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TMI Blog2024 (2) TMI 1160X X X X Extracts X X X X X X X X Extracts X X X X ..... d section. This ground which is both factual and legal was not taken by the appellant in reply to the show cause notice. Section 73(4B) provides that the Central Excise Officer shall determine the amount of service tax within one year from the date of notice, where it is possible to do so. In the absence of such a ground having been taken in the reply to the show cause notice, it was not considered by the Commissioner. It would, therefore, in the absence of the factual aspect having been brought on record, not be appropriate to decide this issue. Extended Period of Limitation - HELD THAT:- The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall have effect as if, for the word one year , the word five years has been substituted. It would be seen from the show cause notice that the extended period of limitation has been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deliberate and with an intent to escape payment of duty. Mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of tax. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. Thus, mere non disclosure of the receipts in the service tax returns would not mean that there was an intent to evade payment of service tax. In the present case, all that has been stated in the impugned order is that since the appellant suppressed facts, the provisions of the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act would be applicable since such suppression of facts was with an intent to evade payment of service tax. The extended period of limitation could not, in view of the aforesaid decisions, have been invoked in the present case even if the returns were self assessed. Management consultancy service - HELD THAT:- The entire demand confirmed under this head falls within the extended period of limitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the fees. This is a typical revenue sharing model and in view of the aforesaid decision of the Tribunal in Niraj Prasad, there is no element of service involved. The appellant is, therefore, justified in submitting that franchise service (reverse charge) was not rendered by the appellant since the agreement was a mere revenue sharing agreement. - the appellant was not required to pay any service tax on franchise service on a reverse charge basis. Penalty under section 78 - HELD THAT:- The Commissioner has imposed penalty under section 78 of the Finance Act for the reason that the ingredients for imposing penalty under this section and for invoking the extended period of limitation are same. It has been found that the extended period of limitation could not have been invoked. Thus, the penalty under section 78 of the Finance Act deserves to be set aside. Penalty under section 77 - HELD THAT:- Penalty of Rs. 10,000/- has been imposed upon the appellant for the reason that the appellant had contravened the provisions of section 70 of the Finance Act as the correct periodical ST-3 returns had not been filed. The appellant has very fairly stated that it is liable to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in affiliation with Punjab Technology University which is a State University established by the state government of Punjab under the Punjab Technical University Act, 1996 which has a mandate to set up centers of excellence in emerging technologies for promoting training and research development. Accordingly, BSc and MSc (Multimedia) Degrees were designed for 12th pass and graduate students towards a career in Visual Effects (VFX) and 3D Visualisation/Animation. B. Star Animation Diploma course in affiliation with Centennial College, Canada which is the oldest publicly funded college in Ontario, Canada, and is affiliated to the Canadian Bureau for International Education (CBIE). The Star Animation Diploma program is designed for undergraduates and provides opportunity to become a professional in the industry of Animation and VFX. 6. The appellant also entered into franchise agreements with different business partners like, VAS Group, Evolve Consulting and Theme Animation Pvt. Ltd. and received Royalty fees and Sign-up fees. The appellant claims that it has been paying service tax on this franchise service provided in India. 7. The appellant and Centennial College, Can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable category of franchise service, the department believed that the appellant used the brand name Centennial College which provides infrastructural support (including land, building, cleaning and electrical etc.) to run Centennial program in India. It has, therefore, been alleged that the appellant is managing all operational functions and marketing/promoting its educational program. With this assertion, it has been alleged that appellant is transferring certain amount to Centennial College, Canada in foreign currency, which is exigible to service tax under Reverse Charge Mechanism in terms of rule 2(1)(d)(iv) of the Service Tax Rules, 1994 [the Service Tax Rules] read with section 66A of the Finance Act; IV. Section 65(19): Against the miscellaneous income , department alleged that appellant is rendering Business Auxiliary Services [BAS ] to Centennial College, Canada and getting 50% of marketing expenses paid by Centennial College, Canada for the period April 2006 to March 2007; and V. Management or Business Consultant Services [section 65(105)(r)]: The department alleged that other income reflected in the balance sheet for April 2006 to March 2007 is taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... III. Franchise Services (Reverse Charge Mechanism) (Foreign Currency remittance) 60,98,383 12,66,956 12. The appellant has also stated that the department had proposed appropriation of service tax of Rs. 44,41,384/- only but the appellant had actually paid service tax of Rs. 92,63,532/- before service of show cause notice. Thus, the remaining tax of Rs. 48,22,148/- was not acknowledged/appropriated in the show cause notice dated 21.10.2011. Challans were also provided with the reply to show cause notice. A plea was, therefore, made by the appellant to appropriate the remaining tax already paid by the appellant. 13. In addition, the appellant claimed that after service of show cause notice, challans amounting to Rs. 5,63,622/- against franchisee service under forward charge and Rs. 33,730/- against management or business consultancy services were submitted and a request was made to appropriate the amount. 