Extended period cannot be invoked where interpretation of law involved and conflicting decisions available

2024 ACR 87 CESTAT Allahabad
M/s Samtel Display Systems Ltd
Vs
Commissioner of Central Excise, Ghaziabad
HON’BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON’BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
Service Tax Appeal No.1483 of 2011
(Arising out of Order-in-Appeal No.113-ST/GZB/2011-12 dated 29/06/2011 passed by Commissioner (Appeals) Customs, Central Excise & Services Tax, Ghaziabad)
FINAL ORDER NO.70520/2024 DECIDED ON 08.08.2024

Note –

It has been found in series of decisions this Tribunal and various High Courts where in respect of interpretation of law there are conflicting decisions, extended period of limitation cannot be invoked.

APPEARANCE:

Shri Prakhar Shukla, Advocate for the Appellant

Shri Sandeep Pandey, Authorised Representativefor the Respondent

ORDER

SANJIV SRIVASTAVA:

This appeal is directed against Order-in-Appeal No.113ST/GZB/2011-12 dated 29/06/2011 passed by Commissioner (Appeals) Customs, Central Excise & Services Tax, Ghaziabad. By the impugned order, Commissioner (Appeals) has held as follows:-

(i) Demand of Rs.11,76,887/-, Rs.2,07,424/- & Rs.10,86,280/- (Sl.No.1 to 3 of the above table): The main issue for decision before me is whether the appellants as recipient of the instant services/services in respect of transactions made with the foreign parties re (services used in or in relation to promotion or marketing the appellant’s final goods) were liable to pay service tax during the relevant period. I find that Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 under which a recipient of service in India became liable to pay service tax in relation to any taxable service provided by a non-resident, has been struck down by the Hon’ble High Court of Bombay in the case of Indian National Shipowners Association V/s UOI, 2009 (13) STR 225 (Bom.) [Para 17 of judgment of the High Court) Further, it is seen that the department, while raising the above demand of service tax against the appellants has also relied on Section 66A of the Finance Act, 1994, which deals with the liability of service tax on the recipient of taxable services in India, if such services are received from abroad. The said Section 66A was enacted on 18.04.2006 vide Finance Act, 2006.

Further, it is seen that the Hon’ble High Court of Bombay in the case of Indian National Shipowners Association, supra, has held that the service recipient in India is liable to service tax for the service received from abroad only from 18.04.2006 ie after the enactment of Section 66A of the Finance Act, 1994. The High Court noted that the statutory provision was absent before the enactment of the said Section 66A to charge service tax from recipient. In the said judgment, it has been observed/held that “ll appears that it is first time when the act was amended and Section 66A was inserted by Finance Act, 2006 w.e.f. 18.04.2006, the Respondents got legal authority to levy service tax on the recipients of the taxable service. Now, because of the enactment of Section 66A, a person who is resident in India or business in India becomes liable to be levied service tax when he receives service outside India from a person who is non-resident or is from outside India. Before enactment of Section 66A it is apparent that there was no authority vested by law in the Respondents to levy service tax on a person who is resident in India, but who receives services outside India. In that case till Section 66A was enacted a person liable was the one who rendered the services. In other words, is only after enactment of Section 66A that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian residents. In such cases, the Indian recipient of the taxable services is deemed to be a service provider. Before enactment of Section 66A, there was no such provision in the Act and therefore, the Respondents had no authority to levy service tax on the members of the Petitioners- association. The Hon’ble High Court of Delhi in the case of Unitech Ltd. v/s Commissioner of Service Tax, Delhi, 2009 (15) STR 385 (Del), referring/relying on the said judgment of the High Court of Bombay in the case of Indian National Shipowners Association, supra, took a similar view. Further, it is seen that the Hon’ble Supreme Court on 14.12.2009 dismissed the SLP of the Department/UOI filed against the said order/judgment of the Hon’ble High Court of Bombay in the case of Indian National Shipowners Association, supra, as reported in 2009 (2) STR J 57. Thus, as per the above rulings/judgments, it has been made very ciear that the service tax liability on the recipient of the services received from abroad would arise only from 18.04.2006, the date on which Section 66A was brought into the Finance Act

Therefore, in view of the above facts and applying the ratio of the above judgments, I am inclined to hold that the service tax liability on the appellants in respect of the instant services received from abroad would arise only from 18.04.2006 when Section 66A was brought into the Finance Act. It therefore follows that the impugned demand of service tax & interest thereon, which pertains for the period prior to 18.04.2006, is liable to be set aside and the demand of service tax & interest thereon, which pertains for the period 18.04.2006 onwards, stands confirmed. Thus, the demand for the period prior to & after 18.04.2006 stands set aside & confirmed on the above terms and the bifurcation of the demand to this effect has to be done at the level of the appropriate lower authorities/ adjudicating authority.

