AI Structured Summary
Not yet generated for this judgment
Judgment
Income Shown by Coca-Cola India Pvt. Ltd. In their Balance Sheets,,,,,,
Head/
Year",2005-06,2006-07,2007-08,2008-09,2009-10,Remarks/Total
Marketing
Support
(including
Marketing,
Support,
Advertising
and Sales","16,61,713,559","59,93,85,763","65,52,43,068","90,20,73,601","1,45,87,95,535","Provided to
CCIPL &
HCEMPL)
Service
Provided",NIL,NIL,NIL,NIL,"4,74,11,597",
Income
from Lease
of Property","Taxable
w.e.f.1.06.07
under IPR
services","30,60,000","29,37,022","65,37,311","87,89,420",
Income
from Lease
of Vehicles","Taxable w.e.f. 16.05.08 under 'Supply of
Tangible Goods for use in India'",,,"13,64,496","12,83,012",
Total
Taxable
Value","1,66,17,13,559","60,24,45,763","65,81,80,090","90,99,75,408","1,51,62,79,564","5,34,85,94,384
Rate of S.
Tax",10.20%,12.24%,12.36%,12.36%,10.30%,
Amount of
S. Tax
payable","16,94,94,783","7,37,39,361","8,13,51,059","11,24,72,960","15,61,76,795","59,32,34,959
Total,"1,66,53,85,203","61,94,17,035","67,25,72,327","92,90,71,733","1,52,90,11,645","5,41,54,57,943
Rate of S.
Tax",10.20%,12.24%,12.36%,12.36%,10.30%,
Amt. Of S.
Tax
Payable","16,98,69,291","7,58,16,645","8,31,29,940","11,48,33,266","15,74,88,199","60,11,37,341
expenses, we humbly submit that wherever tax is payable on such advertising and reverse charging expenses, we have paid the tax under",,,,,,
reverse charge method. We crave leave to produce documents in this regard for which 30 days' time may be granted to US.,,,,,,
Further we submit in terms of Section 70 of the Act that, there is no failure on our part to furnish a return or to pay the tax as provided",,,,,,
in the Act as there is no obligation or liability on our part to submit any such return or pay tax in respect of the above activities.,,,,,,
Further the Department is erroneously calling upon us to register ourselves under ""Renting of immovable property Act"" and under",,,,,,
Supply of Tangible Goods for use in India"" and under ""Business Auxiliary services"" whereas in all the above cases quoted in the Show",,,,,,
Cause Notice we have paid money to the Indian residents in respect of property taken on rent by us, vehicles taken on rent by us and on",,,,,,
cost of expenses paid by us to their parties. In these cases, the best that can be alleged against us is that we are only a service recipient and",,,,,,
not a service provider! Hence calling us to register in respect of the above services, even though we are a service recipient, is contrary to",,,,,,
the provisions of Jaw and hence unsustainable.,,,,,,
Whereas CBEC vide Notification No.19/2008 dated has further inserted the following explanation in Rule 6 of the Rules, which is as",,,,,,
under:,,,,,,
Explanation:- For the removal of doubts, it is hereby declared that where the transaction of taxable service is with any associated",,,,,,
enterprise, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the",,,,,,
case may be, to any account, whether called 'Suspense account' or by any other name, in the books of account of a person liable to pay",,,,,,
service tax."",",,,,,,
The liability to pay Service Tax under reverse charge by the service recipient was provided under Rule 2(1)(d)(iv) of the Rules, inserted",,,,,,
by the Service Tax (Amendment) Rules, 2002, under Notification No.1212002 dated 1.8.02 w.e.f. 16.08.02 when it read as under:-",,,,,,
2(1) In these rules, unless the context otherwise requires,-",,,,,,
(d) person liable for paying the service tax means,",,,,,,
(iv) ""in relation to any taxable service provided by a person who is a non-resident or is from outside India, does not have any office in",,,,,,
India, the person receiving taxable service in India"";",,,,,,
This Rule 2(1)(d)(iv) was amended by the Service Tax (Fifth Amendment) Rules, 2005 under Notification No.2312005-ST dt. 7.6.05,",,,,,,
w.e.f. 16.6.05 when it read as under:,,,,,,
2(1) In these rules, unless context otherwise requires,",,,,,,
 (d) person liable for paying the service tax means,",,,,,,
(iv) ""in relation to any taxable service provided or to be provided by a person, who has established a business or has a fixed establishment",,,,,,
from which the service is provided or to be provided, or has his permanent address or usual place of residence, in a country other than",,,,,,
India, and such service provider does not have any office in India, the person who receives such service and has his place of business,",,,,,,
fixed establishment, permanent address or, as the case may be, usual place of residence, in India;""",,,,,,
74.This Rule 2(1)(d)(iv) was further amended by the Service Tax (Second Amendment) Rules, 2006, under Notification No.10/2006 dated",,,,,,
19.4.06 read as under:-,,,,,,
2(1) In these rules, unless context otherwise requires,",,,,,,
(d) person liable for paying the service tax means,",,,,,,
(iv) ""in relation to any taxable service provided or to be provided by a person from a country other than India and received by any person",,,,,,
in India under Section 66A of the Act, recipient of such service;""",,,,,,
Section 66A has also been inserted in the Act, w.e.f 18.4.06 read as under:-",,,,,,
66A.(1) Where any service specified in clause (105) of section 65 is, -",,,,,,
(c) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided,,,,,,
or to be provided or has his permanent address or usual place of residence, in a country other than India, and",,,,,,
