9911796707
TMI Blog2019 (7) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... der appropriation of Service Tax and Education Cess totally amounting to Rs. 10,81,74,382/-, since paid by the assessee, as detailed in Annexure-I of the SCN., against the aforesaid confirmed demand. 41.2 I confirm the demand of Service Tax and Education Cess totally amounting to Rs. 39,33,395/- (Rupees Thirty Nine Lakhs Thirty Three Thousand Three Hundred and Ninety Five Only) short paid/ not paid by the assessee i.e. M/s Adiraj Manpower Service Pvt ltd., Pune in respect of MRSA services provided by them to M/s Sigma, during the period from April 2012 and September 2012 to March 2014, as detailed in Anne4xure -II of the Show Cause Notice, under the provisions of Section 73(2) of the Act. I further order appropriation of Service Tax and Education Cess totally amounting to Rs. 71,534/-, since paid by the assessee, against the aforesaid confirmed demand. 41.3 I also order recovery of interest, at the appropriate rate(s) as applicable during the relevant period, on the demand of Service Tax as confirmed at paras 41.1 and 41.2 above under the provisions of Section 75 ibid. I further order appropriation of the amount of interest of Rs. 17,06,959/- since paid by the assessee agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable on the specified records of the assessee, as stipulated under the first proviso to Section 78(1) of the Finance Act,1994. 41.7 Further I also give an option to the assessees, under the second and third proviso to Section 78(1) of the Finance Act, 1994 to pay penalty equivalent to 25% of the demand of Service Tax as determined/ confirmed in para 41.2 above (i.e. 25% of Rs. 39,33,395/- which is equal to Rs. 9,83,349/-) provided the assessee pays the entire amount of demand of service tax, as determined/ confirmed in para 41.2 relevant to the period from April 2012 and September 2012 to March 2014 i.e. Rs. 39,33,395/- along with interest payable thereon as ordered in para 41.3 above on the said amount as well as the 25% penalty, within 30 days of the communication of this order. 42 This order is issued without prejudice to any other action that may be taken against the noticee under the provisions of Chapter-V of the Finance Act, 1994 and/ or the rules made thereunder and/ or any other law for the time being in force." 2.1 Appellants are providing the services under the category of "Manpower Recruitment or Supply Agency Service". Acting on intelligence that the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from April 2012 to March 2014 (including service value provided to M/s Sigma Electric Manufacturing Corporation Pvt Ltd., Chakan, Pune from September 2012 to March 2014) from the assesssee, as detailed in Annexure -should not be demanded and recovered from them in terms of proviso to sub section (1) of Section 73 of the Finance Act, 1994. The amount of Service Tax of Rs. 69,450/- Education Cess Rs. 1,389/- and SHE Cess Rs. 695/- toatally amounting to Rs. 71,534/-, paid by the assessee vide challan no 86709 dated 24.03.2014 during the course of enquiry/ investigations , out of the demand mentioned above, should not be appropriated against the afore said demand of Service Tax. (iii) Interest of, on the demand of Service Tax as demanded at (i) and (ii) should not be demanded and recovered from the assessee, under the provisions of Section 75 of the Finance Act, 1994. Further the interest of Rs. 17,06,959/- already paid by them against their interest due, for the demand at (i) above, and the interest of Rs. 12,876/- already paid by the them vide challan no 86709 dated 24.03.2014 should not be adjusted and appropriated against the interest due for the demand confirmed at (ii) above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined under Section 65B(44) and is also not specified as service under Section 66D (negative list). Hence these services are leviable to service tax but are exempted by the Notification No 25/2012-ST {Seven Hillds Construction {2013 (31) STR 611 (T-Mum)], Ritesh Enterprises [2010 (18) STR 17 (T-Bang)], Nagar Taluka Shramik Seva Sangh [2010 (19) STR 119 (Commr Appl)], Karwar Dock & Port Labour [2010 (17) STR 423 (T-Bang)]. iii. Canteen charges recovered from employees and reimbursement of other expenses should not have formed the part of taxable value of services provided by the Appellant. They were providing the canteen facilities to their employees and recovering the charges towards providing such service to their employee form them. Such charges and other reimbursable expenses could not have formed the part of taxable value. iv. Late Fee could not have been demanded from them as they had filed their SR-3 return in time. For the period April 2013 to September 2013 they had filed the service tax return on 25.10.2013 which was within the due date. Hence no late fees could have been levied upon them. v. Extended period of limitation should not have been invoked. Department ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GSTL 386 (T-Chan)] and Sarkar & Sen Company {2016 (45) STR 479 (AAR)] benefit of Notification No 25/2012-ST has been extended to job work activities. v. The processed undertaken by them are nothing but intermediary process as explained in the table below: Manufacturing Process Process Performed By Base Metal bringing from storage and pouring in melting furnace Job Worker i.e. Appellant Melting in Furnace Principal Manufacturer Manufacture of Raw Casting Principal Manufacturer Fettling & Deburring of the raw casted goods Job Worker i.e. Appellant Material Handling and Handing