IT : Assessing Officer has to apply his mind to objections raised by assessee to reopening and has to deal with same in order
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[2013] 33 taxmann.com 361 (Delhi)
HIGH COURT OF DELHI
Jay Bharat Maruti Ltd.
v.
Assistant Commissioner of Income-tax*
BADAR DURREZ AHMED AND R.V. EASWAR, JJ.
W.P. (C) NO. 711 OF 2013
FEBRUARY 8, 2013
Section 147 of the Income-tax Act, 1961 - Income escaping assessment - General [Objections of assessee] - Assessment year 2007-08 - Whether passing of an order dealing with objections filed by assessee against proposed reopening is not an empty formality; Assessing Officer has to apply his mind to objections raised and has to deal with same in order - Held, yes - Whether where Assessing Officer, while rejecting assessee's objections, had not applied his mind and even did not bother to change words such as 'we', 'us', etc., which assessee had used in its objections/reply, order of Assessing Officer was to be set aside- Held, yes [Para 4] [In favour of assessee]
R. Santhanam and A.P. Sinha for the Appellant. Ms. Anshul Sharma and Abhishek Maratha for the Respondent.
JUDGMENT
Badar Durrez Ahmed, J. - This writ petition is directed against the notice dated 30.08.2011 issued by the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as 'the said Act') pertaining to the assessment year 2007-08. It is also directed against the order dated 28.01.2013 whereby the respondent has rejected the objections raised by the petitioner pursuant to the receipt of the purported reasons behind the proposed reopening of the assessment for the said assessment year 2007-08.
2. On going through the order dated 28.01.2013 we find that the same has been passed without any application of mind. To say the least, it is a cut-and-paste job. This is apparent from the fact that the paragraph 3 is merely a repetition of the provisions of section 147 and 148 of the said Act. Thereafter, paragraphs 4, 5 upto 5.6 comprise of quotations and extracts from Supreme Court and High Court decisions. Paragraph 5.7 is perhaps a reference to the case at hand. However, we find that the words mentioned therein could apply to any case. It appears to be a generic paragraph which is perhaps applied by the respondent to several such cases. In order to appreciate this fact we are reproducing the paragraph 5.7 hereinbelow: -
"5.7 In this case, the belief of the AO has been held in good faith and not on the basis of any rumour. In fact the reasons for issue of notice existed at the time of issue of notice and the reasons are genuine. They were in fact communicated to the assessee also. The reasons recorded are quite detailed. As is evident from the perusal of the reasons recorded, they in fact record the satisfaction of the AO that the income has escaped assessment on the basis of the reasons elucidated and the material on record as relied upon by the AO at the time while recording his satisfaction that the income had in fact escaped assessment."
3. Apart from the aforesaid paragraph there is no discussion of the points raised by the petitioner in its objections. In fact, portions of the objections furnished by the petitioner have been copied verbatim as would be apparent from paragraph 2 of the order which reads as under: -
"2. Notice u/s. 148 was issued after recording the reasons under section 147 of the Act on 30.08.2011 and duly served. In response to the same, assessee has submitted written submission dated 27.09.2011 wherein the assessee submitted that the notice is illegal and without jurisdiction. We object the reassessment proceedings. The return already filed by u/s 139 for A Y 2007-08 may please be treated as return filed in pursuance of the notice now received. Further, it was also requested to enable us to make objections both on facts and in law to the proposed reassessment, please give us reasons recorded for reopening the assessee and also the order of sanction obtained for the purpose and on receipt of the same we shall make detailed submission and objection, both on facts and in law after which we wish to be heard in person for which adequate opportunity be granted to determine the justifiability or otherwise of the action for reassessment in terms of the decision of GKN Driveshaft Ltd. v. CIT [2003] 259 ITR 19 (SC) and not issue on merits be taken up for any decision before the validity of action for reassessment is decided. The reasons recorded under section 147 were provided to the AR of the Assessee Company. The assessee filed an objection against the issuance of notice under section 148 vide written submission."
It is apparent on going through the above extract that the respondent has not even bothered to change the words such as "we", "us", etc. which the petitioner had used in its objections/ reply. This shows that the respondent had not even applied his mind and not even bothered to correct the contents of paragraph 2 so as to put it into second person or third person in the grammatic sense.
