9911796707
TMI Blog2014 (3) TMI 1160X X X X Extracts X X X X X X X X Extracts X X X X ..... ate fee for belated filing of Service Tax returns, even though prescribed under Section 70 of the Finance Act read with Rule 7C of the Service Tax Rules, 1994, it does not alter the basic character of the tax return filed i.e. late tax return. It is only that the penal liability initiated under Section, abates in an event. The ST-3 returns filed late, therefore, do not fulfill the basic condition under Section 32E(1) of the Central Excise Act, 1944, that the applicant has filed returns in the prescribed manner. The application filed by the applicant is, therefore, liable to be rejected. In view of the majority decision of the Member, Shri A.K. Prasad and the Vice-Chairman, Shri Vineet Kumar, holding that the present application filed by M/s. A.G. Technologies Pvt. Ltd. is not admissible under Section 32E of the Central Excise Act, 1944, as made applicable to Service Tax, the same is rejected. X X X X Extracts X X X X X X X X Extracts X X X X ..... 007 with M/s. TCS, in which the applicant were referred to as "Business Associates" (BA), wherein it was noticed that for development, enhancement, implementation and maintenance of software projects, proposed by the applicant to TCS, it was willing to provide, on subcontract basis, technical assistance in respect of computer application software system development, implementation and maintenance work undertaken by TCS for its various clients by deputing its employee's to TCS/TCS clients locations to work on the projects along with TCS project team. It appeared that the services provided by the applicant to M/s. TCS did not fall under Information Techno logy Software Services on which Service Tax was not leviable at the material time, but under designated service of Manpower Supply Agency and chargeable to Service Tax under Section 65(105)(k) of Chapter V of the Finance Act, 1994. 2.4 The applicant had entered into subcontract agreement with effect from 17-1-2006 with M/s. Microsoft Corpn. India P. Ltd. (in short 'MS') and the applicant (referred to as Contractor in the agreement); that MS may inform contractor of clients requirement from time to time and contractor shall use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with interest accrued in due course. 2.7 Accordingly SCN was issued to the applicant asking them as to why :- (i) Service Tax amounting to ₹ 3,59,94,021/- as detailed in Annexure A, B & C to the Show Cause Notice on the "Manpower Recruitment Service" and "Management Consultant Services'' and "Information Technology Software Services" rendered by them for the period 2007-08 to 2011-12, should not be demanded and recovered from the under Section 68 read with proviso to Section 73(1) of the Act, read with Rule 6 of the Rules; (ii) Service Tax amounting to ₹ 3,40,89,388/- paid by them through GAR-7 challans, should not be appropriated against their Service Tax liability for the said period; (iii) Interest, at the appropriate rate, on the Service Tax not paid on its due date till the date of payment, should not be demanded and recovered from them under Section 75 of the Act; (iv) Penalty should not be imposed upon them under the provisions of Section 76 of the Act; (v) Penalty should not be imposed upon them under the provisions of Section 78 of the Act for suppressing the receipt of value of taxable services, with intent to evade payment of Service Tax; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ka, Managing Director of the applicant, agreed that their skilled personal/employees were deputed to work under the supervision of M/s. TCS, M/s. "Microsoft and M/s. Infosys that these services offered, fall under the ambit of Manpower Supply Agency, that no Service Tax was paid by them on this count, and that for the period from 16-5-2008 onwards, they had charged Service Tax in their invoices and collected on all the services including I.T. Services rendered by them to their clients. It is pertinent to note that after 16-5-2008 when Service Tax was introduced on I.T. Services, the applicant had paid ₹ 2,44,479 Service Tax through GAR-7 Challan, only on 7-10-2008. Thereafter, the next payment was made only after enquiry for non-payment of Service Tax was initiated by the Department in November, 2009. Thus, it is observed that the applicant although collected the Service Tax from their clients, did not deposit such tax collected with the treasury on due dates as stipulated under Section 68 of the Finance Act and Rule 6 of the Service Tax Rules. The submission of the applicant that they were facing severe financial crunch which led to delays in payment is not correct, as it ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... munity from mandatory penalty has not adduced any substantial reasons and justified its prayer for grant of such immunity. They had been regularly defaulting on payment of Service Tax and would have continued to do so, had it not been for the initiation of the investigation by the Department. The Show Cause Notice has correctly sought imposition of penalty under the provision of Section 76, 77 and 78 of the Finance Act, 1944. The Revenue therefore, prayed that :- the Settlement Commission be pleased to reject the application in limine. (ii) Since the applicant has not fully paid the interest due in the application for