1. The Revenue challenges the order of the Commissioner (Appeals) made on 30.12.2004 setting-aside the order-in-original by which demand of Rs. 9,981/- by way of Service Tax recoverable on the amount paid by the assessee to the Goods Transport Operators (hereinafter referred to as 'GTOs') during the period from 16.11.1997 to 01.06.1998 was confirmed and recovery of interest ordered.
2. The respondent was a registered trader for trading of excisable goods. During the course of its trading activities, the respondent utilized the services of the GTOs on payment of freight. Service Tax was payable in respect of the services provided by GTOs and levied on the receiver of such services w.e.f. 16.11.1997 by Notification dated 05.11.1997. The said taxable service was exempted from Service Tax by Notification No. 49/98-ST dated 02.06.1998. Thus, Service Tax on taxable services provided by the GTOs was leviable on the recipient of the services for the period from 16.11.1997 to 01.06.1998. The respondent did not obtained registration under Rule 4 of the Service Tax Rules nor paid Service Tax under Rule 6 and did not file returns as required by Rule 7. On examination of the ledgers produced by the respondents, it appeared that the entire amount of taxable service had escaped assessment and the Service Tax calculated thereon was Rs. 9,981/-. As no return was filed under Section 70 of the Finance Act, 1994 and material facts were not disclosed, show cause notice was issued to the respondent on 22.11.2002 for recovery of the Service Tax and penalties. In reply to the show cause notice filed on 30.12.2002 (wrongly typed as 30.06.2002), the respondent pleaded that, it was a SSI Unit and, therefore, not liable to pay Service Tax. The respondent relied upon the decision of Hon'ble Supreme Court in Laghu Udyog Bharati v. Union of India 2(d)(xii) was held to be ultra vires the Act. On the basis of the material on record, the adjudicating authority held that, the liability to pay Service Tax was transferred to receiver of the services from the provider of services on introduction of Sub-rule (xvii) of Rule 2(1)(d) of the Service Tax Rules vide Notification No. 42/97-ST dated 05.11.1997 w.e.f 16.11.997, by which only 8 categories of persons were specified, which included "any dealer of excisable goods who is registered under the Central Excise Act in force in any part of India", and made liable to pay the Service Tax in respect of the transport services availed by them. Service Tax availed on taxable services of GTOs was thus leviable for the period from 16.11.1997 to 01.06.1998 vide Notification No. 49/98-CE dated 02.06.1998 issued in respect of the said 8 categories of persons and orders were issued for keeping in abeyance the Service Tax, inter alia, in respect of factories registered as small scale industries. The category of dealers of excisable goods, however, continued to be liable to pay Service Tax, though they were not to be compelled to get the registration. Vide Notification No. 49/98-ST, the taxable services provided to a customer by a goods transporter were exempted from the whole of the Service Tax.
3. After Clause (xvii) of Rule 2(1)(d) was struck down by the Hon'ble Supreme Court as ultra vires the Act in Laghu Udyog Bharati v. Union of India (supra), by Finance Act, 2000, which came into force from 12.05.2000, validating provisions were made and the action taken under Rule 2(1)(d)(xvii) was validated, notwithstanding anything contained in any judgment, decree or order of any Court, Tribunal or other authority. By Section 160(1) of the Finance Act, 2003, it was provided in the context of the Notification dated 05.11.1997, that it will stand amended as specified in the 12th Schedule, on and from the 16th day of November, 1997 to the 1st day of June, 1998 retrospectively. As per this amendment, Clause (i) and (ii) of the Notification dated 05.11.1997 were substituted by, inter alia, providing that, any factory registered under or governed by the Factories Act, 1948, other than a factory registered as small scale industry with the State Government, would be liable to pay Service Tax. Therefore, only a factory registered as small scale industry with the State Government would be exempted.
