PRINCIPAL COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS vs. M/S.GAC SHIPPING (INDIA) PVT. LTD.

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C.E.Appeal/36/2018HC KeralaKLHC01006261201819 May 2022Author: HONOURABLE MR.JUSTICE S.V.BHATTI,HONOURABLE MR.JUSTICE BASANT BALAJI16 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the scope of the present appeal was limited to whether the Tribunal's findings warranted interference and whether the order of remand was sustainable. The Tribunal's categorical finding of fact, which was not contested as incorrect by the appellant, was that the entire demand in the show-cause notice was based on details found in the assessee's books of accounts, and no specific grounds were made regarding suppression with intent to evade service tax. The Tribunal attributed the issue to the complexity of the assessee's operations and the inability to readily furnish location-wise splits. The High Court found that the appellant could not attack this crucial finding of fact. Furthermore, the High Court held that the genesis for issuing the show-cause notice for the extended period of limitation stemmed from the very material on record before the authority, and neither fraud nor suppression/misrepresentation could be stated against the assessee. The High Court found no reason to interfere with the Tribunal's finding on the inapplicability of the extended period of limitation. The argument regarding the limited remand was also found unconvincing. Consequently, the questions were answered against the Revenue and in favour of the assessee.

What were the facts?

The appellant, Principal Commissioner of Central Excise and Customs, Cochin, is in appeal against the order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore, dated October 31, 2016. The respondent, M/s. GAC Shipping (India) Pvt. Ltd., provides Steamer Agency and Customs House Agency services. The dispute pertains to service tax demands for the periods 2000-01 to 2004-05 and 2005-06. Show-cause notices were issued, leading to original adjudication orders, appeals to the appellate authority, and subsequent appeals to the CESTAT. The High Court had previously remanded the matter to the Tribunal in 2012 for fresh adjudication. The current appeals challenge the Tribunal's subsequent order.

What were the issues?

1. (Question of Law) Whether the Appellate Tribunal was justified in remanding the case to the Original Adjudicating Authority to re-determine the Service Tax due within the period of limitation, given the respondent's alleged withholding of information and the department's inability to routinely check accounts? 2. (Question of Law) Whether the Appellate Tribunal was justified in finding no suppression, considering the respondent's complex operations across different parts of the country, despite clear service tax laws for account maintenance and returns? 3. (Question of Law) Whether the Appellate Tribunal was justified in holding that the demand was based on the respondent's books of accounts and lacked specific grounds for suppression, when the information was allegedly not disclosed willingly and came to light only through audit scrutiny? Assessee's Contention: The understanding of the High Court's previous judgment by the appellant is erroneous. The Tribunal has appreciated the case and recorded findings within its jurisdiction. The case does not attract any contingencies of Section 73 of the Finance Act, 1994, as the show-cause notice and reply revolve around details already furnished in returns, negating fraud or suppression. The extended period of limitation under Section 73 should not be applied as a matter of course. Revenue's Contention: The order under appeal is contrary to the High Court's previous judgment and directions. The Tribunal was required to examine all issues. The findings on the extended period of limitation under Section 73 are perverse and unavailable. The case squarely falls within Section 73, making the extended period available. The remand is illegal and should be set aside.

Which sections of the Income-tax Act were involved?

Section 65,Section 73,Section 35G

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI THURSDAY, THE 19TH DAY OF MAY 2022 / 29TH VAISAKHA, 1944 C.E.APPEAL NO. 35 OF 2018 AGAINST THE ORDER/JUDGMENT IN ST 216/2008 OF CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE APPELLANT/S:

PRINCIPAL COMMISSIONER OF CENTRAL EXCISE AND COCHIN CENTRAL REVENUE BUILDING,I.S.PRESS ROAD, COCHIN 682018.

SRI.RAMAVARMA REGHUNATHAN THAMBURAN, SC, SMT.A.SREEKALA, SC, CENTRAL BOARD OF EXCISE AND SRI.P.G.JAYASHANKAR RESPONDENT/S: M/S GAC SHIPPING (INDIA) PVT LTD GAC HOUSE, SUBRAMANIAN ROAD, WILLINGTON ISLAND COCHIN- 682003.

