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TMI Blog2015 (4) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... es from a third party or wait for discharge of the liability by the assessee till it has recovered the amount from its contractors. - The fastening of liability on such account by such order on the contractors is, thus, a matter restricted to claims of the appellant against such parties. It would have no bearing insofar as the claim of the Revenue against the appellant for recovery of the tax dues is concerned. Extended period of limitation - Held that:- Plea of “bona fide belief” is devoid of substance. The appellant is a public sector undertaking and should have been more vigilant in compliance with its statutory obligations. It cannot take cover under the plea that contractors engaged by it having agreed to bear the burden of taxation, there was no need for any further action on its part. For purposes of the taxing statute, the appellant is an assessee, and statutorily bound to not only get itself registered but also submit the requisite returns as per the prescription of law and rules framed thereunder. - Imposition of the service tax liability under Section 73 read with Sections 68 and 95 of Finance Act, 1994 and the levy of interest thereupon in terms of Section 75 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its revenue, DTC entered into contracts with seven agencies (contractors/advertisers) thereby providing space to such parties for display of advertisements, inter alia, on bus-queue shelters and time-keeping booths. The said contracts included one dated 08.11.2004 with M/s Shivaai Industries Pvt. Ltd (SIPL), 2305, Dharampura, Chawri Bazar, Delhi-110006 (service tax registration No. DL-1/ST/RII/ADV/SIPL/1921/06) and the other M/s International Avenues (IAV), A-1, Community Centre, C-Block, Naraina Vihar, New Delhi-110028 (service tax registration No. DL-1/ST/R-II/ADVIA/1907/06). It appears that both the said contracts contained similar stipulations including clause No. 9 which would read as under:- It shall be responsibility of the contractor/Advertiser to pay direct to the authority and MCD concerned the advertisement tax or any other taxes levy payable or imposed by any authority and this amount will be in addition to the license fee quoted above 4. Concededly, DTC received from the said contractors/advertisers, total sum of ₹ 30,43,71,671/- (Rupees Thirty Crore Forty Three Lacs Seventy One Thousand Six Hundred Seventy One only) during the period 01.05.06 to 31.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve not paid during the period May, 2006 to March, 2008, should not be recovered under Section 75 of the Finance Act. 1994; (iii) Penalty should not be imposed under Section 76 of the Finance Act, 1994, as amended in view of failure to pay the Service Tax amounting to ₹7,19,01,910/-(three SCNs) on the said services as stated above; (iv) Penalty should not be imposed under Section 77 of the Finance Act, 1994, as amended in view of failure to get registered and furnish prescribed returns in time; (v) Penalty should not be imposed under Section 78 of the Finance Act. 1994, as amended on account of suppression of fact that service of Sale of Space for Advertisement had been rendered and intentionally contravening of provisions of service tax law rules with intent to evade payment of duty and thereby evading Service Tax amounting ₹7,19,01,910/- on the said services as stated herein above. 7. DTC submitted replies by letters dated 03.07.2008, 07.11.2008 and 13.12.2008, inter alia, seeking to explain that it is an autonomous body of Govt. of NCT of Delhi created under the Road Transport Act and had no intention to violate the provisions of the taxing statutes. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Service Tax thereby confirming the demand of ₹7,19,01,910/- under Section 73 read with Section 68 and 95 of the Finance Act, 1994, and Section 140 of the Finance Act, 2007, directing interest (at appropriate rate) to be charged under Section 75 and imposing penalties of ₹1,000/- under Section 77 of Finance Act for failure to file ST-3 returns for each of the three periods, ₹5,000/- under Section 77(1) for not obtaining the registration in accordance with Section 69, ₹5,000/- under Section 77(2) generally for the contravention of the statutory provisions relating to the service tax and ₹7,19,01,910/- (Rupees Seven Crore Nineteen Lacs One Thousand Nine Hundred and Ten Only) under Section 78 for intentional failure to pay the service tax to evade the liability. 