P.V. Subba Rao ORDER
Dilip Gupta, J. (President)
1. Service Tax Appeal No. 55438 of 2014 and Service Tax Appeal No. 55439 of 2014 have been filed to assail the order dated 25.07.2014 by which the two show cause notices dated 14.06.2012 and 15.03.2013 have been adjudicated upon and service tax amounting to Rs. 2,02,31,146/- has been confirmed under section 73(1) of the Finance Act, 19941 with interest and penalty.
2. The issue involved in these two appeals relates to taxability of 'convenience fee' charged by PVR Limited2 on its customers for online booking of movie tickets under the category of 'online information and database access retrieval system3' defined under section 65(75) of the Finance Act and taxable under section 65 (105)(zh) of the Finance Act.
3. The appellant is engaged in the business of exhibition of movies through various cinema halls located all over India. The appellant sells tickets for movies from the cinema ticket windows and also through its website www.pvrcinemas.com which is accessible through computer and mobiles phones. The website gives information on movies that are currently being exhibited in its cinemas, upcoming movies, trailers of movies and similar information. According to the appellant, no price is charged for accessing this website and any individual can access this website and gain information on movies that are being exhibited or would be exhibited in PVR cinemas. The customers who book tickets online through the website or through mobile phones electronically are required to pay an amount of INR 5/- to INR 25/- per ticket over and above the value of tickets. When the tickets are booked electronically, the hard copies of the same can either be collected over the counter or be retrieved by way of print out from a machine kept outside the counter of the movie hall.
4. The appellant received a show cause notice dated 14.06.2012 for the period 01.04.2007 to 31.12.2011 alleging that the 'convenience fee' charged by the appellant on its customers for booking the tickets online through the website is exigible to service tax under 'OIDAR' but the appellant did not deposit service tax. The show cause notice also invoked the extended period of limitation and created a demand of Rs. 1,70,93,379/- with penalty and interest.
5. The appellant filed a reply on 13.09.2012 refuting the allegations made in the show cause notice. The appellant submitted that service tax cannot be levied on convenience fee under OIDAR as the information provided on the website is available and freely accessible to all; that nothing is charged from the customers when it comes to giving access to the information; that the information available on the website is also available through newspaper advertisements or pamphlets; that the convenience fees is charged for the convenience provided to the customers for booking the tickets online rather than physically standing in the queue; and that the fees charged is only to recover the cost of infrastructure and bank charges.
6. The appellant also received a second show cause notice dated 15.03.2013 for the subsequent period from 01.01.2012 to 30.06.2012. This show cause notice created a demand of Rs. 31,37,767/- with penalty and interest. A reply dated 18.04.2013 was filed by the appellant to this show cause notice.
7. Both the aforesaid show cause notices were adjudicated upon by a common order dated 25.07.2014. The Commissioner confirmed the demand of service tax on convenience fee under the taxable service of 'OIDAR' primarily on the reasoning that the appellant provided online information to the ticket buyer on payment of monetary consideration called 'convenience fee' and, therefore, the claim made by the appellant that the information was provided free of cost is not true. The Commissioner also noted that the payment of the tickets were made through debit/credit card and after processing the same a booking number was allotted to customers through emails sent via computer network. The Commissioner, therefore, concluded that there was a two way transfer of data/information. The relevant portion of the order is reproduced below:
"5.2.12. I find that M/s. PVR Ltd. provides 'On-line information and data base access and/or retrieval' services in the following manner:-
On the website of M/s. PVR Ltd., information/data viz. names and addresses of cinema hall, name of the movies being shown there or to be shown in future, number of shows, timings of shows of each movie being shown there or will be shown in future, rates of the tickets, total number of seat in that particular cinema hall, number of vacant seats available at that particular point of time etc. are continuously updated by M/s. PVR Ltd. In addition to the same, customer can also see the trailers of the movies on the said website.
A customer desirous of booking tickets, first of all chooses the suitable cinema hall/desired movie name from the list generated therein, thereafter he selects his options from the various options generated/shown onscreen in an interactive manner in respect of the movie he wants to see, show-timing, rates of tickets, etc. In the website, number of seats available for a particular show is also updated time to time. If a customer enters for a number of tickets/seats for a particular show and in case the desired numbers of seats are not vacant/available for that particular show, the website also shows the number of seats available at that point of time in for that particular show.
After finalizing all the details/options, the customers make payment through his debt or credit card, for which he has to enter his credit or debit card number, name of the card holder, expiry date etc. and after processing the payments online, a booking number is allotted to the customer. In addition to the same, as per "Terms and Conditions" printed from the website "once the booking has been processed, the user will receive a confirmation e-mail to their e-mail address with all the relevant dates of their booking................... to collect the tickets the user must present the credit/debit card that was used to book the tickets in that particular cinema. The user has to carry the printout of the confirmation mail."
