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TMI Blog2022 (2) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... ne and the Shipping Line issues a Master Bill of Lading in favour of the appellant. In turn, it sells the space to its customers and issues a House Bill of Lading to each of them. The first leg is the contract between the Shipping line and the appellant. The second leg is the contract between the appellant and its customers - In the appellant s case, if the space on the ships which it bought cannot be sold to its customers fully, or due to market conditions, or is compelled to sell at lower than purchase price, the appellant incurs loss. In a contrary situation, it gains profits. This activity is a business in itself on account of the appellant and cannot be called a service at all. Neither can the profit earned from such business be termed consideration for service - the appellant is not liable to pay service tax. Container detention charges - HELD THAT:- There is a difference between consideration under the contract which is what each party to the contract does in return to the other party doing its part of the contract and compensation under the contract which is a penalty for breach of contract by either frustrating the contract through non-performance or by not perfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services were all duly recorded by the appellant. It is now well established legal principle that suppression of facts is not mere omission. It must be a deliberate act with mens rea to suppress and thereby evade. The facts brought out in the impugned order do not demonstrate the mens rea - Insofar as the appellant did not dispute the demands of service tax, it paid the same along with interest even before the SCN was issued. In our considered view, this case is covered squarely by section 73(3) and no SCN should have been issued to that extent. The appellant, having paid the service tax on those services which it rendered even before the SCN was issued and having argued that no SCN should have been issued to it as per Section 73(3), now in the synopsis submitted before us, has sought refund of the service tax paid. This prayer cannot be accepted for more than one reason. Once it is held that section 73(3) applies and no SCN should have been issued demanding the service tax, the basis for forming such a view, viz., payment of service tax with interest cannot now be reversed. Secondly, if service tax is payable, the charge of tax continues to exist. In this case, once the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the Directorate General of Shipping. It provides (i) Customs clearance service; (ii) Transportation service; and (iii) Freight forwarding service. b) It books cargo space on ships with the shipping lines and in turn, sells it to its customers. The Shipping line issues a Master Bill of Lading in its name and in turn, it issues House Bills of Lading to its customers. c) The appellant pays the Shipping line for the entire space booked and the customers pay the appellant for the space which they purchase from the appellant. d) The total amount paid to the Shipping line can be less than what the appellant receives from selling the space or more than that. The price at which it sells space to its customers depends on market conditions. Thus, there could be loss if the appellant is unable to sell the total space it purchased from the shipping line or has to sell at a lower price or profit in a contrary condition. e) The demand of Service tax is on the differential between the purchase and sale price (or the mark-up) of the ocean freight under the category of Business Support Service (BSS) up to 30.6.2012 and under section 66B read with section 66D from 1.7.2012. f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is not sufficient to invoke extended period of limitation. Demand for the period October 2009 to March 2010 is beyond even the extended period of limitation of five years r) Even in case of fraud, collusion, willful misstatement or suppression of facts, the demand can be raised only within five years, the demand in respect of this period needs to be set aside. Penalties under section 77 78 may be waived in terms of section 80 s) Section 73(3) provides that where any service tax not levied or paid or short levied or short paid before the issue of notice, no Show Cause Notice can be issued. In the present case, service tax on legal service, cab operator service (on reverse charge basis), forklift charges, fumigation charges, and reversal of credit on some common services was done immediately on being pointed out along with interest. Hence, no SCN should have been issued and no penalty should have been imposed on the appellant. t) However, learned commissioner denied the benefit of this section invoking section 73(4). Since the demand has been confirmed invoking extended period of limitation, she held that the benefit of Section 73(3) cannot be given to the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market conditions, or is compelled to sell at lower than purchase price, the appellant incurs loss. In a contrary situation, it gains profits. This activity is a business in itself on account of the appellant and cannot be called a service at all. Neither can the profit earned from such business be termed consideration for service. Respectfully following Satkar Logistics, Nilja Shipping Pvt. Ltd., Surya Shipping and ITC Freight services, we hold that the appellant is not liable to pay service tax. 10. As far as the container detention charges are concerned, these are charged by the owner of the container if the container is not returned to it within time. In other words, it is in the form of a penal rent. It is in the form of liquidated damages for failure to return the container within the time indicated in the contract and not a consideration for a service. There is a difference between consideration under the contract which is what each party to the contract does in return to the other party doing its part of the contract and compensation under the contract which is a penalty for breach of contract by either frustrating the contract through non-performance or by not perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (Business Support Service). Such charges can at best be called as 'penal rent' for retaining the containers beyond the pre-determined period. Therefore, the amount collected as 'detention charges' is not chargeable to service tax. 5. The Board desires that pending cases, if any, on this issue may be decided in line with the above clarification. Yours faithfully, (Gautam Bhattacharya) Joint Secretary (TRU-II) Tel: 2309302 12. In view of the above, the demand of service tax on container detention charges is unsustainable and is liable to be set aside. 