settlement of the case, the settlement commission may be pleased to reject the request for immunity for penalties under the Finance Act, 1944. (iii) For such further and other relief, as the Hon'ble Settlement Commission may deemed fit and proper in the nature and circumstances of the case. Hearing 6.1 A hearing was held in the case on 13-11-2013. Shri Rajan Mashelkar, Consultant and Shri Anup, Sr. Ex. Finance appeared for the applicant whereas S/Shri S.R. Naik. Superintendent & N.K. Thakur, Inspector Commissioner of Service Tax-I, Mumbai appeared on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom penalty on the ground that the applicants had collected huge amounts from their clients as S. Tax but not deposited the same with the Govt. in time. In the course of adjudication they could be liable for penalty upto 1% per month subject to 25% of the S. Tax not paid. 6.7 Revenue was also directed to file written submission on the legal point of admissibility of the application on account of non-filing of returns during the relevant period, within one week. 6.8 On the question of short payment of interest of ₹ 10,08,890/- as mentioned in Revenue's report, the Ld. Consultant readily accepted the same and agreed to deposit it within one week from the date of hearing. Further submissions of the applicant dated 19-11-2013 7.1 The applicant have filed further submissions dated 19-11-2013 as per the directions given by the Bench at the time of hearing, as under : A. The requirement of filing ST-3 returns has been met, which though filed late, were filed before filing the application for settlement. (i) Section 32(E), sub-section (1), clause (a) provides that no such application shall be made unless, the applicants has filed returns showing produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission of such return, the person liable to furnish the said return shall pay to the credit of the Central Government, for the period of delay of - (i) fifteen days from the date prescribed for submission of such return an amount of five hundred rupees; (ii) beyond fifteen days but not later than thirty days from the date prescribed for submission of such return an amount of one thousand rupees; and (iii) beyond thirty days from the date prescribed for submission of such return an amount of one thousand rupees plus one hundred rupees for every day from the thirty first day till the date of furnishing the said return; Provided that the total amount payable in terms of this rule for delayed submission of return, shall not exceed the amount specified in Section 70 of the Act : Provided further that where the applicant has paid the amount as prescribed under this rule for delayed submission of return, the proceedings, if any, in respect of such delayed submission of return shall be deemed to be concluded : Provided also that where the gross amount of Service Tax payable is nil, the Central Excise Officer may, on being satisfied that there is sufficient rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmit that the aforesaid decision is rendered .in the context of the filing of returns under the Central Excise Act, 1944 and rules made there under, wherein there are no specific provisions for the delayed filing of returns. However in case of Service Tax, there is a specific provision in terms of Rule 7C of Service Tax Rules, 1994 to cover the delayed filing of Service Tax returns by payment of late fees as prescribed. 7.5 Therefore on payment of the prescribed late fees the filing of returns is tantamount to the filing of returns in the prescribed manner and therefore there is full compliance with the requirement under clause (a) of Sub-Section 32E of Central Excise Act, 1944. 7.6 The interest of ₹ 44,32,744/- has been calculated as per the report of the Commissioner, Service Tax-I, Mumbai. Of this, an amount of ₹ 34,23,854/- has already been paid and the report mentions that balance if ₹ 10,08,890/- is recoverable from Applicants. In this regard Applicant submitted that they had paid ₹ 5,00,000/- towards balance interest vide Challan No. 00016, dated 19-11-2013. The Applicants submitted that they were going through a period of financial constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (25-3-2010) 540552 323 37073 May 347046 5-6-2009 (25-3-2010) 193506 292 36093 June 385888 5-7-2009 1000000 (30-4-2010) 807618 298 40957 July 403140 5-8-2009 (30-4-2010) 404478 267 38337 August 430488 5-9-2009 503000 (30-4-2010) 473990 236 36185 September 459883 5-10-2009 (30-4-2010) 14107 206 33741 October 430260 5-11-2009 500000 (18-8-2010) 83447 285 43715 November 474925 5-12-2009 500300 (16-9-2010) 108522 284 48039 December 2527398 5-1-2010 2578980 (29-9-2010) 2160104 266 49965 Jan. 534064 5-2-2010 (29-9-2010) 1626040 235 44700 Feb. 548966 5-3-2010 (29-9-2010) 1077074 207 40473 Mar. 2927074 31-3-2010 1850000 (5-10-2010) 4341954 187 194951 658046 5000000 (28-4-2011) 392 91874 Total 736103 2010-11 Payable Due date of payment Amount paid and date of payment Balance after deducting amount payable No. of days delayed Interest @ 13% Interest @ 18% April 483026 5-5-2011 (28-4-2011) 3858928 357 61417 May 443240 5-6-2011 (28-4-2011) 3415688 326 51464 June 509207 5-7-2011 (28-4-2011) 2906481 296 53683 July 532608 5-8-2011 (28-4-2011) 2373873 265 50269 August 536702 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32E of