1 M/s Chenta Inc is a proprietary concern of the petitioner No.2 having its registered office at Silpukhuri, Guwahati. The petitioner No.1 is carrying on the business of providing Airtel Prepaid and Postpaid Subscription and for the purpose, was granted the registration No.AFUPG7526CST001 for the purpose of service tax. It is stated that the petitioner No.1 apart from the aforesaid business, is also undertaking some other businesses for which different service tax registrations are being granted. For their businesses Page No.# 3/10 of being a franchisee outlet of Westside, they are granted registration No.AFUPG7526CSD002. For the third business in respect of Chenta Inc Dish TV, they are granted the registration No.AFUPG7526CSD004, whereas for the fourth business in respect of Silver Streak, they are granted registration No.AFUPG7526CSD005. 3. In respect of the business of the petitioner No.1 pertaining to registration No. AFUPG7526CST001 relating to Airtel, an enquiry was conducted by issuing a summon dated 05.12.2012 under section 14 of the Central Excise Act of 1944 read with Section 83 of Chapter-V and VA of the Finance Act of 1994. By the said summon, the petitioner No.2 was called to give evidence and make statement on such matters concerning the enquiry conducted by the Central Excise authorities on the allegation of evasion of service tax in respect of their business pertaining to registration No. AFUPG7526CST001. The petitioner claims that under the Service Tax, Voluntary Compliance Encouragement Scheme of 2013 (in short Scheme of 2013), they are entitled to certain beneficial treatments in respect of their earlier non-disclosure of the liability to pay the service tax. Section 106(1) of the Finance Act of 2013 pertaining to the voluntary compliance of the scheme of 2013 provides that any person may declare his tax dues in respect of which no notice or an order for determination under section 72 or 73 or Section 73(A) of Chapter V of the Finance Act of 1994 had been issued or made before the first day of March, 2013. 4. The declaration to be made under section 106(1) is subjected to the condition provided under Section 106(2) that where a declaration had been made by a person against whom an enquiry or investigation in respect of a service tax not levied or not paid or short levied or short paid has been initiated by way of amongst others, issuance of summons under section 14 of the Central Excise Act, 1944 as made applicable to the Chapter-V by Section 83 thereof and such enquiry, investigation or audit is pending as on the first day of March, 2013, the designated authority shall by an order and for reasons to be recorded in writing reject such declaration. 5. Provisions of Section 106(2) of the Finance act of 2013 pertaining to the Scheme of 2013 is as follows:- “Any person may declare his tax dues, in respect of which no notice or an Page No.# 4/10 order of determination under section 72 or section 73 or section 73A of the Chapter has been issued or made before the 1st day of March, 2013.” 6. Pursuant to the provision of Section 106(1) of the Finance Act of 2013, the petitioner had submitted a declaration in respect of their service tax dues for the three other businesses pertaining to registration No. AFUPG7526CSD002 AFUPG7526CSD004 and AFUPG7526CSD005. By the order of 30.12.2013 of the Assistant Commissioner of Central Excise, the declaration made by the petitioner under section 106(1) was rejected by invoking the powers under section 106(2), purportedly on the ground that as an enquiry by issuing a summon under section 14 of the Central Excise Act was initiated against the businesses pertaining to registration No. AFUPG7526CST001, therefore, the petitioners are not entitled to the benefit under section 106(1) of the Finance Act of 1994. In paragraph 2.4 of the order dated 30.12.2013, it is stated that the concerned authority is not inclined to accept the contention of the petitioner that multiple units having separate registration are two distinct assessees on the ground that firstly a show cause notice being issued on completion of enquiry/investigation cannot be equated to a summon issued in course of enquiry/investigation and secondly, the claim of the petitioner as reported by the DGCEI stood confirmed by the earlier view as taken in the order dated 10.06.2013. 7. In order to substantiate his contention, Mr. K.N Choudhury, learned senior counsel for the petitioners relies upon a clarification issued by the Ministry of Finance, Department of Revenue, Central Board of Excise and Customs of the Government of India in the Circular No.174/9/2013-ST dated 25.11.2013 wherein it had been clarified that if the issue or the period of enquiry, investigation or audit is identifiable from the summons or any other documents, the declaration in respect of such period or issue alone will be liable for rejection. A further reliance has been placed by Mr. Choudhury, learned senior counsel on another circular of the Ministry of Finance, Department of Revenue, Central Board of Excise and Customs, Government of India bearing circular No.170/5/2013-ST dated 08.08.2013, wherein also it has been clarified that where two separate service tax registrations are available, it would be construed to be two distinct assessees for the purpose of levy of service tax and therefore, for determining the liability for availing the benefits of the voluntary declaration scheme, the unit that has not been issued with a show cause notice shall be eligible to make Page No.