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TMI Blog2011 (4) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by the Tribunal that the demand of differential tax both on merits and on limitation and accordingly has set aside the order passed by the Assessing Officer as well as the first Appellate Authority. 2. M/s. Scott Wilson Kirkpatrick (India) Private Limited - the assessee is providing taxable services under the category of 'Consulting Engineer Service' and are duly registered under the Finance Act, 1994. The assessee entered into a contract agreement captioned as 'Project Coordinating Consultancy Services for Karnataka State Highways Improvement Project'. In pursuance of the said agreement, the assessee provided services like project preparation which includes feasibility study, screening of the roads, identify analysis and developmental proposals for institutional measures and such other engineering consultancy services which are more descriptively mentioned in the Appendix A of the said agreement. In terms of the said agreement, the assessee billed/charged gross amount of Rs. 30,02,26,393 from their clients both in local currency and in foreign currency. The value of taxable service rendered i.e., an amount of Rs. 22,15,54,047 in local currency and an amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The appeal is admitted by this Court on 17-9-2007 to consider the following substantial questions of law:- 1. Whether the Tribunal was right in holding that the major portion of the demand is time barred? 2. Whether the order of the Tribunal in regard to deduction of reimbursable expenses is legally tenable, in the facts and circumstances of the case? 3. Whether for the purpose of levying service tax, the contract made has to be read in toto or has to be bifurcated for other various services? 4. Whether the Tribunal is justified in applying the Notification Nos. 2/1999-ST, dated 28-2-1999, 06/1999-ST, dated 9-4-1999, 21/2003-ST, dated 20-11-2003 and granting exemption in favour of the assessee without verifying the conditions prescribed therein wherein it is stated that foreign exchange received was repatriated from or sent outside India? 6. At the time of hearing, the learned counsel for the assessee raised an objection regarding maintainability of this appeal before this Court. He contended that this appeal is filed under section 35G of the Central Excise Act, 1944, for short hereinafter referred to as the Act , in view of section 83 of the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reads as under :- 83. Application of certain provisions of Act 1 of 1994 - The provisions of the following sections of the Central Excises and Salt Act, 1944 as in force from time to time, shall apply, so far as may be in relation to service tax as they apply in relation to duty of excise . Therefore, sections 35G and 35L of the Central Excise and Salt Act, 1944 are mutatis mutandis made applicable to the Finance Act, 1994. That is how the present, appeal is filed by the revenue under section 35G of the Central Excise and Salt Act, 1944 before this Court. 11. In order to appreciate the aforesaid contention, firstly it is necessary to see the statutory provisions as contained in sections 35G and 35L which reads as under: 35G. Appeal to High Court. (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law. 35L. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion relating to or in relation to these two aspects alone, the High Court has no jurisdiction and in respect of other things it has jurisdiction. 13. In order to appreciate this contention, we have to carefully see the wordings employed by the Legislature. The relevant words are as under: - Not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of Service for the purposes of assessment . The key word in the said provision is for the purpose of assessment . That means the order referred to therein, is an order passed in the course of assessment. Therefore, all orders passed in the course of assessment involving the determination of any question having a relation to the rate of duty of service or to the value of Service, cannot be the subject-matter of appeal before the High Court. By the use of the word 'among other things' it is made clear, even order which may not be directly related to the rate of duty of service or the value of Service, however which are intermingled with those matters are also excluded. In other words those are not the only orders contemplated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial sense in which it may have been used in the Indian Income-tax Act in a particular context. 17. The Apex Court in the case of ITO v. K.N. Guruswamy [1958] 34 ITR 601 explaining the meaning the word 'assessment' arising under the Income-tax Act has held as under:- Total income means the total amount of income, profits and gains computed in the manner laid down in the Act, and there are no good reasons why the word assessment occurring in the saving provisions should be restricted in the manner suggested so as to exclude proceedings for assessment of escaped income or under-assessed income. ......... In its normal sense, to assess means to fix the amount of tax or to determine such amount . The process of re-assessment is to the same purpose and is included in the connotation of the term assessment . The reasons which led us to give a comprehensive meaning to the word assessment in section 13(i) of the Finance Act, 1950, operate equally with regard to the saving provisions under present consideration. 