14. It is after eleven years from the date of issuance of the show cause notice on 21.10.2011 that the Commissioner passed the order dated 02.05.2022 confirming the demand of Rs. 1,61,61,355/- and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 73(1) of the Finance Act and the issues of commercial coaching and training services, and franchise service (reverse charge) have been contested, both on the ground of limitation as also on merits. 18. In fact, the learned counsel for the appellant has summarised the contentions, issue wise, in the following manner: Commercial Coaching and Training Services (in Rs.) Franchise Services (Forward Charges) (in Rs.) Franchise Services (Reverse Charges) (in Rs.) Management Consultancy Service (in Rs.) Demand in the show cause notice Best Judgment Assessment (BJA) 3,11,31,564 1,07,88,799 60,98,383 33,730 Set aside in impugned order 2,73,56,539 45,34,582 0 0 Confirmed in impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been imposed. 20. Ms. Jaya Kumari, learned authorised representative appearing for the department has, however, supported the order insofar is it confirms the demand of service tax and has also contended that the Commissioner committed an error in dropping the demand of Rs. 2,73,36,539/- relating to commercial coaching and training service by granting exempting under the Notifications dated 20.06.2003 and 10.09.2004. Learned authorised representative submitted that the exemption notification would not be available if the charges of such services are paid by the person undergoing such courses directly to the commercial training or coaching centers. 21. The submissions advanced by the learned counsel for the appellant and the learned authorised representative appearing for the department have been considered. Inordinate delay in adjudication 22. Learned counsel for the appellant placed reliance upon the provisions of section 73(4B) of the Finance Act to contend that the order passed by the Commissioner should be set aside as it was passed beyond the period prescribed in the said section. This ground which is both factual and legal was not taken by the appellant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,480 01.10.2008 to 31.03.2009 25.04.2009 25.04.2010 01.04.2009 to 30.09.2009 25.10.2009 25.10.2010 75,92,756 01.10.2009 to 31.03.2010 25.04.2010 25.04.2011 01.04.2010 to 30.09.2010 25.10.2010 25.10.2011 44,25,577 Demand is within time 01.10.2010 to 31.03.2011 25.04.2011 25.04.2012 24. Section 73 of the Finance Act deals with recovery of service tax not levied or paid or short-levied or short paid or erroneously refunded and section 73(1) of the Finance Act, as it stood relevant time, is reproduced below: 73(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s if, for the word one year , the word five years has been substituted. 28. To appreciate the contention that has been advanced by the learned counsel for the appellant regarding the invocation of the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act, it would be appropriate to refer to the allegations made in the show cause notice and the manner in which it has been dealt with by the Commissioner. 29. The relevant portion of the allegations made in the show cause notice are: 21 Whereas it appears that the party has deliberately contravened the provisions of Finance Act, 1994, as amended and the Rules made thereunder with intent to evade payment of service tax. In spite of the fact that they are engaged in providing service of Commercial Training or Coaching, the party has wrongly taken the stand that the course completion certificate issued by them is recognized by law and hence they were not covered in the service tax net in terms of exclusion clause given in the definition of Commercial training or coaching centre under Section 65(27) of the Finance Act, 1994. Further, the party is neither discharging their service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . They failed in brining correct facts to the knowledge of the department and not paid service tax correctly in respect of services provided by them, namely Commercial Coaching and Training Service, royalty amount they had paid to their overseas client, Franchisee Service on payment made to the Centennial College Canada under reverse charge and on Management or Business Consultancy Service, which was required to be paid, as explained above. In the era of self-assessment, a great trust was placed on the assesses by the Department. The notice has breaches that trust by not disclosing the correct facts to Department and by not calculating and paying the service tax correctly. They suppressed the fact in order to evade service tax on the amount received in lieu of the service rendered. Had the inquiry not been conducted in this regard same would have remained hidden and Government suffered a loss of a big amount of revenue. I find that it is an established position that the onus of proper assessment and discharging of the service tax falls on the tax payer. The noticee has failed to discharge the said burden and on the contrary, they failed to pay service tax properly. Hence, I hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to Section 11A of the Act. (emphasis supplied) 37. These two decisions in Pushpam Pharmaceuticals and Anand Nishikawa Company Ltd. were followed by the Supreme 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. 38. The Supreme Court in Continental Foundation Joint Venture Holding vs. Commissioner of Central Excise, Chandigarh-I [ 2007 (216) E.L.T. 177 (SC) ] also held: 10. The expression suppression has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or collusion and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to evade payment of service tax. However, the impugned show cause notice does not contain any allegation of fraud, collusion, or wilful misstatement on the part of MTNL. The impugned show cause notice alleges that the extended period of limitation is applicable as MTNL had suppressed the material facts and had contravened the provisions of the Act with an intent to evade service tax. Thus, the main question to be addressed is whether the allegation that MTNL had suppressed material facts for evading its tax liability, is sustainable. xxxxxxxx 41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to evade the service tax, which it was aware would be leviable, suppressed the fact of receipt of consideration for rendering any taxable service. On the contrary, the statements of the officials of MTNL, relied upon by the respondents, clearly indicate that they were under the belief that the receipt of compensation/financial support from the Government of India was not taxable. Absent any intention to evade tax, which may be evident from any material on record or fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings and is before us that it is entitled to the CENVAT credit. Thus, we find that it is a case of difference of opinion between the appellant and the Revenue. The appellant held a different view about the eligibility of CENVAT credit than the Revenue. Naturally, the appellant self-assessed duty and paid service tax as per its view. Such a self-assessment, cannot, by any stretch of imagination, be termed deliberate and wilful suppression of facts. 