Raj State Warehousing Corporation V. Union Of India and Commissioner, Central Excise, Jaipur-I and Customs Excise And Service Tax Appellate Tribunal

EXCIA/18/2011

AI Insights

The case involves appeals by both the M/S Raj State Warehousing Corporation and the Commissioner of Central Excise, Jaipur-I, concerning the imposition of service tax and penalties under the Finance Act, 1994. The primary legal questions revolved around the applicability of penalties under Section 76 and the interpretation of the limitation period for tax demands. The Tribunal had previously found that the assessee did not have any intention to evade tax and that the demand was only sustainable for the normal period of one year. The High Court's decision affirmed these findings, emphasizing the lack of intent to evade tax by the public sector undertaking and the applicability of the one-year limitation period.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 701286 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 25-10-2017
• Assessment Year: misc
• Laws Referred To: Finance Act, 1994
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SANDEEP PATHAK
• Assessee Lawyers: DIVESH SHARMA; PRATEEK KASLIWAL
• Keywords: Cargo Handling Agency; Extended Period of Limitation; Penalty; Public sector undertaking; Service tax
• Section: 73; 76

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Central/Excise Appeal No. 18 / 2011 M/S Raj State Warehousing Corporation. Bhawani Singh Road, Jaipur (Rajasthan) Through its Managing Director Shri D.B. Gupta ----Appellant Versus 1. Union Of India, Through Secretary Finance, North Block, New Delhi 2. Commissioner, Central Excise, Jaipur-I, N.C.R. Building, Statue Circle, Jaipur-I 3. Customs Excise And Service Tax Appellate Tribunal, Customs Appeal Branch, New Delhi ----Respondent Connected With D.B. Central/Excise Appeal No. 23 / 2011 Commissioner Of Central Excise, Jaipur-I, New Central Revenue Building, Statue Circle, Jaipur-302 005. ----Appellant Versus M/s Raj State Warehousing Corporation, Bhawani Singh Road, Jaipur (Rajasthan). ----Respondent _____________________________________________________ For Appellant(s) : Mr. Divesh Sharma for Mr. Prateek Kasliwal For Respondent(s) : Mr. Sandeep Pathak _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 25/10/2017 1. Both these appeals are preferred by the assessee as well as department. (2 of 5) [EXCIA-18/2011] 2. This court while admitting Income Tax Appeal No. 18/2011 on 22.09.2011, framed following substantial question of law:- “Whether in absence of any speaking order any penalty under Section 76 can be levied moreso when CESTAT came to a conclusion that there were no intention on part of appellant to evade its tax liability?” 3. This court while admitting Income Tax Appeal No. 23/2011 on 21.12.2011, framed following substantial question of law:- “Whether proviso to Section 73 of Finance Act, 1994 will not be applicable on the assessee on the ground that it is a public sector undertaking despite the fact that “Suppression of Fact” on the Part of Assessee was duly proved”. 4. Counsel for the assessee has pointed out that while imposing penalty, the Tribunal has observed as under: “5. As per Clause (zr) of Section 65(105), service tax is leviable on \"any service provided to any person, by a cargo handling agency in relation to cargo handling service\". The argument of the Appellant is that it could never understand that they were a \"cargo handling agency\" because they are in the business of warehousing of goods for which they were already paying service tax. This was a service provided by the contractors and the charges were recovered from the customers who used such services. But as a corporation owned by the Rajasthan State it did not want to enter into dispute on this issue with the Union of India and as soon as the issue was pointed out to it, it started paying tax for the charges collected by it and paid to its contractor who was providing the service. In instant proceeding it was not contesting the merits of the issue. Its only contest that it had no intention of evading any tax. Since there was no intention to evade tax, it argued that the demand invoking the extended period of lime is not maintainable. (3 of 5) [EXCIA-18/2011] 6. Considering the status of the Appellant as a Public Sector Undertaking and its conduct after the matter had been pointed out to it and the fact that the audit by the department on previous occasions did not point out this issue, though, they were collecting charges during such period also, we are satisfied that instant Appellant did not have any intention to evade the impugned tax. Therefore the demand will be sustainable only to the extent of demand covered by the normal period of time of one year. Interest under Section 75 is to be paid on the sustainable portion of the demand. Penalty under Section 76 will be maintainable in respect of the period within normal period. Penalty under Section 78 will not be maintainable.” 5. However, no reasons were given by any of the authority. In that view of the matter, Section 76 of the Finance Act, 1994 reads as under:- “76. Penalty for failure to collect or pay service tax – Any person responsible for collecting service tax in accordance with the provisions of sub-section (1) of section 68, who --- (a) fails to collect such tax; or (b) having collected the service tax, fails to pay such tax to the credit of the Central Government in accordance with the provisions of sub-section (2) of that section; Shall pay, --- (I) in the case referred to in clause (a), in addition to paying the tax in accordance with the provisions of sub-section (3) of that section and interest in accordance with the provisions of section 75, by way of penalty, a sum equal to the amount of service tax that he failed to collect; and (ii) in the case referred to in clause (b), in addition to paying the tax in accordance with the provisions of sub-section (2), of that section and interest in accordance with the provisions of section 75, by way of penalty, a sum which shall not be less than one hundred rupees but which may extend to two hundred rupees for every day during which the failure continues, so, however, that the penalty under this clause shall not exceed the amount of (4 of 5) [EXCIA-18/2011] service tax that he failed to pay.” and contended that before penalty imposed, the reasons are required to be given and it has come on record that the Government corporation is there, there was no intention. As soon as pointed out to them, they started paying tax and co-operate with the department. 6. In that view of the matter, in our considered opinion, the penalty under Section 76 was not called for. Therefore, issues are required to be answered in favour of the assessee. 7. In the appeal preferred by the department, counsel for the appellant pointed out following observations made by Commissioner in order dated 30.10.2006 (Annexue-3) : “ I find that the demand of service tax from the assessee is not barred by limitation as the assessee had not made available, in any form, the data/information necessary for calculation of the tax to be demanded. Neither the ‘supervision charges’ shown in their balance sheets were elaborated. The details of these charges were made available by the assessee only during investigations by the department. Leviability of tax on certain sum can be determined only when its true nature is known.” 8. While considering the question of limitation, the Tribunal has taken into consideration the period of one year as a limitation period. However, counsel for the department contended that three years period of limitation will apply. However, looking to the provisions, the Tribunal has rightly applied the period of limitation as one year. In that view of the matter, in our considered opinion, the Tribunal has not committed any error in (5 of 5) [EXCIA-18/2011] holding that the limitation is one year. 9. Therefore, the issues are answered in favour of assessee against the department. 10. In view of above, the assessee appeal is allowed and the departmental appeal is dismissed. 11. A copy of this order be placed in other file. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Chouhan/43-44 "