4. For the aforesaid reasons, after hearing the counsel for the parties at the stage of admission itself we feel that such an order cannot be permitted to stand as it smacks of non-application of mind. The passing of an order dealing with the objections filed by the assessee is not an empty formality. The assessing officer has to apply his mind to the objections raised and has to deal with the objections in the order. This has not been done in the present case. Consequently, order dated 28.01.2013 is set-aside. The matter is remitted to the respondent to pass a fresh order after taking into account the objections filed by the petitioner as also after giving the petitioner an opportunity of hearing. The order be passed by the respondent within three weeks. We have not commented at all on the merits of this petition with regard to the validity of the notice dated 30.08.2011. That issue is kept open. The writ petition stands disposed of.
VARSHAIntroduction
1. Levy of tax on services in India has to be seen in two phases i.e. Pre-Finance Act 2012 and Post such Act w.e.f. 1-7-2012. This tax was, for the first time, introduced by the Finance Act, 1994 in view of the expanding contribution of service sector in the GDP growth of the country which constituted nearly 50 per cent of GDP at the relevant time. Shri Manmohan Singh, the then Finance Minister, in the budget speech for the year 1994-95 observed that there was no sound reason for exempting services from taxation.
First phase
2. The tax started by bringing within its fold services in a selective way through various years' Finance Acts. This scheme continued till the Finance Act, 2011.
Second Phase
3. The Finance Act, 2012 brought a fundamental change in taxation of services. This Act switched to comprehensive scheme of taxation by which all services have become taxable barring those placed in the 'Negative List' (section 66D) or are specifically exempted from tax by Government's notifications issued in exercise of power under section 93 of the Act.
Taxation of services by Government/Government entities
4. Taxation aspects concerning Government provided services thus also need consideration in two phases - Part-I and Part-II.
Part-I : Law upto Finance Act, 2011 (upto 30th June, 2011)
5. There was no specific provision concerning such services in the first phase. Exemptions were given to certain categories of services but Government services were not included under such exemptions because such services were not declared taxable by any Finance Acts since 1994. However, CBEC vide its Circular No. 87/7/2006-ST, dated 18-12-2006 clarified that no service tax on fee collected by public authorities while performing statutory functions/duties be collected. In this circular, it has been clarified that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government treasury. Such activity is purely in public interest and it is undertaken as mandatory and statutory function. These are not in the nature of service to any particular individual for any consideration. Therefore, such an activity performed by a sovereign/public autho-rity under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities. This circular was superseded by the CBEC's Master Circular No. 96/7/2007ST, dated 23-8-2007, in which the CBEC has expressed an identical view.
Part-II
6. In the second phase from 1-7-2012, all services are taxable. It, therefore, became necessary to consider about the taxability of Government provided services and whether these have been included in the Negative List or in Mega Government Exemption Notification. Section 66D(a) provides that all services provided by Government or Local bodies shall be non-taxable except a few services as under -
| "(a) | services by Government or a local authority excluding the following services to the extent they are not covered elsewhere- |
| (i) | services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government; | |
| (ii) | services in relation to an aircraft or a vessel, inside or outside the precincts of a part or an airport; | |
| (iii) | transport of goods or passengers; or | |
| (iv) | support services, other than services covered under clauses (i) to (iii) above, provided to business entities. |
| (b) | services by the Reserve Bank of India." |
It may be mentioned here that some of the services like transport of passengers is also specified in clause (o) and transport of goods is specified in clause (p) of section 66D. All the clauses viz. (a), (o) and (p) should be read harmoniously in order to determine taxability of service of transport of passengers or goods provided by Government or local authorities.
Why some Government services are taxable?
7. The object is to provide a level playing field. Certain services which are provided by non-governmental bodies (such as by private entrepreneurs) are also provided by Government bodies. Exempting such services rendered by Government bodies would have given an unfair advantage to them and weaken the position of private establishments in the same fields. The other reason is to avoid break in Cenvat chain as the support services provided by Government are normally in the nature of intermediary services.
Meaning of Government
8. There is no definition of Government in the Finance Act, 1994 (Act). However, as per section 2(23) of the General Clauses Act, 1897 the term "Government" has been defined to include both the Central Government and any State Government. The same explanation has been used even in section 21(12)(a) of Indian Penal Code, 1860.