the Central Excise Act, 1944, is reproduced below :- "SECTION 32E. Application for settlement of cases. - (1) An assessee may, in respect of a case relating to him, make an application, before adjudication, to the Settlement Commission to have the case settled, in such form and in such manner as may be prescribed and containing a full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction, the manner in which such liability has been derived, the additional amount of excise duty accepted to be payable by him and such other particulars as may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassification, under-valuation, inapplicability of exemption notification or Cenvat credit [or otherwise] and any such application shall be disposed of in the manner hereinafter provided : Provided that no such application shall be made unless, - (a) the applicant has filed returns showing production, clearance and Central Excise duty paid in the prescribed manner; (b) a show cause notice for recovery of duty issued by the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77 of the Finance Act, 1994 for late filing of returns would stand concluded. 10.5 The Bench is of the view that the issue of not filing returns as per prescribed procedure cannot be overcome by filing late returns and getting it regularized by payment of late fee, fine or penalty. In fact the prescribed manner of filing returns is indicated in Rule 7 of the Service Tax Rules, 1994, and Rule 7C covers situations where the returns are not filed in the prescribed manner. Rule 7C is merely a mechanism of regularizing a situation where the prescribed procedure has not been followed. Rule 7C cannot be interpreted to mean that filing of late returns is the same thing as filing returns in the prescribed manner. Filing of late returns is an exception and not the rule. An exception cannot be considered as the rule. Not filing returns in time is a contravention of Rule 7. When returns are filed late there is a contravention of law and in such a situation it would be against all canons of justice and fair play to consider such returns as having been filed in the prescribed manner. 10.6 The applicants have also relied on the decisions of the Delhi High Court in the case of Icon Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Excise Rules, 2002, 'returns' are to be filed, by an assessee on a monthly/quarterly basis. There is no provision for filing of these 'returns' in a consolidated manner covering more than one month. Though there is no specific bar against filing of belated returns relating to a particular month, there is no provision for consolidating the returns for any number of months. But going by the earlier stated view that the said Section 32E(1) only refers to mention of the duty paid in the prescribed manner in the return, the Bench observes that if the applicant is to file a consolidated return belatedly without ECC Number, and covering more than one month, such return cannot, naturally, contain the details of any duty paid in the prescribed manner, as no duty would have been paid at nil till then. Further, if the assesses is to file a consolidated return before filing an application or along with the application, there would be questions even on the details of production and clearances shown therein. If the applicant is to furnish the quantum, which is to be reflected in the application for settlement, there will be no additional duty liability disclosure in the said settleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 Advocate's Certificate 130 10.8 The Larger Bench decision in the case of Emerson Electric Co. held that if the prescribed returns are filed voluntarily, though, late but before the initiation of any enquiry/investigation or issue of Show cause notice, it could still be considered as sufficient compliance of the provisions of Clause (a) of the first proviso of Section 32E(1) of the Central Excise Act, 1944. 10.9 It is observed that this issue had also come up before the Delhi High Court in the case of M/s. Rohit Bal Designers P. Ltd. v. Customs & Central Excise Settlement Commission (AIT-2007-133-HC) = Writ Petition No. 1297 of 2006 wherein the Settlement Commission rejected the Settlement application of M/s. Rohit Bal Designers on the ground that the Central Excise returns had not been filed during the relevant period. The matter was challenged before the Delhi High Court through a Writ petition and vide its order dated 22-1-2007 the Delhi High Court, exercising its writ jurisdiction, allowed the petitioner namely M/s. Rohit Bal Designers, to file the returns within a period of six weeks and it was directed that the Settlement Commission would then consider the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has failed to do so. Therefore, the Settlement Commission, in light of the aforesaid facts and evidence on record, and the provisions of law, has rightly come to the conclusion that the application moved by the petitioners could not be entertained." 