SRI.JOSEPH KODIANTHARA (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SRI.P.G.CHANDAPILLAI ABRAHAM SHRI.VIPIN ANTO H.M. SHRI.ALEXANDER JOSEPH MARKOS SHRI.SHARAD JOSEPH KODANTHARA THIS CENTRAL EXICISE APPEAL HAVING COME UP FOR ADMISSION ON 19.05.2022, ALONG WITH C.E.Appeal.36/2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI THURSDAY, THE 19TH DAY OF MAY 2022 / 29TH VAISAKHA, 1944 C.E.APPEAL NO. 36 OF 2018 AGAINST THE ORDER/JUDGMENT IN ST 217/2008 OF CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE APPELLANT/S:

PRINCIPAL COMMISSIONER OF CENTRAL EXCISE AND COCHIN, CENTRAL REVENUE BUILDING, I.S.PRESS ROAD, COCHIN - 682 018.

SRI.RAMAVARMA REGHUNATHAN THAMBURAN, SC, SRI.P.G.JAYASHANKAR RESPONDENT/S:

M/S.GAC SHIPPING (INDIA) PVT. LTD. GAC HOUSE, SUBRAMANIAN ROAD, WILLINGTON ISLAND, COCHIN - 682 003.

JOSEPH KODIANTHARA (SR.) ABRAHAM MARKOS V. ABRAHAM JOSEPH MARKOS RACHEL ABRAHAM MARIA JOSEPH THIS CENTRAL EXICISE APPEAL HAVING COME UP FOR ADMISSION ON 19.05.2022, ALONG WITH C.E.Appeal.35/2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

J U D G M E N T

S.V.Bhatti,J.

Principal Commissioner of Central Excise and Customs, Cochin/Department is the appellant. M/s. GAC Shipping (India) Pvt. Ltd, Willingdon Island/assessee is the respondent. 2. The assessee is running Steamer Agency services and Customs House Agency services at Kochi and a few different ports in India. The services rendered by the assessee fall under Section 65 of the Finance Act, 1994 (for short, ‘the Act’). The Department is in appeal against the final order dated 31.10.2016 in ST/216 & 217/2008 of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore. The orders of the primary authority, appellate authority etc are stated in the following tabular form:

Show- cause notice Order-In- Original Final Order in Order of Appeal Order- In- Original Final Order in Order of Appeal CEA Final Order CEA No.6/2005 /ST dt.22.10.20 05; 2000- 01 to 2004-

No.11/200 6/ST Dt. 23.08.2006 No.1210/2007 dt. 25.10.2007 No.ST/315/200 6 dt. 25.10.2007 No.2/200 8/ST dt.20.02. 2008 No. 847/2009 dated 29.06.2009 ST/216/200

No.16/2 010 dt. 26.03.20

No.21056 /2016 dt.31.10. 2016 No.35 /2018 No.69/200 6/ST dt.17.10.20 06; 2005-

No.08/200 7/ST dt.10.05.20

No.1226/2007 dt. 15.11.2007 No.ST/307/200

No.3/200 8/ST No. 848/2009 dated 29.06.2009 ST/217/200

No.17/2 010 dt. 26.03.20

No.21057 /2016 dt.31.10. 2016 No.36 /2018

3.

The appeals are filed under Section 35G of the Central Excise Act, 1994 and the substantial questions of law raised in both the appeals are similar and are stated thus: “CEA No.35 of 2018

(i) Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in remanding the case to the Original Adjudicating Authority to re-determine the Service Tax due within period of limitation, when the respondent withheld the information from the department by not correctly filing the required periodic returns and especially when the departmental officers were barred from routinely going to the premises of the respondent for checking their accounts?