10. In reaching conclusions to above effect, the adjudicating authority repelled the contentions of DTC objecting to the assessment for the extended period of five years invoking Section 73 of the Finance Act, 1994 holding that the assessee had contravened the relevant statutory provisions thereby indulging in suppression of material facts . Penalty under Section 77 of the Finance Act was imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 9 of Arbitration and Conciliation Act, 1996, inter alia, fastening the liability of service tax (in the event of it being imposed) on such contractors, the Revenue ought not to insist upon such payment by DTC. The CESTAT, however, held that such considerations would not transfer the substantive and legislatively mandated liability to service tax from the appellant (the service provider) to the advertisers (the service recipients). 13. The CESTAT rejected the claim of DTC as to bona fide belief by observing that:- 6. A bona fide belief is a belief entertained by a reasonable person. The appellant is a public authority and an instrumentality of the State and should have taken care to ascertain whether it was liable to tax in terms of the provisions of the Act. There is neither alleged, asserted nor established that there is any ambiguity in the provisions of the Act, which might justify a belief that the appellant/service provider, was not liable to service tax. It is axiomatic that no person can harbour a bona fide belief that a legislated liability could be excluded or transferred by a contract. The appellant was clearly and exclusively liable to service tax on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia and sale of time slots by a broadcasting agency or organization. 17. There is no dispute that services provided are taxable within the meaning of Section 65 (105) (zzzn) and that the appellant is liable to pay service tax thereupon. We, however, do not agree with the views of CESTAT that the service tax liability could not have been transferred by way of a contract. The reliance of DTC on the ruling in Rashtriya Ispat Nigam Limited (supra) on this score was correct and it appears that the same has not been properly appreciated by CESTAT. Noticeably, the claim of the assessee in that case was also founded on contractual terms similar to the one relied upon by the appellant here. 18. The service tax liability in Rashtriya Ispat Nigam Limited (supra) arose out of contract given out for transportation of goods. The contractor engaged had undertaken to bear and pay all taxes, duties and other liabilities in connection with discharge of his obligation . The contractor had invoked the arbitration clause for raising a dispute as to its liability to pay service tax. The claim petition was dismissed by the arbitrator which award was challenged by a petition under Section 34 of Arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax burden can be transferred by contractual arrangement to the other party. But, on account of such contractual arrangement, the assessee cannot ask the Revenue to recover the tax dues from a third party or wait for discharge of the liability by the assessee till it has recovered the amount from its contractors. 21. The directions of this court on the two petitions under Section 9 of Arbitration and Conciliation Act (instituted by the two contractors) would only govern the rights and obligations arising out of the contracts entered upon by DTC with the contractors. It may be that in terms of the said orders, DTC would be in a position to recover the amount of service tax paid by it to the Revenue respecting the services in question. The fastening of liability on such account by such order on the contractors is, thus, a matter restricted to claims of the appellant against such parties. It would have no bearing insofar as the claim of the Revenue against the appellant for recovery of the tax dues is concerned. 22. We agree with the observations of CESTAT that the plea of bona fide belief is devoid of substance. The appellant is a public sector undertaking and should hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was reasonable cause for the said failure. [emphasis supplied] 27. It is plain and clear from the reading of the bare text that in order to invoke the penalty under the above-noted clause, the Revenue must make out a case of intent to evade payment of service tax , which may manifest by reason of fraud, collusion, willful mis-statement or suppression of facts. 28. It is indeed not the case of the Revenue here that service tax liability was avoided by the appellant with intent to defraud or on account of collusion or willful mis-statement or suppression of facts. In the given facts and circumstances and in light of explanations offered by the appellant even in response to the show cause notices, it is clear that there was no effort to evade the payment of service tax. 29. Noticeably, the appellant was raising bills on the contractors also to claim the service tax dues in terms of the contractual terms, and - there is no dispute raised in this regard - the collections made from the contractors on account of service tax chargeable were deposited in the government account from time to time. The insistence of the appellant that it would deposit the service tax with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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