18. The Supreme court, in the case of C.A. Abraham v. ITO [1961] 41 ITR 425 explaining the meaning of the word 'assessment' in the context of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which ends a controversy or a dispute by some authority to whom it is submitted under a valid law for disposal. The expression order must have also a similar meaning, except that it need not operate to end the dispute. Determination or order must be judicial or quasi-judicial, purely administrative or executive direction is not contemplated to be made the subject-matter of appeal to this Court. The essence of the authority of this Court being judicial this Court does not exercise administrative or executive powers i.e., character of the power conferred upon this Court, original or appellate, by its constitution being judicial, the determination or order sought to be appealed from must have the character of a judicial adjudication. Meaning of rate of duty 20. It is in this background we have to interpret the words rate of duty . The question is, what is the meaning attached to the 'rate of duty' as mentioned under these provisions. In order to understand the word 'rate of duty' and the dispute relating to that, it is useful to refer to the meaning assigned to the said word by the Parliament by way of an Explanation to sub-section (5) of section 35G by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of assessment of duty of excise shall be enhanced or reduced by addition or reduction of the amounts in respect of such matters as are specifically provided under the Act. Though the determination of the word 'duty' may not include all those questions, the Explanation makes it clear the aforesaid expanded meaning is to be attributed to the aforesaid phrase for the purpose of this section only. It is because the said Explanation is added to section 35E which deals with the power of revision of Board or Commissioner of Central Excise in certain case. In other words what is sought to be conveyed by the Explanation is that the authorities while exercising the revisional jurisdiction shall not go into those questions. That in no way comes in the way of understanding the meaning of the phrase 'rate of duty'. On the contrary it clearly sets out the intention of the Legislature insofor as the meaning to be attributed to the said phrase. Therefore, the said meaning could be read into the phrase wherever it is used in the other parts of the statute, as held by the Apex Court in Navin Chemicals case. It also would be in conformity with the interpretation placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have considered the rival contentions made on behalf of parties and also perused the provisions of sections 35G and 35L(b) of the Act of 1944, an appeal against the order passed by the Appellate Tribunal would lie to the High Court except an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment. Section 35L(b) provides that an appeal against an order passed by the Appellate Tribunal relating among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment would lie to the Supreme Court. It is, thus, clear from the aforesaid proviso that an appeal against an order passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment would lie to the Supreme Court and not the High Court. 25. The Apex Court in the case of ITC Ltd. v. Collector of Central Excise 1997 (94) ELT 456 dealing with section 35L(b) of the Central Excise Act, 1944 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of a special Bench and an ordinary Bench, the Supreme Court had an occasion to consider the very same words used in both the sections in the case of Navin Chemicals Mfg. Trading Co. Ltd. v. Collector of Customs 1993 (68) ELT 3 under the Customs Act. The Apex Court held as under : The controversy, therefore, relates to the meaning to be given to the expression 'determination of any question having a relation to the rate of duty of customs or to the value of the goods for purposes of assessment'. It seems to us that the key lies in the words 'for the purpose of assessment' therein. Where the appeal involves the determination of any question that has a relation to the rate of customs duty for the purposes of assessment that appeal, must be heard by a Special Bench. Similarly, where the appeal involves the determination of any question that has a relation to the value of goods for the purposes of assessment, that appeal must be heard by a Special Bench. Cases that relate to the rate of customs duty for the purposes of assessment and which relate to the value of goods for the purposes of assessment are advisedly treated separately and placed before Special Benche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mit his application to cases where for the purposes of assessment, questions arise directly and proximately as to the rate of duty or the value of the goods. 2. At para 12 they concluded as under : This, then, is the test for the purposes of determining whether or not an appeal should he heard by a Special Bench of CEGAT, whether or not a reference by CEGAT lies to the High Court and whether or not an appeal lies directly to the Supreme Court from a decision of CEGAT: does the question requires determination have a direct and proximate relation, for the purposes of assessment to the rate of duty applicable to the goods or to the value of the goods. 