(ii) Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in finding no suppression, terming the entire operations of the respondent as complex

and spread over different parts of the country, when Service tax laws provide clear and distinguishable procedures for maintaining accounts and filing periodic returns? (iii) Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in holding that the entire demand made in the Show Cause Notice was based on the details found in the books of accounts maintained by the respondent and no specific grounds had been made regarding the suppression of facts, when the respondent did not disclose the information willingly and all the above facts came to light only because of the scrutiny of the records by the Audit Department in relation to the activities of the respondent?

4.

Heard learned Advocate Mr. P.G. Jayashankar for the appellant and the learned Senior Advocate Mr.Joseph Kodianthara for the respondent. The circumstances necessary for disposing of the appeal could be briefly stated thus:

5.

The assessee filed yearly service tax returns for the period 2000-01 to 2004-05 and also for the year 2005-06. The Department after noticing that the assessee did not pay service tax on the full taxable value of services rendered by the assessee. For clarity, it may be stated that in C.E.A No.35 of 2018, the Revenue issued show-cause notice No. No.6/2005/ST dated

22.10.2005 for the block period 2000-01 to 2004-05 as noted above. It resulted in an order in original dated 23.08.2006 etc. Likewise, in C.E.A No.36 of 2018, show cause notice No.69/2006/ST dated 17.10.2006 for the period 2005-06 was issued. The alleged omissions and commissions by the assessee and the surrounding circumstances warranting issuance of show-cause notice, no doubt, are stated in great detail by the Principal Commissioner of Central Excise and Customs, Cochin in Order in Original. Keeping in our view the scope of challenge to the order under appeal and the grounds raised, therefore, we are of the view that this Court need not refer to all the circumstances in detail. We have perused the orders and stated briefly, that the core of the controversy in the show-cause notices is whether the assessee filed returns and the service tax was not paid on the full taxable value of services rendered by the assessee. Further, whether the show-cause notice for extended limitation period is justifiable under any one of the circumstances covered by Section 73 of the Act. Alternatively,

whether the period of five-year limitation is attracted to the case or not. The earlier round of litigation is not referred to in this Judgment, because the grounds now raised by the appellant take support from the judgment of this Court between the parties herein for the same assessment years, in C.E.A Nos.16 & 17 of 2010 dated 26.03.2012. The learned counsel appearing for the appellant invited our attention to the following paragraph in the judgment dated 26.03.2012: In view of the findings above, we allow both the Central Excise Appeals by vacating the orders of the Tribunals and restore the appeals back to the files of the Tribunal with direction to them to repost the appeals, hear the matter on all issues raised as if those are first appeals filed for the first time and decide the matter without being influenced by their findings in the first round of appeals, which at the maximum amounts to observations or restatement of the arguments of the parties. The Tribunal should address all the issues raised against fresh adjudication orders issued after remand. There will be direction to the Tribunal to hear and dispose of the appeals within a period of three months from the date of receipt of a copy of this judgment. The appellant is free to produce whatever is the evidence or records required and is also free to collect information from other collectorates and furnish the same so that there is no duplicity of assessment for the same service under 2 collectorates.

The Tribunal upon remand by this Court, concluded the issue as

follows: 7. Assessee has pleaded that substantial part of the demand will be hit by limitation. The show-cause notice for the period 2000-01 to 2004-05 has been issued on 22.10.2005 by invoking the extended period of time limit under Section 73 of the Finance Act, 1994. The dispute as arisen has a result of the audit undertaken by the department of the assessee's books of accounts. We find that the entire demand made in the show cause notice is based on the details found in the books of accounts maintained by the assessee. On perusal of the show cause notice, we find that no specific grounds have been made regarding how the assessee has indulged in suppression with intent to evade payment of service tax. The entire case has arisen on account of the fact that the assessee's operations are complex and in different parts of the country and could not readily furnish the split up of location-wise. To compound matters, they have centralised registrations in more than one place for some services and at the same time having individual registrations in many other places. In this background, we are of the view that there is no justification to say that the assessee has suppressed facts with intent to evade payment of service tax. Consequently, the demand for service tax will have to be limited within the normal period of limitation available under Section 73. * 7.2 In the facts and circumstances of the present case, the case have to be remanded back to the original adjudicating authority to re-determine the service tax due within the normal period of limitation after deducting the claims made by the assessee and outlined above. Even for the period of 2005-06 (Appeal No.ST/217/2008) the demand needs to be reworked by allowing deductions as above. We make it clear that for purposes of allowing said deductions, the details as duly certified by independent Chartered Accountant may be made use of. Since the issue has undergone

