Raju ORDER
Ramesh Nair, Member (J)
1. The brief facts of the case are that the appellants were engaged in supply of manpower to various industrial organizations as per the arrangements with the service recipients. The appellants would charge 10% of the actual wages to be paid to the workers so hired/supplied as their service charges. The appellants have recovered the wages/salary to be paid to the manpower supplied by them from the service recipient and paid to the man power. The appellants have treated the wages/salary as reimbursable expenses. The appellants have discharged the service tax on the aforesaid 10% service charges.
1.2. A show cause notice dated 19.05.2011 was issued to the appellants demanding the service tax for the period 2005-06 to 2009-10 on the ground that the appellants were required to pay service tax on the gross value including the wages/salary paid to the manpower so supplied. The show cause notice calculated the demand of service tax including the wages/salary paid to the man power so supplied. The show cause notice also alleged suppression, wilful misstatement on the part of the appellants and invoked the extended period of limitation. After considering the reply filed by the appellant, the Learned Commissioner of Service Tax, Ahmedabad confirmed the demand of service tax as proposed in the show cause notice. Therefore, the present appeal filed by the appellant on the grounds of merit as well as on limitation.
2. Shri Jigar Shah, Learned Counsel appearing on behalf of the appellant submits that the salary/wages is clearly a reimbursable expense which was paid by the appellants to the respective man power and the same was not retained, therefore, the said amount is not liable to service tax. He submits that the appellant's limited service provided to the service recipient is up to the procurement of labour, therefore, the provision of the service by the assessee to the companies ends on engagement of labour. The labourers work for the whole month and they earned salary for themselves and providing services to the company. The appellant has earned his part of income by way of commission it would be absurd to claim that the salary earned by the labourers from the company is part of consideration earned by the appellant. He submits that as per section 67 of the Finance Act, 1994, the service tax is payable only on the gross amount charged by the service provider for such service provided or to be provided by him. In the present case the salary/wages is not the service charges for the services provided by them, whereas the same is remuneration earned by the labourers by providing their service to the respective company. The service of appellant is limited to providing the man power to the company for which they are paid 10% commission which is the consideration against the service provided by the appellant, therefore, in terms of Section 67 also the entire amount i.e. Commission, Salary and Wages cannot be alleged as the gross value chargeable to service tax. He submits that the issue is settled in favour of the appellant in the following judgment:
Malabar Management Services reported in MANU/CC/8073/2007 : 2009 (9) STR 483 (Tri. Chennai).This decision has been held by the Hon'ble Supreme Court reported in 2019 (22) GSTL J56 (SC).
2.1. He submits that not only the issue settled in the above case but this Hon'ble Tribunal also followed the decision of Malabar Management Services in following case:
Modern Business Solution reported in MANU/CS/0107/2018 : 2019 (24) GSTL 353 (Tri.- Ahmd)(Tribunal order dated 18.07.2019 under ROM Application No. 10121 of 2019 in appeal No. ST/120/2012- DB).
2.2. He also submits that the entire demand is time barred as mala fide intention or suppression of fact cannot be alleged on the part of the appellant. He submits that in the present case, the show cause notice was issued on 19.05.2011 invoking the extended period of limitation. The period of dispute in the present case is financial year 2005-06 to 2009-10. He submits that the issue in the present case is one of the interpretation of law. The matter reached up to the Hon'ble Supreme Court on constitutional validity of valuation provision and finally decided in favour of the assessee in the case of Malabar Management Services (Supra). In such circumstances it cannot be said that the appellants had any mala fide or suppressed material information from the revenue authorities. He placed reliance on the judgment of Hon'ble Gujarat High Court in case of N.R. Agarwal Industries reported in MANU/GJ/1198/2012 : 2014 (300) ELT 213 (Guj.). He also relied upon another judgment of Hon'ble Gujarat High Court in case of Charak Pharma P. Ltd. MANU/GJ/1449/2011 : 2012 (278) ELT 319 (Guj.).
2.3. He also submits that the appellant have filed their financial statements before various government authorities. Therefore, there cannot be any suppression of facts on the part of the appellant. In this submission he placed reliance on the judgment in the case of Mega Trends Advertising Ltd. reported in MANU/CN/0221/2019 : 2020 (38) GSTL 57(Tri. ALL)
2.4. As regard penalties imposed under both the section 76 and 78, he submits that the issue has been settled by the Hon'ble Gujarat High Court in the case of Raval Trading Co. reported in MANU/GJ/0286/2016 : 2016 (42) STR 210 (Guj.) wherein, the Hon'ble High Court has held that penalty in both the section cannot be imposed. The penalty under section 76 of Finance Act, 1994 cannot be imposed when the penalty imposed under section 78. He further submits that the Authorized Representative placed reliance on circulars of the 2005 which is contrary to the decision of Hon'ble High court and Hon'ble Supreme Court. In this regard he placed reliance on the judgment of Intercontinental Consultants & Technocrats of Delhi High Court which was upheld by the Hon'ble Supreme Court. He submits that the circular was issued prior to the declaration of the law in the above case therefore, the same is not applicable. He placed reliance on the order of Hon'ble Supreme Court Judgment in case of Ratan Melting & Wire Industries reported in MANU/SC/4587/2008 : 2008 (231) ELT 22 (SC) wherein it was held that when the law is declared by the Hon'ble High Court or Hon'ble Supreme Court then on the same point if there is any circular issued by the revenue administration then the circulars are to be ignored. With his above submission he prays for setting aside an order on merit as well as on limitation.