The negative list provides for exemption of services of local authorities too. This term has, however, been defined in the Act to mean-
| (a) | a Panchayat as referred to in clause (d) of article 243 of the Constitution; | |
| (b) | a Municipality as referred to in clause (e) of article 243P of the Constitution; | |
| (c) | a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; | |
| (d) | a Cantonment Board as defined in section 3 of the Cantonments Act, 2006. | |
| (e) | a regional council or a district council constituted under the Sixth Schedule to the Constitution; | |
| (f) | a development board constituted under article 371 of the Constitution; or | |
| (g) | a regional council constituted under article 371A of the Constitution. |
The term has been very widely defined not only to include body formed by the elected representatives at Panchayat or Municipality level but also include Cantonment Board and Regional Council formed for the local development of the area.
Services taxable
9. The Government services made taxable need to be examined in regard to sub-categories of such services. These are considered as under:
| (a) | Services by Postal Department - The services rendered by this department which are taxable are: |
| (i) | Speed post | |
| (ii) | Express parcel post | |
| (iii) | Life insurance | |
| (iv) | Agency services provided to person other than Government |
| | All other services provided by department of posts will not be liable to be taxed. | |
| (b) | Aircraft or vessel services - The services provided in relation to aircraft or a vessel, inside or outside the precincts or a port or an airport by Government or local authority are taxable services. For understanding the meaning of these words, reference to other enactments mentioned in section 65B of the Act is necessary. This shows: |
| (i) | Aircraft is defined in section 65B(7) to have the meaning assigned to it under the Air Craft Act, 1934. | |
| (ii) | Vessel: It is defined in section 65B(53) as per the meaning assigned to it in clause (z) of section 2 of the Major Port Trusts Act, 1963. | |
| (iii) | Airport : It is defined in section 65B(8) as per the meaning assigned to it in clause(b) of section 2 of the Airports Authority of India Act, 1994. | |
| (iv) | Port: It is defined in section 65B(38) as having the meaning assigned to it in clause (q) of section 2 of the Major Port Trusts Act, 1963 or in clause (4) of section 3 of the Indian Ports Act, 1908. |
Services of Airports and Ports of varied type taxable as such are:
| (a) | Airport Services : Some of such services are : |
| (i) | Transportation and Logistic Services | |
| (ii) | Passenger and cargo traffic control service | |
| (iii) | Baggage handling | |
| (iv) | Maintenance service | |
| (v) | Cleaning of aircraft | |
| (vi) | Amenities to passenger and visitor | |
| (vii) | Hostel restaurant and rest room service | |
| (viii) | Security service | |
| (ix) | Air traffic service | |
| (x) | Air safety service | |
| (xi) | Warehousing service | |
| (xii) | Ground safety service | |
| (xiii) | Search and rescue facility service | |
| (xiv) | Aeronautical communication service | |
| (xv) | Meteorological service | |
| (xvi) | Others (postal facility, catering service, money exchange, parking facility, telephone facility, ATM facility, pre-paid taxi service) |
Service tax is payable in respect of such services.
9.1 Port services -Section 45 of the Major Port Trust Act, 1963 provides for levy of various charges towards following services :
| ♦ | Trans-shipping of passengers or goods between vessels in the port or port approaches; | |
| ♦ | Landing and shipping of passengers or goods from or to such vessels, to or from any wharf, quay, jetty, pier, dock, berth, mooring stage or erection, land or building in the possession or occupation of the Board or at any place within the limits of the port or port approaches; | |
| ♦ | Carnage or porterage of goods or any such place; | |
| ♦ | Wharfage, storage or demurrage of goods or any such place. |
9.2 Vessel services - These include:
| ♦ | Stevedoring service: bringing the vessel to the dock or wharf. | |
| ♦ | Repairing, pilotage, towage, anchorage, hauling, berthing, morring, remorring, hooking, measuring services to the vessel | |
| ♦ | Railway haulage service | |
| ♦ | Labour charges |
Transport of Goods services
10. Clauses (o) and (p) of section 66D specifically deal with services of transport of passengers and transport of goods respectively. The services specified in clauses (o) and (p) in this respect are only taxable. Therefore, the taxability of services provided by Government or local authority will have to be seen in the light of the provisions contained in clauses (o) and (p) of section 66D.