several rounds of litigation, we direct that this exercise may be completed within a period of three months from the date of receipt of this order. The assessee is also directed to cooperate and satisfy the department authorities regarding the quantum of deductions.

Hence, the appeals at the instance of the Revenue both against the order of remand and also the remand limiting consideration of the service tax payable by the assessee for the assessment year 2005-06 as set out in the judgment.

6.

Adv.P.G Jayashankar, vehemently contends that the order under appeal is contrary to the explicit view taken by this Court and also the direction issued in C.E.A No.16 and 17 of 2010. It is urged that the Tribunal was called upon by this Court in the said judgment to examine all issues and record a finding thereon. Therefore, the remand per se is illegal. It is also argued that the findings recorded on the extended period of limitation under Section 73 of the Act, are perverse, unavailable and the case on hand, squarely falls within Section 73 of the Act, where the extended period of limitation could be available. The remand has a limited scope, and the order is illegal and liable to

be set aside.

7.

Learned Senior Advocate Joseph Kodianthara contends that the understanding of the judgment dated 26.03.2012 of this Court by the appellant is erroneous. This Court vide judgment dated 26.03.2012 found fault with a few findings recorded by the Tribunal in its order dated 26.09.2009 and remitted the matter. The Tribunal has appreciated the case and recorded findings available in this behalf which are within its jurisdiction.

7.1 Replying to the argument on Section 73 of the Act, he argues that the case on hand does not attract any of the contingencies contemplated by Section 73 of the Act. According to him. the show-cause notice and the reply again revolve around the detail already furnished by the assessee in the respective returns. Therefore, there is no fraud, or suppression and the entire material was available before the authority and if at all any action is warranted it should have been taken within the time prescribed by law. Section 73 of the Act deals with the

extended period of limitation and ought not to be applied as matter of course.

8.

Though a few submissions on the merits of the matter are made, we are convinced the scope of appeal is whether the findings recorded by the Tribunal warrant our interference and/or whether the order of remand is sustainable or not.

8.1 The appellant urges that the service tax returns filed by the assessee are incorrect and incomplete. The case, according to the Revenue is one either the services for which amount was collected or not reflected in the books of account and services rendered or recorded as service tax not paid. The argument is not taking note of the finding recorded by the Tribunal. The Tribunal recorded the categorical finding of fact which is not even contested before us as incorrect; “we find that the entire demand made in the show cause notice is based on the details found in the books of account maintained by the assessee. On perusal of the show cause notice, we find that no specific grounds have been made regarding how the assessee has indulged in suppression with intent to

evade payment of service tax. The entire case has arisen on account of the fact that the assessee’s operations are complex and in different parts of the country and could not readily furnish the split-up of location- wise.” 8.2 The appellant does not contest the finding of fact recorded as incorrect before us. It is a simple finding of fact, which could be recorded by the Tribunal within its jurisdiction pursuant to the remand ordered by this Court in C.E.A Nos. 16 & 17 of 2010. 9. Upon due verification of record, and the scope of appeal, we are constrained to record that the finding of fact recorded by the Tribunal on the inapplicability of extended period of limitation for the show cause notice dated 22.10.2005 does not warrant our interference and the grounds raised in this behalf do not merit consideration. Because the genesis for issuing show-cause notice for extended period of limitation is from the very material on record before the authority. As rightly argued by Mr. Joseph Kodianthara, neither fraud can be stated nor suppression/misrepresentation against the assessee.

