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TMI Blog2007 (4) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... t and imposed penalties under Sections 76 & 78 of the Act. 2. The appellants have raised a jurisdictional objection. It is submitted that the SCN was issued by the Addl. Director-General of Central Excise Intelligence without jurisdiction. This submission is based on (a) that "Central Excise Officer" was substituted for "Asst. Commissioner of Central Excise or Dy. Commissioner of Central Excise" in Section 73 of the Finance Act 1994 only w.e.f. 13-5-2005 (under the Finance Act, 2005) and (b) that, during the period of dispute (July'03 to Nov'04), only the Asst. Commissioner or Dy. Commissioner of Central Excise had jurisdiction to issue SCN. 3. After hearing both sides, we have overruled the; objection raised by the appellants inasmuch as, on the date on which the SCN was issued, the Central Excise Officer duly authorized for the purpose had jurisdiction to issue the SCN and the Addl. Director-General of Central Excise Intelligence, specified as "Commissioner of Central Excise" in the Table annexed to Notification No. 38/2001-CE. (N.T.), dt. 26-6-2001 as amended by Notification No. 37/2004-C.E., dt. 5-11-2004 read with Section 2(b) of the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellants as GSA of Malaysian Airlines to facilitate and promote expansion of the airlines' services in India as also to achieve their sales target in the time frame fixed by them. He submitted that ORC was being paid to the appellants by Malaysian Airlines for the tickets sold by IATA agencies for the ser vices provided to IATA for and on behalf of the airlines. He submitted that the ORC was @ 6% on ticket fare. Shri Krishnan also informed that all the branches of the appellants (including the one at Chennai) had registered themselves with the respective Commissionerates as 'air travel agents' and that they had been paying service tax on air travel agents' service. However, he admitted, the appellants had not paid any service tax on ORC received from Malaysian Airlines. He also admitted that the appellants had not received any inward remittances in any foreign currency from Malaysian Airlines. In his further statement dt. 29-9-20Q5, Shri Krishnan stated that, consequent on initiation of action by DGCEI, the appellants had since obtained registration with the department in the category of "Business Auxiliary Service" and that, from April' 05 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change. 7. It has also been contended that none of the ingredients under Section 73(1)(a) of the Finance Act 1994 for invoking the extended period of limitation had been established by the department for demanding service tax for the period July 2003 to November 2004 from the appellants by way of SCN dt. 16-11-2005. In this connection, the appellants' counsel has relied on the Supreme Court's judgement in Collector v. HMM Ltd., 1995 (76) E.L.T. 497 (S.C.) and a few other decisions of the Apex Court. 8. Ld. SDR has reiterated the findings of the Commissioner. She has particularly pointed out that the entire service in question had been rendered in India only and there was no export of service. Therefore, the Board's circular cited by the appellants was not applicable. ORC was received in Indian currency by the appellants during the period of dispute and, therefore, the benefit of Notification No. 21/2003-S.T. relied on by the appellants would not be applicable to them. The Notification required to be given strict interpretation. The apex court's judgement in J.P. Boda case (supra) under the Income Tax Act was not applicable to the instant case. Ld. SDR, further, po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt operation of suitable Enquiry, Sales Reservations and Ticketing Offices readily identifiable as MAS offices (in accordance with MAS requirements) adequately equipped for the sales of transportation for passengers at no expense to MAS. Such offices shall be located at a prime and prominent location in a commercial or business district. The basic lay out and design of the Enquiry, Sales Reservations and Ticketing Offices shall adhere to the standard lay out and design of such offices as determined by MAS Property Department. The office, staff and equipment shall be dedicated to MAS. Under no circumstances shall the office be used to represent any other organization besides MAS. (b) Sales promotion including the development of specific markets for transportation by personal and regular contact with actual and prospective passengers and with commercial houses and Sales Agents. (c) Undertaking of special publicity when so requested by MAS. (d) Prominent display of MAS advertising publicity and display material in windows and interiors of all the GENERAL SALES AGENT's offices in the area and such advertising publicity and display material are to be based on MAS standards. (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outlined by MAS in any Service Level Agreement that will be appended or annexed to this Agreement or as may be reflected in MAS manuals." The appellants received passenger sales commission from the airlines on the passenger ticket sales made by them from their own office in India at the rates specified in the Agreement vide Article 9 (i) of the Agreement. On this sales commission, the appellants paid service tax. They also received passenger overriding commission (ORC) from the airlines vide Article 9 (ii) of the Agreement @ 6% on