From the above it is clear that not only all sort of information required for booking of tickets were made available on the said website by M/s. PVR Ltd., but the choices/options given by the customer online were also processed online. The payments for the tickets were also made through debit/credit card and after processing the same, booking number in respect of the booked tickets was allotted to the customers/emails sent to the customers through computer network. Therefore, there was two way transfer of data/information. All the transactions were processed online and for providing the said services, an amount termed by M/s. PVR Ltd. as "Convenience fee" is charged by M/s. PVR Ltd. from the customers.
5.2.13. In view of the above definitions, I find that the assessee has provided 'Online Information and a Database Access or Retrieval' services by providing access to the ticket buyer on payment if monetary consideration called 'convenience fee', data relating to booking of tickets online, through internet facility, whether it be on a computer or mobile, allowing the ticket buyer has the option to access/retrieve the booking made by him by putting in a code provided by the assessee either to take print out of the tickets or get details of his booking. I also finding that the assessee in their reply have stated that they are providing information free of charge to customers, which is not true as they are charging a 'convenience fee' from people buying their tickets online. Moreover, service tax on this service provided, contrary to the claims of the assessee, existed prior to 01.07.2012, as can be seen from the Act/notifications/circulars etc. I also find that the assessee has not been able to substantiate his claim of the amount being cum tax, and therefore I am inclined to consider the amount not inclusive of tax."
(emphasis supplied)
8. The demand under the extended period of limitation was upheld on the ground that the Department was never made aware about the collection of convenience fee while providing OIDAR services and the evasion of service tax was detected by the Department only later. The Commissioner also observed that mere suppression of facts was enough for invoking the extended period of limitation and it was not necessary that there should be an intent to evade payment of service tax. The relevant portion of the order is reproduced below:
5.3 I find that the extended time period of five years is invocable under the provision contained in proviso to Section 73(1) of the Finance Act, 1994 as amended in specified cases, I find that the assessee had not disclosed to the Department about 'convenience fee' received while providing 'Online information and Database Access or Retrieval Service', which were taxable.
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5.3.4 I am of the view that it is possible to invoke extended period in the case of Service Tax even in situation where there is no intent to evade payment of tax. Even if it is presumed that the assessee has not contravened any provisions with intent to evade payment of Service Tax, yet the assessee has failed to comply with the obligations cast upon it by the Legislature. There is no requirement that there should be suppression with intention to evade. Mere suppression is adequate for the recovery of tax for the extended period as well as for imposing penalty. In any case, the assessee, in this case, has willfully contravened the provisions of the Service Tax Rules, 1994.
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5.3.6 All these facts narrated above go to show that the assessee suppressed the facts, by non-compliance of the obligations cast upon them by the statutory provisions. The suppression of the facts clearly gives one conclusion that the assessee had intention to evade the tax, and nothing else. It was imperative to mention here that suppression with intent to evade payment of tax need not require to be proved with mathematical precision in the regime of self-assessment, where assessment has to be made by the assessee himself without any control of the Department. Therefore, for the purpose of invoking the extended period, there was no need to establish the intention of the assessee.
(emphasis supplied)
9. These two appeals have been filed to assail the order dated 25.07.2014 passed by the Commissioner.
10. Shri Sujit Ghosh learned counsel for the appellant assisted by Ms. Pragya Avasthi made the following submissions:
(i) The underlying intention in the transaction entered into between the appellant and the customer is to confer a right upon a customer to enter a cinema hall and watch a particular movie. The contract is to facilitate the screening of movie to the customer and not to provide any access to information or database;
(ii) The explicit terms of the contract convey the intention of the parties and have to be acted upon. In this connection reliance has been placed upon the decision of the Supreme Court in Nabha Power Limited (NPL) vs. Punjab State Power Corporation Limited (PSPCL) and Another MANU/SC/1291/2017 : (2018) 11 SCC 508 and the Allahabad High Court in Reliance Industries Limited vs. State of U.P. MANU/UP/1757/2012 : 2012 (9) ADJ 10;
(iii) Since the website of the appellant is used for sale of its tickets, it is in the nature of an e-commerce transaction. In this connection reliance has been placed on the decision of the Tribunal in Commissioner of Service Tax, Mumbai vs. Click For Steel Services Limited MANU/CM/0665/2017 : 2017 (7) G.S.T.L. 215 (Tri. - Mumbai);
(iv) Convenience fees in question is charged only for 'booking of tickets' and mere access to the website for information is free of cost;
(v) The extended period of limitation in the first show cause notice for the period from 01.04.2007 to 31.03.2011 could not have been invoked. In this connection reliance has been placed upon the decision of the Tribunal in Shiv-Vani Oil & Gas Exploration Services Ltd. vs. C.S.T., New Delhi MANU/CE/0783/2016 : 2017 (47) S.T.R. 200 (Tri.- Del.);
(vi) The activity of the appellant is not covered under any taxable service prior to 01.07.2012;
(vii) The subsequent Circular dated 09.11.2016 issued by the Board clarifies that booking services or tickets to entertainment events do not fall under the category of OIDAR services;
(viii) The manner of computation of tax adopted by the Department is incorrect. Service tax, if at all, is required to be computed on a cum-tax basis. In this regard, the Commissioner made only a one line observation that the appellant has not been able to substantiate his claim of the amount being cum tax; and
(ix) The impugned order has incorrectly confirmed penalty and interest under section 78 and section 75 of the Finance Act.