To add another reason for the above, let us take a situation, where the genesis for issuing the show cause notice under extended period of limitation on account of material recovered or information received by the Department then the consideration of the applicability of extended period of limitation is on different inputs. The appellant since unable to attack a crucial finding of fact recorded by the Tribunal, necessarily must fail in the challenge against the order impugned in the appeal. The other argument is ancillary and it is stated the limited remand in the circumstances of the case is also erroneous. Definitely, the Tribunal has jurisdiction to direct open remand or remand after recording a few findings on the issues it had dealt with in a case. What begs the question is whether limited remand now ordered by the Tribunal warrants our interference under Section 35G of the Central Excise Act, 1994. The appellant except raising a few grounds fails to convince this Court to substantiate the arguments. We are, hence, of the view that the order of remand under appeal does

not warrant our interference. Hence the questions are answered against the Revenue and in favour of the assessee. Appeals fail and dismissed accordingly. No order as to costs. Sd/- S.V. BHATTI JUDGE

Sd/- BASANT BALAJI JUDGE

APPENDIX OF C.E.APPEAL 35/2018

APPELLANT’S ANNEXURES ANNEXURE A1 A TRUE COPY OF THE SHOW CAUSE NOTICE DATED 22.10.2005 ISSUED BY THE APPELLANT TO THE RESPONDENT. ANNEXURE A2 A TRUE COPY OF THE ORDER IN ORIGINAL NO.11/2006/ST DATED 23.08.2006 ISSUED BY THE COMMISSIONER. ANNEXURE A4 NO.2/2008/ST DATED 20.02.2008 ISSUED BY ANNEXURE A5 TRUE COPY OF THE SHOW CAUSE NOTICE NO.69/2006-ST DATED 17.10.2006 ISSUED BY THE APPELLANT TO THE RESPONDENT. ANNEXURE A6 NO.8/2007/ST DATED 10.05.2007 ISSUED BY ANNEXURE A7 NO.ST/307/2007 DATED 17.11.2007 ISSUED ANNEXURE A8 NO.3/2008/ST DATED 20.02.2008 ISSUED BY ANNEXURE A9 TRUE COPY OF THE COMMON ORDER IN APPEALS NO.ST/216/08 & ST/2017/08 DATED 29.06.2009, ISSUED BY THE CESTAT. ANNEXURE A10 TRUE COPY OF THE COMMON FINAL ORDER NO.21056/2016 DATED 31.10.2016, ISSUED ANNEXURE A3 NO.ST/315/2006 DATED 25.10.2007 ISSUED

APPENDIX OF C.E.APPEAL 36/2018

APPELLANT’S ANNEXURES ANNEXURE A1 A TRUE COPY OF THE SHOW CAUSE NOTICE DATED 22.10.2005 ISSUED BY THE APPELLANT TO THE RESPONDENT. ANNEXURE A2 A TRUE COPY OF THE ORDER IN ORIGINAL NO.11/2006/ST DATED 23.08.2006 ISSUED BY THE COMMISSIONER. ANNEXURE A3 NO.ST/315/2006 DATED 25.10.2007 ISSUED ANNEXURE A4 NO.2/2008/ST DATED 20.02.2008 ISSUED BY ANNEXURE A5 TRUE COPY OF THE SHOW CAUSE NOTICE NO.69/2006-ST DATED 17.10.2006 ISSUED BY THE APPELLANT TO THE RESPONDENT. ANNEXURE A6 NO.8/2007/ST DATED 10.05.2007 ISSUED BY ANNEXURE A7 NO.ST/307/2007 DATED 17.11.2007 ISSUED ANNEXURE A8 NO.3/2008/ST DATED 20.02.2008 ISSUED BY ANNEXURE A9 TRUE COPY OF THE COMMON ORDER IN APPEALS NO.ST/216/08 & ST/2017/08 DATED 29.06.2009, ISSUED BY THE CESTAT. ANNEXURE A10 TRUE COPY OF THE COMMON FINAL ORDER NO.21057/2016 DATED 31.10.2016, ISSUED

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