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2007 (4) TMI 26

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..... 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 Central Excise Act, was empowered to issue such notice. 4. The demand of service tax is on "Overriding Commission" (ORC, for short) received by the appellants in Indian currency from Malaysian Airlines during the period of dispute under an Agreement dated 2-11-2000. M/s. Malaysian' Airlines System .....

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..... TA 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 onwards, they had been paying service tax on ORC received from Malaysian Airlines. Shri Krishnan also furnished particulars of payments of ORCs received by the appellants from the airlines during the period of dispute. Statements were also recorded by the investigating agency from Shri T.V. Dorairaj, Executive Director of the appellants and Shri S. R .....

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..... ounsel 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, pointed out that, from Feb' 05 onwards, the appellants had been paying service tax on ORC received in the same manner from their foreign client in respect of the same service without claiming the benefit of the above Notification and, therefore, their claim for the benefit of the Notification for the period of dispute is without bona fides. On the strength .....

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..... 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) To notify the GENERAL SALES AGENT'S reservations and ticketing staff and to Sales Agents in the area, instructions, special advices and sales points sent to the GENERAL SALES AGENT by MAS. (v) Hiring adequate and suitably qualified personnel for various positions in the areas of reservations, ticketing, sales, accounts, administration and so forth. Unless otherwise st .....

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..... mmission, 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 was operated by the Chennai office of Malaysian Airlines. These facts were admitted by the airlines' functionaries in India as also by the appellants' officials in their statements, and confirmed by the Authorised Signatory of ABN Amro Bank in a letter to the Department. On such facts, it can only be held that the services provided by the appellants were received by their client in India, fo .....

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..... ular 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 foreign exchange for taxable services rendered is repatriated from, or sent outside, India." For the benefit of the above Notification, ld. counsel argued that the payments of ORC received by the appellants from Malaysian Airlines should be deemed to be receipts in convertible foreign exchange in terms of the apex court's decision in J.B. Boda case (supra). The question considered by the apex court in the said case was whether the .....

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..... ble 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 in this case. The provision prior to its amendment effective from 10- 9-2004 reads as under :- "Section 73. Value of taxable services escaping assessment - (1) If- (a) The Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise has reason to believe that by reason of omission or failure on the part of the assessee, to make a return under Section 70 for any prescribed period or to disclose wholly or truly all material facts .....

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..... ent. 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 evident from the statements of Sh. Krishnan. Thus it is evident that the appellants were aware of their service tax liability in respect of ORC received by them from Malaysian Airlines during the period of dispute. They had been receiving such payments through credit notes which mentioned the amounts in terms of Indian rupee and the money was realized in the same currency. However, the appellants did not choose to get themselves registered with the department for payment of service tax on ORC in the category of "Business Auxiliary .....

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..... 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 Finance Act 1994 by the appellants. The decisions cited by counsel, which are inapplicable to the present case for the period prior to 10-9-2004, are distinguishable on facts from the present case for the period from 10-9-2004. 11. In the result, the entire demand of service tax raised on the appellants by the Commissioner under subsection (1) of Section 73 of the Finance Act, 1994, along with interest under Section 75 of the Act, is upheld. However, we are of the view that it would be harsh to impose on the appellants the maximum penalty prescribed under Section .....

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