ABP (P.) Ltd. vs Commissioner of Service Tax

Soumitra Pal, J.—In the writ petition the petitioner No. 1, stated to be a leading public house in the country and, inter alia, engaged in the business of printing and publishing a wide range of newspapers and periodicals and the petitioner No. 2, a citizen of India and share holder of the petitioner No. 1, have challenged the notice dated 1/4-12-2006 (for short "the notice") issued by the Assistant Commissioner (SIV) Service Tax, Kolkata, respondent No. 2, requesting the petitioner No. 1 to furnish certain documents mentioned therein with regard to the information regarding taxability of its activity under the category of Business Auxiliary Service (for short ''BAS'') under the Finance Act, 1994. It may be noted that provisions for service tax have been made in Sections 64 to 96-I (Chapters V. and VA) of the Finance Act, 1994. In the writ petition it has been stated that the petitioner No. 1, registered under the Service Tax with regard to eight activities, have been regularly filing service tax returns and paying tax thereto. According to the petitioner, in view of several exemptions granted by notifications and circulars, the commercial activity of printing, publishing and selling newspapers and periodicals and selling of advertisement space in print media does not fall under the category of BAS. It has been stated that the impugned notice is based on suspicion as it has been mentioned that the commercial activities may fall under category of BAS. Since the entire nature of commercial activities is known to the service tax authorities as apparent from the notice itself and from the returns filed, and since such commercial activities do not fall under the category of BAS, the documents sought for are not relevant. Moreover, the notice impugned is vague and thus the inquiry is fishing and roving in nature.

Learned senior advocate appearing on behalf of the petitioner relying on the statements in the writ petition submitted that since in the affidavit-in-opposition it has been stated that the authorities have reasons to believe that the petitioner is carrying on BAS activities, the respondents ought to have disclosed what had prompted them to issue such notice. Submission is that the letter dated 20-12-2006 sent on behalf of the petitioner No. 1 in reply to the notice does not preclude the petitioner from challenging the same. Learned senior advocate for the petitioner had relied on several judgments which shall be dealt with in appropriate stage.

Learned advocate for the respondents justifying the action has submitted that Section 83 of the Finance Act, 1994 read with Section 14 of the Central Excise Act, 1944 (for short the "Central Excise Act") authorise the respondent to issue such notice. Since Finance Act, 1994 is a special Act and Section 14 of the Central Excise Act do not contain the words ''reason to believe'', the judgments relied on by the petitioner are not applicable to the facts of the case. Moreover, the instant writ petition is not maintainable since it is evident from the reply dated 20-12-2006 that the petitioner No. 1 had submitted to the jurisdiction of the authority as it had understood the purport of the notice and request was made to grant time for compliance.

In order to appreciate the issue it is necessary to refer to the impugned notice dated 1/4-12-2006, the relevant portion of which is as under:-

It is suspected that your commercial activity may fall under the category of ''Business Auxiliary Service (BAS)'', the definition of which provided u/s 65(19) of the Finance Act, 1994 as "Business Auxiliary Service means any service in relation to - (i) promotion or marketing or sale of goods produced for provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provide on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; (v) production of goods on behalf of the client; or provision of service on behalf of the client; or a service incidental or auxiliary to any activity specified in Sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customers or vendor, public relation service, management or supervision, and includes services as commission agent.

In this regard, an inquiry has been initiated, for which you are requested to furnish the following documents related to the last 3 financial years, within 5 days of receipt of this letter.

Brief declaration of all your commercial activities, nature of relationship with the present group, and mode of reimbursements/payments of any kind received by you.

Monthwise figures of all considerations (cash or kind) received by you for the services provided.

Balance sheet and audited books of account of your concern and your present group.

Copy of Service tax registration certificate and returns submitted.

Copy of Income Tax returns.

List of your agents, distributors in Kolkata and payments made on them.

Sd. Assistant Commissioner (SIV) Service Tax, Kolkata

(Emphasis supplied)

In order to appreciate the issue it is necessary to refer to Section 83 of the Finance Act, 1994 and Section 14 of the Central Excise Act. Section 83 of the Finance Act, 1994 is as under:-

Application of certain provisions of Act 1 of 1994.--The provisions of the following sections of the (Central Excise Act, 1944), as in force from time to time, shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise:-

9C, 9D(xxx), 11B, (11BB), (11C)(xxx), 12(12A) 12B, 12C, 12D, 12E, 14, (14AA), (15, 33A, 35F) to 35-O (both inclusive), 35Q, 36, 36A, 36B, 37A, 37B, 37C, 37D(38A) and 40.

Section 14 of Central Excise Act is as follows:-

Power to summon persons to give evidence and produce documents in inquiries under this Act.-(1) Any Central Excise Officer duly empowered by the Central Government in this behalf shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making for any of the purposes of this Act. A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned.

