Rai Enterprises Thr. vs. Commissioner Customs And Central Excise Service Tax

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CEA/14/2019HC Madhya Pradesh03 June 2019Author: HON'BLE SHRI JUSTICE SANJAY YADAV8 pages
For Petitioner: Trilok Chand Singhal
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was justified in declining to condone the delay. While the department did not respond to the Tribunal's query regarding proof of service, the facts on record indicated that all prior notices, including the show-cause notice and the order of the adjudicating authority, were addressed to the appellant's registered address and were received. The appellate order dated April 30, 2014, was also shown to be served at the same address. Since the appellant failed to discharge the onus of proving a sufficient cause for the delay, the Tribunal's decision to dismiss the application for condonation was upheld. Consequently, no substantial question of law arose for consideration, and the appeal was dismissed. The court did not decide on the merits of the original service tax demand or penalties.

What were the facts?

This appeal by Rai Enterprises challenges an order of the Customs, Excise and Service Tax Appellate Tribunal (Tribunal) dated August 10, 2018. The Tribunal had dismissed an appeal against an order dated April 30, 2014, passed by the Commissioner (Appeals) CGST, Customs, Central Excise, & ST, Indore. The primary reason for the Tribunal's dismissal was the delay of approximately four years in filing the appeal before it. The Tribunal found that the reasons provided for the delay, including the proprietor's death and alleged non-receipt of the order, were insufficient. The appellant, a manpower recruitment agency, had been issued a show-cause notice on October 12, 2010, proposing demand of service tax, interest, and penalties due to non-compliance and non-payment of service tax. The adjudicating authority confirmed a service tax demand of Rs. 43,12,700/- along with penalties and interest.

What were the issues?

1. Whether the Tribunal was justified in not condoning the delay in filing the appeal, considering the facts and circumstances, and by not adopting a liberal view? This question turns on Section 35G of the Central Excise Act, 1944, and the principles of condonation of delay. The appellant contended that the Tribunal's finding of perverse communication of the appellate order was without cogent material, as the department did not produce evidence of service as mandated by Section 35A(5) of the Central Excise Act, 1944. They relied on 'Saral Wire Craft Private Limited Vs. Commissioner of Customs, Central Excise and Service Tax and others' regarding improper service. The revenue did not record any specific arguments in the judgment regarding the condonation of delay.

Which sections of the Income-tax Act were involved?

Section 35G,Section 35A,Section 73(1),Section 75,Section 77,Section 78,Section 68,Section 70,Section 37C

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1 CEA.14.2019 HIGH COURT OF MADHYA PRADESH BENCH AT GWALIOR DIVISION BENCH: HON'BLE SHRI JUSTICE SANJAY YADAV & HON'BLE SHRI JUSTICE VIVEK AGARWAL CENTRAL EXCISE APPEAL NO. 14 OF 2019 Rai Enterprises Vs. Commissioner, Customs and Central Excise & Service Tax, (CGST C.E. & C.C. Bhopal), Bhopal ********************* Shri R.D. Jain, learned Senior Counsel with Shri Yogesh Singhal, learned counsel for the appellant. *********************

J U D G M E N T (03/06/2019) Per Justice Sanjay Yadav: This appeal under Section 35G of Central Excise Act, 1944, is directed against the order dated 10.08.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal (for brevity “Tribunal”), New Delhi. The Tribunal was in seisin with an appeal against the order dated 30/04/2014 passed by the Commissioner (Appeals) CGST, Customs, Central Excise, & ST, Indore in Appeal No.IND/CEX/000/APP/77/2014. 2 CEA.14.2019 (2) Before the Tribunal, there was a delay of 4 years; condonation whereof, was sought. The Tribunal dismissed the application for condonation observing that no sufficient cause was shown. The Tribunal found:

“3. After hearing both the sides and perusing the record, we are of the opinion that the order under challenge was announced on 18th May, 2014. The assessee, the Proprietor thereof passed away on 3rd November, 2016 i.e. after 2 years of the date of order under challenge. The application mentions no reason for the delay for said 2 years except that the deceased Mr. Santosh Rai was under medical treatment. The documents attached shows that the illness was for the year 2010-11.

Hence this reason is opined as not relevant for explaining the delay for the said 2 years. Further, the ground taken that the applicant who is the son of the deceased Proprietor had not received the copy of the impugned order prior to 23rd February, 2018 is also opined by us to not to be a reasonable cause, as the appellant's own annexure with the application i.e. the copy of the letter of the Department dated 23rd February, 2018 makes it clear that the letter was issued earlier also on several occasions with the repeated reminders. The absence of any action on those letters is opined sufficient to not to extend any benefit in favour of the applicant. Perusal of record also shows that an observation of the original adjudicating authority in the order dated 23rd December, 2011 highlighting the conduct of the then assessee observing that despite several communications and notices to the assessee/deceased Santosh Rai he had been non- cooperative with the Department for providing any requisite documents.

