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TMI Blog2024 (2) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... n it has been held When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue - thus, the services provided by the Appellant to M/s SIFCL were correctly classifiable under the taxable category of Business Auxiliary Service as defined by Section 65 (19) and amended from time to time during the relevant period. Reimbursement of expenses - HELD THAT:- The impugned order in no way disputes that reimbursable expenses need to be deducted from the gross amount for determining the taxable value. However have denied the same only for the reason that appellant has failed to provide the documents and evidence in respect of these expenses - the submissions made by the appellant needs to be accepted relying on the decision of Hon ble Delhi High Court in the case of INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. ANR. [ 2012 (12) TMI 150 - DELHI HIGH COURT] and affirmed by the Hon‟ble Apex Court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STAVA: This appeal is directed against Order in Original No 16/Comm/LKO/CX/09 dated 31.08.2009 of the Commissioner Central Excise Lucknow. By the impugned order following has been held: In the facts and circumstances of the case and in view of the discussions and findings in the foregoing paragraphs: 1. I confirm demand of Service Tax amounting to Rs. 80,99,58,723.00 (Rupees Eighty Crore Ninety Nine Lacs Fifty Eight Thousand Seven Hundred and Twenty Three only) on M/s Sahara India, Sahara Bhawan-1, Kapoorthala Complex, Aliganj, Lucknow in respect of Business Auxiliary Services rendered by them to SIFCL during the period 01.07.03 to 31.07.06. I appropriate the amount of Rs 10 Crores deposited by them. I direct them to pay the balance forthwith. 2. I also direct M/s Sahara India, Sahara Bhawan-1, Kapoorthala Complex, Aliganj, Lucknow to pay interest at applicable rates, in terms of Section 75 of the Finance Act, 1994. 3. I impose a penalty of Rs 80,99,58,723.00 (Rupees Eighty Crore Ninety Nine Lacs Fifty Eight Thousand Seven Hundred and Twenty Three only) under Section 76 Finance Act, 1994. I direct them to pay the penalty forthwith. 4. I impose a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thousand Three Hundred and Eighty One only) and Education Cess amounting to Rs 1,23,76,789/- (Rupee One Crore Twenty Three Lakh Seventy Six Thousand Seven Hundred and Eighty Nine only) not paid by the should not be demanded and recovered from them in terms of Sub section 1(a)/ proviso to sub-section 1 of section 73 of the Finance Act, 1994. Service tax amounting to Rs 4 Service Tax Appeal No.979 of 2009 10 (ten) Crore already paid by them under protest should not be appropriated against the amount supra. ii) Interest at the appropriate rate on the said amount of service tax and education cess should not be charged and recovered from them in terms of Section 75 of the Finance Act, 1994. iii) Penalty should not be imposed upon them in terms of Section 76 and 77 of the Finance Act, 1994. iv) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994. 2.4 The show cause notice was adjudicated as per the impugned order referred in para 1 above. Aggrieved appellants have filed this appeal. 3.1 We have heard Shri B. L. Narasimhan and Shri Prakhar Shukla, Advocates for the appellant and Shri Deepak Kumar Special Counsel for the revenue. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Ltd. [2017-TIOL-3837-CESTAT-ALL]; Accepting deposits from the customers cannot be considered as service‟ since the most important element of service, i.e., consideration is absent as much as contractually there is no consideration either paid or payable by the customer. After introduction of Support Services of Business or Commerce under Section 65 (104c) of the Act from 01.05.2006 for the same very activity appellant has taken registration under this category, and hence no tax can be demanded under any other category for the previous period. Reliance is placed on the following decisions: o Indian national Shipowners‟ Association [2009 (14) STR 289 (Bom)] o CBRE South Asia Pvt Ltd [2020-TIOL-197-CESTAT- Del] affirmed by Hon'ble Supreme Court as reported at [2021-TIOL-06-SC-ST-LB] o Malviya national Institute of Technology [2019 (6) TMI 127-CESTAT NEW DELHI] o Sourav Ganguly [2020-TIOL-1687-CESTAT-KOL] o Global Coal Mining Pvt Ltd. [2020 (36) GSTL 77 (T- Delhi)] o Capital transport Convoy Contractors [2016 (2) TMI 546 CESTAT NEW DELHI] Extended period of limitation is not invokable since the appellant was under bonafide belief t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said section with effect from 10.09.2004. Their contention relying on certain case laws to effect that, if the activity was covered under the (ii) then how can the same be classified again under (vi) is without any substance. Normally this would not happen, but when a more specific entry is introduced for defining the same service rendered then the classification has to be done as per the specific entry. Section 65 A of the Finance Act, 1994 provided for the application of this principle for classifying the services which are classifiable under more than one entries. The decisions referred to by the learned counsel are distinguishable. Thus it is possible that the same activity of the appellant is classifiable with reference to (ii) of Section 65 (19) up to 9.10.2004 and with reference to (iv) thereafter. The contention of the appellant that (vi) is applicable only if SIFCL is rendering any taxable service to its clients namely depositors as it is not the case that accepting of deposit is in the nature of taxable service. It has been stated earlier also that the phrase used in section 65 (19) (vi) is service and not taxable service. Thus this contention is not tenable. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be interpreted strictly in accordance with the statutory provisions. This aspect needs to be kept in mind while classifying the taxable services. In view of the above clarification also the contention made by the appellant that services provided by them are correctly classifiable under BSS is not correct, particularly when the said services are taxable under the category of BAS. Appellants have not indicated any basis of claiming the classification under the category of BSS. At Sr No 11 on page 363 of the paper book appellant has themselves declared the Nature of Service: The firm is engaged in services to provide office space along with infrastructural facilities like telephone security etc., from its branches in India which is taxable under Business Support Service. Therefore, we are liable to pay Service Tax under the said category with effect from 1.05.2006. From this it is seen that appellant has taken registration under this category in respect of services which are not in dispute in the present proceedings. Just for the reason that the appellant had obtained registration under the category of BSS will not exclude the applicability of the BAS in respect of activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or (v) production of goods on behalf of the client; or (vi) provision of services on behalf of the client; or (vii) any service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as commission agent, but does not include any information technology service and any activity that amounts to manufacture within the meaning of clause (f) of section (2) of the Central Excise Act, 1944 (1 of 1944) 4.3 From the definition of Business Auxiliary Service as per Section 65 (19) reproduced as above it is quite evident that for the period up to 09.10.2004, the clause (ii) was with reference to promotion and marketing of services provided by the client and clause (iv) was with reference to the incidental or auxiliary support services provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equipped infrastructure facilities, having more than 1500 offices with, the required manpower at various places and in different parts of country. The staff officers of the noticee have sufficient professional expertise for running business of savings finance, as they have been doing it since last many years whereas the noticee is also able to provide field staff field force like Agents, Field Officers etc., which are necessary required for carrying on conducting business as Residuary Non Banking Financial Institution. 