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TMI Blog2023 (8) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... , suppression of facts has still to be willful and with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has to be wilful and there should also be an intent to evade payment of service tax. In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT] , the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since suppression of facts has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accordingly, confirms the demand for the value of services only. 3. The order dated 29.10.2015 passed by the Commissioner adjudicates the two show cause notices dated 26.04.2012 and 17.04.2014 that were issued for the period 2008-09 to 2010-11 and the period 2012-13 respectively. 4. The first show cause notice dated 26.04.2012, after referring to Schedule-I to the Agreement that provides that the appellant was to be paid the sum of Rupees Three Crores and Eighty Lakhs for the two types of activities namely for playing cricket and for business support, alleges that the amount was taken by the appellant from M/s. Knight Riders Sports Private Limited [Knight Riders] for providing 'business support services'. Accordingly, the appellant was called upon to show cause as to why: "i) Service Tax amounting to Rs. 1,25,24,800/- (including Edu./SHE Cess) in respect of services provided under 'Business Support Services' should not be demanded and recovered from them under provision of Section 73(1) of the Act by invoking the extended period; ii) Interest at the appropriate rates on the aforementioned amount should not be recovered from him under Section 75 of the Finance Act, 1994; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, disputing the allegations raised in the notice. The appellant, amongst other grounds, submitted that he had been engaged by Knight Riders to play cricket, which is not a taxable service under the Finance Act. He further submitted that the contract with Knight Riders was an employment contract, and the relationship was that of an employer and employee, which was also not taxable under the Finance Act. Subsequently another show cause notice dated 17.04.2014 was issued to the appellant raising a service tax demand. The appellant disputed the allegations in the said notice by a reply dated 22.06.2015 and reiterated that the Agreement between Knight Riders and the appellant was that of employment, which was not taxable under the Finance Act. The Commissioner, by order dated 29.10.2015, confirmed part of the demand of service tax with applicable interest by taking recourse to the extended period of limitation contemplated under section 73(1) of the Finance Act. For the period prior to July 2012, the Commissioner, based on clause 4.8 of the Agreement, held that only 20% of the consideration received by the appellant pursuant to the Agreement would be attributable to promotional activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re remuneration is not for providing support services and that a certain component of the remuneration was for playing cricket. I also agree that no such split has been given by the notice in their reply to the show cause notice. To examine this aspect as also the validity of the argument that the relationship between the notice and franchisee is that of an employee to an employer, I proceed to examine the terms of their contract titled "Indian Premier League Playing Contract". ***** 15.7 The above discussed clauses and the contract between the notice and the franchisee definitely do not read the employer-employee contract. The contract clearly recognizes the endorsement value of the player and there are sufficient in built provisions to ensure the comfort of the player. In addition the expenses incurred for any of the personal appearances are sought to be reimbursed by the franchisee had declared being a mere employee of the franchisee. There was absolutely no need to build any conditions regarding the number of appearances and the maximum duration of such appearances, had the relationship been that of an employer and employee. Further, had an employee been employed to play m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the services provided by the Noticee. The notice did get himself registered with service tax which actually shows that he was aware that the services provided by him were or could be taxable but instead of seeking any clarification from the department to be certain about the taxability or otherwise, Shri Ishant Sharma chose to keep mum and wait till the department finds out. But for the enquiries the details of the terms of contract would not have come to light as these contracts are not available in public domain and as such it's a clear case of suppression and non-payment even though registered. I find that all the case laws cited in defence are those of central excise duty where the central excise officers have many occasions of interaction and thus allegations regarding suppression of information or misstatement are difficult to sustain, but the said case laws do not apply in the current case where the tax officials couldn't have come to know about the services but for the enquiries conducted by the Department. I also find that the noticee did not file the ST-3 returns and not paid due service tax to the government, even though in terms of the contract M/s KRSPL must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act; (iv) The agreement is not a divisible contract and there is no component of the fees attributable towards promotional activities. Even if it is assumed that the appellant is doing promotional activities, the agreement is indivisible. There is no clause in the agreement bifurcating the fees attributable to the activity of playing cricket and the activity of promotion. The impugned order, on the basis of clause 4.8 of the Agreement, alleges that even if the appellant does not play any match in the tournament, he is entitled to receive 10%/20% of the player's fee, which shows that this amount is in relation to the promotional activities undertaken by the appellant. This finding is not correct. The said amount is merely to retain the player and to block him from playing for any other team or tournament; (v) The demand for the period 2012-13 is erroneous as the taxable value has been increased arbitrarily by 20%; (vi) The extended period of limitation could not have been invoked in the facts and circumstances of the case; and (vii) Penalties under sections 76, 77 and 78 of the Finance Act could not have been imposed on the appellant. 