(2) All persons so summoned shall be bound to attend, either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to State the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required:

Provided that the exemptions under Sections 132 and 133 of the CPC (5 of 1908) shall be applicable to requisitions for attendance under this section.

(3) Every such inquiry as aforesaid shall be deemed to be a "judicial proceeding" within the meaning of Section 193 and Section 228 of the Indian Penal Code (45 of 1860).

(Emphasis supplied)

It is evident that admittedly the petitioner is carrying on commercial activity of printing, publishing and selling of newspapers and periodicals and selling of advertisement space in the print media. The authorities had issued the notice dated 1/4-12-2006 requesting the petitioner No. 1 to furnish documents as mentioned therein as an "inquiry" had been initiated since it was "suspected" that the commercial activity of the petitioner "may fall" under BAS. The question is whether the authorities are competent and were justified in issuing such notice. As seen by Section 83 of the Finance Act, 1994, Section 14 of the Central Excise Act has been made applicable in relation to Service Tax. Section 14 of the Central Excise Act empowers "Any Central Excise Officer" "to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which the officer is making for any of the purposes of the Act". Inquiry, in the instant case, is for the purpose whether the petitioner No. 1 is carrying on business of BAS. Evidently, for that purpose, authorities have issued the notice for the production of certain specified documents mentioned therein which is under the control of the person to whom, notice has been issued. Such notice cannot have been issued without any apprehension or reason. That apprehension or reason is suspicion. "Suspicion" means "a feeling that something is possible or likely" - Oxford. In The New Collins Dictionary and Thesaurus "suspicion" means "the act or an instance of suspecting; belief without sure proof, esp. that something is wrong".... "Conjecture, guess. . . hunch, idea, impression, notion, supposition, surmise". Now it is to be noted it is in that context and with regard to such inquiry, information has been sought by the authorities for apprising itself regarding the correct state of affairs before a conclusion is drawn. As documents sought for are identifiable, it cannot be termed to be a fishing or an omnibus inquiry. Rather it has to be kept in mind that the authorities are conducting the inquiry - a statutory duty - as to whether the petitioner comes under purview of the BAS, which has been termed in the notice as reason to suspect. Suspicion is the ground for making an inquiry. As there is suspicion, the petitioner No. 1 has been requested to furnish documents. Since it is a statutory notice, the petitioners are bound to comply as unless documents are produced it cannot be decided whether the petitioner No. 1 falls within the ambit of BAS. This is the pre-show-cause notice stage. It is to be borne in mind that the notice does not inflict any civil liability as it cannot be converted into a notice of demand. Besides, the extent of inquiry is to be judged by the authorities and not by the petitioner. After facts are gathered supported by materials, suspicion or impression is converted into reason to believe. Then the stage is set for issuance of show-cause notice which can be displaced by materials furnished by the petitioner. Therefore, for the reasons as aforesaid, the notice dated 1/4-12-2006 is just, proper and valid. That apart, the petitioners cannot turn back and challenge the notice as the petitioners had submitted to the jurisdiction as they have understood its purport as evident from the letter dated 20-12-2006 and had sought extension of time to submit the documents. So far as the judgments relied on by the petitioners are concerned, since the words "reason to believe" do not occur in Section 14 of the Central Excise Act, the judgment of the Apex Court in Calcutta Discount Company Limited Vs. Income Tax Officer, Companies District, I and Another, and in Sheo Nath Singh Vs. Appellate Assistant Commissioner of Income Tax, Calcutta, are not applicable to facts of the case. Similarly the judgments in The Barium Chemicals Ltd. and Another Vs. The Company Law Board and Others, Rohtas Industries Vs. S.D. Agarwal and Others, ; New Central Jute Mills Co. Ltd. v. Deputy Secretary, Ministry of Finance, Department of Revenue and Company Law (1970) 40 Comp. Cas. 102 (Cal.); Modi Industries Ltd. v. Union of India (1982) 52 Comp. Cas. 589 (Delhi) and Hariganga Cement Ltd. Vs. Company Law Hoard and another, are also not applicable as therein the Supreme Court and the High Courts were dealing with the provisions contained in Section 237(b) of the Companies Act, 1956. The principles of law laid down in the judgment of the Apex Court in B.D. Gupta Vs. State of Haryana, , where the Supreme Court was dealing with the show-cause notice, are not applicable as in the instant case the notice under challenge is not a notice to show cause.

Hence, the writ petition is dismissed. Interim order stands vacated.

No order as to costs.

Later

After the judgment and order is delivered, learned senior advocate appearing for the petitioner prays for stay of its operation. Prayer is considered and allowed. Let there be a stay of operation of this order till 5-3-2010.

All parties concerned are to act on a signed copy of the minutes of the operative part of this order on the usual undertakings.