16.4 As per the agreement with SIFCL, the noticee continued to act as an agent for receipt of fixed deposits and render the service mentioned in the agreement. With all service conditions and facilities readily available with the noticee, M/s SIFCL has contacted the Noticee to continue its cooperation with M/s SIFCL to enable them to continue its relationship to promote and manage its business of para banking and the Noticee has agreed to continue its business co-operation with M/s SIFCL and to continue to act as Agent to M/s SIFCL for its para banking related business activities which have been discussed amongst parties and have been mutually agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial Corporation Limited as on 1st April of each financial year; and b) 0.25% of the opening balance of audited aggregate deposit liability under various scheme on account of fixed deposit of Sahara India Financial Corporation Limited as on 1 st April of each financial year. Provided that the total consideration as referred to above in sub-clause a) and b) shall not exceed 3.75% of the aggregate deposit liability as on 1 st April of each financial year as outstanding in the books of M/s SIFCL. The amount payable to M/s Sahara India shall be paid in four quarterly installments. 16.4.7 The noticee shall remit to M/s SIFCL the net amount of deposits collected by the noticee under the various schemes of deposits run by M/s SIFCL after meeting all commitments for payments to depositors under all categories as set out in the respective deposit schemes. 16.4.8 M/S SIFCL will allow the noticee to retain an amount equivalent to the sum required for meeting maturities/pre maturities/ secured loan for the succeeding fortnight, out of collection of deposits under various deposit schemes. The sum so retained with the noticee shall not bear any interest and will be us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/ commission received by the noticee was cum service tax for the period of demand show cause notice. 18.4 Whether the CENVAT Credit on the input service was admissible to the Noticee during the period of demand. 18.5 Whether the Noticee is liable to penalty under Section 76, 77 78 of the FA 94 for violation of different provisions of the FA 94. . 20.3 The Noticee s further main contention is that M/s SIFCL is not engaged in the providing any service or sale of goods. The deposit accepted by them is required to be invested as per the direction of RBI. The deposits are actionable claim and money which are an actionable claim and money which are not goods as per definition of goods given in sales of Goods Act, 1930. It is submitted that M/s SIFCL does not deal in goods and also do not provide any services. Yet, the fact remain that they have appointed the noticee for collection of deposit and other related works as mentioned in the agreement. The Noticee has submitted that they are providing services in relation to the actionable claim and money which are not goods as per the definition of goods given in the Sales of Good Act, 1930. Due to this fact i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness as defined under the Banking Regulation Act, 1949. 2. To borrow and receive money as deposits, loan or otherwise at interest or otherwise subject to Section 58A, 292, 293 of the Companies Act, 1956, and directions issued by reserve Bank of India, Issue debentures or debenture stocks bonds or other instruments of similar nature, perpetual or otherwise convertible into any other class of security or otherwise, unsecured or by creating a charge upon all or any of company s assets (both present and future) including its uncalled capital, if any and issue bonds, hybrid debt, subordinate debt, bills of exchange, promissory notes or other obligation or securities or issue such other instrument of similar nature as it may deem fit for the purpose of company s business and to apply the same or any part thereof for all or any purposes of the Company and to purchase, redeem or pay of any such security/instrument 3. (a) To buy acquire, sell, dispose of, exchange, convert, underwrite, subscribe, participate, invest in and hold, whether in its own account or on behalf of any person, body corporate, company, society firm or association of persons, whether incorporated or not, sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcement of Security Interest Act, 2002 and guidelines issued by RBI in this regard from time to time, and to facilitate easy transferability of financial assets by issue of debentures, bonds or any other security in nature of debenture and to raise funds by issue of security receipts to qualified institutional buyers and to act as an enforcement agent and or manager for any Bank or Financial Institutions for the purpose of recovery of the dues from the borrower on fee basis and as receiver if appointed by the Court or tribunal and to issue security receipts to qualified institutional buyers pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of an undivided right, title or interest in the financial asset involved in the securitization. (b) To carry out asset reconstruction as per the guidelines framed by RBI by change in takeover of the management of business of the borrower, the sale or lease of part of business, rescheduling the debts of the borrower, enforcement of the security as per Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, settlement of the dues of the borrower and taking pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the terms of regulation issued by Insurance Regulatory Development Authority or any other such authority constituted under the law for purpose from time to time and to carry on the business as Insurance Advisers, Pension Advisers, Consultants, Assessors, Values and Surveyors. 4.6 It is settled principle in law that the business of the appellant cannot be bifurcated into various limbs for computation of business income. From the above Memorandum of Association it is quite evident that accepting deposit is only one of the limbs of the entire gamut of business activities undertaken by the appellant. It may prima facie appear to be without any consideration as has been submitted by the appellant. It is the submission of the appellant that the act of accepting the deposits is without any consideration and hence cannot be termed as service . M/s SIFCL accepts the deposits made by the depositors in various schemes launched by them. They use the deposits to fund their activities in business during the period amounts are held by them. The depositors in turn allow/ permit M/s SIFCL to utilize their deposits for the purpose of business activities of the M/s SIFCL. The permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld, that consideration is some right, interest, profit or benefit accruing to one party or forbearance, detriment, loss, or responsibility given, suffered or undertaken by the other . 4.7 Having recorded the meaning of consideration as above we also place on record the fact that in respect of business and commerce, every act is for gain and there is no place for free lunches in the scheme of Business and Commerce. There ain't no such thing as a free lunch (TANSTAAFL) is a phrase that describes the cost of decision-making and consumption. In economics, TANSTAAFL describes the concept of opportunity costs, which states that for every choice made, there is an alternative not chosen which would also have produced some utility. Decision-making requires trade-offs and assumes that there are no real free offerings. In the case of Curie Vs Misa referred above this principle has been applied. The consideration as such can be in form monetary transaction or otherwise. 