12. Dr. Radhe Tallo, learned au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at appellant has been appointed/ engaged by the respective Franchisee under the agreement of "employment'. The agreement create the relationship of "employer - employee". After carefully considering the facts of the case, we find that the employer - employee relationship cannot be disputed and therefore the decisions relied upon by the Learned Counsel are squarely applicable to the present case. Though there are many cases decided in respect of various cricket players of IPL teams which are on the identical facts and issue of the present case." (emphasis supplied) 17. Neither of these clauses in any manner indicate that the appellant is providing any support or assistance to Knight Riders to carry out its business. The appellant is not undertaking any business promotion activities. The appellant is an employee of Knight Riders. Clauses 4 and 5 of the Agreement only stipulate certain conditions which the appellant has to follow as an obligation under the contract of employment. The player's fee in the Agreement is a fixed amount which is not linked to or subject to change pursuant to any alleged promotional activities to be performed under the Agreement. The fee is payable to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. 20. The second show cause notice has also, without any basis, increased the player fees for the year 2011-12 by 20%. In any view of the matter, since the demand cannot be sustained, it is not necessary to discuss this finding. 21. Learned counsel for the appellant also submitted that the extended period of limitation could not have been invoked in the facts and circumstances of the case. 22. The demand for both the periods has been confirmed under the proviso to section 73 (1) of the Finance Act. The impugned order seeks to uphold the invocation of the extended period of limitation for the reason that the appellant had registered himself with the service tax department and instead of seeking any clarification from the department about the taxability of the services provided by him, kept quiet and it is only through enquiries that the details of the terms of contract came to the notice of the department. Thus, the appellant suppressed facts. There is no finding in the impugned order that the so called suppression was with an intent to evade payment of service tax. 23. There is substance in the contention advanced by the learned counsel for the appellant that mere suppression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , one of which was suppression of facts. It is in this context that the Supreme Court observed that since "suppression of facts' has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The observations are as follows; "4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the subsequent decision in Uniworth Textile Limited vs. Commissioner of Central Excise, Raipur [2013 (288) E.L.T. 161 (SC)] and the observation are: "18. We are in complete agreement with the principal enunciated in the above decisions, in light of the proviso to section 11A of the Central Excise Act, 1944." 29. It will also be useful to refer to a recent decision of the Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and ors. [W.P. (C) 7542/2018 decided on 06.04.2023] and the relevant observations are reproduced below: "32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification. The respondents have surmised that this would have been the normal course for any person acting with common prudence. However, it is apparent from the statements of various employees of MTNL that MTNL did not believe that the amount of compensation was chargeable to service tax and therefore, there was no requirement for seeking clarifications. Further, there is no provision in the Act which contemplates any procedure for seeking clarification from jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of an assessee, the extended period of limitation under the proviso to Section 73(1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of compensation as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL's contention that the receipt is not taxable under the Act is a substantial one. No intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return. 42. We agree with the contention that the impugned show cause notice was issued beyond the period of limitation and is, thus, liable to be set aside." (emphasis supplied) 30. A perusal of the aforesaid judgment of the Delhi High Court reveals that when an assessee believes that the amount received was not chargeable to service tax, there is no requirement for seeking clarification, more particularly when the Finance Act also does not contemplate any procedure for seeking clarification from the jurisdictional service tax authority. The Delhi High Court also emph ..... X X X X Extracts X X X X X X X X Extracts X X X X
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