11. Dr. Radhe Tallo learned Authorised Representative appearing for the Department supported the impugned order and submitted that it does not suffer from any legality so as to call for an interference in the appeals. It is his submission that the consideration charged for "convenience fee" is clearly a charge for the information provided for online sale of cinema tickets. Learned Representative submitted that data/information is provided online to the customers and convenience fees is charged only after the necessary information is obtained by the customers. It is his submission that the idea behind charging convenience fee is to charge for the "privilege" a customer gets for using the alternate service option. Learned Representative also submitted that the extended period of limitation contemplated under the proviso to section 73(1) Finance Act was rightly invoked in the facts and circumstances of the case as the appellant clearly suppressed information from the Department by not including the component of convenience fee in the taxable value.
12. The submissions advanced by the leaned Counsel for the appellant and the learned Authorized Representative appearing for the Department have been considered.
13. Section 65(75) of the Finance Act defines "on-line information and database access or retrieval" to mean providing data or information retrievable or otherwise, to any person, in electronic form through a computer network. Taxable service under section 65(105)(zh) of the Finance Act means any service provided or to be provided, to any person, by any person, in relation to on-line information and database access or retrieval or both in electronic form through computer network, in any manner.
14. As noticed above, the appellant exhibited movies through cinema halls. It sold tickets from the cinema ticket window as also through its website, which could be accessed through computer and mobile phones. The website provides information on movies that are exhibited in the cinema halls, the upcoming movies, trailers of movies and other like information. No fees is charged by the appellant for accessing this website and any individual can access the website for the aforesaid information. However, customers who actually book tickets online through the website or through mobile phones electronically are required to pay a certain amount per ticket over and above the value of ticket towards 'convenience fees'. In such a situation, when the tickets are booked online, the hard copy of the tickets can either be collected over the counter of the cinema hall or can be retrieved by way of the print out from a machine kept outside the counter in the cinema hall.
15. The issue that arises for consideration in these two appeals is regarding the taxability of 'convenience fee' charged by the appellant on its customers for online booking of movie tickets under OIDAR category under section 65(105)(zh) of the Finance Act.
16. Learned counsel for the appellant has broadly raised two submissions. According to the learned counsel for the appellant, the Commissioner was not justified in confirming the demand of service tax on convenience fee and even otherwise, the confirmation of demand for the period from 01.04.2007 to 31.03.2011 in the first show cause notice dated 14.06.2012 is bad in law since it is beyond the stipulated period of limitation contemplated under section 73(1) of the Finance Act and the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act could not have been invoked.
17. These two issues raised by learned counsel for the appellant are being separately dealt. The issue relating to extended period of limitation shall be first dealt.
Extended Period of Limitation
18. In the present case, two show cause notices were issued to the appellant. The first show cause notice dated 14.06.2012 was issued for the period 01.04.2007 to 31.12.2011 and the second show cause notice dated 15.03.2013 was issued for the period 01.01.2012 to 30.06.2012. The issue relating to wrong invocation of the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act has been raised by learned counsel for the appellant only in respect of the first show cause notice dated 14.06.2012 and that too for the period 01.04.2007 to 31.03.2011 only, as according to the learned counsel for the appellant the remaining period from 01.04.2011 to 31.12.2011 covered under the first this show cause notice is within the prescribed period of one year contemplated under section 73(1) of the Finance Act. Learned Counsel for the appellant has also stated that the entire period covered under the second show cause notice dated 15.03.2013 from 01.01.2012 to 30.06.2012 is within limitation.
19. It needs to be noted that the impugned order dated 25.07.2014 covers both the show cause notices and confirms a demand of Rs. 1,70,93,379/- under the first show cause notice and a demand of Rs. 31,37,767/- under the second show cause notice. Out of the total demand of Rs. 1,70,93,379/- confirmed under the first show cause notice, an amount of Rs. 43,99,503/- is for the period 01.04.2011 to 31.12.2011. This period is within limitation and, therefore, an amount of Rs. 1.27 crores out of the total of the total demand of Rs. 1.70 crores confirmed under the first show cause notice is the amount which, according to the learned counsel for the appellant, is covered by the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act.
20. The contention of the learned counsel for the appellant is that the necessary ingredients for invoking the larger period of limitation contemplated under the proviso to section 73 (1) of the Finance Act, namely willful suppression of facts with an intent to evade payment of service tax do not exist and, therefore, the extended period of limitation could not have been invoked.