# 5/10 a declaration under the scheme. The relevant provisions of the two clarifications are as follows:- Circular Dated 25.11.2003: Issues Clarification An assessee has two units at two different locations say Mumbai and Ahmedabad. Both are separately registered. The Mumbai unit has received a Show Cause Notice for non-payment of tax on a revenue stream but the Ahmedabad unit has not. Whether the Ahmedabad unit is eligible for VCES? Two separate service tax registrations are two distinct assessees for the purpose of service tax levy. Therefore, eligibility for availing of the Scheme is to be determined accordingly. The unit that has not been issued a show cause notice shall be eligible to make a declaration under the Scheme. Circular dated 08.08.2013:- Issues Clarification An apprehension was raised that declarations are being considered for rejection under section 106(2) oif the Finance Act, 2013, even though the tax dues pertain to an issue or a period which is different from the issue or the period for which inquiry/ investigation or audit was pending as on 1.3.2013 Section 106(2) prescribes four conditions that would lead to rejection of declaration, namely, (a) An inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short paid has been initiated by way of (i) search of premises under Section 82 of the Finance Act, 1994; or Page No.# 6/10 (ii) issuance of summons under section 14 of the Central Excise Act, 1944; or (iii) requiring production of accounts, documents or other evidence under the Finance Act, 1994 or the rules made thereunder; or (b) an audit has been initiated, and such inquiry, investigation or audit was pending as on the 1st day of March, 2013. These conditions may be construed strictly and narrowly. The concerned Commissioner may ensure that no declaration is rejected on frivolous grounds or by taking a wider interpretation of the conditions enumerated in section 106(2), if the issue or the period of inquiry, investigation or audit is identifiable from summons or any other document, the declaration is respect of such period or issue alone will be liable for rejection under the said provision. 8. The clarifications contained in the aforesaid two circulars clearly makes it discernible that when an assessee has two different registrations in respect of two different businesses, it Page No.# 7/10 has to be construed that they are two separate assessees for the purpose of levy of service tax and further if any enquiry/investigation had been undertaken in respect of one of the two businesses, the voluntary declaration made in respect of the other business having the status of being a separate assessee, cannot be rejected merely by stating that an enquiry had been initiated in respect of the other business, where the assessee would have the status of being a distinct and separate assessee. 9. For both the reasons as mentioned hereinabove i.e. the petitioner having four different service tax registrations, it has to be construed that they are four different assessees for the purpose of levy of service tax and secondly also in view of the clarifications given by the circulars dated 08.08.2013 and 25.11.2013, their voluntary declaration under the scheme of 2013 is not liable to be rejected merely on the ground that there is an enquiry/investigation in respect of some other business for which separate service tax registration is available. 10. The voluntary declaration of the petitioners in respect of the other three businesses under section 106(1) of the Finance Act of 2013, as indicated above, had been rejected by the order dated 30.12.2013 on two grounds i.e. a show cause notice issued on completion of enquiry/investigation cannot be equated to a summon issued in course of enquiry and that by an earlier order dated 10.06.2013 of the DGCEI, the enquiry/investigation made against the petitioner was not confined to the business activities under registration No. AFUPG47526CST001. 11. The first reason given in the order dated 30.12.2013, does not make any sense inasmuch as, how the reasoning that a show cause notice issued on completion of enquiry/investigation cannot be equated to a summon issued in course of enquiry/investigation can be the basis to reject the voluntary declaration of the petitioner in respect of the other businesses. In respect of the second ground, it is taken note of that the stand of the authorities is that there was an earlier order dated 10.06.2013 of some authority, which concludes that the enquiry/investigation was made in respect of all the four businesses of the petitioner. 12. On a perusal of the order dated 10.06.2013, it is noticed that all that the said order provides is as follows:- Page No.