(i) Demand of Rs.2,229/- (Sl. No. 4 of the above table): With regard to this demand of service tax of Rs. 2,933/- under the category of GTA Service, I find that the appellants have admitted the said service tax liability of Rs. 2,933/- and they have reportedly paid an amount of Rs.5.221/- along with due interest under the said category of GTA Service. The said payment of service tax has been made by the appellants in terris of Rule 2(1)(d)(v) (a) of the Service Tax Rules, 1994. The appellants have submit ed a copy of the relevant challan of payment of the said amount of Rs. 5,221/- and the same is subject to cross verification by the appropriate lower authorities. Therefore, the said demand of Rs. 2,933/- & interest thereon stands confirmed/appropriated.

With regard to the imposition of penalty of Rs. 24,73,524/- under Section 78 of the Finance Act, 1994 read with Sec. 76 of the said Act, I find that the issue involved is more in the nature of the interpretation of law and there are conflicting decisions of the Hon’ble CESTAT on the above issue of the service tax liability on the recipient of service Therefore, under the said circumstances, there appears to be no malafide on the part of the appellants. Therefore, the imposition of the said penalty against the appellants is not warranted and hence the same is set aside in terms of Section 80 of the Finance Act, 1994.

The appeal is disposed off on the above terms.”

2.1 Show cause notice dated 23.10.2009 was issued to the appellant demanding service tax in respect of various services as detailed in table bellow:-

2.2 Show cause notice asking to the appellant to show cause as to why-

1. “Service Tax amounting to 24,73,524.00 (Rs. 24,23,049.00 as service tax and Rs 50,475.00 as Ed. CESS) should not be demanded and recovered from them under proviso to Section73(1) of the Act, ibid.

2. Interest at the appropriate rate on the total amount of Service Tax should not be recovered from them under section 75 of the Act, ibid

3. Penalty should not be imposed upon them under section 76 of the Act, ibid for non payment of Service tax and Education CESS.

4. Penalty should not be imposed upon them under section 78 of the Act, ibid for suppressing value of taxable service.”

2.3 This show cause notice has been adjudicated as per the Order-in-Original, wherein Original Authority have held as follows:-

ORDER

1. “I confirm the demand of Rs.24,73,524.00 under Section 73(1) of the Finance Act, 1994 against the pary.

2. “I confirm the demand of interest on the above amount of Rs.24,73,524.00 under Section 75 of the Act, ibid.

3. “I impose penalty of Rs.24,73,524.00 under Section 78 read with Section 76 of the said Finance Act, 1994.”

2.4 Aggrieved appellant have filed appeal before the First Appellate Authority which has been disposed of by the impugned order referred in para-1 above. Aggrieved appellant filed appeal before this Tribunal.

3.1 We have heard Shri Prakhar Shukla learned Counsel appearing for the appellant and Shri Sandeep Pandey, learned Authorised Representative appearing for the revenue.

4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument.

4.2 Admittedly, Commissioner (Appeals) have in the impugned order come to conclusion that the issue involved in the matter is more in nature of interpretation of law and there are conflicting decision of this Tribunal on the issue involve. Therefore, no malafide can be attributed to the appellant that being so, we do not find any merits in the demand made by invoking the extended period of limitation, as it has been found in series of decisions this Tribunal and various High Courts where in respect of interpretation of law there are conflicting decisions, extended period of limitation cannot be invoked.

4.3 Impugned order remanding the matter to the Original Authority after setting aside the demand made to the extent it was prior to the period 18.04.2006 relying upon the decision of Hon’ble High Court of Bombay in the case of Indian National Shipowners Associations Vs UOI 2009 (13) STR 225 (Bom.) and decision of Hon’ble Delhi High Court in the case of Unitech Ltd. Vs Commissioner of Service Tax, Delhi 2009 (15) STR 385 (Del.) as the matter has been remanded back for re-quantification to the Original Authority, we do not find interfere with the said order and direct Adjudicating Authority to re-quantify the demand after taking into account above observations made in para 4.2 in respect of limitation.

5.1 Appeal is disposed of upholding the remand order for requantification of demand subject to observations made in para 4.2 & 4.3.

5.2 As the matter is considerably old, Adjudicating authority should decide the matter in de-novo proceedings within three months from the date of receipt of this order.

(Pronounced in open court on-08 August, 2024)

(P.K. CHOUDHARY)

MEMBER (JUDICIAL)

(SANJIV SRIVASTAVA)

MEMBER (TECHNICAL)