MANIK CHOUDHURY V. THE COMMISSIONER OF CENTRAL EXCISE, CUSTOM AND SERVICE TAX, SHILLONG AND 2 ORS

CentralExciseAp/18/2018

AI Insights

The case revolves around the appellant, Manik Choudhury, who provided vehicles on hire to NEEPCO and was subsequently issued notices by the Central Excise Department for not paying service tax under the 'Rent-a-cab service' category. The primary legal contention was whether the show cause notice issued for demanding service tax was barred by limitation. The Commissioner (Appeals) found that the notice was indeed barred by limitation and there was no suppression of facts by the appellant, as the department was aware of his activities from 2004. However, the CESTAT restored the original demand, leading to the current appeal in the High Court, which favored the appellant by reinstating the Commissioner (Appeals)'s decision.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 725746 (HC-MEGHALAYA)
• Appeal Type: Others
• Pronouncement Date: 30-04-2019
• Assessment Year: misc
• Laws Referred To: Central Excise Act, 1944, Finance Act, 1997, Finance Act, 1994
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: N MOZIKA
• Assessee Lawyers: R JHA
• Keywords: Limitation Period; Rent-a-Cab Service; Service tax; Suppression of facts; Tour Operator
• Section: 73(1); 14; 75; 77; 78; 76; 35G; 65(72)(n)