4.8 Hon ble Supreme Court has in case of Indian Bank Ltd. [1965 AIR 1473 SC] held as follows: Therefore, it seems to us that there is nothing in the language of S. 10 from which it can be fairly implied th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtioned expenses appropriated to it as though it were a trade by itself. Mr. Sastri urges that the authority of the above decision has been shaken in Mitchell and Edon (H. M. Inspectors of Taxes) v. Ross (40 T.C. II), but we are unable to accept this contention. The, point ,urged in this case was that the authority of Fry v. Salisbury House Estate ([1930] A.C. 432) had been qualified by the decision in Hughes v. Bank of New Zealand (21 T.C. 472), but this was negatived. A number of Indian cases have been cited before us and we will now proceed to examine them. The Madras High Court's decision in Commissioner of Income 'Tax v. Somasundaran Chettiar (A.I.R. 1928 Mad. 487) does not assist Mr. Sastri. The carried on business at Madras, where his head office was, and Ipoh, a place in the Federated Malay. Money was borrowed ,at Madras and part of it sent to Ipoh where it was used as capital in the conduct of Ipoh business. The High Court held that interest ,on the part of the borrowed money used at lpoh was rightly disallowed as a deduction because the business which was being taxed was the business at Madras and not the business at Ipoh. No exception can be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain kinds, similar to the exemptions conferred on certain classes of income by the provisos to Secs. 8 and 9 of the Burma Act. Then he noted the difference between the wording of s. 10 (2) (ix) of the Burma Act and the corresponding clause in the English Act. But we are unable to appreciate that these differences necessitate the rejection of the principle laid down in Hughes v. The Bank of New Zealand (21 T.C 472). It is true that under the Indian Income Tax Act it is income that is taxed but it is not taxed in vacuo. It is taxed in the hands of a person. In England, the interest of tax-free securities was exempted much in the same way as in India. It did not matter there who held them. Hughes v. The Bank of New Zealand (21 T.C 472) cannot be distinguished on the grounds mentioned by the Rangoon High Court. In our judgment Chellapa Chettiar v. C.I.T. Madras ((1937) 5 I.T.R. 97.) was correctly decided. The decision of this Court in indore Malwa United )Wills v. C.I.T. (Central) Bombay ([1962] Supp. 3 S.C.R. 310) is distinguishable. It appears to us that it was because s. 14 (2) (c) and s. 4(1)(a) and (c) existed at the relevant time that the words 'profits and gains' in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Equity 930300000 930300000 930300000 980300000 Preference 3000000000 3000000000 3000000000 3000000000 Reserves Surplus 2 2883388594 2931588992 3138424648 3304569564 Loan funds Liability Towards Depositors 3 88035557912 115372586226 155612020135 181076117145 Deferred Tax Liability 259730754 334541833 385731258 344270887 Total 95108977260 122569017051 163066476041 188705257596 APPLICATION OF FUNDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current assets 12771169159 10983980966 21350200029 34955471670 Total 95108977260 122569017051 163066476041 188705257596 SCHEDULE 3 Liablity Toward Depositors As per last balance Sheet 72936347833 85106396262 110427525150 148237792325 Collection during the year 58818457487 63916457889 79226393605 69158971003 Maturity during the year -46648409058 -38595329001 -41416126430 -46808537903 Net deposits (a) 85106396262 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other Income 13 197685804 108968890 162897139 135363223 TOTAL 9851513803 9389535803 10981173470 12897431215 EXPENDITURE Operational Other Expenses 14 3333310729 2899277022 3725676106 5301330585 Interest 15 5453170525 5728037917 6245763435 6548939672 Depreciation 198600873 229984844 273986802 258188283 Provisions, depreciation Write off 16 213852490 99592118 215514577 575206838 TOTAL 9198934617 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 402138969 415884732 557031552 699027432 Schedule 11 INTEREST On securities 5326750813 5564025007 6596335020 8410381283 On Loans Advances 1166158682 854502147 797685179 1162091738 On Fixed Deposits 104613278 179605790 1297582145 1790194238 On Certificate of Deposits 384802481 189018925 108864386 192349964 On Others 515025277 401464927 435224610 449846 Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ms SIFCL and the Schedule 15 which gives the interest paid out by M/s SIFCL. Schedule 11 is in respect of the income of the appellants and schedule 15 is in respect of expenditure of the appellants in procuring these investments. The consideration in such a case can be well explained by application of principal of TANSTAAFL. Thus we do not agree with the submissions made by the appellant in this regard that there is no consideration received by M/s SIFCL for accepting the deposit. The deposit made is itself the consideration whereby the money of the depositor funds the activities of M/s SIFCL. The depositor in a way transfers the right to use the money deposited to M/s SIFCL for earning profits by application of those deposits. This transfer of right to use the funds of depositors in terms of various definitions referred above is consideration. 4.12 Mumbai Bench had categorically agreed to the submission of similar nature as made in the present case that the accepting deposits is without consideration and hence cannot be termed as service. In case of ICICI Bank Ltd [2019 TIOL 589 CESTAT Mumbai] following was observed: 37. It is a common knowledge that the customers deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the deposits, but the banks thereafter provide number of services like discounting of cheques, minimum balance charges, handling charges for gold loans, locker rent and similar services, which are in relation to banking and other financial services and are chargeable to service tax as consideration for providing such services are not received in the form of interest. The list of services on which the banks have to pay service tax under banking and other financial services , can be bifurcated into two categories. The first category consists of services which have a direct nexus with the activity of accepting deposits, while the second category consists of those services which have a direct nexus with the lending activity of the banks. The services under the aforesaid two categories have been stated by the banks to be as follows : (i) Direct nexus with the activity of accepting deposits. a. Charges towards issuance of Cheque book; b. Charges to maintain minimum balance; c. Debit Card charges; d. Duplicate Pass Book/Bank Statement charges. e. Stop payment charges f. Cheque return charges g. Demand Draft charges h. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if they accept deposits. It has been seen that without payment of insurance premium on the outstanding deposits, banks will not be able to function or render any output service of banking and other financial services and the licence granted to the banks by the Reserve Bank of India can be cancelled. 54. The contention of the Department is that accepting of deposits is covered under Section 66D(n) of the Finance Act which contains the negative list. As noticed above, the negative list comprises, under sub-clause (n) of Section 66D, services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. The issue is whether extending deposits would mean the activity of accepting deposits. The activity of accepting deposits would be an activity where the banks receive deposits from the customers in the form of savings account, recurring deposits, for which the banks pay interest to the customers. On the other hand, the extending of deposits would be an activity of a bank giving its surplus money in the form of deposit to another person, where the consideration received would be in the form of interest. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot get covered under exemption notification. We fail to understand whether the authorities would go against the directions given in the circular. Besides that, the circular is also, in our view, contrary to the proviso to Section 37B of the Central Excise Act, 1944 (for short the Act ). Section 37B reads as under : The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and such officers and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the said Board : PROVIDED that no such orders, instructions or directions shall be issued (a) so as to require any Central Excise Officer to make particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the [Commissioner of Central Excise ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered in terms of the definition as it existed then. Commissioner has in the impugned order analyzing the definition as it existed during the relevant period vis a vis the facts of the present case observed as follows: The noticee have contended that the allegation in the show cause notice is with reference to the promotion in marketing of the business of client and that the definition under Section 65 (19) of FA 94 relates to promotion and marketing of services by their client and not the business of the client. The very business of the Noticee is in nature of service as they are encouraging saving habits among public, facilitating successful launching/ running of saving schemes. Indirectly they are engaged in mobilization of funds from public which tantamount to service. The word business used in the notice in relation to promoting and marketing of the business of client is with reference to sub clause (ii) of Clues 19 of Section 65 of the FA 94 which inter alis is promotion and marketing of service provided by the client . In this connection it is observed that M/s SIFCL are not dealing with goods which implies that they are engaged in providing services i.e. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manifest and without doubt, the construction ought to prevail unless there are some strong and obvious reasons to the contrary. Further to quote Para 57 of the same case: .....The dominant purpose in construing a statue is to ascertain the intention of the legislature as expressed in the statue, considering it as a whole and its context. That intention, and therefore the meaning of the statue, is primarily to be sought in the words used in the statute itself, which must, if they are plain and unambiguous, be applied as they stand. (ii) In Hemraj Gordhandas Vs Assistant Collector of Customs and Central Excise, AIR 1970SC 755, the Hon'ble Supreme Court held that in a taxing statute, there was no room for intendment. (ii) In Tata Consultancy Service Vs State of Andhra Pradesh, 2004(178) ELT 22, the Hon'ble Supreme Court held that ordinarily statute had to be literally construed and same cannot be denied merely because consequences of such interpretation may lead to penalty. (iv) In the case of Commissioner of Central Excise, Chandigarh-Il Vs. Bhalla Enterprises,2004(173) ELT 225 (S.C), it was held that the principle of strict/liberal interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secure business on behalf of Sahara India Financial Corporation Limited under all its scheme - which may be changed varied, suspended and modified from time to time as per instruction of Sahara India Financial Corporation Limited. The definition of BAS include the services provided by a commercial concern in relation to not only promotion, marketing of services, provided by a client, but also any incidental or auxiliary service commission such as billing, collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and public relation services. The use of the term such as clearly indicates the definition provided is only illustrative and not exhaustive. There can be other service / services though not specified in definition which can be classified as auxiliary services and therefore will be liable to service tax under this category of service. The word Service as defined in Legal Glossary of Government of India (2001) means the action of serving, helping or befitting, conduct tending to the welfare or advantage of another......... The dictionary (Oxford Modern English Dictionary) meaning of word 'Service' is the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services is apparently covered under conducting. promoting, introducing and securing business on behalf of M/S SIFCL and the noticee has all infrastructure and work force available with them for enhancing the business of their client for set of consideration as stipulated in MOU's entered during relevant period. The activities of the noticee are to be covered under BAS defined under clause 19 of the Sec.65 of the FA'94 as amended from time to time since 01.07.2003, Thus it is seen that the noticee has rendered auxiliary services to M/S SIFCL and for which the receipt of money as commission as agreed upon and thus there is a service provider - client (service receiver), relationship between noticee and SIFCL. The Noticee had pleaded that in their case there was no client and accordingly no service tax could be leviable on them. They have submitted that the existence of a client, Service provider and payment for the service are three parameters for levy Service Tax. In their case there is no client and they are not liable to pay service tax. However the noticee has understood the meaning of the word 'client' in a very narrow sense on the basis of the mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed by the appellant, the activities of appellant will qualify as incidental and auxiliary support services, provided by the appellant to the business of the M/s SIFCL. Hon‟ble Supreme Court has in the case of M/s Good Year India Ltd [1997 (95) ELT 450 (SC)] held as follows: 2. .. The words such as stainless steel, nickel monel, incoloy, hastelloy in sub-heading (2) are only illustrative of the various metals from which valves can be made but the said description is not exhaustive of the metals. If the material from which the valves are made is a corrosion-resisting material then the valves would fall under sub-heading (2) of Heading 84.61. . Relying on this decision Hon'ble Bombay High Court has in the case of Coca Cola India Pvt Ltd [2009 (15) STR 657 (Bom)] held as follows: 24. The next expression to be considered from the definition is such as . A few dictionary meanings of the term such as are reproduced. Concise Oxford Dictionary, Such as means for example or of a kind that; Chambers Dictionary, such as means for example : In Good Year India Ltd. v. Collector of Customs - 1997 (95) E.L.T. 450 the Supreme Court observed as under: . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has in case of Ultratech Cement [2010 (260) E.L.T. 369 (Bom.)] held as follows: 35. The argument of the Revenue, that the expression such as in the definition of input service is exhaustive and is restricted to the services named therein, is also devoid of any merit, because, the substantive part of the definition of input service as well as the inclusive part of the definition of input service purport to cover not only services used prior to the manufacture of final products, subsequent to the manufacture of final products but also services relating to the business such as accounting, auditing..... etc. Thus the definition of input service seeks to cover every conceivable service used in the business of manufacturing the final products. Moreover, the categories of services enumerated after the expression such as in the definition of input service do not relate to any particular class or category of services, but refer to variety of services used in the business of manufacturing the final products. There is nothing in the definition of input service to suggest that the Legislature intended to define that expression restrictively. Therefore, in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, press note issued by the Ministry of finance along with the Draft 2004 Rules and various decisions of the Apex Court, this Court held that the expression activities in relation to business in the inclusive part of the definition of input service further widens the scope of input service so as to cover all services used in the business of manufacturing the final products and that the said definition is not restricted to the services enumerated in the definition of input service itself. The Court rejected the contention of the revenue that a service to qualify as an input service must be used in or in relation to the manufacture of the final products and held that any service used in relation to the business of manufacturing the final product would be an eligible input service. 