4.

In view of the above observations, we are of the opinion that there is no cogent explanation for the initial delay of two years. The document of applicant himself, falsifies the ground taken by him. Hence the benefit as prayed by the legal representatives of the deceased Proprietor, in the given circumstances, cannot be extended. The application stands dismissed.” 3 CEA.14.2019 (3) The indulgence is sought on the substantial question as to whether the Tribunal was justified, in the given facts, in not condoning the delay and by not taking the liberal view. (4) The appellant, Rai Enterprises, having its registered address at 211, New Colony No.1, Birla Nagar, Gwalior, provides “Manpower Recruitment or Supply Agency’s Services”. Its sole proprietor was Santosh Rai (since died on 03/11/2016). (5) On 12/10/2010, the appellant was subjected to show-cause notice. It states that the appellant, which holds Service Tax Registration No.ST/R-1/GWL/MPR/10/2005-06, since provides service of “Manpower Recruitment or Supply Agency’s Services to M/s J.K. Industries, Banmore, M/s Unipatch Rubber Ltd., Gwalior, M/s M.G. Industries (P) Ltd., Malanpur, M/s J.B. Mangharam Foods Ltd., Gwalior etc. which is taxable & chargeable to service tax under Chapters V & VA of the Finance Act, 1994, w.e.f. 16/06/2005. And that noticee being responsible for collection, recovery and deposition of service tax in terms of Section 68 of the Act of 1994 read with Rule 6 of the Service Tax Rules 1994. And mandatory it is for the noticee to submit prescribed returns in regular interval in terms of Section 70 of the Act read with Rule 7 of the Rules 1994. The notice further states that summons were issued on 12.02.2007, 20.02.2007, 16.03.2007, 29.03.2007 and lastly on 04.06.2007, the noticee did not furnish the information sought. Consequently, information was collected from the 4 CEA.14.2019 companies to whom the noticee rendered services. Thereafter, vide notice dated 20.07.2007, the appellant was called upon to provide the information/documents such as TR6 Challan and ST3 returns evidencing payment of service tax. Except some information, appellant did not co-operate. Consequent whereof, information was sought from Additional Commissioner, Income Tax Department, Gwalior for providing copy of balance sheets/Profit and Loss A/c and Income Tax Returns for the period from 2005-06 to 2007-08 and TDS certificate for said years. After collecting information, the same was collated whereon the appellant was found to have failed to discharge its service tax liability to the tune of Rs.49,67,004/- (Service Tax Rs.48,69,612/- + Education Cess Rs.97,392/-) against the services provided. Accordingly, the appellant was called upon to show cause and explain as to why: (i) service tax of Rs.49,67,004/- (Service Tax Rs. 48,69,612/- + Education Cess Rs.97,392/-) [Rs. Forty Nine lac Sixty Seven Thousand Four Only) should not be demanded and recovered from them in terms of proviso to Section 73(1) of the Finance Act, 1994 and the amount of Service Tax amounting to Rs.9,20,117/- deposited by them should not be adjusted/appropriated against the said amount. (ii) interest should not be recovered from them under Section 75 of the Finance Act, 1994; (iii) penalty should not be imposed upon them under Section 77 of the Finance Act, 1994; (iv) penalty should not be imposed upon them under Section 78 of the Finance Act, 1994; (6) The appellant replied to the said show-cause notice informing 5 CEA.14.2019 that the service tax liability of the period in question was Rs.43,12,701/- and not Rs.49,67,004/-, which was paid in the year 2011 and the revised ST-3 Return was filed on 16.08.2011. The Additional Commissioner on the findings that the appellant violated the provisions of Section 77 and 78 of the Finance Act, 1994, passed the following order on 23.12.2011: (i) I confirm the demand of Service Tax amounting to Rs.43,12,700/- (Service Tax of Rs.42,28,137/- and Ed. Cess of Rs.84,563/-) (Rupees Forty Three Lakhs Twelve Thousand and Seven Hundred only) and order for recovery from the Noticee under proviso to Section 73(1) of the Finance Act, 1994. I also order for appropriation of service tax amounting to Rs.43,12,700/- which has already been deposited by the Noticee against the said demand. (ii) I impose a penalty of Rs.5,000/- (Rupees Five Thousand) or Rs.200/- (Rupees Two Hundred) per day upon them under Section 77 of the Act for failure to furnish the prescribed returns on due dates and failure to obtain Service Tax Registration. (iii) I also impose a penalty of Rs.43,12,700/- (Rupees Forty Three Lakhs Twelve Thousand and Seven Hundred only) upon Noticee under Section 78 of the Finance Act, 1994. (iv) The Noticee is liable for payment of interest on the aforesaid amount confirmed for recovery as per the provisions of Section 75 of the Finance Act, 1994. (7) It is pertinent to note that all the correspondences and notices were addressed to the appellant at 211, New Colony No.1, Birla Nagar, Gwalior (M.P.). (8) An appeal against the order was filed on 06/05/2013 which was dismissed on 30/04/2014. And as evident therefrom it was addressed 6 CEA.14.2019 to the appellant. As sub-section (5) of Section 35A of the Central Excise Act, 1944, stipulates that the Commissioner (Appeals) shall communicate the order passed by him to the appellant, the adjudicating authority, the Principal Chief Commissioner of Central Excise or Chief Commissioner of Central Excise & the Principal Commissioner of Central Excise or Commissioner of Central Excise. (9) That an appeal was filed before the Tribunal after a period of 4 years on 24/03/2018, with an application for condonation of delay stating therein that the appellant’s proprietor’s son vide letter dated 01/03/2018 intimated the Superintendent of Central Excise, Gwalior, that, they have not received the copy of order-in-appeal dated 30.04.2014 and also requested to supply the same to present an appeal. It was also stated that the proprietor of the firm died on 03/11/2016. It is this application which is dismissed by the Tribunal vide impugned order; adverted supra. (10) Though it is contended on behalf of the appellant that the Tribunal recorded a perverse finding that the appellate order was duly communicated. The finding, it is urged, is without cogent material on record, as the department did not produce any material evidence as to communication of the order under Section 35A(5) of 1944 Act. Reliance is placed on the decision in “Saral Wire Craft Private Service Tax and others [(2015) 14 SCC 523]”; wherein, on the 7 CEA.14.2019 finding that the order was said to be served on “kitchen boy”, it was held that:

“8. The Inspector of the Department should have meticulously followed and obeyed the mandate of the statute and tendered the adjudication order either on the party on whom it was intended or on its authorized agent and on one else. It is not the respondents’ case that Shri Sanjay was the authorised agent. Even before us, despite several opportunities given, the respondents have failed to file their response to the special leave petitions so as to controvert the asseveration of the appellant that Shri Sanjay on whom the decision was tendered was a mere daily wager ‘kitchen boy’ and that the appellant had no knowledge of the passing of the adjudication order. We are also informed that the recoveries envisaged in the adjudication order have already been effected.” (11) Section 37C of 1944 Act envisages the manner in which the decisions, orders, summons etc. are to be served: “37C. Service of decisions, orders, summons, etc.— (1) Any decision or order passed or any summons or notice issued under this Act or the rules made thereunder, shall be served,— (a) by tendering the decision, order, summons or notice, or sending it by registered post with acknowledgement due or by speed post with proof of delivery or by courier approved by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), to the person for whom it is intended or his authorised agent, if any; (b) if the decision, order, summons or notice cannot be served in the manner provided in clause (a), by affixing a copy thereof, to some conspicuous part of the factory or warehouse or other place of business or usual place of residence of the person for whom such decision, order, summons or notice, as the case may be, is intended; (c) if the decision, order, summons or notice cannot 8 CEA.14.2019 be served in the manner provided in clauses (a) and (b), by affixing a copy thereof on the notice board of the officer or authority who or which passed such decision or order or issued such summons or notice. (2) Every decision or order passed or any summons or notice issued under this Act or the rules made thereunder, shall be deemed to have been served on the date on which the decision, order, summons or notice is tendered or delivered by post or courier referred in sub-section (1) or a copy thereof is affixed in the manner provided in sub- section (1).]” (12) In the case at hand though as evident from paragraph 2 of the impugned order that the department did not respond to the letter dated 28.06.2018 sent by the Tribunal seeking the date and proof of service. However, the facts on record reveal that all the notices right from 12/02/2007 were addressed at the registered address of the appellant and were received by them. The appellate order dated 30/04/2014 is shown to be served on same address. In this fact situation, since the appellant failed to discharge the onus that it was prevented by sufficient cause from filing the appeal within limitation, the Tribunal, in our considered opinion, was justified in declining to condone delay. (13) In view whereof, since no substantial question of law arises for consideration, no indulgence is caused. (14) Consequently, appeal fails and is dismissed. No costs. (Sanjay Yadav) (Vivek Agarwal) Judge Judge pd PAWAN DHARKAR 2019.06.01 13:04:04 -07'00'

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