Judgement Text

" 1 Serial No.01 Supplementary List HIGH COURT OF MEGHALAYA AT SHILLONG Central Excise Ap.No.18/2018 Date of Order: 30.04.2019 Manik Choudhury Vs. The Commissioner of Central Excise, Custom & Service Tax, Shillong & ors Coram: Hon’ble Mr. Justice Mohammad Yaqoob Mir, Chief Justice Hon’ble Mr. Justice H.S. Thangkhiew, Judge Appearance: For the Petitioner/Appellant(s) : Mr. R Jha, Adv For the Respondent(s) : Mr. N Mozika, Adv i) Whether approved for reporting in Yes Law journals etc.: ii) Whether approved for publication in press: No Per Mohammad Yaqoob Mir, ‘CJ’: (ORAL) 1. Order dated 05.02.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal, East Regional Bench, Kolkata (hereinafter for short referred to as CESTAT) is assailed by medium of this appeal under Section 35G of the Central Excise Act, 1944 (hereinafter for short referred to as the Act of 1944). 2. For appreciating the rival submissions of learned counsel for the parties, precise flashback of the factual matrix shall be advantageous. 3. Appellant admittedly has been providing vehicles on hire to North Eastern Electric Power Corporation Ltd. (NEEPCO) which activities of the appellant fall within the category of ―Rent-a-cab-service‖ but had not paid the service tax w.e.f. 01.04.2002. The Superintendent (Service Tax), Central Excise Office, Shillong Range issued a notice on 16.03.2004 informing the appellant that he was found providing ―tour operator’s‖ service to customers which is taxable under service tax vide Finance Act, 1997 so has been advised to get registered with the jurisdictional 2 Superintendent of Central Excise/Assistant/Deputy Commissioner within seven days from the date of issue of notice and to submit his returns. Further, he has been advised to deposit the service tax forthwith. 4. Appellant vide his response to the notice dated 16.03.2004 has made it clear to the Superintendent (Service Tax) that he is not a ―tour operator‖ as defined under Section 65(72)(n) read with Section 78 of the Act and has further added that he is neither a owner of any ―tourist vehicle‖ nor a ―tour operator‖ as such requested for dropping the matter of registration as tour operator. 5. Appellant by way of abundant caution represented to the Director (Technical) NEEPCO Ltd., Shillong vide his letter dated 31.03.2004 informing him that he has received the letter from Central Excise Department in connection with service tax. The said letter of Central Excise issued is based on the information from NEEPCO Ltd. Further, mentioning therein that he has already taken up the matter with the Central Excise Department that he does not fall within the purview of service tax rules. In case of Excise department’s overruling any appeal and imposing the service tax for vehicle hiring charges, he will claim the amount through a supplementary bill for payment to the concerned authority, as service tax is an indirect tax. 6. Respondent authorities (Excise department) appear to have slept over the matter till 13.10.2006. On 13.10.2006 summon under Section 14 of the Act of 1944 has been issued calling upon the appellant to attend the office of the Commissioner of Central Excise and to produce the documents as per schedule i.e. (i) list of parties to whom he has supplied vehicles on hire; (ii) details of collections/payments received from such parties to whom he has supplied vehicles on hire basis; (iii) copies of agreement between the parties and the appellant and; (iv) trade license/registration certificates for the vehicles issued by the competent authority. 7. Appellant filed a detailed response to the said summon on 08.11.2006 with a request to drop the enquiry as initiated. One more 3 summon dated 22.02.2007 has been issued under Section 14 of the Act of 1944 asking the appellant to produce in addition to other documents the copies of all returns filed with the Income Tax department for the year 2002-03, 2003-04, 2004-05 and 2005-06. The appellant has submitted the reply on 28.02.2007. Again on 22.03.2007, one more summon has been issued under Section 14 of the Act of 1944 asking the appellant to produce certain documents which he has responded on 09.04.2007. 8. Finally a show cause notice has been issued from the office of Commissioner of Central Excise, Shillong on 27.03.2008 in terms whereof, after referring to the detailed investigation into the activities of the appellant, he has been called upon to pay the service tax amounting to Rs.11,45,418.49.00/- and education cess amounting to Rs.22,908.00/-. Further to show cause as to why penalty shall not be imposed under Sections 76, 77 and 78 of the Finance Act 1994. Further interest as applicable on the amount demanded be not recovered under Section 75 of the Finance Act of 1994. 9. The appellant submitted his reply thereafter order-in-original was passed by the Additional Commissioner (adjudicating authority) where- under the payment of service tax of Rs.11,07,235/- and education cess of Rs.22,145/- has been confirmed. Payment of interest under the Finance Act and penalty exceeding the amount of demand confirmed for Rs.11,29,380/-. Rs.1000/- has been imposed as penalty under Section 77 of the Finance Act, 1994. 10. The order-in-original dated 29.06.2009 was challenged by medium of appeal before the Commissioner of Central Excise (Appeals), Guwahati. The learned Commissioner (Appeals) vide detailed order dated 03.12.2010 recorded the finding to the effect that the department was well aware about the activities of the appellant right from March 2004 onwards, same is clear from the notice issued to the appellant under C.No.1(1)SH/Range/S.Tax/2003 dated 16.03.2004, directing the appellant inter-alia to register within seven days under the taxable service of tour 4 operator under the Finance Act, 1994. The appellant intimated the department about his activity of giving his vehicle on hire and had also emphasized that his activity is not covered under tour operator scheme and does not attract any service tax. Unfortunately, the department did not initiate any further action pursuant to the notice dated 16.03.2004. Thereafter, the department had issued summon dated 22.02.2007. Ultimately on 27.03.2008 issued a show cause notice demanding service tax invoking extended period of limitation. 11. It has been further observed by the Commissioner (Appeals) that it is clear that department since 16.03.2004 onwards was aware of the appellant’s activity, therefore, appellant cannot be charged with suppression of facts with the intent to evade payment of service tax, even if he did not file the service tax returns. In view of the said position extended period is not invocable, only normal limitation of period prescribed under Section 73(1) of the Finance Act, 1994 would be available to the department for causing recovery of non-paid service tax. For the period from 2003-04 to October 2006, a show cause notice was issued on 27.03.2008 therefore, according to the Commissioner (Appeals) the entire demand is barred by limitation. It is further clear that the allegation of suppression with the intent to evade payment of duty is not sustainable, therefore, interest imposed under Section 75 of the Finance Act, 1994 and penalty imposed under Sections 76, 77 and 78 of the Act is also set aside. Finally, Commissioner (Appeals) has set aside the impugned order on the ground of limitation. 