28. In the case of Commissioner of Customs v. Jayathi Krishna Co. 2000 (119) ELT 4 (SC), the question involved was whether the assessee is liable to pay interest under section 61(2) of the Customs Act. When the imposition of interest under the aforesaid provision was challenged before the Tribunal, the Tribunal held that DEEC Scheme having been made applicable to the goods in question, the question of payment of interest would not arise at all. Against the said order, the revenue preferred an appeal directly to the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 64.04 and accordingly, they were liable to pay duty of customs at 50 per cent + CVD at 15 per cent ad valorem and the assessee was not entitled to concessional rate of duty under Notification No.45/94-Cus., dated 1-3-1994 and the department was right in invoking Rule 8 of the Customs Valuation Rules. 33. In Commissioner of Customs v. Edhayam Frozen Foods 2008 (230) ELT 225 (Mad.), objection was taken regarding the maintainability of the appeal before the High Court under section 130 of the Customs Act. It was held that the determination of question involved in this case does not have a relation to the rate of duty or the value of the goods for the purpose of assessment and therefore, the appeal was maintainable. The question involved therein was whether Prawn/Shrimp is also fish and liable to export cess under Agricultural Produce Cess Act, 1940. In coming to the conclusion they relied on the judgment of the Apex Court in Navin Chemicals Mfg. Trading Co. Ltd.'s case (supra) wherein an observation was made that the case did not have a direct or proximate relation for the purpose of assessment either to the rate of duty applicable to the said goods or to the value there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... setting down how every one shall pay, or be charged with, to any tax. By the use of the expression 'rate' a relation between the taxable income and the tax charged is intended, but the relation need not be of the nature of proportion of fraction. The Explanation to sub-section (5) of section 35E of the Central Excise Act, the expression includes the determination of a question relating to the rate of duty, to the value of Service for the purposes of assessment; to the classification of Service under the Tariff and whether or not they are covered by an exemption notification; and whether the value of Service for the purposes of assessment should be enhanced or reduced having regard to certain matters that the said Act provides for. Questions relating to the rate of duty and to the value of Service for purposes of assessment are questions that squarely fall within the meaning of the said expression. A dispute as to the classification of Service and as to whether or not they are covered by an exemption notification relates directly and proximately to the rate of duty applicable thereto for purposes of assessment. Whether the value of Service for purposes of assessment is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of service tax. (h) Whether a particular services fall within which heading, sub-heading of section 65 (105) of the Service Tax Act, 1994 which defines taxable service . 37. From the aforesaid discussion, it is clear that an order passed by the Appellate Tribunal relating to the determination of any question having relation to the rate of service taxes or to the value of services for the purposes of assessment lies to the Supreme Court under section 35L(b) of the Act and not to the High Court under section 35G. 38. The intention behind this bifurcation of jurisdiction between the Apex Court and the High Court seems to be that more often than not, any decision on these aforesaid aspects not only affects the interest of the parties rendering services who are parties to a dispute, but also to the parties rendering those services throughout the country. In a country governed by Parliamentary legislation because of the territorial bifurcation in forming states and because of the divergent opinion which is possible, the service tax payable would vary from place to place. In order to bring uniformity in the levy of service tax throughout the country and consequently to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground of limitation. The objection of the assessee was over-ruled and demand was issued. The first appellate authority, i.e., the Commissioner of Appeals up held the demand and dismissed the appeal. 40. The Tribunal accepted the case of the assessee and set aside the same. 41. As is clear from the questions of law framed, the question that is to be decided by this Court in this appeal is whether for the purpose of levying service tax, the contract made has to be read in toto or has to be bifurcated for other various services and whether the assessee is entitled to exemption from payment of service tax in pursuance to the Notification Nos. 2/99, dated 28-2-1399, 6/99, dated 9-4-1999 and 21/2003, dated 20-11-2003, apart from other issues. 42. All these questions relate to determination of rate of duty payable, entitlement of exemption under notification. They have to be decided by the Apex Court in an appeal to be preferred under section 35L of the Central Excise Act, 1944 and not by the High Court in an appeal preferred under section 35G of the Central Excise Act, 1944. Therefore the learned Counsel for the assessee is justified in contending that this appeal preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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