Support services to business entities (other than those discussed earlier)
11. The last category of Government services liable to tax are support services to business entities. The meaning of these terms are elucidated in later discussion.
| (a) | Business entity - The 'business entity' is defined in section 65B(17) as follows: | |
| '(17) "business entity" means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession' | ||
| Business entity is a person who ordinarily carries out activity for profit. However, if any person carries out any activity as a hobby or pleasure or pastime, the person cannot be considered as 'business entity'. | ||
| (b) | Support service - The word 'support service' is defined in section 65B(49) as follows: | |
| | '(49) "support services" means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carryout in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis.' |
This definition encompasses following categories of service namely:
| (i) | Infrastructural | |
| (ii) | Operational, administrative, logistic, marketing or other support functions | |
| (iii) | Advertisement & Promotion, Construction or Works Contract, renting of immovable property, security, testing and analysis. |
11.1 Payment of tax in respect of support services - Entity No. 6 in Notification No. 30/2012-ST, dated 20-6-2012 is in respect of services provided by way of support services by Government or Local authorities to business entity.
Valuation of services provided by Government/Local authorities
12. Valuation is an integral part for levy of service tax. Service is, generally payable, on the amounts billed at the prescribed rate. It is also required to be paid on reimbursements unless the reimbursement satisfies the specified conditions in the valuation Rules. Thus, valuation is an important aspect in determining the base on which service tax is to be levied. For considering valuation aspects, reference is necessary to section 67 and Service tax (Determination of Value) Rules, 2006 ('Valuation Rules' for short).
The valuation provisions also need consideration in two Parts namely, position (i) prior to April 18, 2006 and (ii) w.e.f. April 18, 2006. Prior to April 18, 2006, tax was levied on the 'gross amount' charged by the service provider. As a corollary, consideration received in money was the sole basis to determine the value of taxable service. In cases where the service provider received any part of the consideration in non-monetary form or by way of reimbursement, such items did not figure in the invoice raised, thereby depressing the real value of taxable service.
To correct the lacunae, a new section 67 was substituted for then existing section 67 by the Finance Act, 2006 to take care, inter alia, of the situations where any part of the consideration for services rendered or to be rendered was not received in money form. By this amendment, all previous circulars on valuations were withdrawn. Finance Act, 2012 has further increased the essence of the Valuation Rules. This is because the definition of 'service' has been introduced in section 66B(44) of the Act and this definition of 'service' lays emphasis on the term ' consideration'.
According to section 67 read with rule 3 of the Valuation Rules the value of taxable service in different situations shall be as under:
| S. No. | Situation | Value of taxable service |
| (i) | In a case where the provision of service is for a consideration in money | The gross amount charged by the service provider for such service provided or to be provided by them. |
| (ii) | In a case where the provision of service is for a consideration not wholly or partly consisting of money | The value shall be such amount in money with the addition of service tax charged, is equivalent to the consideration. |
| (iii) | In a case where the provision of service is for a consideration which is not ascertainable. | According to rule 3(a) of Valuation Rules, in this case the value of taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration. |
| According to rule 3(b) of Valuation Rules, the service provider shall determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service. |
12.1 Other provisions (new) in section 67 - These are:
| "(i) | Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. | |
| (ii) | The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after the provision of such service. | |
| (iii) | Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. | |
| | Explanation - For the purposes of this section,— |
| (a) | "consideration" includes any amount that is payable for the taxable services provided or to be provided; |
| (b) | ** | ** | ** |
| (c) | "gross amount charged" includes payment by cheque, credit card deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise". |
12.2 General aspects in the exercise for determination of value - The foregoing discussion shows that in the exercise relating to valuation, the following aspects will need consideration:
| (i) | Service tax is to be imposed on the value of services rendered i.e. on consideration which can be in money form or in kind. Tax is payable on only the value of taxable service and not on the entire value of any contract. | |
| (ii) | When consideration is not ascertainable, it has to be worked out on the basis of section 67(1)(iii) and Rules. | |
| (iii) | Amount charged which does not relate to services rendered has to be excluded. | |
| (iv) | The gross amount liable to service tax will be inclusive of service tax payable. To work out the taxable amount, the following formula can be used- |
| Gross value of the Bill × 100 | = Service tax payable | |
| 100 + Rate of service tax | ||
| (including 2 per cent and 1 per cent education cess) | ||
| (v) | Value includes amount received before, during or after the provision of service. Thus service tax will be payable on the advances received also. | |
| (vi) | Treatment of reimbursement received - With effect from 18-4-2006, comprehensive provisions regarding determination of value of taxable service has been introduced. Accordingly, rule 5(2) of the Valuation Rules provides that the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service. This rule is applicable only when the prescribed conditions are satisfied. | |
| (vii) | Valuation can be only with reference to Valuation Rules. |
12.3 Valuation regarding taxable services of Government/Local authority - Though detailed Valuation Rules have been prescribed, in the case of Government provided services, these will have no application as these services are mostly on the basis of bills and consideration generally is in money. Hence, the service tax will be leviable on the gross amount charged by the service provider for the service provided or to be provided. Hence, detailed Rules of valuation will not be applicable in their cases.