38. We concur with the above decision of this Court in the case of Coca Cola India Pvt. Ltd. (supra) 4.16 It is the submission of the appellants that by Finance Act, 2006, the sub section 104(c) was inserted in the Section 65 of the Finance Act, 1994 defining the business support services as follows: support services of business or commerce means services provided in relation to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) For the purposes of this Chapter, classification of taxable services shall be determined according to the terms of the sub clause s of clause (10% of Section 65. (2) When for any reason, a taxable service is prima facie, classifiable under two or more sub-clauses of clause 9105) of section 65 classification shall be effected as follows: (a) The sub clasuse which provides the most specific description shall be preferred to sub clauses providing a more general description. (b) (c) . 4.18 It is also noted that the appellant had never before raised this ground either before the adjudicating authority or in their appeal memo. Hence this ground which has been urged for first time at the time of hearing of appeal cannot be admitted in view of the observations as follows made by the Ahmedabad Bench in the case of DLF Limited [2014 (302) ELT 303 (T-Ahmd)]: 6. So far as the issues outlined at para 2(iv) an (v) above are concerned it is observed that the same were not raised by the appellant before the lower authorities and have also not been raised in the grounds of appeal before us, therefore, the same cannot allowed to be raised at the time of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 65(19)(ii) read with 65(105) (zzb) of the said Act does not arise. 65. As already stated above, the term Service has not been defined under the said Act. In Black s Law Dictionary the term service has been defined to be an act of doing something useful for a person or a company for a fee. The expression service charges is defined therein to mean charge assessed for performing of service, such as charges assessed by bank against the expenses of maintaining or servicing a customer checking account. Even while defining the term taxable service under the said Act, the definition specifies the taxable service to mean any service provided or to be provided to any person whereas the business auxiliary service has been defined to mean any service in relation to the service provided by the client. Being so, taking into consideration the common understanding of the definition of the term service as well as the definition of the term taxable service under the said Act, it is evident that the service contemplated under Section 65(19) is the one which relates to service rendered by the service recipient. It may be taxable service or may not be so. However, the situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his experience as the wherewithal to provide. However, temporary occupation of mandap does not involve transfer of the property either under Transfer of Proper Act or otherwise. The nature and character of the Service tax levied on Mandap Keeper is in relation to transaction between the Mandap Keeper and his customer which is essentially that of providing a service. 79. In Fakir Chand Gulati case, the point for consideration before the Apex Court was whether a land owner who enters into agreement with a builder for construction of an apartment building and for sharing of the constructed area is a consumer entitled to maintain a complaint against the builder as a service provider under the Consumer Protection Act, 1986. It was held therein that the basic underlying purpose of such agreement is the construction of a house or an apartment in accordance with the specification by builder for the owner, the consideration for such construction being the transfer of undivide share in land to the builder and grant of permission to the builder to construct two or more floors. Apart from consideration flowing from the land owner to the builder in the form of sale of undivided share in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h defined banking and other financial services. Subsequently the definition underwent changes which were introduced by way of Section 90 of the Finance Act, 2004 and Section 135 of the Finance Act, 2007. The appellant filed writ petition in the High Court challenging the levy of Service tax imposed by Section 65(12)(a)(i) of the said Act. During the pendency of the writ petition, the government issued a Notification dated 1-3-2006 exempting 90% of the amount payable under higher purchase/equipment leasing agreements from Service tax on the ground that the said 90% represented interest income earned by the service provider. By virtue of the amended definition of the expression banking and other financial services, the transactions in the nature of financial leasing, equipment leasing and hire-purchase had been sought to be brought within the Service tax net. The Apex court after taking note of various provisions of law observed that the Reserve Bank of India was constituted under RBI Act, 1934 inter alia to regulate the country s monetary system. Chapter III-B of the RBI Act deals with the provision relating to non-banking financial companies and financial institutions. Section 45-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept of Service tax and had held that the Service tax is a valued added tax which in turn is destination based consumption tax in the sense that it is levied on commercial activities and it is not a charge on the business but on the consumer. And that the Service tax is an economic concept based on the principle of equivalence in a sense that consumption of goods and consumption of services are similar as they both satisfy human needs. It was further held by the Apex Court that:- Today with the technological advancement there is a very thin line which divides a sale from service . That, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It is this principle of equivalence which inbuilt into the concept of Service tax under the Finance Act, 1994. That Service tax is, therefore, a tax on an activity. That, Service tax is a value added tax. The value addition is on account of the activity which provides value addition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the interest/finance charge which is treated as income or revenue and which is credited to the revenue account, Such interest or finance charges together with the lease management fee/processing fee/documentation charges are treated as considerations for the services rendered and accordingly they constitute the value of taxable services on which Service tax is made payable . 84. In Bharat Sanchar Nigam s case the matter related to the state Legislative competency to levy sale tax on the transaction, by which mobile phone connections are enjoyed by the customers, under Entry 54 List-II of the Seventh Schedule to the Constitution. After taking note of the consensus amongst the parties on the point that the goods element in telecommunication were the electromagnetic waves by which data generated by the subscriber was transmitted to the desired destination and proceeding on the basis that incorporeal rights may be goods for the purpose of levying sale tax, it was held that electromagnetic waves are neither abstracted nor are they consumed in the sense that they are not extinguished by their user. They are not delivered, stored or possessed. Nor are they marketable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice. It is on the activity conducted or service rendered by the service provider to its customer that attracts the provisions of the said Act. The tax under the said Act cannot be levied on materials or on sale. Undoubtedly, in case of sale, if any services are rendered in the nature of processing fee or documentation charges, etc., that could form part of the services rendered and may constitute the value of taxable service on which the Service tax may be leviable. In other words, sale, by itself, of immovable property, either developed or undeveloped, or even alongwith construction therein, would not amount to rendering any service, either taxable or otherwise. But at the same time, any service rendered in the form of documentation or the like, certainly the same could amount to rendering service and would attract the provisions of the said Act. It is, therefore, necessary for the department before classifying an activity of service provider to be taxable service, to establish the factum of rendering of any such service by the service recipient to others in the course of sale of the immovable property by such service recipient, and only then it could be said that the service pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 418 (S.C.)] affirming the above decision of Tribunal. We do not dispute that post the amendments made from 09.10.2004, the sub clause (vii) linked the incidental and ancillary activities with the activities specified in clause (i) to (vi). 