13. Toll tax is an amount paid by the appellant to the authorities which it gets reimbursed by its Customers. None of the elements required to levy service tax are present in such a transaction. No service tax can be levied on these amounts as well. 14. We now examine the three interlinked issues of prayer for (i) the submission that once they paid duty on the taxable services, no SCN should have been issued at all in view of Section 73(3) of the Act, (ii) waiver of penalties invoking section 80; and (iii) prayer for demand for the period beyond the normal period, invoking extended pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, a statement, containing the details of service tax not levied or paid or short levied or short paid or erroneously refunded for the subsequent period, on the person chargeable to service tax, then, service of such statement shall be deemed to be service of notice on such person, subject to the condition that the grounds relied upon for the subsequent period are same as are mentioned in the earlier notices. (1B) Notwithstanding anything contained in sub-section (1), in a case where the amount of service tax payable has been self-assessed in the return furnished under sub-section (1) of section 70, but not paid either in full or in part, the same shall be recovered along with interest thereon in any of the modes specified in section 87, without service of notice under sub-section (1). (2) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined : [****] (2A) Where any appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereunder shall be imposed in respect of payment of service tax under this sub-section and interest thereon. (4) Nothing contained in sub-section (3) shall apply to a case where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of - (a) fraud; or (b) collusion; or (c) willful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax. 4(A) [* * * *] (4B) The Central Excise Officer shall determine the amount of service tax due under sub-section (2)- (a) within six months from the date of notice where itis possible to do so, in respect of cases falling under sub-section (1); (b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A)]. (5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003. (6) For the purposes of this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined under sub- section (2) of section 73, the time within which the reduced penalty is payable under clause (ii) of the proviso to sub-section (1) in relation to such increased amount of penalty shall be counted from the date of the order of the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be. SECTION 77. Penalty for contravention of rules and provisions of Act for which no penalty is specified elsewhere. - (1) Any person, - (a) who is liable to pay service tax or required to take registration, fails to take registration in accordance with the provisions of section 69 or rules made under this Chapter shall be liable to a penalty which may extend to ten thousand rupees; (b) who fails to keep, maintain or retain books of account and other documents as required in accordance with the provisions of this Chapter or the rules made thereunder, shall be liable to a penalty which may extend to ten thousand rupees; (c) who fails to - (i) furnish information called by an officer in accordance with the provisions of this Chapter or rules made thereunder; or (ii) produce documents called for by a Central Excise Officer in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le shall be fifteen per cent. of such service tax and proceedings in respect of such service tax, interest and penalty shall be deemed to be concluded; (ii) the date of receipt of the order of the Central Excise Officer determining the amount of service tax under sub-section (2) of section 73, the penalty payable shall be twenty-five per cent. of the service tax so determined : Provided also that the benefit of reduced penalty under the second proviso shall be available only if the amount of such reduced penalty is also paid within such period : Explanation. - For the purposes of this sub-section, specified records means records including computerised data as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of accounts shall be considered as the specified records. (2) Where the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be, modifies the amount of service tax determined under sub-section (2) of section 73, then, the amount of penalty payable under sub-section (1) and the interest payable thereon unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is invokable in the instant case. .. 174. I also find that the noticee failed to pay their due service tax in Govt. exchequer by suppressing the actual value of services provided by them by not filing Service Tax returns. I thus find that since they have willfully suppressed the facts regarding their service tax liability with intent to evade payment of service tax on the services provided by them to their customers/clients. Accordingly the noticee is liabel to penal action under the provisions of section 78 of the Finance Act, 1994. I further find that since all the transactions relating to this case, are duly recorded in the specified records such as invoices and statutory books of accounts of the noticee during the subject period, therefore, I hold that penalty under the first proviso to section 78 (1) of the act, ibid., is imposable on the noticee as stipulated in Law. 18. We find that the only allegation of these elements held against the appellant in the impugned order is that of suppression of facts and the reason for this is that they have not disclosed the full value of the taxable services in their ST-3 returns. It is also accepted in the impugned order that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73(3) applies and no SCN should have been issued at all, the appellant cannot claim refund of the service tax paid. This would also apply to any service tax paid beyond the period of five years. 22. In view of the above discussions, we find that the appellant had, through its conduct during the investigation by providing all the information and paying the service tax with interest to the extent it had not disputed, has made out a case for seeking waiver of penalty invoking section 80. The penalty imposed under section 77(1) and 77(2) on the Act is set aside. 23. In view of the appeal is partly allowed and the appeal is disposed of as below: a) The demand of service tax on mark up on ocean freight, container detention charges and toll taxes is set aside. b) The appellant s plea that the service tax to the extent it had not disputed and paid along with interest was covered by section 73(3) is accepted and the SCN to that extent is invalid. The provisions of section 73(4) are not applicable because the intention is not established in the impugned order but merely omissions. c) The penalty under section 78 is set aside as the suppression is not proved. d) The penalty ..... 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