IT: Where at time of hearing before Tribunal, assessee was prevented from arguing matter on merits, Tribunal committed no error in recalling its own order and placing matter for rehearing
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[2013] 33 taxmann.com 345 (Gujarat)
HIGH COURT OF GUJARAT
Deputy Commissioner of Income-tax
v.
Rajendra M. Vyas*
AKIL KURESHI AND MS. SONIA GOKANI, JJ.
SPECIAL CIVIL APPLICATION NO. 1158 OF 2013†
FEBRUARY 12, 2013
Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of [Power of rectification] - Assessee was prevented from arguing matter on merits at time of hearing before Tribunal - Order being passed in favour of revenue - Tribunal allowed assessee's application filed under section 254(2) for rehearing of case - Revenue contended that it was wholly impermissible for Tribunal to hear appeal afresh as it has no power of review - Whether, where Tribunal decided certain issues on merits without giving full opportunity to assessee to make submissions thereon, such order was erroneous - Held, yes - Whether, therefore Tribunal committed no error in allowing assessee's application under section 254(2), by exercising its power of rectification and recalling its own order for hearing afresh - Held, yes [Paras 6 & 7][ In favour of assessee]
CASES REFERRED TO
Neesa Leisure Ltd. v. Union of India [2011] 338 ITR 460/16 taxmann.com 163/[2012] 204 Taxman 86 (Guj.) (para 4) and Dy. CIT v. Manu P. Vyas [2013] 32 taxmann.com 176 (Guj.) (para 6).
Mrs. Mauna M. Bhatt for the Appellant.
ORDER
Ms. Sonia Gokani, J. - This petition is preferred challenging the order of the Income Tax Appellate Tribunal ("the Tribunal" for short) dated 23.7.2012 challenging the validity of the order of the Tribunal in MA No.88/Ahd/2012, whereby the Tribunal exercised the powers under Section 254(2) of the Income Tax Act ("the Act" for short).
2. The respondent assessee preferred appeal before CIT (Appeals), which was partly allowed on 25.1.2006, whereby it confirmed various additions by virtue of such order. Aggrieved by the same, both the sides challenged the order of CIT(Appeals) before the Tribunal. Challenge was made for the entire block period of 1.4.1995 to 26.2.2002. The Tribunal, after an elaborate discussion, passed an exhaustive order on 30.3.2012 and dismissed the appeal of the Revenue.
3. Miscellaneous Application was preferred by respondent under Section 254(2) of the Act and the Tribunal allowed such an application on 23.7.2012, recalling its own order on 30.3.2012 and fixed rehearing of the appeal.
4. It is contended before us by the Revenue that it is not open for the Tribunal to examine validity of search proceedings in view of the decision of this Court rendered in the case of Neesa Leisure Ltd. v. Union of India [2011] 338 ITR 460/16 taxmann.com 163/[2012] 204 Taxman 86. It is urged that when by a detailed judgment, the Tribunal has adjudicated the dispute by and between the parties, the Tribunal's order suffers from the vice and requires to be quashed and set aside. It it also urged that it is wholly impermissible for the Tribunal to hear the appeal afresh as it has no power of review. It emerges from the record the Tribunal, after detailed hearing, it adjudicated the controversy in favour of the Revenue and against the assessee respondent. The Tribunal also gave its final findings examining various additions made by CIT(Appeals) in Miscellaneous Civil Application for rectification moved by the assessee respondent. The stand taken by the assessee respondent is that the only question that was required to be examined by the Tribunal was in respect of its jurisdiction to consider the assessee's challenge to the validity of the search itself. The Tribunal was not to adjudicate the case on merits.
5. The Tribunal, after noting rival contentions of the parties, concluded in MA No.88/2012 that the assessee, since was prevented from arguing the matter on merits, at the time of hearing, it was essential for the Tribunal to recall its own order dated 30.3.2012 and place the matter for hearing afresh. This has perturbed the Revenue, and therefore, present petition has been preferred.