21. In order to appreciate this contention it would appropriate to reproduce section 73 of the Finance Act as it stood at the relevant time. This section deals with recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. It is as follows;
"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 paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:
PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of-
(a) fraud; or
(b) collusion; or
(c) willful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax,
by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year", the words "five years" had been substituted."
22. It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice.
23. The 'relevant date' has been defined in section 73 (6) of the Finance Act as follows;
73(6) For the purpose of this section, "relevant date" means,-
(i) In the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short paid-
(a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
(b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
(c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;
24. 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 willful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under 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.
25. Learned counsel for the appellant submitted that the appellant had not suppressed any material facts, much less suppressed them willfully, from the Department in regard to the collection of convenience fee from the customers for online booking of movie tickets, nor was there any intent to evade payment of service tax and, therefore, the extended period of limitation could not have been invoked in the facts and circumstances. For this purpose, learned counsel for the appellant placed the following factual position.
26. Pursuant to the audit conducted by the Audit Team of Service Tax Commissionerate, Delhi from 25.11.2008 to 28.11.08 for the period 2004-2005 to 2007-08, a communication dated 27.02.2009 was sent to the appellant by the Superintendent Service Tax (Audit) raising only two specific objections about service tax on the amount charged from advertising agencies and utilization of CENVAT Credit in excess of 20%. The appellant submitted a letter dated 18.05.2009 in response to both the audit objections. The appellant also submitted various documents, including financial records, agreements, details of revenue earned, credit availed etc., before the authorities. Subsequently summons dated 08.07.2009 was issued to the appellant by the office of Commissioner of Service Tax asking for certain documents and records mentioned in the Schedule to the summons, which among others, included convenience fees. The Schedule is reproduced below:
SCHEDULE
"1. All bills/invoices received against Advertisement and Publicity expenditure made during 2006-07 & 2007-08:
2. Details of Advertisement (Agency & Non-agency); Management fee; Royalty income; Convenience fee & Expenditure in foreign currency:
3. Copy of any Agreement/Contract regarding sponsorship activity."
27. The appellant submitted a letter dated 23.07.2009 in reply to the aforesaid summons and in connection with 'convenience fee' submitted a note which is reproduced below:
2. Note on Convenience fees: PVR undertakes the sale of tickets from theatres as well via the internet and interactive voice response ('IVR'). For the sale of tickets through internet or IVR, PVR charges additional amount known as "Convenience Fee". To book tickets via internet, the user has to register himself at the PVR website and obtains a user id and a password. On accessing the website the user identifies the movie and the show. Payment for the tickets is made via credit card and a transaction number is generated. The tickets are provided at theatre premises on quotation of the transaction number.
28. It is, therefore, clear that the appellant had described in detail in the Note the purpose for charging convenience fees.
29. Thereafter, a demand cum show cause notice dated 23.10.2009 was issued by the Commissioner of Service Tax proposing to levy service tax on advertisement services provided to clients. What, therefore, needs to be noted is that even though all facts relating to convenience fees had been placed by the appellant before the Department, the show cause notice dated 23.10.2009 did not demand any service tax on convenience fee.
30. Subsequently, in connection with the enquiry regarding payment of service tax, communications dated 26.05.2010, 16.07.2010 and 04.08.2010 were sent to the appellant seeking details regarding Trading Accounts and Balance Sheet for the period 2005-06 to 2009-10.
31. The appellant, by a letter dated 11.08.2010, submitted the following documents:
1. Copies of Annual Report from 2005-06 to 2009-10,
2. Copies of ST-3 returns filed from April 2005 onwards till march 2010.
3. Copies of invoices.
32. The Annual Report from 2005-06 to 2009-10 also consisted of the Balance Sheet. Schedule 17 of the Balance Sheet provides for "operating income" which also makes mention of the "convenience fees". The amount of convenience fees as mentioned in the Balance Sheet is Rs. 14,926,478/-, which is the same amount on which service tax has been demanded by the Department for the year 2007-08 in the show cause notice dated 14.06.2012.
33. A CERA Audit was also conducted and a Local Audit report dated 27.06.2011 was issued for the period 2007-10 raising for the first time an issue about non-payment of service tax on convenience fees. The Department believed that service tax was required to be paid on the amount collected as convenience fees under "business auxiliary service"4. The appellant submitted a reply dated on 27.07.2011 stating therein that service tax would not be payable on convenience fees under BAS.
34. The Commissioner, while confirming the demand under the extended period of limitation, observed that the Department was never made aware about the convenience fees received by the appellant and, therefore, the appellant had suppressed facts. The Commissioner also observed that mere suppression of facts is enough for invoking the period of limitation and there is no requirement of any intent to evade payment of service tax.