3. On the other hand Shri. S.N. Gohil Learned Superintendent (Authorized Representative) appearing on behalf of the Revenue reiterates the finding of the impugned order. He also filed a detailed written submission dated 16.03.2021 which is taken on record. He placed reliance on the following circulars and various judgments:-
1. Circular No. B1/6/2005- TRU : MANU/DSTX/0026/2005 dated 27.07.2005
2. Circular No. B1/4/2006- TRU dated 19.04.2006
3. MANU/TN/7642/2018 : 2019 (25) GSTL 513 (Mad)- CCE, Puducherry Vs. CESTAT, Chennai
4. MANU/CM/0502/2013 : 2016 (46) STR 491 (Tri. Mum)- Sai Labour Contractor Vs. CCE, Aurangabad
5. 2017 (47) STR J45 (SC)- Sai Labour Contractor Vs. Commissioner
6. MANU/CE/0208/2005 : 2006 (3) STR 655 (Tri- Del)- J&J Enterprises Vs. CCE, Raipur
7. MANU/CN/0012/2015 : 2016 (42) STR 561 (Tri- All)- Laxmi Construction Vs. CCE, Allahabad
8. MANU/CE/0251/2013 : 2014 (34) STR 225 (Tri- Del)- Neelav Jaiswal & Brothers Vs. CCE, Allahabad
9. MANU/CS/0226/2019 : 2020(37) GSTL 189 (Tri- Ahmd)- CCE, Surat Vs. Jalaram Security Services.
10. MANU/CS/0284/2018 : 2019 (369) ELT 1338 (Tri.- Ahmd)- Bhagwati Spherocast P. Ltd. Vs. CCE, Ahmedabad -II
11. MANU/CB/8094/2007 : 2007 STR 397 (Tri.- Bang)- Renu Singh & Co. Vs. CCE, Hyderabad
12. MANU/CB/8052/2007 : 2007(7) STR 230 (Tri.- Bang)- K.K. Appachan Vs. CCE, Palakkad
13. MANU/CS/0279/2008 : 2008 (12) STR 710 (Tri.- Ahmd)- Shakti Motors Vs. CST, Ahmedabad
4. We have heard both the sides and perused the records. On careful consideration of the submissions made by both the sides and detail scrutiny of the records we are of the view that the appeal can be disposed of on point of limitation without going into the merit of the case. The appellant has vehemently submitted that in the facts of the case, the extended period of the demand could not have been invoked. We find that the appellant is registered with the service tax authority. They filed periodically ST-3 return in respect of service provided by them declaring the value as per their bona fide belief which is equal to commission which they received from the service recipient. With this disclosure the revenue is very much in the knowledge about the nature of service provided by the appellant therefore the revenue was not prevented to verify the correctness of the nature of service as well as the value declared by the appellant in their ST-3 return. In this undisputed fact it cannot be said that the appellant have suppressed the vital fact with intention to evade service tax. We also find that the issue is purely of interpretation of valuation provision under Finance Act, 1994. The very same issue has been considered by the Hon'ble Supreme Court in the case of Malabar Management Services and finally decided in favour of assessee, following the said judgments this Tribunal has also passed an order in case of Modern Business Solution (Supra). In view of this legal position it is clear that issue is one of interpretation of law as regard valuation of services in question under the Finance Act, 1994. The Hon'ble Gujarat High Court in case of N.R. Agarwal Industries considering the limitation aspects observed as under:
"6. From the above facts it could very well be seen that the assessee had a decision in his favour and therefore it was reasonable on its part to hold a belief that the Cenvat credit was available. It was only subsequently that the issue came to be decided against him. It was hardly a relevant aspect. The assessee acted bona fide and in honest belief that Cenvat credit was available. In the facts and circumstances, no intention could be ascribed on the part of the assessee to evade the duty or suppress any fact. In that view, there was no justification in invoking the longer period of limitation beyond the normal period as the conditions therefore were not satisfied. The question formulated does not raise any substantial question of law in view of above facts, findings and discussion. Appeal is devoid of merit."
The Hon'ble Gujarat High Court in another case considering on issue of limitation observed as under:
"4. Learned counsel Mr. Oza also pointed out to us that the decision in M/s. Marsha Pharma Private Limited had been carried in appeal by the Department in Tax Appeal No. 2399 of 2009 and this Court, vide its order dated 30th September, 2010, chose not to entertain the appeal on the ground that the Tribunal committed no legal error in holding that the extended period of limitation could not have been invoked. This Court also found that there was no question of law much less a substantial question of law proposed, which had required further meritorious consideration. It is also further pointed out by the learned counsel that the Board had chosen not to file any SLP against the said order, as can be culled out from the letter received from the Superintendent (Legal), dated 23rd November, 2011. In other words, decision of this Court given in case of M/s. Marsha Pharma Private Limited has attained finality and as the Tribunal, relying on the said decision, when has addressed the issue, there is no requirement for giving any separate and independent reasonings for the questions proposed before us and following the decision of this Court; as mentioned earlier, the order of the Tribunal is not being interfered with. With no other question of law to be determined, this Tax Appeal stands dismissed."
4.1. In view of the above judgment it is settled that if on any issue there is a legal dispute which involved interpretation of law the mala-fide intention or suppression of fact with intent to evade payment of service tax cannot be attributed to the assessee. On this ground also the extended period of demand was not invokable.
4.2. As per the facts in the present case the period of dispute i.e. 2005-06 to 2009-10 and show cause notice was issued on 19.05.2011. It is also observed that the appellant has filed their ST-3 return covering the period October 2009 to March 2009 on 27.04.2010. As per the aforesaid facts the entire demand is beyond the normal period and falling under the extended period of limitation. As per the above discussion and findings which is supported by the various judgments on limitation. The entire demand is time barred.
5. We therefore set aside the impugned order on the ground of demand being time bar without going into the merit. Appeal is allowed.
(Pronounced in open court 19.04.2021.)
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