2014 (12) TMI 282 - AT - Service Tax

Steamer Agent services - Penalty u/s 78 - Jurisdiction of Adjudicating Authority - Held that - A jurisdictional objection has to be raised at the earliest opportunity. Such opportunity was available to the appellants when the SCN was served on them. They did not challenge the Additional Collector s jurisdiction while replying to the SCN, nor did they choose to do so before the adjudicating authority later. They have not raised any jurisdictional objection even in this appeal. The appellants, having submitted to, and acquiesced in the jurisdiction of the departmental authorities, are stopped from challenging it as they did through Counsel at this stage - Following decision of Sangameshwar Pipe and Steel Traders case 2002 (1) TMI 115 - CEGAT, COURT NO. II, NEW DELHI . Amounts were collected by the appellant from their clients for rendering the services of a steamer agent . The amounts so collected were to be remitted to various governmental authorities towards statutory levies. However, the appellant had collected huge amounts from their clients far in excess of the statutory levies and retained the excess amounts so collected with them. The statement also reveals that the amounts collected from the clients were far higher than the statutory levies required to be collected; in many cases, the same were a couple of times more than the requirement. In other words, the appellants were collecting amounts charges for the services rendered under the guise of statutory levies and retaining the excess amounts with them on which they did not discharge any service tax liability. Therefore, the demand of service tax on the amounts so collected along with interest thereon under Section 73 read with Section 75 of the Finance Act, 1994, is sustainable in law. Invocation of extended period of limitation - Held that - appellant did not disclose the collection of extra amounts to the department either in the statutory returns or otherwise. The facts came to light only when investigation was undertaken and the statement of the Managing Director was recorded in January, 2002 and the show cause notice was issued in March, 2002. As held by the Hon ble Apex Court in the Nizam Sugar Factory Ltd. 2006 (4) TMI 127 - SUPREME COURT OF INDIA case, it is the date of knowledge which is relevant for computation of time limit for issue of show cause notice. In the present case, the department came to know of suppression of value only in January, 2002 when the statement of the appellant was recorded and the notice has been issued in March, 2002. Thus the notice has been issued well within time and the plea of time bar fails. Law as it stood at the relevant time prescribed a minimum penalty equal to the tax sought to be evaded and a maximum penalty of twice the amount of tax. The penalty imposed in the present case is within the limits envisaged under the law. The conduct of the appellant by collecting huge amounts under the guise of statutory levies far in excess of such levies clearly reveals mala fide intention on the part of the appellant. Therefore, imposition of maximum penalty as provided for in the law cannot be faulted. - Decided against assessee.

Summary

Issues involved:
Jurisdictional objection regarding the show cause notice, liability to pay service tax on extra amounts collected, time bar for issuing the notice, quantum of penalty imposed.

Jurisdictional Objection:
The appellant raised a jurisdictional objection regarding the show cause notice, arguing that it was issued without proper jurisdiction as the power to issue the notice vested with a different authority. However, the Tribunal dismissed this objection, stating that the appellant had acquiesced to the jurisdiction of the adjudicating authority by not raising the issue earlier. Referring to a previous Tribunal decision, the Tribunal held that the appellant was stopped from challenging the jurisdiction at the appellate stage.

Liability to Pay Service Tax:
The appellant contended that the extra amounts collected were not subject to service tax as they were trade margins or profits, citing a previous Tribunal decision in a similar case. However, the Tribunal found that the amounts collected were in excess of statutory levies and were retained by the appellant, indicating a mala fide intention. The Tribunal held that the demand for service tax on these amounts, along with interest, was sustainable under the Finance Act, 1994.

Time Bar for Issuing Notice:
The appellant argued that the demand for service tax was time-barred as the extra amounts collected were reflected in their books of accounts. However, the Tribunal held that the date of knowledge by the department regarding the suppression of value was relevant for computing the time limit for issuing the show cause notice. Since the facts came to light during an investigation in January 2002, and the notice was issued in March 2002, the Tribunal found the notice was issued within the time limit.

Quantum of Penalty Imposed:
Regarding the penalty imposed, the Tribunal noted that the law at the relevant time allowed for a penalty ranging from the tax amount sought to be evaded to twice that amount. The Tribunal found that the penalty imposed fell within the prescribed limits and was justified due to the appellant's conduct of collecting excess amounts under the guise of statutory levies, indicating a mala fide intention. Therefore, the Tribunal upheld the imposition of the maximum penalty.

In conclusion, the Tribunal dismissed the appeal, finding no merit in the appellant's arguments and upholding the order confirming the demand for service tax, interest, and penalty.