35. The conclusion drawn by the Commissioner that the appellant had suppressed having received any amount towards convenience fee is not correct. The first show cause notice is dated 14.06.2012 and was issued for the period commencing 01.04.2007 to 31.12.2011. Section 73(1) of the Finance Act provides that the notice has to be served within one year from the relevant date. It is clear from the facts stated above that as far back as on 27.07.2009 the Department was aware that the appellant had been collecting convenience fees from customers and by 11.08.2010 the Department was also aware of the quantum of convenience fees collected, which amount has also been mentioned in the show cause notice dated 14.06.2012. It is, therefore, more than apparent that the Department was aware of the collection of convenience fees by the appellant much before one year from the date of issue of the first show cause notice dated 14.06.2012. It cannot, therefore, be said that the appellant had suppressed facts relating to collection of convenience fee from the Department and, therefore, the confirmation of demand by the Commissioner for the period 01.04.2007 to 31.03.2011 is clearly not warranted.
36. This brings us to the further submission made by learned counsel for the appellant that even otherwise there was no willful suppression of facts nor was there any intention to evade payment of service tax on convenience fees.
37. It is correct that section 73(1) of the Finance Act does not mention that suppression of facts has to be "willful" since "wilful" precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression "wilful" before "suppression of facts" under section 73(1) of the Finance Act, suppression of facts has still to be willful and with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has to be "willful" and there should also be an intent to evade payment of service tax.
38. Before adverting to the decisions of the Supreme Court and the Delhi High Court, it would be useful to reproduce the proviso to section 11A of Central Excise Act, 1944, as it stood when the Supreme Court explained "suppression of facts" in Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay MANU/SC/1239/1995 : 1995 (78) E.L.T. 401 (SC). It is as follows:
"11A: Where any duty of excise has not been levied or paid or has been short-levied or short-pain or erroneously refunded, by the reason of-
(a) fraud; or
(b) collusion; or
(c) any willful misstatement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Act of the rules made thereunder with intent to evade payment of duty
by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant dated, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under Section 11AA and a penalty equivalent to the duty specified in the notice."
39. In Pushpam Pharmaceuticals Company, the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of 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 willful 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 fraud, collusion or willful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression."
(emphasise supplied)
40. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise MANU/SC/0641/2005 : 2005 (188) E.L.T. 149 (SC) and the observations are as follows:
"26........... This Court in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression "suppression of facts" in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held:-
"In taxation, it ("suppression of facts") can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression."
27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [MANU/CE/0455/1987 : 1995 Suppl. (3) SCC 462], we find that "suppression of facts" can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to Section 11A of the Act."
(emphasis supplied)
41. 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 MANU/SC/0060/2013 : 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."
42. The Supreme Court in Continental Foundation Joint Venture Holding vs. Commissioner of Central Excise, Chandigarh-I MANU/SC/3646/2007 : 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 have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct."
(emphasis supplied)
43. The Delhi High Court in Bharat Hotels Limited vs. Commissioner of Central Excise (Adjudication) MANU/DE/7874/2017 : 2018 (12) GSTL 368 (Del.) also examined at length the issue relating to the extended period of limitation under the proviso to section 73(1) of the Finance Act and held as follows;
"27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word "suppression" in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. "fraud, collusion, willful misstatement". As explained in Uniworth (supra), "misstatement or suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty.
xxxx
Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention."
xxxx
The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bona fide belief."
(emphasis supplied)
44. It would also be useful to refer to a decision of the Tribunal in Shiv-Vani Oil & Gas Exploration Services Ltd., wherein the Tribunal after making reference to the decision of the Supreme Court in Cosmic Dye Chemical vs. CCE, Bombay MANU/SC/0791/1995 : 1995 (75) E.L.T. 721 (SC), observed that there should be an intent to evade payment of service tax if the extended period of limitation has to be invoked. The observations are as follows:
"8. Regarding the demand for extended period, we find the reason given by the Original Authority is not legally sustainable. In fact he recorded that in terms of proviso to Section 73 of Finance Act, 1994, the intention to evade payment of duty is not required to invoke extended period or to impose penalty. We find that for invoking extended period as well as for imposing penalty under Section 78, the legal provisions are identical. The words used like fraud, collusion, willful mis-statement, suppression of fact or contravention of any provisions of Chapter V of Finance Act, 1994 or of the Rules made thereunder with intent to evade the payment of Service Tax, will show that the ingredient of mala fide is a pre-requisite to invoke both the legal provisions (proviso to Section 73 and Section 78). The Original Authority recorded that it may be true that the assessee has not contravened any provisions with intend to evade payment of service tax, however, he proceeded to confirm the demand for extended period and to impose penalty of an equal amount under Section 78. We find that Hon'ble Supreme Court in Cosmic Dye Chemical v. CCE, Bombay reported in MANU/SC/0791/1995 : 1995 (75) E.L.T. 721 (S.C.) held as below:-
Now so far as fraud and collusion are concerned, it is evident "6. that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word "wilful" preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or Rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not willful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be willful"."
45. It is, therefore, clear that even when an assessee has suppressed facts, the extended period of limitation can be invoked only when "suppression" is shown to be willful with intent to evade the payment of service tax.
