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TMI Blog2017 (9) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... ere not included in the show-cause notice? (ii)Whether the remand order of the Tribunal is otherwise bad in law? The facts in brief are that the Commissioner, Service Tax had issued show cause notice(SCN) dated 16th October, 2010 alleging the appellant did not levy or pay service tax of Rs. 4237.49 lakhs and education cess of Rs. 51.45 lakhs, leviable on taxable services namely 'banking and other financial services' and 'business auxiliary services', during the periods respectively from 1st April, 2002 to 31st March, 2007 and 1st July, 2003 to 31st March, 2007. The longer period of limitation as provided under the proviso to section 73(1) of the Finance Act, 1994 was invoked for recovery of the aforesaid amounts of service tax and education cess. By letter dated 14th January, 2008 the assessee showed cause. The matter proceeded for adjudication and order-in-original dated 31st March, 2009 came to be passed. Both the assessee and the Revenue preferred appeals against the said order-in-original. The appellant/assessee, in these appeals, has assailed findings in the order of the Tribunal relating to the aforesaid demand resulting in directions for remand. Mr. J.K. Mittal, learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vs. Commissioner of Central Excise, Mumbai reported in 2016 (334) ELT 577 (SC), paragraph 11; (ii) Commissioner of Central Excise, Bhubaneshwar-I Vs. Champdany Industries Ltd. reported in (2009) 9 SCC 466, paragraph 38; and (iii) Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd. reported in (2006) 7 SCC 592, paragraph 16. Mr. Mittal submitted that without prejudice to his submission on the scope of adjudication as arisen from the SCN, in any event the adjudicating authority had expressed the view that 'gain on securitization' being a profit/gain on sale of financial assets, eg. loan receivables and not an amount charged towards rendering any financial service, the question of charging service tax on the same does not arise at all. The Revenue had not challenged the said finding before the Tribunal. As such the order of the adjudicating authority on this issue was correct and there was no occasion for the direction of remand given in relation thereto in the impugned order. In directing remand, according to Mr. Mittal, the Tribunal had gone beyond the lis and provided an opportunity to the Revenue to cure defects in the SCN which is not permissible under the law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t figures have not been analysed and no explanation is available to show that RBI statement figures show only the commission income. In this respect the said assessee have submitted that the figures being picked up from the RBI Returns has also included amount of 'M & C Agent Fee- Securitisation A/c.,' in the nature of differential interest between FD Rate and applicable Discount Rate. This being in the nature of pure interest, cannot in any case be charged to Service Tax. The said assessee have provided the following figures as "Collection Commission" for the years 2003-04 to 2005-06 and stated that in the year 2006-07 there is no income under the head "Collection Commission". I am of considered opinion that there is no justification in calculating Service Tax liability on the basis of figures of RBI Returns as these are not true reflection of income under "Collection Commission". There was no challenge against such findings of the adjudicating authority put up by the Revenue before the Tribunal. The Revenue was unable to produce any material before the Tribunal to show that the reasons given by the adjudicating authority were on erroneous appreciation of facts. Direction for rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiation of penalty proceedings does not and cannot arise.........." He submitted further, the SCN was issued under section 73 and penalty imposed under section 78 of the said Act. Both the sections stand substituted. Section 73 was substituted with effect from 10th September, 2004 which date fell within the respective periods for which the demand was made. Section 78 stood substituted with effect from 14th May, 2015. According to him the adjudicating authority failed to appreciate that part of the demand was in respect of a period in which the provisions in section 73, before substitution, applied and in imposing penalty had done so under the provisions of substituted section 78. He went on to submit, as per the Central Excise Intelligence and Investigation Manual the SCN is more than a notice. He relied on the particulars given in paragraph 2 of chapter 9 of the said Manual, to the clauses therein as are reproduced below: "2...... i. The Show Cause Notice should be issued only after proper inquiry/investigation i.e. when the facts used are ascertained and allegations are justified. ii. ...... iii. The Show Cause Notice should not be an exercise in deliberate ambigu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to the context of answering the questions framed. The Commissioner, Service Tax in making the order-inoriginal accepted, inter alia, the contention of the assessee that in the period under consideration the assessee had indulged in providing to its customers, operating lease of equipment. This was done by the equipment being let out subject to payment of rentals, there being no transfer of ownership of the assessee at the end of the lease term. Risks and rewards incident to ownership were thereby not substantially transferred. Possession of the assets were to be handed back to the assessee after termination of the agreement. The Commissioner held that this operating lease was different from financial lease as defined under section 65(12) of the Finance Act, 1994. The Commissioner observed that a new taxable service had been introduced with effect from 16th March, 2008 as supply of tangible goods service defined under section 65(105)(zzzzj) of the said Act. The Commissioner held that operating lease is nothing but renting of tangible goods including machinery equipment and appliances for use, without transferring right of possession and effective control. The Commissioner, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, we find the grievance was that the adjudicating authority had only relied upon the figures furnished and clarifications given by the assessee without probing the basis of such figures or veracity of clarifications given by the assessee. That the assessee's contention of operating lease was accepted even where the basic condition, that is the user would be liable for maintenance of the equipment and the payment of taxes and insurance etc., is present. As such the adjudicating authority while observing that operating lease, loan against hypothecation and hire purchase finance are not taxable under the category of 'banking and other financial services', had not examined whether these services were actually financial leasing and hire purchase under the garb of different name and style. It appears, the Tribunal accepted the contentions of the Revenue in making its directions for remand except on the issue of Rs. 93 lakhs, being a part of the aggregate demand, on which the direction was made in fairness since the other issues involved regarding the rest of the demand stood remanded. For the purpose of answering the questions formulated it is necessary to ascertain the law regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument before this Tribunal, the appellant had referred to sample copies of agreements relating to lease agreements entered prior to and after 16.7.2001, hire purchase agreement before and after 16.7.2001, hire purchase finance agreements, loan-cum hypothecation agreements. ......... 