3.1 While we are on this aspect of the matter, we may dispose of one contention, which was sought to be raised on behalf of the respondent on the basis of the averments made in paragraph 2 of the reply to the show cause notice. It was submitted by the learned Counsel that, the Respondent was SSI Unit and was manufacturing the excisable goods, as stated in para 2 of its reply. Reliance was also placed on the certificate dated 22nd March, 1990 issued in favour of the respondent by the District Industries Centre, Madhya Pradesh, stating that the respondent was a small scale industrial unit. In that certificate, the Office address of the respondent was different. The reliance placed on the said averment in the reply to the show cause notice and on the Notification dated 06.02.1998, which provided that the Service Tax payable by Small Scale Industry will be kept in abeyance, is wholly misconceived and ignores the respondent's own communication dated 29.09.2004, in paragraph 3 of which, it was specifically stated as under: 3. In this context, it is submitted that the noticee's company was established under Companies Act, 1956 as Private Limited Company and were/are a solely and exclusively trading company. They never engaged in any manufacturing activity of any type of goods in the unit at the premises 9-D, Light Industrial Area, Bhilai. As such the submission made in para 2 and 22 of reply to the notice vide their letter No. EHP/2002-2003/CEX dated 30.12.2002 may please be treated as deleted.
Obviously, therefore, the benefit of the exemption was not available to the respondent, who was a registered dealer and did not carry out any manufacturing activity as a SSI Unit, as was sought to be initially asserted by the respondent in the reply to the show cause notice, which averments were withdrawn by the further reply filed by the respondent on 29.09.2004. The adjudicating authority, therefore, rightly held that, the respondent was liable to pay Service Tax as a dealer of excisable goods who receive such services during the period in question, and that it was not liable to any exemption under the Notification dated 02.06.1998.
4. The Appellate Commissioner by a brief reasoning contained in paragraph 5 of the impugned order, held that, the matter was no longer res integra and was covered by the Tribunal's decision in the case of L.H. Sugar Factories Ltd. v. Commissioner of Central Excise, Meerut-II, . It was observed that, the Tribunal had elaborately dealt with the effect of introduction of Section 71A of the Finance Act, 2003 and also Section 73 of the Finance Act, 1944, as amended by the Finance Act, 2003, and held that, the liability to file return is cast on the providers of such services only under Section 71A. It was held that class of persons who come under Section 71-A was not brought under the net of Section 73. Therefore, the show cause notice which was issued to the appellant on 29.11.2002 invoking Section 73 was not maintainable. The order of the adjudicating authority was, therefore, set aside.
5. The learned authorized representative for the Department submitted that, after the decision of the Hon'ble Supreme Court in Laghu Udyog Bharati v. Union of India (supra), the Act was retrospectively amended by Finance Act, 2003, as per which the receiver was made liable to pay Service Tax in respect of the GTOs provided to such receiver for the period from 16.07.1997 to 16.10.1998. He referred to the amendments, which were made in Sections 65, 66 and 67 of the Act and also pointed out that even Rule 2(d)(xvii), which was struck down by the Hon'ble Supreme Court, was validated. He, therefore, submitted that the liability of the respondent to pay Service Tax was firmly established and could not be disputed. He argued that, the show cause notice was issued on 29.11.2002, after the amendments and revalidating provisions were enacted by Sections 116 and 117 of the Finance Act, 2000. Though the show cause notice was issued with reference to the provisions of Section 73 read with Section 70 of the Act, it should be treated as effective even for the purpose of the provisions of Section 73 and 71A of the Act. He argued that mere mention of a wrong provision in the show cause notice did not invalidate the same. Moreover, the decision of the Tribunal as affirmed by the Hon'ble Supreme Court in L.H. Sugar Factories Ltd. v. Commissioner of Central Excise, Meerut-II (supra), was not applicable, because the basis of that decision, which was the decision of the Hon'ble Apex Court in Laghu Udyog Bharati v. Union of India (supra), no more survived from 12.05.2000, as held by the Apex Court in J.K. Industries Ltd. v. CCE, Indore, reported in 2006 (3) STR 14 (T-Del). He also argued that the show cause notice was valid when it was issued under the then existing provisions and that the effect of the amendment made by Section 158 of the Finance Act, 2003, incorporating Section 71-A in the Act, was that the said show cause notice, that had remained dormant or was deemed to have been kept in abeyance till the time limit granted upto 30.11.2002, revived on the tax not being paid and the return not being filed as required by Section 71-A of the said Act and Rule 7-A of the said Rules. He further argued that, even if a fresh show cause notice was not issued, the process of issuing show cause notice was only a part of natural justice and since personal hearing was, in fact, granted to the respondents on 20.01.2003, and that the respondent had filed reply thereafter on 29.09.2004, there was no prejudice caused to the respondent who was fully aware of its statutory liability to pay the Service Tax under the validating laws. He submitted that the ratio of the decision in L.H. Sugar Factories Ltd. v. Commissioner of Central Excise, Meerut-II (supra), was not applicable because the very foundation of that decision, which was the ratio of Laghu Udyog Bharati v. Union of India (supra), ceased to exist and that no date for filing return was provided in Section 71-A of the Act, as observed in paragraph 6 of the decision in L.H. Sugar Factories Ltd. v.Commissioner of Central Excise, Meerut-II (supra). The learned authorized representative for the Department also relied upon the decision in Shree Ganpati Synthetics v. Commissioner of Central Excise, reported in 2004 (178) ELT 820 (T-Del) and , in 6. The learned Counsel for the respondent argued that the liability of the respondent, if at all, was only for the months of December, 1997 and January, 1998 in view of the Circular dated 02.06.1998 and the documents showing that the respondent was SSI unit. We have dealt with this contention in the earlier part of the judgment in paragraph 3.1 and found it without merit by pointing out that the initial assertion in the reply to the show cause notice that the respondent was a SSI unit manufacturing excisable goods, was subsequently withdrawn by the further reply to the show cause notice. The adjudicating authority has rightly found that the respondent was a registered dealer, who was not entitled to the benefit of such exemption.