4.22 With effect from 09.10.2004 Section 65 (19) was amended substituting the existing section by new section wherein sub clauses (iv) was replaced by (iv), (v), (vi) and (vii) which are reproduced below: (iv) procurement of goods or services, which are inputs for the client; or (v) production of goods on behalf of the client; or (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittances, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision; Impugned order holds that the services provided by the appellant to his client are covered by (vi). From the terms of the Memorandum of understanding referred earlier it is evident that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The legislation is primarily directed to the problems before the Legislature based on information derived from past and present experience. It may also be designed by use of general words to cover similar problems arising in future. But, from the very nature of things, it is impossible to anticipate fully the varied situations arising in future in which the application of the legislation in hand may be called for, and, words chosen to communicate such indefinite referents are bound to be in many cases lacking in clarity and precision and thus giving rise to controversial questions of construction. The process of construction combines both literal and purposive approaches. In other words the legislative intention, i.e., the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed... 19. The well-settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said meaning irrespective of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e must clarify the position of plain meaning rule or clear and unambiguous rule with respect of tax law. The plain meaning rule suggests that when the language in the statute is plain and unambiguous, the Court has to read and understand the plain language as such, and there is no scope for any interpretation. This salutary maxim flows from the phrase cum inverbis nulla ambiguitas est, non debet admitti voluntatis quaestio . Following such maxim, the Courts sometimes have made strict interpretation subordinate to the plain meaning rule [Mangalore Chemicals case (Infra para 37).], though strict interpretation is used in the precise sense. To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is self-contradictory. 23. Next, we may consider the meaning and scope of strict interpretation , as evolved in Indian law and how the higher Courts have made a distinction while interpreting a taxation statute on one hand and tax exemption notification on the other. In Black s Law Dictionary (10 th Edn.) strict interpretation is described as under: Strict interpretation. (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The literal rules of construction require the wording of the Act to be construed according to its literal and grammatical meaning whatever the result may be. Unless otherwise provided, the same word must normally be construed throughout the Act in the same sense, and in the case of old statutes regard must be had to its contemporary meaning if there has been no change with the passage of time. That strict interpretation does not encompass strict - literalism into its fold. It may be relevant to note that simply juxtaposing strict interpretation with literal rule would result in ignoring an important aspect that is apparent legislative intent . We are alive to the fact that there may be overlapping in some cases between the aforesaid two rules. With certainty, we can observe that, strict interpretation does not encompass such literalism, which lead to absurdity and go against the legislative intent. As noted above, if literalism is at the far end of the spectrum, wherein it accepts no implications or inferences, then strict interpretation can be implied to accept some form of essential inferences which literal rule may not accept. 25. We are not suggesting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute. VISCOUNT SIMON quoted with approval a passage from ROWLATT, J. expressing the principle in the following words : In a taxing Act one has to look merely at what is clearly said. This is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. It was further observed : In all tax matters one has to interpret the taxation statute strictly. Simply because one class of legal entities is given a benefit which is specifically stated in the Act, does not mean that the benefit can be extended to legal entities not referred to in the Act as there is no equity in matters of taxation.... Yet again, it was observed : It may thus be taken as a maxim of tax law, which although not to be overstressed ought not to be forgotten that, the subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax on him , [Russel v. Scott, (1948) 2 All ER 1]. The proper course in construing r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Kesoram Industries Limited, (2004) 10 SCC 201 [hereinafter referred as Kesoram Industries case for brevity]. In the later decision, a Bench of seven-Judges, after citing the above passage from Justice G.P. Singh s treatise, summed up the following principles applicable to the interpretation of a taxing statute : (i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed : it cannot imply anything which is not expressed : it cannot import provisions in the statute so as to supply any deficiency : (ii) Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of Legislature s failure to express itself clearly . 4.23 Relying on the decision of Hon‟ble Supreme Court as referred ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principles requires it to be construed strictly. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject, but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction 13. This view has been followed repeatedly by the Hon ble Supreme Court and recently in Commissioner of Customs (Import), Mumbai v. Dilip Kumar Company [2018 (361) E.L.T. 577 (S.C.)], the law has been summarised by the Hon ble Supreme Court as follows: (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o provide documentary evidence substantiating his claim for abatement from the gross amount received from the client for services rendered. The noticee has also relied on various clarifications in respect of various services like custom house agent, market research agency, security agency and manpower recruitment agency in which reimbursement on actual basis is kept out of the service tax net. Here the principle of keeping reimbursement on actual expenses outside the service tax net is not disputed. But as DGST letter, documentary evidence is a must for considering reimbursement on actual basis to be kept outside the service tax net. The Noticee has submitted certificate dt 11.8.2009 by M/s CPS Company Chartered Accountants, that direct expenses incurred by M/s Sahara India, during the relevant period, has been reimbursed by M/s SIFCL. They also submitted some copies of Debit notes and details period wise direct expenses and uncertified copy of general ledger of M/s Sahara India for the relevant period. The Noticee has not submitted any clinching evidence as to how these expenses have accrued to be reimbursed by M/s SIFCL nor they have submitted any detailed breakup o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules, 2004, therefore they are not eligible to take the benefit of CENVAT credit. It is also pertinent to point out that the burden of proof that they are entitled for availment of CENVAT Credit is on the noticee in terms of Rule 9 (5) of the CENVAT Credit Rules, 2004. In absence of such proof from the Noticee the plea cannot be as per Service tax Law. The question at this stage is theoretical. CENVAT Credit is governed by various stipulations and it is for the assessee to follow the prescribed procedure to claim the credit on input services. It is seen that during the course of investigations by DHGCEI and thereafter during substantial submission of reply by the noticee has not brought on records the documents maintained by them and to the availment of input services under the provisions of Business Auxiliary Services . It is also seen that the noticee has not submitted any documentary evidences for consideration of CENVAT Credit of input services or any other compliance of provisions relating TO Cenvat Credit. I therefore, hold that CENVAT Credit of input service and documentary evidences in respect of payment of Service tax on input service the compliance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioning tactics to willfully avoid the tax and follow the required procedure. 