over to next machining operation after acceptance of quality control Job Worker i.e. Appellant Machining Raw casted goods Principal Manufacturer Assembly Principal Manufacturer or Job Worker i.e. Appellant as applicable Packing of Finished Goods. Principal Manufacturer or Job Worker i.e. Appellant as applicable vi. In the entire production process they were doing fettling which means by which a crude casting is turned into a cost effective quality component that meets all the standards required by the customer and removal of unwanted metal, also they were doing handling of material, pouri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition of the contract entered between the appellants and M/s Sigma (Contracts dated 1st January 2012, 1st January 2013 & 1st January 2014) it is quite evident that the services provided by them were those of manpower supply and not of job work. (Specifically conditions at Sl No 10 to 17 of Terms and Conditions). iv. If the agreement was for the job work then why should contract have conditions like minimum wages to labour, submission of muster etc by the Appellant to M/s Sigma and issues like payment under ESI Act, Provident Fund to the employees of the appellant be part of the contract. v. All these conditions which are the part of the contract clearly show that the appellants were providing man power supply services and were not engaged in any job work. vi. He further referred to Schedule I to the Contract and submitted that Fettling and Material and Supply Cast/ machined Parts are only three activities which are subjected to per Kg price, however the manpower supplied by the appellants to the M/s Sigma as per the agreement is undertaking the various activities like Fetling, Material Handling, Assembly, Pouring, Supply Cast/ machined Parts, Painting & Packing. Most of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what it intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by Statute proceeds on the assumption that society suffers injury by and the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaken the responsibility of Fetling, Material Handling, Assembly, Pouring, Supply of Cast & machine part, painting. 1. The Contractor has undertaken this job contract which is highly specialized in its nature where trained and expert team with coordination is required. 2. The contractor shall receive the consideration as per the services rendered and as per rates mentioned in Schedule "II" attached herewith. The Contractor shall be responsible for cleaning premises in highly hygienic condition. The Contractor while undertaking Fetling, Material Handling, Assembly, Pouring, Supply of Cast & machine part, painting or so shall avoid any wastage, theft, pilferage etc and shall not damage the premises of the Company. 3. The Contractor shall provide all items and equipment's proper uniform, protective clothing etc and maintain his personnel as per requirements of the Company in hygienic conditions at his own cost. 4. The Contractor has agreed that the premises of the Company shall be used by the Contractor only for the contractual work of the Company and the Contractor agrees that this agreement does not create or vest any right or status to the Contractor or his perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slation, rules and regulations applicable to him and hi personnel. The contractor shall submit Xerox copies of musters, vouchers to the company in respect of his personnel. 13. The Contractor indemnifies the Company that he shall bear any burden of whatsoever nature like fees, fines, penalty, damages, rise in wages, HRA,, Back-Wages, etc in respect of his personnel under the provisions of any law. 14. ..... 15. The Contractor shall ensure that the persons engaged by him shall not obstruct the working of the Company and in the event of any such obstruction the Contractor is liable for damages and compensation to the company. 16. The Contractor ensures that he will maintain the discipline among his own employees. In case of any misbehavior or mis conduct by the personnel engaged by the Contractor, The Contractor shall take proper action against such person, the Company shall not have any right to take such action. In the event if the Contractor does not take proper action the contract is liable to be terminated without notice. 17. The Contractor shall pay timely dues under ESI Act, Provident Fund if applicable in respect of his persons/ employees and shall maintain Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above contract needs to be examined in light of the provisions of Contract Labour (Regulation & Abolition) Act, 1970. This Act permits companies and establishments in the manufacturing and services sectors to engage contract labour through contractors. Features of the said Act, relevant for the controversy in hand are reproduced below: Section 2 (c) "contractor", in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods of articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor; (e) "establishment" means- (i) any office or department of the Government or a local authority, or (ii) any place where any industry, trade, business, manufacture or occupation is carried on; (i) "workman" means any person employed in or in connection with the work of any establishment to do any skilled, semiskilled or un-skilled manual, supervisory, or clerical work for hire or reward, whether the terms of employment be express or implied, but does not include any such person- (A) who is empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the duty of the contractor to ensure the disbursement of wages in the presence of the authorized representative of the principal employer. (4) In case the contractor fails to make payment of wages within the prescribed period or makes short payment, then the principal employer shall be liable to make payment of wages in full or the unpaid balance due, as the case may be, to the contract labour employed by the contractor and recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor. Section 29. Registers and other records to be maintained.