net-flown-revenue on international sector and @ 2.5% on net-flown-revenue on sector within Malaysia, between Malaysia and Singapore or between Malaysia and Brunei. The present demand of service tax is on this commission. Admittedly, like passenger sales commission, Overriding Commission was also paid by the airlines to the appellants as a percentage of the fares collected from passengers at the time of sale of the airlines' flight tickets to them in India. The appellants received this commission in Indian currency into their (ABN Amro) bank account from "QA22" account (in the same bank) of the airlines. This "QA22" account wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such layout and design as determined by Malaysian Airlines so as to be "readily identifiable as offices of Malaysian Airlines" vide Article 5 (iv) of the Agreement. In this scenario, it cannot be gainsaid that the appellants were providing services to Malaysian Airlines in India. Since no 'export of service' was involved in the transaction between the appellants and Malaysian Airlines, the Board's circular dt. 25-4-2007 is not applicable to the case. 9.4 For the period from 20-11-2003, counsel relied on Notification No. 21/2003-S.T. This Notification reads as under :- "In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the pubic interest so to do, hereby exempts the taxable a services specified in sub-section (105) of Section 65 of the said Act, provided to any person in respect of which payment is received in India in convertible foreign ex change from the whole of the service tax leviable thereon under Section 66 of the said Act. Provided that nothing contained in his notification shall apply when the payment received in India in convertible forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the airlines by way of credit notes, which expressed the amounts in Indian rupee. These credit notes were produced at ABN Amro Bank. The bank credited the amounts in Indian rupee into the appellants' account out of 'QA22' account of Malaysian Airlines, a fact confirmed by the bankers themselves. Such receipts, by the appellants from the airlines, of amounts, no part of which was received by the appellants from the airlines by way of inward remittance in convertible foreign exchange, would not come within the scope of the above expression used in Notification No. 21/2003-S.T. ibid. It is settled law that the provisions of an exemption Notification require to be strictly construed. 10. We have also considered the plea of limitation raised by the appellants. The SCN demanding service tax from the appellants for the period July' 03 to Nov.' 04 was issued under Section 73(1) of the Finance Act, 1994 on 16-11-2005. The notice invoked the extended period of limitation for demanding tax for the said period. The appellants' case is that the requirements under Section 73(1) for invoking the extended period of 5 years for demanding tax from them were not fulfilled i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot; (emphasis supplied) We find from the records that there is copious evidence of the appellants' knowledge of their tax liability. In their letter dated 22-7-2004 addressed to Malaysian Airlines, Kuala Lumpur, the appellants had mentioned the legal opinion taken by them to the effect that the services rendered by them as GSA to the airlines were covered under "Business Auxiliary Services". In that letter, they even suggested that service tax on ORC could also be collected from the airlines and paid to the Government. This knowledge of tax liability is also evident from the statements of their functionaries in India. Their Accounts Manager, Sh. S. Krishnan even expressed willingness to pay up the tax for the period of dispute. The correspondence between the Chennai office of Malaysian Airlines and their Head Office at Kuala Lumpur over a period of time from July2004 are also available on record, which indicate that the airlines authorities were aware of, and exercised about, their liability to take over the incidence of service tax on ORC from their GSA viz, the appellants. Such loud thinking in the airlines' circles was triggered by the appellants only as is ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct cannot be applied to a service tax case under pre-10-9-2004 provisions of Section 73(1) of the Finance Act 1994. The extended limitation provisions of Section 73(1) of the Finance Act 1994 as amended w.e.f. 10-9-2004 [vide Finance (No. 2) Act, 2004] are similar to those of Section 11A(1) of the Central Excise Act. Under these provisions, the period of limitation for recovery of tax/duty is five years where such tax/duty has remained non-levied, non-paid, short-levied or short-paid or has been erroneously refunded by reason of fraud, collusion, wilful mis-statement or suppression of facts, or contravention of the relevant provisions of law with intent to evade payment of tax/duty. The question whether the demand of service tax for the period from 10-9-2004 is time-barred has to be determined with reference to the amended provisions of Section 73(1) ibid. We note that two of the ingredients required for invoking the extended period of limitation under these provisions were alleged in the show-cause notice against the appellants and the same have been established in the impugned order, which are (i) suppression of facts and (ii) contravention of Sections 68, 69 and 70 of the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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