10.11 Similar view was taken in the case of J.R.B. Engineering Works v. Customs & Central Excise Settlement Commission reported in 2012 (275) E.L.T. 179 (Del.). The relevant portion of the judgment upholding the decision of the Larger Bench in the case of Emerson Electric Co. is reproduced below : "11. On a perusal of the Section 32E(1)(a), it is noticeable that certain riders have been added for entertaining applications for settlement. Clause (a) clearly lays down that unless the applicant has filed returns, showing production, clearance and Central Excise duty paid in the prescribed manner, no such application shall be entertained. Rule 12 of the Central Excise Rules, 2002 provides for filing of monthly return in the form specified by every assessee about their production and removal of goods and other relevant particulars, within ten days after the close of the month to which the return relates. In the case of small ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction,…………… The proper officer can then verify the declaration of undisclosed duty liability only if the proper officer has with him the returns of the relevant period disclosing the actual duty paid. If no return is filed during the relevant period this verification is not possible. A return filed late, but voluntarily, i.e. before detection of the evasion by the department, can also serve the purpose of disclosing to the department the duty actually paid. But if the return is filed late, after a case of evasion has been detected by the department, filing of such return for the past period becomes meaningless as the assesse can always indicate the correct duty liability in the said returns including the duty evasion detected by the department and then, technically, there would be no case of any "... full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer", and the Settlement application would become infructuous. This is why the Courts have held that any return filed, for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions of Section 32E(1)(a) and he had also filed late returns along with the prescribed fee in terms of Rule 7C of the ST Rules. As far Central Excise returns are concerned it is clear that late filings of returns are not permitted under the Central Excise Rules. Rule 12 of Central Excise Rules stipulates that returns have to be filed every month and any lapse will be an offence which is liable for penalty. Under Rule 7 of Service Tax Rules, Returns are to be filed half yearly and there is a provision under Rule 7C to file delayed return on payment of prescribed fee and when requirements of Rule 7C are complied with the assessee is free of penal proceedings under the Finance Act, for non-filing of return. The issue is whether filing the prescribed return late with the prescribed fee in terms of Rules 7C will make an applicant eligible for settlement in terms Section 32E(1)(a) of the Central Excise Act, as far as Service Tax cases are concerned. 13. Section 32E(1)(a) stipulates that to be eligible for settlement, the applicant should have filed returns showing production, clearance and Central Excise Duty paid in the prescribed manner. This provision has been made applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an one return can be filed late with late fee for a previous period. When Service Tax Returns are filed in terms of Rule 7C, it should be construed that the prescribed manner of the frequency of the return is not violated if it satisfies the requirements prescribed in Rule 7C. In Central Excise, delay in filing of return can be regularized only by imposition of penalty where as in Service Tax the assessee has the option to regularize the return by filing the same in the manner prescribed under Rule 7C. No time limit has also been prescribed for filing returns late in terms of Rule 7C. 17. Even in Service Tax cases, the other required conditions for approaching the Settlement Commission, for settlement, on merits in terms of Section 32E(1)(a) are issue of SCN in the case and payment of the accepted duty along with interest. In such a scenario even if returns are filed belatedly i.e. even after issue of SCN, it is not in conflict with the charges in the SCN so long as the belated filing of returns are permitted under law. When it is filed before approaching the Commission, it will serve only the purpose of satisfying the requirement of 32E(1)(a) for eligibility for settlement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been made. 19. A close reading of Section 32E(1) shows that the section relates to the form and manner for disposal of the settlement application and proviso (a) is only a requirement for acquiring right of settlement of the case. Since, late filing of returns are permitted under Service Tax Rules, there is substantial compliance of the qualifying condition when done as prescribed in Rule 7C. 20. Thus, an assessee who has filed returns late in terms of Rule 7C of Service Tax Rules cannot be said to have contravened the provisions of the Act, or Rules regarding filing of returns in Service Tax. An assessee who has evaded taxes for which a SCN has been issued to him may wish to came forward to accept the charges against him and make honest disclosures to seek settlement of the case. He may also file Returns in the prescribed manner belatedly since, It is a qualifying condition for settlement of Service Tax cases. The process of settlement itself is on account of honest disclosures by the applicant, payment of duty evaded along with interest, and the co-operation rendered to the due process of settlement. Reading Section 70 of the Finance Act, and Rule 7C of the Service ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