22.2.3 The party has relied upon the following case laws in their defence to plead that the demand was time barred and extended period was not applicable on them. They have cited following judgment in their defence: (a) Cosmic Dye Chemical Vs Collector of Central Excise Bombay 1995 (75) ELT 721 (SC): (b) CCE Vs Cemphar Drug and Liniments 1989 (40) ELT 276 (SC) . (c) Pushpam Pharmaceuticals Company 1995 (78) ELT 401 9SC) . (d) Continental Foundation Jt Venture Vs Commissioner of Central Excise Chandigarh 2007 (216) ELT 177 (SC) (e) Bhayalakshmi Poha Industries . Thus it is seen that the ratio of the above cases is not applicable in the present case. 22.2.4 Under the provisions of Section 69 of FA 94 any service tax provider providing taxable service and liable to pay service tax has to obtain registration from the jurisdictional Superintendent of Central Excise. The relevant provision of the Finance Act, 1994 is as under: Section 69: - Registration (1) Every person liable to pay the service tax under this Chapter or the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icee deliberately did not comply with the provisions of service tax law with intent to evade Service tax due to the Govt. exchequer. The noticee has however obtained registration under business support service on 10.11.06. I therefore, hold that the noticee consciously suppressed material facts from the Department with intent to evade Service Tax by not taking registration and not filing returns as per the Service Tax Law. Furthermore, the noticee did not discharge its statutory obligation of Service Tax payment. The provision of taxable service and evasion of service tax by the noticee was detected by the Department. After taking into all the facts and circumstances of the case, I hold that the extended period for demand of Service tax under Section 73 (1) of the Finance Act, 1994 is invokable. 23. Whether the noticee is liable to Penalty under Section 76, 77 and 78 of Finance Act, 1994. a) The submission of the noticee is that there was ambiguity regarding the scope of Business Auxiliary Services during the relevant period as the noticee was not sure whether the services provided by them are taxable in light of discussion held herein before. b) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is difficult to accept that the assessee was under bona fide belief that Excise duty was not payable and that it was not permissible for the Department to avail the larger period of limitation by invoking proviso to Section 11A of the Act. All the Authorities below have rejected this argument of the assessee. The Tribunal while upholding the view of the Commissioner agreed with the reasons given by the Commissioner in the following manner : The Commissioner has also for valid reasons held that the extended period of limitation was applicable and that the Department s record did not show the receipt of any letter allegedly written on 28-9-1996. The assessee, dealing with several similar manufacturing units who paid excise duty on identical processes, and doing job work on their behalf would have obviously known that excise registration was required for the cold rolling mills in its factory for the purpose of manufacturing cold-rolled pattas/pattis. The partner of the assessee was fully aware that such activity was dutiable, in view of the fact that four out of six units from which the goods were received by M/s. Gujarat Industries were paying duty on similar manufacturing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. In view thereof, the authorities below have rightly invoked Section 28 of the 1962 Act and allied provisions. 4.30 In case of Kitply Industries [2011 (264) E.L.T. 481 (S.C.)] Hon‟ble Supreme Court ahs held as follows: 22. Consequently, we propose to look into the first issue in the light of the background facts as stated hereinbefore. The specific case of the appellant is that the respondent having manufactured the excisable goods covered under different chapter headings, removed them without payment of proper duty of excise and that from the aforesaid action it is explicit that there was an intention on the part of the respondent to evade payment of duty particularly when the contract clause between the respondent and M/s. Adyar Gate Hotel Ltd. clearly mentioned that the contractors quoted rate would also include excise duty. 23. Although, the respondent has pleaded that it was done out of ignorance, but in our considered opinion there appears to be an intention to evade excise duty and contravention of the provisions of the Act. Therefore, proviso of Section 11A(i) of the Act would get attracted to the facts and circumstances of the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake any conclusion one way or the other. It is on record that the appellant had not provided copy of the agreement to the department in respect of the services received from abroad and these were provided only in 2010 when the investigation commenced. Further, the exact details of the payments made in respect of the marketing promotion activities were given to the department for the first time only in January, 2011 vide letters dated 5-1-2011 and 7-1-2011. The show cause notice has been issued on 20-4-2011 and, therefore, it cannot be said that the show cause notice is barred by limitation of time. 4.33 In the case of Mehta Co. [2011 (264) E.L.T. 481 (S.C.)] Hon‟ble Apex Court held as follows: The cause of action, i.e., date of knowledge could be attributed to the appellant in the year 1997 when in compliance of the memo issued by the appellant and also the summons issued; the hotel furnished its reply setting out the details of the work done by the appellant amounting to Rs. 991.66 lakhs and at that stage only the department came to know that the work order was to carry out the job for furniture also. A bare perusal of the records shows that the aforesaid reply w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid submissions made by the learned counsel for both the parties. The service tax was introduced by the Finance Act, 1994 and the relevant provisions are contained in Chapter-V of the said Act, Section 66 is the charging Section and Section 67 provides the manner of valuation of taxable services for charging service tax. Section 68 of the Act, cast an obligation on every person providing taxable service to any person to collect the service tax at the rate specified in Section 66 of the Act. From Section 76 to Section 80 of the Act, different kinds of penalties are provided for varying default/failure on the part of those who are liable to pay service tax. Since in the instance case the penalties are levied under Section 76 and 78 of the Act, we reproduce these two Sections hereunder :- 76. Penalty for failure to pay service tax - Any person, liable to pay service tax in accordance with the provisions of Section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, in addition to such tax and the interest on that tax amount in accordance with the provisions of Section 75, a penalty which shall not be less than two hundred rupees for every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the first proviso shall be available, if the amount of service tax so increased, the interest payable thereon and twenty five per cent of the consequential increase of penalty have also been paid within thirty days of communication of the order by which such increase in service tax takes effect. A perusal of the provisions would show that Section 76 provides for penalty for failure to pay service tax. In such a case, in addition to the tax and interest on that tax amount to be calculated in accordance with the provision of Section 75, penalty is also leviable on the defaulter which shall not be less than ₹ 200 for every day during which such failure continues or at the rate of two per cent of such tax per month whichever is higher. There is, however, a cap on this penalty stipulated in the proviso to this Section which states that penalty payable is not to exceed the service tax payable. 