26. As already noted above even though the ld. Commissioner has recorded finding on the aspect of demand of Service Tax on the services of financial leasing, equipment leasing and hire purchase as taxable service while dropping the demand on operating lease, loan against hypothecation and hire purchase finance, but failed to discuss any of the agreements/documents to ascertain the true colour of the transaction between the appellant and its customers. Also, we find that even though the demand is spread over a period of five years i.e. from April, 2002 to March, 2007, however, agreements for all these years had not been enclosed. In absence of complete facts supported by documents indicating the nature of true transaction between the appellant and its customers, it would certainly be difficult to arrive at a conclusion, whether the claim of the appellant that their transactions involve financial l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain the true nature of transaction between the appellant and its customers so as to arrive at a conclusion whether the said services fall within the scope of "Banking & other Financial services". (II) The securitization agreements/contracts between the appellant and its customer banks be examined/scrutinized to ascertain whether the transaction is that of a sale or a service, accordingly, its deductibility from the gross taxable value or otherwise. (III) In the event various services rendered are held to be taxable, detail findings and reasons in computing the value either from RBI statements or from any other source for the years 2004- 05, 2005-06 & 2006-07 be recorded. (VI) The transactions between the Appellant and clients (banks) be scrutinized to ascertain the collection commission received by the Appellant whether would fall under the scope of Business Auxiliary service (BAS). (V) The Appellant be allowed to furnish further evidences in support of their claim that demand of Rs. 93.00 lakh is the result of computation error, the amount of Rs. 69,52,945/- is collected as contingency deposit and not service tax. (VI) The demand on penal interest and termination c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of additional evidence as follows: "28.The Karnataka High Court had, however, not complied with provisions of Order 41, Rule 27 of the C.P.C. which require that an appellate Court should be satisfied that the additional evidence is required to enable them either to pronounce judgment or for any other substantial cause. It has recorded no reasons to show that it had considered the requirements of rule 27, Order 41, of the C.P.C. We are of opinion that the High Court should have recorded its reasons to show why it found the admission of such evidence to be necessary for some substantial reason...." We are conscious that the Central Excise Act, 1944 in providing for the powers of the Appellate Tribunal did not make applicable the provisions of the Code of Civil Procedure as far as may be to appeals to it but those provisions have been made applicable as far as may be to appeals to the High Court. That being the situation we find no reason to not expect adherence to some procedure by the Tribunal in exercising appellate powers of making directions for remand and taking additional evidence. In Sundaram Finance Ltd. (supra) the majority decision regarding the true effect of a tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal had before it sample agreements and the omission on the part of the Revenue to disclose any material before it for the purpose of obtaining directions for production of additional evidence on remand. The Tribunal found lack of assistance from the order of the Commissioner, since according to it, the Commissioner had not examined all the agreements. However, the Tribunal did not come to a finding that though the sample agreements said something but the true nature of transactions in relation thereto was something else. The question is really of interpretation. In Sundaram Finance Ltd. (supra) the Supreme Court gave the interpretation of the transaction resulting from the agreement and other documents executed in that case. Here too the Revenue has urged an interpretation of, as according to it, the true nature of transactions emanating from the appellant's documents as constituting transactions of taxable services on which service tax had not been paid. The Commissioner gave his interpretation while the Tribunal did not but remanded the matter with direction for taking additional evidence. The Revenue was unable to show that there was any material before the Tribunal that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dication in the facts and circumstances. "The said assessee have obtained Service Tax registration on 23.08.01. This shows that they believed that they were liable for payment of Service Tax against providing taxable service viz "Banking & Other Financial Service". But they did not submit any ST-3 Returns required under section-70 of the Finance Act,'94. For contravention of the provisions of section-70, the said assessee are liable for penalty under section-77 of the Finance Act, '94. The said assessee after getting registration on 23.08.01, started collection of Service Tax. It has been ascertained that they have collected Rs. 93 lakhs as Service Tax and shown in their books of accounts as "Contingency Deposit". This shows their any ST-3 Returns. This shows their suppression of facts with intent to evade payment of Service Tax. As such extended period in terms of proviso to section-73(1) of Finance Act, '94 is applicable in this case. The said assessee are also liable for penalty under section- 78 of the Finance Act,'94. As penalty is considered under section- 78 no penalty is imposed under section-76 of the Finance Act,'94." In the context of the facts in this case as fou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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