7. It was further contended by the learned Counsel for the respondent that, Section 73 of the said Act would apply to persons who were required to file return under Section 70 and that Section 71A provided that Section 70 will not apply to those covered under the proviso to Section 68(i). He, therefore, submitted that Section 70 was inapplicable in the case of respondent and, therefore, no show cause notice could have been issued with reference to Section 70 of the Act against the respondent. He also submitted that the show cause notice was not revised after 30.11.2003. He finally pointed out from paragraph 20 of the order of the adjudicating authority that the respondent/noticee had suo moto paid the amount of Service Tax. It appears that relying upon this submission, the adjudicating authority did not impose any penalty under Section 76, 77 or 78 of the Act.Gujarat Ambuja Cements Ltd. v. Union of India (supra), has settled the controversy with regard to the liability of the recipient of GTO's. Service for the period in question, in the context of the provisions of Sections 71 and 71A and the ratio of the decision of the Hon'ble Supreme Court in Laghu Udyog Bharati v. Union of IndiaL.H. Sugar Factories Ltd. v.Commissioner of Central Excise, Meerut-II (supra) by the Tribunal, by holding in paragraph 23 of the judgment that, the law must be taken as having always been as was now brought about by the Finance Act, 2000 and that, the statutory foundation for the decision in Laghu Udyog Bharati v. Union of India (supra), had been replaced and the said decision had thereby ceased to be relevant for the purposes of construing the amended provisions. In paragraph 19 of the judgment, the Hon'ble Supreme Court observed that, Section 71-A seeks to provide that, persons referred to in the proviso to Sub-section (1) of Section 68 shall furnish return within six months from the day on which the Finance Bill, 2003 received the assent of the President, in the prescribed manner on the basis of the self-assessment of the Service Tax and that the provisions of Section 71 would apply accordingly. That period was extended by Hon'ble Supreme Court by its order dated 17.11.2003 for a period of two weeks with effect from the date of the order made by it. It was observed that, the Central Government would have the power to frame rules relating to manner of furnishing returns under Section 71-A. Rule 7-A provides the manner of furnishing such returns and prescribes Form ST-3B for the purpose. This Tribunal while applying the ratio of the decision of the Hon'ble Supreme Court in J.K.Industries Ltd. v. Commissioner of Central Excise (supra) that, by applying the provisions of Section 71 to returns filed under Section 71-A, persons who came under Section 71-A were brought under the net of Section 73. Since there was no scope for applicability of Section 70 of the said Act, the said provisions for filing of returns was necessarily required to be made as per Section 71A because, such recipients could not have filed returns earlier. It was held that, such recipient was bound to file return as mandatorily required by Section 71A which was a machinery provision. The contention that the time limit of filing the return in such cases should be computed on the basis of the provisions of Section 73 read with Section 70 from the date on which half-yearly returns were required to be filed under Rule 7, was rejected on the ground that those provisions of Section 70 and Rule 7 were wholly inapplicable in cases where the provisions of Section 71A applied.