12. Aggrieved by the order of Commissioner (Appeals), Revenue filed an appeal before CESTAT successfully as learned Tribunal opined that in the grounds of appeal in response to the department’s letter dated 16.03.2004, appellant had informed that he was neither the owner of any ―tourist vehicle‖ nor a ―tour operator‖. The said reply according to the Tribunal has not been considered by the Commissioner (Appeals) when according to the Revenue in the letter dated 16.03.2004, appellant had 5 intentionally suppressed the material facts regarding rendering service under the category of ―rent-a-cab‖. It is perceived from the said letter that the appellant had not disclosed the service rendered by him to the department, accordingly, the finding of Commissioner (Appeals) was held unsustainable as a result whereof, order of the adjudicating authority was restored. Aggrieved whereof, instant appeal has been filed under Section 35G of the Act of 1944. 13. The question in essence for determination is as to whether show cause notice dated 27.03.2008 issued by the Revenue was barred by limitation. Learned Commissioner (Appeals) has held that it was barred by limitation whereas, learned Tribunal has concluded that the appellant had suppressed the information therefore, show cause notice is not hit by limitation. As per Section 73 of the Finance Act, 1994 when a service was not levied or paid or has been short-levied or erroneously refunded, notice be served upon the person chargeable with service tax within one year from the relevant date. However, in terms of proviso to sub-section (1) of Section 73 of the Finance Act, 1994, if default in paying service tax is by fraud or collusion or willful misstatement or suppression of facts or contravention of provision of the chapter or rules then the period of limitation will be five years from the relevant date. Section 73(1) as it was on the relevant date is reproduced hereunder:- ―73. Recovery of Service tax not levied or paid or short levied or short paid or erroneously refunded – (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the [Central Excise Officer] may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of — (a) fraud; or (b) collusion; or 6 (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words ―one year‖, the words ―five years‖ had been substituted. Explanation. — Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years, as the case may be.‖ 14. The period of unpaid service tax was from 2002-2004 when initial notice dated 16.03.2004 was issued by the Revenue (Superintendent, Service Tax). Then when summon was issued on 13.10.2006, the relevant period was shown from 2002-2006. Show cause notice has been issued on 27.03.2008 admittedly after the prescribed period of one year but within five years. The benefit of five years limitation is available only when the case falls within the scope of proviso. The adjudicating authority in the order-in-original has concluded that the appellant had suppressed the facts of providing vehicle on hire under the ―rent-a-cab service‖ operator scheme which was not agreed by the Commissioner (Appeals) by holding that the activities of the appellant were within the knowledge of Revenue, that finding is not agreed to by the learned Tribunal on the ground that while responding to the notice dated 16.03.2004, appellant had not divulged it that he was providing vehicle on hire. 15. We have bestowed our thoughtful consideration to the entire materials placed on record we have no hesitation in holding that the finding recorded by the Commissioner (Appeals) is absolutely in consonance with the facts and circumstances of the case. It is only when the Revenue had the information about the activities of the appellant of providing vehicle on hire, a notice in the year 2004 was issued asking him to get registered within seven days. The notice was responded by the appellant wherein he had made clear that he is not the owner of any ―tourist vehicle‖ or a ―tour operator‖. Not only this took the matter with Director (Technical) NEEPCO 7 to whom he provided vehicle on hire, vide in his communication dated 31.03.2004 mentioning therein that he has not recovered the service tax for vehicle hiring charge from NEEPCO whereas, Central Excise Department had issued notice based on the information from NEEPCO. It appears that the Revenue thereafter has not chosen to initiate any action. When it is so, can it now lie in the mouth of the Revenue that the appellant had suppressed the facts of providing vehicles on hire to NEEPCO, answer has to be in the negative. 16. It is in the said background, after a detailed discussion the Commissioner (Appeals) has rightly concluded that the activities of the appellant were well within the knowledge of the Revenue, therefore, no question of suppression of any fact. The finding of the Commissioner (Appeals) in our considered opinion is quite apposite. That being so, the finding of learned Tribunal that in response to the notice dated 16.03.2004, the appellant had not informed that he was providing vehicle on hire to NEEPCO pales into insignificance because it was within the knowledge of Revenue that the appellant was providing vehicle on hire only then they issued notice dated 16.03.2004 otherwise there could be no cause for the Revenue to issue any notice to the appellant to get his rent-a-cab registered. 17. From the record nothing is forthcoming so as to substantiate the action of the Revenue in sleeping over the matter for a period w.e.f. 2004 till 2006 and then on 27.03.2008 when show cause notice was issued. Show cause notice having been admittedly issued after the prescribed period of one year was clearly barred by limitation as rightly concluded by the Commissioner (Appeals). 18. In our considered view, learned Tribunal has not gone into details of the matter, simply by referring to the finding at para-17 of the Commissioner (Appeals) then to differ with the same by referring to the letter dated 16.03.2004 would suggest that other details have escaped the attention of the learned Appellate Tribunal. 8 19. For the stated facts, reasons and circumstances, the order of learned Appellate Tribunal is not sustainable as such is set aside. The order of learned Commissioner (Appeals) dated 03.12.2010 being well reasoned and logical is restored. 20. Appeal succeeds shall stand disposed of accordingly. (H.S. Thangkhiew) (Mohammad Yaqoob Mir) Judge Chief Justice Meghalaya 30.04.2019 “Lam AR-PS” "