2015 (9) TMI 1604 - Commission - Service Tax

Settlement Commission - The application has been filed for settlement of a case under Section 32E of the Central Excise Act 1944 made applicable to service tax vide Section 83 of the Finance Act 1994 (32 of 1994) - Held that - The Bench finds that the applicant has not filed returns as prescribed in clause (a) of the first proviso to Section 32E(1) as made applicable to Service Tax as per Section 83 of the Finance Act 1994. This clause states that no application shall be made unless the applicant has filed returns showing production clearance and central excise duty paid in the prescribed manner - The Bench finds that even after having been intimated that the ST-3 returns had not been filed in contradiction to the contentions in the application for settlement the applicant has neither availed the opportunities offered to him to be heard in the matter nor explained the contradiction in his averments made in the application and the position as intimated by the jurisdictional Commissioner. Thus the Bench considering the case record including the report received from the jurisdictional Commissioner and statement dated 7-3-2015 of the applicant concludes that the applicant has not only not filed the requisite ST-3 returns but also tried to mislead the Bench by enclosing documents purported to be ST-3 returns filed with the Department. The applicant has not fulfilled the condition for approaching the Settlement Commission as stipulated in clause (a) of the first proviso to sub-section (1) of Section 32E of the Central Excise Act 1944 read with Section 83 of Finance Act 1994 and also not cooperated with the Settlement Commission in the proceedings - the Bench holds that M/s. Saujannaya Enterprises are not eligible to make an application to the Settlement Commission and consequently without going into the merits of his Service Tax liability rejects the application for settlement filed by M/s. Saujannaya Enterprises.

Issues Involved:

1. Non-deposit of collected Service Tax.
2. Non-submission of statutory returns.
3. Misstatement and suppression of facts.
4. Eligibility to approach the Settlement Commission.
5. Calculation of Service Tax liability.
6. Claim of Pure Agent expenses.
7. Immunity from penalties and prosecution.

Detailed Analysis:

1. Non-deposit of collected Service Tax:
The applicant, a registered Service Tax assessee, was found to be collecting Service Tax from customers but not depositing it with the exchequer. The investigation revealed a significant shortfall in the deposited amount compared to the collected Service Tax.

2. Non-submission of statutory returns:
The applicant did not submit the required statutory returns to the prescribed authority. During the investigation, the applicant admitted to not filing returns due to ignorance, contradicting the claim in the settlement application that returns had been filed.

3. Misstatement and suppression of facts:
The applicant was found to have shifted business premises without informing the jurisdictional Service Tax Authority and continued collecting Service Tax without updating the registered premises in their ST-2 Certificate. The investigation also revealed discrepancies in the applicant's statements regarding the filing of returns.

4. Eligibility to approach the Settlement Commission:
The applicant's eligibility to approach the Settlement Commission was questioned due to non-compliance with the condition of filing returns as stipulated in Section 32E(1) of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994. The applicant's contradictory statements and failure to cooperate with the Settlement Commission further disqualified them from making a settlement application.

5. Calculation of Service Tax liability:
The total Service Tax liability for the period 2007-08 to 2011-12 was calculated to be Rs. 3,95,19,174/-, with a shortfall of Rs. 3,30,88,508/- after accounting for partial payments made by the applicant. The applicant contested the calculation, claiming that the liability included amounts received as a trustee or pure agent, which should not be taxable.

6. Claim of Pure Agent expenses:
The applicant claimed that part of the amounts considered as taxable value included Pure Agent expenses, which should be excluded from the taxable value. However, the DGCEI report stated that there was no mention of Pure Agent services in the agreements submitted by the applicant, and thus, the claim did not merit consideration.

7. Immunity from penalties and prosecution:
The applicant sought immunity from penalties and prosecution under any Central Act, claiming to have made a full disclosure and deposited a significant amount towards the Service Tax liability. However, due to non-compliance with the conditions for settlement and misleading the Commission, the application for settlement was rejected.

Conclusion:
The Bench concluded that the applicant did not fulfill the conditions for approaching the Settlement Commission, as stipulated in Section 32E(1) of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994. The applicant's contradictory statements, failure to file returns, and attempts to mislead the Commission led to the rejection of the settlement application without delving into the merits of the Service Tax liability.

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