14. On the other hand, as per Section 78, penalty can be imposed for suppressing the value of taxable service. This provision applies where the service tax has not been levied or paid or where it has been short-levied or short-paid or where the service tax has been erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that this amendment is only clarificatory in nature. We may mention that Punjab and Haryana High Court in its decision dated 12th July, 2010 in STA 13/2010, entitled Commissioner of Central Excise v. M/s. Pannu Property Dealers, Ludhiana [2011 (24) S.T.R. 173 (P H)] has taken the view that even if the scope of two sections of the Act may be different, the fact that penalty has been levied under Section 78 could be taken into account for levying or not levying penalty under Section 76 of the Act. However, that was a case where the appellate authority had exercised its discretion not to levy the penalty under Section 76 of the Act, when the larger penalty had already been imposed under Section 78 of the Act. In this scenario, the appeal of the Revenue against the said view taken by the appellate authority was dismissed holding that appellate authority was within its jurisdiction not to levy the penalty under Section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under Section 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of this case the appellant has to show that there was sufficient and proper reasons which occasioned the appellant to make short deposits of service tax than required under the provisions of the Act. If the appellant can show that the manner in which he was making the deposits of the service tax was bona fide i.e., in good faith, it would amount to reasonable cause . Bona fide implies in the absence of fraud or unfair dealing. The equivalent of this phrase is honestly . The correct province of this phrase is, therefore, to qualify things or actions that have relation to the mind or motive of the individual. Chambers 20th Century Dictionary defines bona fide to mean in good faith : genuine . The word genuine means natural : not spurious; real; pure; sincere . In Law Dictionary Mozley and Whitley define bona fide to mean good faith, without fraud or deceit . Thus the term bona fide or genuinely refers to a state of mind. 4.36 With regards to the penalty imposed under Section 78 we find that once the extended period of limitation has been invoked the penalty under this section is mandatory. In case of Rajasthan Spinning Weaving Mills Ltd [2009 (238) ELT 3 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President; (1) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.] 17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to sub- section 1 of Section 11A and Section 11AC use the same expressions : ....by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,... . In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under Section 11A(1) states that the escaped duty was the result of any conscious and deliberate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1)(c) of the Income Tax Act, 1961 (in short the IT Act ) taking the stand that Section 11AC of the Act is identically worded and in a given case it was open to the assessing officer not to impose any penalty. The Division Bench made reference to Rule 96ZQ and Rule 96ZO of the Central Excise Rules, 1944 (in short the Rules ) and a decision of this Court in Chairman, SEBI v. Shriram Mutual Fund Anr. [2006 (5) SCC 361] and was of the view that the basic scheme for imposition of penalty under section 271(1)(c) of IT Act, Section 11AC of the Act and Rule 96ZQ(5) of the Rules is common. According to the Division Bench the correct position in law was laid down in Chairman, SEBI s case (supra) and not in Dilip Shroff s case (supra). Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q was in vogue in which no mens rea was provided for. It only stated which he knows or has reason to believe . The said clause referred to wilful action. According to learned counsel what was inferentially provided in some respects in Rule 173Q, now stands explicitly provided in Section 11AC. Where the outer limit of penalty is fixed and the statute provides that it should not exceed a particular limit, that itself indicates scope for discretion but that is not the case here. 23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum Volume 85, page 580, Paragraph 1023 : A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. 5. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalties imposed under Section 76 and 77 of Finance Act, 1994. INTEREST 4.41 Issue in respect of interest is settled by the Bombay High Court in case of Padmashree V V Patil SSK [2007 (215) ELT 23 (Bom)] wherein it has been held:- 12. Learned Counsel Shri Kolte has also placed reliance upon the tail piece of Explanation (2) to sub-section (2B) reading but for this sub-section . According to him, but is a conjunction used to indicate the intention of those who use it to limit or restrain the sense or effect of something, which had before been said. He has obtained this meaning from Law Lexicon by P. Ramnatha Aiyar. In order to examine the submission by learned Counsel as to whether this terminal part of Explanation (2) gives the explanation so much strength as to mean that the party, which has utilised the facility of sub-section (2B) of payment of short duty as ascertained by the assessee himself, is not liable to pay the interest as u/s. 11AB, we have tried to search for the meaning of phrase but for . As per Concise Oxford Dictionary, 11th Edition, but for means except for , if it were not for . In view of these meanings obtained from the La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise, the interest would stop to run to the extent of amount deposited by self ascertainment and on the date such amount is so deposited. If the tail piece of Explanation (2) was to be so strong as to nullify the effect of sub-section (2B), Section 11AB would not have incorporated within it the clause or has paid the duty under sub-section (2B) . Reading Section 11AB together with Section 11A (2B) and Explanation (2), we are unable to accede to the interpretation tried to be attributed by Advocate Shri A.P. Kolte to Explanation in question. 13. For all these reasons discussed, we are unable to agree with the proposition that interest u/s. 11AB is also not chargeable in case the short duty or unpaid duty is deposited with the Government before issuance of show cause notice. Summary of our findings 4.42 Commissioner has in the impugned order recorded the findings as follows: 1. Under the facts and circumstances narrated above, the Notice must succeed. Impugned Services provided by the Noticee during the relevant period are BAS to evade Service Tax the Noticee had willfully suppressed material facts and evidences during relevant period f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9180158775 8370200071 877630381 798775634 12376789 11183089 The Notice has therefore, rightly sought to demand and recover Service Tax which would be amounting to Rs. 809958723.00 (Service Tax Rs. 798775634.00 + Ed. Cess Rs. 11183089,00) as calculated above on the Services rendered by them during relevant period under Sec.73 of the FA 1994 3. I also hold that the Notice has rightly invoked the provision of Section 73 of finance Act, 1994 that they had wilfully suppressed material information and evidences from jurisdictional Central Excise Authorities with intent to evade Service Tax during the relevant period 4. The Noticee was liable to pay the demanded and determined amount of Service Tax during the relevant period. They would also liable to pay interest at the appropriate rate in terms of Section 75 of Finance Act, 1994 5. The Noticee was liable to discharge their service tax liability within stipulated time which they failed to do so and therefore they have rendered themselves liable for penalty under Section 76 ibid. 6. This leads to issue of impos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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