- (1) Every principal employer and every contractor shall maintain such registers and records giving such particulars of contract labour employed, the nature of work performed by the contract labour, the rates of wages paid to the contract labour and such other particulars in such form as may be prescribed. (2) Every principal employer and every contractor shall keep exhibited in such manner as may be prescribed within the premises of the establishment where the contract labour is employed, notices in the prescribed form conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprises [2017 (5) GSTL 212 (T-Del)], Nortel Network (I) Pvt Ltd [2017 (52) STR 489 (T-Del)] all are in respect of the law as it existed prior to 1st July 2012 and hence not applicable in the amended regime. Appellants as pointed out do not dispute the taxability of the activities under taken by them post 1st July 2012 and have claimed that benefit of exemption under notification No 25/2012-ST (S No 30) should be admissible to them. We have held that the appellants are not eligible for the benefit of said exemption. We would also refer to the decision of Constitutional bench of Apex Court in case Dilip Kumar & Company [2018 (361) ELT 577 (SC)] wherein it following has been laid down: "40. After considering the various authorities, some of which are adverted to above, we are compelled to observe how true it is to say that there exists unsatisfactory state of law in relation to interpretation of exemption clauses. Various Benches which decided the question of interpretation of taxing statute on one hand and exemption notification on the other, have broadly assumed (we are justified to say this) that the position is well-settled in the interpretation of a taxing statute : It is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Courts insist upon strict compliance before a State demands and extracts money from its citizens towards various taxes. Any ambiguity in a taxation provision, therefore, is interpreted in favour of the subject/assessee. The statement of law that ambiguity in a taxation statute should be interpreted strictly and in the event of ambiguity the benefit should go to the subject/assessee may warrant visualizing different situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable to pay tax, and whether the revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State is to prove the liability of the persons, as may arise within the strict language of the law. There cannot be any implied concept either in identifying the subject of the tax or person liable to pay tax. That is why it is often said that subject is not to be taxed, unless the words of the statute unambiguously impose a tax on him, that one has to look merely at the words clearly stated and that there is no room for any intendment nor presumption as to tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and validity and, therefore, the exemption under the notification is as if it were contained in the Act itself. See in this connection the observations of this Court in Orient Weaving Mills (P) Ltd. v. Union of India, 1962 Supp 3 SCR 481 = AIR 1963 SC 98. See also Kailash Nath v. State of U.P., AIR 1957 SC 790. The principle is well-settled that when two views of a notification are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Coroline M. Armytage v. Frederick Wilkinson, (1878) 3 AC 355, that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions enacting an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit. While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no vio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally". 47. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case (supra). 48. The next authority, which needs to be referred is the case in Mangalore Chemicals (supra). As we have already made reference to the same earlier, repetition of the same is not necessary. From the above decisions, the following position of law would, therefore, clear. Exemptions from taxation have tendency to increase the burden on the other unexempted class of taxpayers. A person claiming exemption, therefore, has to establish that his case squarely falls within the exemption notification, and while doing so, a notification should be construed against the subject in case of ambiguity. 49. The ratio in Mangalore Chemicals case (supra) was approved by a three-Judge Bench in Novopan India Ltd. v. Collector of Central Excise and Customs, 1994 Supp (3) SCC 606 = 1994 (73) E.L.T. 769 (S.C.). In this case, probably for the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n where there is ambiguity in an exemption notification or exemption clause, in which event the benefit of such ambiguity cannot be extended to the subject/assessee by applying the principle that an obscure and/or ambiguity or doubtful fiscal statute must receive a construction favouring the assessee. Both the situations are different and while considering an exemption notification, the distinction cannot be ignored." 