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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 ..... m exercised its power to remand as well as give directions for taking additional evidence. Power of remand and directions for taking additional evidence by an Appellate Court is provided for in Order 41 Rules 23, 23A and 27 to 29 of the Code of Civil Procedure, 1908. The Code separately provides for remand and production of additional evidence in Appellate Court which is not so under section 35C of the Central Excise Act, 1944. The power of remand prescribed by the Code is that where the Court, from whose decree an appeal is preferred, disposed of the suit upon a preliminary point or the case was disposed of otherwise than on a preliminary point, the decree is reversed in appeal and a re-trial is or considered necessary, the Appellate Court will exercise the power of remand in both such instances. However, this power of remand requires the Court from whose decree appeal was preferred, to determine the suit; and the evidence (if any) recorded during the original trial shall, subject to all just exceptions, be evidence during the trial after remand. Penalty - Held that: - no part of the adjudicated demand can be said to be outside the purview of the scope of section 73 prior to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, learned Advocate appeared on behalf of the appellant/assessee. Referring to the SCN he submitted that the demand, for the respective periods, was on two counts namely banking and other financial services falling under section 65(105)(zm) and business auxiliary services falling under section 65(105) (zzb), both under the said Act. The assessee, he submitted, showed cause by letter dated 14th January, 2008 in which the following was relied upon as set out below: That they dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N, 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. He relied on a decision of the High Court of Bombay in the case of Commissioner of Central Excise Vs. Syntel International (P) Ltd . reported in 2015 (39) STR 27 (Bom), in particular to paragraph 8 therein, on the view expressed as is reproduced below: Though the appellate power by implication includes a power to remand the case back to the Adjudicating Authority, still such power should not be exercised routinely and as a matter of course. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot 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 remand on this issue is also unjustified. His next submission was directed to the part of the demand in the SCN based on the allegation that a sum of ₹ 93 lakhs had been collected by the appellant as service tax but not paid to the credit of Central Government. According to him only an amount of ₹ 7,54,689/- was collected by the appellant representing service tax and the balance consisted of a contingency deposit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ambiguity. It should be specific and unambiguous. iv. v. The charges should be specific. They should not be vague/or contradictory. vi. vii. The duty amount needs to be quantified and explained in a chart as to how the same was arrived at. The duty demanded should be manifestly specified in the notice itself. viii. ix. .. x. . xi. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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, therefore, was of the considered opinion that operating lease cannot be termed as financial lease or be classified under the category of banking and other financial services and dropped the demand of service tax on the rentals received by the assessee. The Commissioner then, in the said order, proceeded to consider whether loan against hypothecation is a service as asserted by the Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 powers of the Appellate Tribunal under the said Act. Sub-section(7) in section 86 of the Finance Act, 1994 provides as follows: 86 . ( 7). Subject to the provisions of this Chapter, in hearing the appeals and making orders under this section, the Appellate Tribunal shall exercise the same powers and follow the same procedure as it exercises and follows in hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded 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 leasing, equipment leasing and hire purchase, where the commissioner confirmed the demand and others are operating lease, loan against hypothecation and hire purchase finance, where the demands were dropped. The Hon ble Supreme Court in Sundaram Finance s case has categorically laid down that the nature of transaction culled out from the documents and surrou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 93.00 lakh is the result of computation error, the amount of ₹ 69,52,945/- is collected as contingency deposit and not service tax. ( VI) The demand on penal interest and termination charges are liable to be dropped and the transaction relating to collection of Management Fees be scrutinized and reasons be recorded for its leviability or otherwise to service tax under the category of Banking other Financial Services. Thus by the impugned order there was remand of the issues for reconsideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial 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 transaction determined from the terms of agreement considered in the light of surrounding circumstances was that the agreement undoubtedly contains several onerous covenants but all intended to secure to the appellant (in that case), recovery of the amount advanced. The Supreme Court was accordingly of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 could persuade us to consider an interpretation possible otherwise than that given by the Commissioner, for the purpose of upholding the impugned order. There is no record in the impugned order that the appellant refused, failed or neglected to produce any document or evidence before the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 found by the adjudicating authority, no part of the adjudicated demand can be said to be outside the purview of the scope of section 73 prior to its substitution. Before that authority no ground had been taken that the SCN did not disclose reason to believe omission or failure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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