46. The Commissioner, therefore, fell in error in first observing that the appellant had suppressed information from the Department relating to collection of convenience fees and then holding that mere suppression of facts was enough for invoking the extended period of limitation. As noticed above, even suppression of facts has to be willful and in any case, suppression has also to be with an intent to evade the payment of service tax. There is no finding by the Commissioner as to whether suppression of facts was willful and in the context of intent, the Commissioner held that there is no necessity that suppression of facts has to be with an intent to evade the payment of service tax.
47. For all these reasons, the confirmation of demand of service tax of Rs. 1.27 crores on convenience fees for the period commencing 01.04.2007 to 31.03.2011 is beyond the prescribed period of one year contemplated under section 73(1) of the Finance Act and, therefore, this demand deserves to be set aside.
Merits
48. It has now to be seen whether the convenience fees that is charged by the appellant from each user over and above the prescribed value of the movie ticket can be subjected to service tax under OIDAR.
49. For this purpose, it would be necessary to refer the Terms & Conditions for purchase of a movie ticket and they are as follows.
"Terms and Conditions
Online Booking Contest and Promotion
By accessing and using this website the user accepts and agrees to be bound by the Terms and Conditions. Users should check for current Terms and Conditions as these can be updated and changed from time to time.
Definitions
PVR means and includes all the brands working under the head of PVR Limited.
User means the person accessing the website and availing the online booking facility.
Customer includes all the patrons of PVR and also includes the user defined above.
Website means www.pvrcinemas.com
...................................................................................................
Purchasing tickets online
Cinema tickets are sold by PVR and can be purchased by the user via the online booking system using credit/debit cards.
A nominal "convenience fee" shall be charged from each user over and above the prescribed value of the ticket. This convenience fee shall be in lieu of the convenience given to the user by PVR and shall not form a part of the value of the ticket.
...................................................................................................
Booking of Tickets
The user must provide PVR with the correct information pertaining to the cardholders name, card type, the card number, the card expiry date and the security code on the back of the card (if any) in order to make payment to PVR Cinemas. The user shall be responsible for the correctness of the information provided and shall not be indemnified if the information is wrongly entered whether intentional or unintentional.
The user must ensure the correctness of all details of the booking before finally booking their tickets as PVR will accept no responsibility and will not issue a refund for wrong booking that are the fault of the user. If the user experiences problems with the booking process, they are to call the helpline number of PVR specified on the booing page. The portal shall not cancel any booking once the transaction is complete.
Once the booing has been processed, the user will receive a confirmation e-mail to their e-mail address with all the relevant details of their booking. PVR is not responsible and will not issue a refund to the user for selecting the wrong tickets or if the user does not meet the minimum age requirements for that particular film. The online booking is non transferable and cannot be further sold.
To collect the tickets the user must present the credit/debit card that was used to book the tickets in that particular cinema. The user has to carry the print out of the confirmation mail. The user may procure the ticket from the automatic ticket collection points or they can present the print out to the PVR representative at the ticket counter of the concerned Cineplex. The user shall also carry proof of age for movies certified 'A'.
(emphasis supplied)
50. The explicit terms of the contract are always the final word with regard to the intention of the parties. This is what was observed by the Supreme Court in Nabha Power Limited. The terms of contract have also to be treated on their face value and should be presumed to mean what they say and must be acted upon unless proved to be sham or farce, as was observed by the Allahabad High Court in Reliance Industries Limited. In CMS (I) Operations & Maintenance Co. P. Ltd. vs. C.C.E., Pondicherry MANU/CC/8082/2007 : 2007 (7) S.T.R. 369 (Tri.- Chennai), the Tribunal observed that the pith and substance of an agreement has to be determined and that the main purpose and not the incidental purpose for determining whether tax is leviable or not has to be examined.
51. A perusal of the Terms & Conditions of the contract reproduced above show that the transaction can basically be split into three parts which are as under:
Stage 1: Viewing of information i.e. movie show timings/date of release/availability of vacant seats etc. This Facility is provided free of cost;
Stage 2: Booking of tickets by selecting the seats and making payment through an online portal;
In making this payment, an amount of convenience fees is also charged; and
Stage 3: Collecting/Retrieving of tickets-
1. Over the counter by showing the booking id or
2. By way of taking a print through a machine kept outside the counter
52. The Terms and Conditions also show that when a user accesses and uses the website he agrees to be bound by the terms and conditions. A user has been defined to mean a person who accesses the website and avails the online booking facility. The Terms and Conditions also indicate that convenience fee is collected over and above the value of the ticket in lieu of the convenience given to a user by PVR Cinema. Convenience is a facility offered to a user. A conjoint reading of the clauses of the Terms & Conditions of the contract would indicate that the purpose for charging convenience fee is to receive a consideration for offering a facility of online booking and in the facts of the present case would relate to online booking of tickets. It needs to be noted that the purpose of the transaction is to book and procure a ticket online by a user, though the website may provide for various other information like the current movie being exhibited, the upcoming movies and the timing of the movies. These information are even otherwise available through newspaper advertisements or other advertisements and no charge is leviable for the same.