6. Identical question arose in Special Civil Application No.1159 of 2013, where also we had called for the record from the learned advocate for the Revenue as our initial impression was that no arguments on the merits had taken place before the Tribunal. After considering the material placed before us on record, we have dismissed the petition and the present petition also needs to meet the same fate. Instead of giving fresh reasonings in respect of this petition, the issue being identical, it shall have to be accorded the same treatment. It will be appropriate to reproduce the relevant observations made in the case of Dy. CIT v. Manu P. Vyas [2013] 32 taxmann.com 176 (Guj.) as under:
"5. From the original order passed by the Tribunal on 30.03.2012, we had gathered a strong prima facie impression that the assessee was correct in contending before the Tribunal that no arguments on merits beyond the question of applicability of the decision of this Court in case of Neesa Leisure Ltd and anr v. Union of India Through Secretary and ors. (supra) were made. Further, since the Tribunal itself had, in its rectification order, gone on record to suggest that the assessee was correct in making such a statement we had also inquired with the counsel for the revenue whether there was anything on record to suggest that the impression carried by the assessee and as confirmed by the Tribunal in its rectification order could be stated to be erroneous and there was any material to enquire further, particularly, when we find that the Tribunal was a best judge to record what had transpired during oral hearing before the said forum, the above question became more relevant.
6. Learned counsel Mr. Bhatt for the revenue placed on record a communication dated 08.02.2012 from one Mr. S.K. Gupta, who had appeared before the Tribunal on behalf of the revenue during the said proceedings before the Tribunal, in his letter to the Commissioner of Income Tax, he has stated as under:
"2.2 However, with respect to the arguments and merits, I do not recall whether such arguments were made or not because it is a very old matter being more than one year old. Every day we were arguing 15 to 20 appeals and therefore, being one year old, I do not have any memory with respect to the query made by Shri Manish Bhatt, Advocate as to whether the arguments were advanced on merits or not."
7. From the record therefore, it clearly emerges that the impression carried by the assessee as confirmed by the Tribunal, is not rebutted from any further evidence on record. We would, therefore, proceed to accept the Tribunal's recollection of what transpired during the oral hearing before it true and accurate.
8. In the result, we do not find any merits in the petition in which the principal stand of the department is that the Tribunal could not have recalled its order which was rendered on merits after bypartite hearing. When we find that the Tribunal proceeded to decide certain issues on merits without giving full opportunity to the aggrieved party to make submissions thereon, the order did certainly suffer from an error apparent on the record. Tribunal, therefore, committed no error in exercising power of rectification. We may, however, clarify that by recalling the said order, the Tribunal cannot seem to have recalled its earlier conclusions. With respect to the applicability of the decision of this Court in case of Neesa Leisure Ltd. and anr v. Union of IndiaThrough Secretary and ors. (Supra). We may hasten to add however that with respect to such an issue as far as we are concerned, we have expressed no opinion."
7. This Petition also is being disposed of with the same clarifications as has been done in the above referred matter. Petition is dismissed
ST : Statutory interest is payable in respect of confirmed demand even if same is not demanded in show cause notice
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[2013] 33 taxmann.com 437 (Mumbai - CESTAT)
CESTAT, MUMBAI BENCH
N R Jet Enterprises Ltd.
v.
Commissioner of Central Excise, Mumbai-II*
S.S. KANG, VICE-PRESIDENT
AND SAHAB SINGH, TECHNICAL MEMBER
AND SAHAB SINGH, TECHNICAL MEMBER
ORDER NO. A/995/2012/EB/C-II
APPEAL NO. E/ 2010 OF 2004
APPEAL NO. E/ 2010 OF 2004
OCTOBER 15, 2012
Section 75 of the Finance Act, 1994 - Interest on delayed payment of service tax - Assessee argued that it was not liable to pay any interest because there was no proposal in show cause notice for demand of interest - HELD : Statutory interest is payable in respect of confirmed demand even if same is not demanded in show cause notice - Hence, assessee was liable to pay interest [Para 9] [In favour of revenue]
D.B. Shroff and Anay Banhatti for the Appellant. Amand Shah for the Respondent.
ORDER
S.S. Kang, Vice-President - Heard both sides.
2. The appellant filed this appeal against the impugned order passed by the Commissioner of Central Excise, Mumbai II only challenging the demand of interest.