# 8/10 “Admittedly Summon has been issued against Shri Rajanish Goswami Prop. Of M/s Chetna incorporation on 05.12.2012. Naturally the enquiry will cover all business dealings/turnover of Shri Rajanish Goswami having Pan No.AFUPG7526C. The business turnover of the same proprietor cannot be bifurcated and declaration in respect of a portion can be accepted simply on the ground that separate registration has been obtained.” 13. A perusal of paragraph-7 of the order dated 10.06.2013 shows that all that is provided in the said order is that ‘naturally the enquiry will cover all the business dealing/turnover of Rajanish Goswami having PAN No.AFUPG7526C.’ The said conclusion of the order dated 10.06.2013 is not a finding of fact, but it is a mere presumption of the concerned Assistant Commissioner, who had passed that order and secondly, the presumption is also based on the factual aspect that as all the four businesses of the petitioner No.2 is covered by one PAN number, therefore, it has to be construed to be one business. 14. PAN number is the permanent account number of a given person for the purpose of income tax and it has no relation in any manner as regards the number of business that a person may have for the purpose of service tax. As indicated above, the number of businesses that a person may have for the purpose of service tax, are given separate registration numbers. The very fact that separate registration number is given for the purpose of service tax is itself an indication that the businesses are separate business for the purpose of levy of service tax. Accordingly, merely because the concerned person may have one PAN Number, it by itself is not conclusive that all the businesses that the concerned person may have are also to be clubbed together and be construed to be one business. 15. For the reasons above, the Court is unable to convince itself that an enquiry/investigation was undertaken against all the four businesses of the petitioners. Still in order to verify the factual aspect as to whether the enquiry/investigation was conducted against all the four businesses, the Court deemed it appropriate to call for the records of the proceedings that were initiated against the petitioners. From the entry dated 05.12.2012 in the note sheet, it is seen that the business conducted by the petitioner under registration No.AFUPG7526CST001 was investigated upon for not having paid the service tax in the proper manner. The note sheet nowhere indicates that an enquiry/investigation was also Page No.# 9/10 conducted in respect of the other businesses of the petitioners bearing the registration Nos. AFUPG7526CSD002 AFUPG7526CSD004 and AFUPG7526CSD005. 16. Accordingly, from the materials available on record, the only conclusion that can be arrived at is that the enquiry/investigation for evasion of service tax was conducted against the petitioners only in respect of their business covered by registration No. AFUPG7526CST001. 17. As the conclusion arrived is that the enquiry/investigation was made only in respect of one of the businesses of the petitioners, therefore, the Court is of the view that the benefits that are available under section 106(1) of the Finance Act of 1994 would be applicable to the petitioner in respect of the other three businesses for which no enquiry/investigation was conducted. Section 106 (2) of the Finance Act of 1994 makes it explicitly clear that the declaration under section 106(1) can be rejected only in the event when there is an enquiry/investigation is pending against the particular assessee and whether such enquiry/investigation had commenced prior to 01.03.2013. 18. The aforesaid aspect had also been amply clarified by the two circulars dated 08.08.2013 and 25.11.2013, wherein also it had been provided in clear and explicit terms that if a particular assessee has more than one business having separate service tax registration, in that event, the business unit, which had not been issued a show cause notice, shall be eligible to make a declaration under the Scheme of 2013. 19. In view of the above, the Court is unable to accept the conclusion arrived at by the Assistant Commissioner of Service Tax Division, Guwahati in Order-in-Original No.03/ST/GHY/VCES/13-14 dated 30.12.2013, whereby the claim of the petitioner in respect of the other three businesses under registration Nos. AFUPG7526CSD002 AFUPG7526CSD004 and AFUPG7526CSD005 for a declaration under section 106(1) of the Finance Act of 2013 had been rejected by taking a stand that there is an enquiry/investigation against the petitioners in respect of all his four businesses. 20. Accordingly, it is directed that the authorities in the Service Tax Division, Guwahati of the Office of the Assistant Commissioner of Service Tax shall now proceed to process the declaration made by the petitioners under section 106(1) of the Finance Act of 2013 in Page No.# 10/10 respect of the businesses covered by the registration Nos. AFUPG7526CSD002 AFUPG7526CSD004 and AFUPG7526CSD005 as per law. The writ petition stands allowed to the extent indicated above. JUDGE Comparing Assistant "