53. It cannot be doubted that the dominant intention of a user is to book a movie ticket and convenience fee is charged for the reason that online booking facility saves precious time and effort of a user, since otherwise he would not only have to go to the movie hall but may also have to stand in a long line at the window to procure the ticket. This online booking facility, therefore, offers a convenient way of procuring a ticket as against the conventional method of having to stand outside the ticket counter in a long queue. It is clear that the pith and substance and the dominant intention of the arrangement is not to access/retrieve data/information but it is an arrangement by which the facility of online booking is made available to users.
54. It needs to be remembered that any person who visits the website of the appellant to seek information about the show timings or like information does not have to make any payment and it is only when a ticket is booked online that convenience fee is required to be paid by the user. The substance of the transaction is, therefore, to book a ticket online and thereby engage in e-commerce. It cannot, therefore, be said that convenience fee is charged for any access/retrieval of information or database as contemplated under OIDAR service.
55. In this connection reference needs to be made to the decision of the Tribunal in Click for Steel Services, wherein the assessee was engaged in the business of conducting online auctions for various commodities such as MS Steel for a commercial consideration. The allegation of the Department that the assessee had been providing "online information and database access or retrieval service" was not accepted by the Tribunal and it was held that e-commerce service was provided. The observations of the Tribunal are as follows:
"4. We have carefully considered the submissions made by both sides. From the facts of the case, we find that the respondent is running website through which the interested steel manufacturer/trader are making trade. The respondent is buying and selling the steel product of various steel manufacturer/trader. We do not find that the buyer of the goods is accessing any information online or data online on the respondent's site but they are only interested for sale and purchase of the steel products. The respondent with regard to such trading are getting margin from sale and purchase. Hence the service of the respondent is clearly of e-commerce in respect of steel products......"
(emphasis supplied)
56. The Board Circular dated 09.07.2001 also clarifies that e-commerce transactions do not fall within the ambit of OIDAR service. It also clarifies that when information is supplied free of charge by the website, no service tax is payable and if such website charges a fee for providing information, only then such a website will be liable to tax under OIDAR. This clarification makes it abundantly clear that fees must be charged for providing information and consequentially liable to service tax under the category of OIDAR. The said Circular dated 09.07.2001 is reproduced below:
Government of India
Ministry of Finance
Department of Revenue
9th July, 2001
Subject: Tax on 15 New Services to be effective from
16.7.2001-Instructions regarding.
2. Extension of service tax to fifteen more services: In regard to the new services, which will be subject to service tax from 16th July, 2001, certain issues have been brought to notice during the course of discussion with the concerned Association. These have been discussed and clarified in the Annexures appended as per details below.
(i) xxxxxxx
(ii) xxxxxxx
(iii) xxxxxxx
(iv) On-line information and database access and/or retrieval (OIDAR)
Annexure IV
Annexure IV
On-line information and database access and/or retrieval:
1. xxxxxxxxx
2. xxxxxxxxx
3. xxxxxxxxx
4. xxxxxxxxx
5. xxxxxxxxx
6. Point for clarification:
A question has been raised as to whether e-commerce transactions (other than providing online information and data) are covered in the ambit of service tax. It is clarified that in e-commerce transactions, no service of online information and database access/retrieval is involve. Therefore, e-commerce transactions will not ordinarily be covered under the service tax net. Normally, the web sites do not charge the surfers for information of sale of goods or services offered by them. If at all they do, service tax will be payable on the amount charged for providing the information.
Another point raised related to applicability of service tax on inter-connectivity services provided by one ISP to another and the charges recovered for such services. It is understood that this is done to inter connect various networks so as to reach the server where the information is stored. It is informed that interconnection of one ISP to another is a commercial and technical arrangement under which service providers connect their equipment, networks and services to enable their customers to have access to the data or information. Through this arrangement, it is the customer of an ISP who ultimately receives on-line information and database access and/or retrieval service. Service tax on the amount charged from him is payable. Therefore, interconnection charges paid by one ISP to another ISP are not liable to service tax.
57. The Terms and Conditions of online booking facility do not mention that the essence of the contract is for accessing or retrieving any information or data. Infact, the terms are restricted to the facility of online booking. An arrangement which is predominantly for OIDAR would have provisions clearly indicative of the nature of data/information that is permitted to be accessed or retrieved, obligations pertaining to copyright violations, reproductions, replications, restrictions and several other covenants through which the data and information is either sought to be protected or controlled. Such an arrangement would also contain a term that on payment of fee, the user shall have limited or unlimited rights to retrieve or access data/information making it abundantly clear as to what the dominant intention of the contract is. As against this, the Terms and Conditions of the contract involved in the present appeals relating to online booking arrangement make no such averments or declarations and instead are restricted to the grant of online booking facility and nothing more.