3. The contention of the appellant is that there are total nine Show Cause Notices were issued to the applicant demanding duty alongwith interest and there was a proposal also for imposition of penalties. The adjudicating authority in the impugned order confirmed the demands alongwith interest. However, the adjudicating authority held that there is no dishonest or conscious disregard of obligation on the part of the appellant. Therefore, proposal in respect of imposition of penalties were dropped.
4. The appellant fairly submitted that in the Show Cause Notices dated 15.4.2002 and 31.3.2003 the appellants are liable to pay interest as per the provisions of Section 11AB of the Central Excise Act, 1944. In respect of the remaining seven Show Cause Notices, there is a proposal for interest under Section 11AA of the Central Excise Act, 1944. However, the adjudicating authority demanded interest under the provisions of Section 11AB of the Central Excise Act which is not sustainable. In respect of the three Show Cause Notices, there is a proposal for demand of interest. However, the adjudicating authority demanded interest under Section 11AB of the Central Excise Act, 1944. This demand is also not sustainable.
5. The contention of the appellant is that the provisions of Section 11AB was amended with effect from 11.5.2001. Prior to 11.5.2001 the provision of Section 11AB of the Central Excise Act, 1944 provides that interest is payable in the case of fraud, collusion etc with intent to evade payment of duty. The contention is that there is a clear finding of the adjudicating authority and there is dishonest intention on the part of the appellant. Therefore, prior to the period 11.5.2001, the appellants are not liable to pay interest under Section 11AB of the Central Excise Act, 1944 and in case where no interest is demanded in the Show Cause Notices, the demand of interest in the adjudication order is not sustainable.
6. It is also submitted by the appellant that duty has been paid as determined within the prescribed period under the provisions of Section11AA of the Central Excise Act, 1944 and no interest is payable.
7. In the present case, the demand was confirmed in respect of the nine Show Cause Notices:
| S.No | SCN Date | Duty demand Rs. | Period | Proposed recovery of interest |
| 1 | 5.3.99 | 9,87,129/- | Nov 98-Jan 99 | Section 11AA |
| 2 | 17.8.99 | 17,24,942/- | Feb 99-Jun 99 | 11AA |
| 3 | 4.1.00 | 21,27,778/- | Jul 99-Nov 99 | 11AA |
| 4 | 16.6.00 | 20,11,510/- | Dec 99-May 00 | 11AA |
| 5 | 29.05.01 | 8,31,913/- | Jan 00 Sep 00 | No Interest Demanded In SCN |
| 6 | 2.7.01 | 33,53,696/- | Oct 00-Mar 01 | -do- |
| 7 | 20.9.01 | 25,04,536/- | Apr 01 Jul 01 | -do- |
| 8 | 16.4.02 | 36,46,060/- | Aug 01 Feb 02 | Sec 11AB |
| 9 | 31.3.03 | 65,07,505/- | Mar 02-Jan 03 | Sec 11AB |
8. The appellants are not contesting the demand of interest under Section 11AB in respect of the two Show Cause Notices dated 16.04.2002 and 31.3.2003. In respect of the first four Show Cause Notices, there is a demand of interest in the Notice under Section 11AA of the Central Excise Act, 1944. However, the adjudicating authority confirmed the demand under Section 11AB of the Act. The provisions of Section 11AB of the Act were amended with effect from 11.5.2001. Prior to 11.5.2001, interest on duty under Section 11AB of the Act is payable in the case of suppression of fact, misstatement etc with intent to evade payment of duty. In the present case, the adjudicating authority had dropped the proposal for imposing penalty on the ground that there is no mens rea on the part of the appellant. Therefore, in respect of the first four Show Cause Notices the appellants are liable to pay interest as per Section 11AA of the Act.
9. In respect of Show Cause Notices mentioned at serial 5,6 and 7, there is no proposal in the Show cause notice for demand of interest. We find that statutory interest is payable in respect of the confirmed duty even in case the same is not demanded in the Show Cause Notice. In view of this, we find that the appellants are liable to pay interest in respect of these Show Cause Notices also under Section 11AA of the Act prior to 11.5.2001 and thereafter the appellants are liable to pay interest under Section 11AB of the Act.
10. The appellant during the arguments submitted that the duty has been paid within the time prescribed under the provisions of Section 11AA of the Act i.e. within thirty days from the determination and the appellants are not liable to pay any interest. The fact requires verification. The adjudicating authority has to redetermined the issue of quantification of interest as discussed above.
11. The appeal is disposed of in the above terms.
VINEETRegards,
Pawan Singla
BA (Hon's), LLB
Audit Officer
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