8.1 Under Rule 7A, which was inserted from 14.05.2003, it was provided that notwithstanding anything contained in Rule 7, which related to half-yearly returns, an assessee, in cases of service provided by the goods transporter for the period in question, shall furnish a return within a period of six months from 13.05.2003 in Form ST-3B along with a copy of Form TR-6 in triplicate, failing which the interest and penal consequences as provided in the Act were to follow. It is obvious from this provision that even though the liability of the receiver of GTO services remained alive by virtue of the validating provisions for the period in question (16.11.1997 to 1.6.1998), the return was required to be filed within the period of six months from 13th May, 2003 in the prescribed form ST-3B and since the time was extended by the Hon'ble Supreme Court, it had to be filed by 30th November, 2003, in view of the directions contained in the decision in Gujarat Ambuja Cements Ltd. v. Union of India (supra). Thus on the established facts, there can be no dispute that the respondent was liable to pay the tax by filing returns along with TR-6 challan showing payment of tax which particulars were required to be mentioned in the prescribed form ST-3B latest by 30th November, 2003. The question that, however, arises, is whether the show cause notice, which was issued on 19.11.2002, should be treated as having remained dormant and which automatically revived on non-payment of the tax by 30.11.2003.
9. Admittedly, the show cause notice, which was issued on 29.11.2000, was in the context of the provisions of Section 70. It was, inter alia, alleged in paragraph 7 of that notice that the assessee had not filed quarterly return under Rule 7 of Service Tax Rules, 1994 at the relevant time, when services of GTOs were leviable to Service Tax and not even till the date of the show cause notice. It was alleged that since the noticee failed to pay service tax on the gross amounts charged by the GTOs from 16.1.997 to 01.06.1998 documents were called for and it was found that the entire value of taxable services had escaped assessment for the said period entailing service tax liability of Rs. 9,981/- It was then stated in said paragraph 9 of the show cause notice that it appeared that the noticee had failed to file return as required under Section 70 of the Finance Act, 1994 for the period 16.11.1997 to 01.06.1998 and failed to disclose all material facts required for computing the value of taxable services which escaped assessment. The extended period of five years was, therefore, invoked as provided in Section 73. Therefore, we have a situation where on one hand there was a show cause notice issued on 29.11.2002 as per the pre-amended provisions alleging that the returns were not filed and tax not paid within the time prescribed by Section 70 of the Act read with Rule 7, and on the other, special provisions enacted for the recipients of such services and duly validated, enabling such recipients of services to file the returns and pay the tax by the extended time limit as provided by Section 71A of the Act read with Rule 7A, which was 13.11.2003 under the statute, and 30.11.2003 as extended by the Hon'ble Supreme Court by virtue of its directions contained in Gujarat Ambuja Cements Ltd. v. Union of India (supra). No effort was made by the Revenue to issue a revised show cause notice in the context of the extended date for filing of the returns and payment of service tax.
Without issuance of a show cause notice under Section 73 read with Section 71A in which it would be alleged that the tax was not paid and returns not filed by the extended date, it would have been impossible for the Revenue to have undertaken the proceedings of the nature contemplated by Section 73 of the Act for the recovery of the Tax that had escaped assessment in respect of the returns which were not filed.
The show cause notice dated 29.11.2002 was wholly inadequate and inapplicable to the contingency that arose by virtue of the extended time limit for filing of the returns and payments of service tax by the extended date. Perhaps the Revenue ought to have been more vigilant by revising their notices which were earlier issued, to bring them in tune with the new provisions and the new situation that enabled the assessee to file a return and pay tax by 13.11.2003 under the law and by 30.11.2003 under the time extended by the Hon'ble Supreme Court. The requirement of issuance of show cause notice under Section 73 read with Section 71A cannot be diluted by applying "no prejudice" rule, because, proceedings cannot be undertaken under Section 73 without issuance of the show cause notice that would give an opportunity to the assessee to explain why the recovery should not be made for non-compliance of the amended provisions. For these reasons, the demand pursuant to the show cause notice issued earlier, cannot be sustained. It is, however, pointed out by the learned Counsel for the respondent, from the adjudicating authority's order that, the tax has already been paid. The learned authorized representative for the Department, however, states that there are no instructions given to him to the effect that the tax was, in fact, paid. He submitted that if the tax is already paid suo moto, there will not be any question of any refund because the liability has been upheld. No such question arises at present in this appeal of the Revenue.
10. We find no valid reason to interfere with the impugned order of the Commissioner (Appeals) on the grounds indicated by us hereinabove. For the foregoing reasons, the appeal is dismissed.