58. Where fees is not charged for information and is instead charged for other services like convenience/facility of online booking, even though such fees would be for a provision of service, it would not mean that such fees is charged for providing information/data. Thus, unless the fees is for provision of information/data, the arrangement cannot fall under OIDAR. In the present case the dominant intention for charging fees, as noticed above, is to grant facility of online booking and not for access/retrieval of any data or information.
59. The submission of learned Authorized Representative of the Department that since a booking code is provided to a user when online booking facility is availed and the user has go to a movie hall to get a print out of the ticket, would mean that there is access/retrieval of information cannot, therefore, be accepted. The code received in the process is purely incidental and cannot be said to be the main object of the transaction.
60. In this connection it would be pertinent to refer to the Circulars dated 29.02.2008 and 06.08.2008 issued by the Board clarifying that if a transaction contains major and ancillary elements, classification has to be determined based on the essential features or the dominant element and that the guiding principle is to identify the essential features of the transaction. The said Circulars are reproduced below:
Circular Dated 29.02.2008
"3.2 For the purpose of classification of a service covering number of separate services, a view has to be taken as to whether an individual service is merely a component of the overall supply or is itself a distinct and independent supply i.e., whether the component is merely ancillary to the principal supply or the component can be considered as separate taxable service in its own right. A service, which does not constitute for a customer an aim in itself but a means of better enjoying the principal supply, is considered as a supply ancillary to the principal supply.
3.3 Section 65A states the principles for classification of taxable services. Classification of a composite service is based on that component of the service which gives the essential character. There is a need to determine whether a given transaction is the one containing major and ancillary elements or the one containing multiple and separate major elements. In the case of a transaction multiple and separate major elements. In the case of a transaction containing major and ancillary elements, classification is to be determined based on the essential features or the dominant element of the transaction. A supply which comprises a single supply from an economic point of view should not be artificially split. The method of charging or invoicing does not in itself determine whether the service provided is a single service or multiple services. Single price normally suggests a single supply though not decisive. The real nature and substance of the transaction and not merely the form of the transaction should be the guiding factor for deciding the classification."
(emphasis supplied)
Circular Dated 06.08.2008
"...............The contention that a single composite service should not be broken into its components and classified as separate services is a well-accepted principle of classification. As clarified earlier vide F. No. 334/4/2006-TRU, dated 28-2-2006 (para 3.2 and 3.3) [2006 (4) S.T.R. C30] and F. No. 334/1/2008-TRU, dated 29-2-2008 (para 3.2 and 3.3) [2008 (9) S.T.R. C61], a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service and accordingly classified. While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The method of invoicing does not alter the single composite nature of the service and classification in such cases are based on essential character by applying the principle of classification enumerated in section 65A. Thus, if any ancillary/intermediate service is provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the GTA, and not by any other person, such service would form part of GTA service and, therefore, the abatement of 75% would be available on it."
(emphasis supplied)
61. There is, therefore, no manner of doubt that the essential characteristic of the arrangement under consideration in these appeals is availing the facility of online booking of ticket and not accessing/retrieving any data/information. Service tax under the category of OIDAR, therefore, cannot be levied upon a user merely because he receives a code for getting a printout of the ticket from the cinema hall.
62. The aforesaid discussion leads to the inevitable conclusion that convenience fee is not charged by the appellant for any access/retrieval of information or data base. Service tax under OIDAR cannot, therefore, be levied upon the appellant for the period prior to 01.07.2012. The appellant has stated that it started discharging service tax on convenience fees under the negative list regime after July 1, 2012 under the category of "other taxable services".
63. In any view of the matter, the confirmation of demand of service tax of Rs. 1.27 crores for the period 01.04.2007 to 31.03.2011 out of the total demand of Rs. 2,02,31,146/- covered under the two show cause notices dated 14.06.2012 and 15.03.2014 cannot also be sustained for the reason that it is for a period beyond the prescribed period of one year contemplated under section 73(1) of the Finance Act and the extended period of limitation could not have been invoked.
64. In this view of the matter it would not be necessary to examine the submissions made by learned counsel for the appellant that the subsequent Circular dated 09.11.2016 issued by the Board clarifying that booking services or tickets to entertainment events do not fall under OIDAR service would help the appellant or that the service tax was required to be computed on cum-tax basis.
65. As the confirmation of demand under the two notices cannot be sustained, the imposition of penalty and interest under sections 78 and 75 of the Finance Act cannot also be sustained.
66. Thus, for all the reasons stated above, the impugned order dated 25.07.2014 confirming the demand of service tax under the two show cause notices dated 14.06.2012 and 15.03.3013 is liable to be set aside and is set aside. The appeals are, accordingly allowed.
(Order pronounced on 05.07.2021)
1the Finance Act
2the Appellant
3OIDAR
4BAS
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