5.10 Now coming to the issue of addition of Canteen Charges for determining the taxable value. We do not find any merits in the impugned order holding that canteen charges are reimbursable expenses for providing the services and hence in term of Rule 5(1) of Service Tax (Determination of value) Rules, 2006. Commissioner has in para 36.2.4 specifically held that "In view of the above statutory provisions, I find that, although the assessee have contended that they have not recovered the canteen charges separately from M/s Sigma, the fact remains that they are required to include all the expenditure or costs incurred by them during the course of providing MRSA service and these costs are consideration for the taxable service provided." Once it is held that these charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on will have to be ignored being in conflict with sub-section (2B), which it explains. However, the meaning of this clause "but for this sub-section" can be enlightened when we refer to Section 11AB (1), we have reproduced two portions of this provision (in parts) in the earlier part of this judgment and for the sake of convenience, now we are quoting entire sub-section (1) of Section 11AB, which reads : "11AB. Interest on delayed payment of duty. - (1) where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under sub-section (2), or has paid the duty under sub-section (2B) of Section 11A, shall in addition to duty be liable to pay interest at such rate, not below 10% ....from the first date of the month succeeding the month in which the duty ought to have been paid under this Act or from the date of such erroneous refund as the case may be, but for the provisions contained in sub-section (2) or sub-section (2B) of Section 11A, till the date of payment of such duty." Thus, why the clause "but for" is used, is evident from the tail piece of Section 11AB(1). Ordinari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly invoked in this case." Since the fact about non-payment of service tax in respect of services provided to M/s Sigma, by treating the agreement as job work agreement was never brought to the knowledge of department hence extended period of limitation has been rightly invoked by the adjudicating authority. In case of Bombay Dyeing & Mfg Co Pvt Ltd [1999 (113) ELT 331 (T)] following has been held: "9. Where this situation prevails, the assessee who is in the knowledge that the inputs so received are less than those shown in the covering documents, it is for him to voluntarily take the less credit. Where the assessee is in such knowledge and where the department have no knowledge of the situation, the department can allege suppression of facts. Weighment sheets are not the documents prescribed in the legislature. The assessee was working under the self removal procedure and therefore, there is no reason or cause for the jurisdictional officer to know about the existence of the weighment sheets and the shortages in the weighment of inputs that they indicated. In this situation, we do not see any reason to agree with the submission on limitation." Similarly tribunal has in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered view, the ratio of the aforesaid decision squarely applies to the facts of the present case. Since the copy of the agreement and relevant information were provided to the department only in 2011 the show cause notice issued in April, 2011 is clearly within the period of limitation and therefore, the demands confirmed as above for the period on or after 18-4-2006 cannot be said to be time-barred at all." Thus we do not find any merits in the submissions of the appellant that extended period should not have been invoked for making this demand. The issue of limitation has to be considered on the facts of case in hand and the conduct of the assessee/ appellant. There cannot be application of the decisions in determining the issue of limitation on the basis of the law laid down therein ignoring the facts of case in hand. We do not find that decisions relied upon by the appellants will advance their case any further in the facts of present case. 5.13 It is settled law that penalty under Section 76 & 77of the Finance Act, 1994 is for the contumacious conduct of the appellants in relation to delay in payment of tax and filing of the relevant returns. These sections do not requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the facts and circumstances of the present case. 21. In view of the above discussions, I agree with Member (Judicial) as far as imposition of penalty under Section 78 of the Finance Act in respect of the first show cause notice is concerned. As far as penalty under Section 76 in respect of the second and third show cause notices is concerned, I agree with Member (Technical). The point of difference is accordingly answered." Hence we do not find any merits in submissions of the appellant that penalties under Section 76 are not justified. We uphold the decision of the Commissioner in respect of penalties under Section 76. 5.14 In respect of penalties under Section 77 and late fees under Section 70, appellants have contended that there was no delay in filing the returns as the date for filing the returns was extended and they had filed the return within the extended date. The said submission needs to be examined in terms of the extended date by the CBEC for filing the ST-3 return. In table below actual date of filing the return and extended date are indicated: Period Date of Filing Reference Due Date Actual Date April 12 to June 12 25th Mar 13 21st Mar 13 Notfn No 1/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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