16. Another ground for invoking extended period of limitation given in the impugned order is that the appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-assessment and is required to self-assess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect self- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2023) 8 Centax 209 (Tri.-Del.) ] also observed as follows: 20. The Department cannot be permitted to invoke the period of limitation by merely stating that it is a case of self-assessment as even in a case of self-assessment, the Department can always call upon an assessee and seek information. It is under sub-rule (1) of rule 6 of the Central Excise Rules, 2002 that the assessee is expected to self-assess the duty and sub-rule (3) of rule 12 of the Rules provides that the proper officer may, on the basis of information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule 12 also provides that every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer. Hence, it was the duty of the proper officer to have scrutinized the correctness of the duty assessed by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that has been stated in the impugned order is that since the appellant suppressed facts, the provisions of the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act would be applicable since such suppression of facts was with an intent to evade payment of service tax. The extended period of limitation could not, in view of the aforesaid decisions, have been invoked in the present case even if the returns were self assessed. 49. According to the appellant, only the demand of Rs. 44,25,577/- that has been confirmed is within the normal period of limitation. 50. The appellant has also furnished a chart to highlight what amount was within time and what was barred by time in respect of each of the four services and the same is reproduced below: Commercial coaching training services (in Rs.) Franchise Service (in Rs.) Franchise Service (RCM) (in Rs.) Management Consultancy Service (in Rs.) Total (in Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of commercial coaching and training services , the demand of Rs. 3,11,31,564/- has been challenged and the same has been explained by the appellant in a chart which is reproduced below: Sl. Description Amount (in Rs.) Breakup Remarks 1. Wrong computation based on 'Best Judgment Assessment' instead of actual value on 'accrual basis' 59,18,282 Set aside in the impugned order Part of Revenue appeal 2. Degree affiliated with Punjab Technical University (PTU) 2,11,42,021 1,81,41,040 a. Set aside by virtue of definition under section 65(27) of the Finance Act b. Also barred by limitation Part of Revenue appeal 25,95,804 a. Set aside in the operative portion of order but erroneously confirmed when calculating the demand in numbers b. To be set aside on merits as it is a calculation error Part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,81,41,040/- was set aside as service tax could not be levied. The finding recorded by the Commissioner does not suffer from any error and the learned authorised representative appearing for the department has also not been able to point out any specific error in the finding. It is, because of the discussion on the extended period of limitation, also barred by limitation. 59. Though an amount of Rs. 25,95,804/- has been set aside in the operative part of the order, but while calculating the amount it has included this amount. This is a calculation error and, therefore, the demand for this amount has to be set aside. 60. As regards the diploma courses from Centennial College, Canada, the finding recorded by the Commissioner is as follows: 7.10 In this respect I find the objectives of the Diploma course provided by the notice in Animation Program is to train the students/Learners for the job of an animator, designer, graphics designer, computer animator, 3D modelling animator etc. I find the scope of the Course in designing and developments of ads, movies, games and other entertainment stuff using the skill imparted by the training. I find the Diploma course prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation issue, deserves to be dismissed. So far as the amount of Rs. 7,74,044/- is concerned, payment of this amount is admitted by the appellant. The appeal filed by the department to this extent deserves to be allowed. Franchise service (reverse charge) 62. To appreciate this contention it would be appropriate to examine the definition of franchise and franchisor . They are as follows: 65(47) franchise means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. 65(48) franchisor means any person who enters into franchise with a franchisee and includes any associate of franchisor or a person designated by franchisor to enter into franchise on his behalf and the term franchisee shall be construed accordingly. 63. The service is made taxable under section 65(105)(zze), which is reproduced below: 65(105)(zze) taxable service means any service provided or to be provided, - (zze) to a franchisee, by the franchis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a typical revenue sharing model arrangement. The appellant was not to receive fixed amount per annum or per month from Career Launcher but only a certain percentage of the net revenue. In such a situation, it cannot be said that the appellant was a service provider and Career Launcher was a service recipient. No service was, therefore, provided by the appellant to Career Launcher. This view finds support from the decision of the Tribunal in Mormugao Port Trust. The Tribunal found that unless it can be established that a specified amount had been agreed upon to be paid as a quid pro quo for undertaking any particular activity, it cannot be assumed that there was a consideration agreed upon for a specific activity so as to constitute a service. 68. In the present appeal, there is no fixed amount specified to be paid to Centennial College, Canada. Instead for every student enrolled in a course, Centennial College, Canada gets a specified amount as a share of the fees. This is a typical revenue sharing model and in view of the aforesaid decision of the Tribunal in Niraj Prasad, there is no element of service involved. The appellant is, therefore, justified in submitting that fra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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