(d) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or",,,,,,
usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be",,,,,,
treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply :",,,,,,
Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in,,,,,,
any business or commerce, the provisions of this sub-section shall not apply:",,,,,,
Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country,",,,,,,
where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country",,,,,,
from which the service is provided or to be provided.,,,,,,
(2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a,,,,,,
country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section.",,,,,,
CEBC vide Circular F.No.27517/2010-CX BA dated 30.06.2010 provides that:,,,,,,
i) in case of taxable services provided by a non resident, not having office/establishment in India, and received in India, the service tax",,,,,,
liability arises w.e.f. 01.01.05, on reverse charge basis on the recipient of service in India.",,,,,,
ii) in case of taxable service received outside India by a person, who is a resident in India or has a place of business establishment in India,",,,,,,
the service tax liability arises w.e.f. 18.04.06, on reverse charge basis on the recipient of service in India.",,,,,,
In terms of Section 67 of the Act, the taxable value for the purpose of payment of service tax shall be gross amount charged/paid for the",,,,,,
taxable service and shall include any amount received/paid towards the taxable service before during and after provision of such service.,,,,,,
In order to safeguard the revenue I find that Section 72 appears to be invokable. Section 72 of the Act provides the provisions of best,,,,,,
judgement, which stipulates that where an assessee;",,,,,,
(c) fails to furnish the return under section 70;,,,,,,
d) having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made there under, the Central",,,,,,
excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking",,,,,,
into all the relevant material which is available or which he has gathered shall by an order in writing, after giving the person an",,,,,,
opportunity of being heard, make the assessment of the value of taxable service to the best of his judgement and determine the sum payable",,,,,,
by the assessee or refundable to the assessee on the basis of such assessment.,,,,,,
I find that the demand was raised on the basis of documents submitted by the party as such it cannot be construed as erroneous. The,,,,,,
impugned SCNs are elaborative, categorical and cover all the Rules, Section, etc. The service tax amount payable is rightly demanded and",,,,,,
extended period proviso is invokable for the reasons stated supra""",,,,,,
As is evident, paras 68, 69 and 70 are verbatim reproduction of the appellants' submissions, paras 71 and 76 are essentially quotes from CBEC",,,,,,
circulars and paras 72, 73, 74, 75, 77 and 78 are the reproduction of legal provision. Thus the ""analysis"" is contained only in para 79 which is anything",,,,,,
but analysis and indeed to call it ""analysis"" is an embarrassment to that word itself. In this regard we observe that the appellants claimed and submitted",,,,,,
details showing that out of the expenses on advertising service, for payments made to various advertising agencies abroad, they have paid the service",,,,,,
tax under reverse charge mechanism along with interest for the period 2006-07 to 2011-12. They had not paid service tax upto 2005-06 on such,,,,,,
payments as the reverse charge mechanism came into effect with the introduction of Section 66A in the Finance Act, 1994 with effect from",,,,,,
18.04.2006. That the ""reverse charge mechanism"" did not have any legal basis prior to 18.04.2006 is no longer res integra and therefore idle parade of",,,,,,
familiar judicial pronouncements in this regard (like Indian National Shipowners Assn Vs. Union of India [2009 (13) STR 235 (Bomb) I 2010 (17) STR,,,,,,
557 (SC)]) is avoidable. They also asserted that they had not paid service tax on such foreign exchange expenses shown under this head which,,,,,,
related to purchase of materials. In the absence of any evidence to the contrary, as the onus lies on the Department, it will have to be held that",,,,,,
Revenue is not able to establish that any more service tax is leviable under this head than what has been discharged by the appellants along with,,,,,,
interest.,,,,,,
Coming to the component of demand relating to ""Marketing Support"" (including Marketing Support, Advertising and Sales Promotion), the",,,,,,
adjudicating authority records in paras 39 to 46 as,,,,,,
under:-,,,,,,
    The issues before me are discussed one by one:-",,,,,,
Marketing support (including marketing support, advertising and sales promotion) M/s. CC/PL vide their submissions interalia submitted in",,,,,,
respect of the said service that in the second part of the statement column 1 relates to Marketing support (including marketing support,",,,,,,
advertising and sales promotion). This figure has been taken from the schedule to the Balance Sheet for the previous year which is,,,,,,
appearing under the heading ""Transactions with related parties"". This is erroneously treated as income of the company in the previous year",,,,,,
whereas this relates to an expense of the company. The same error has been committed by the Department in this year also.,,,,,,
In this connection we wish to state that Coca-Cola India Pvt. Ltd. Is a manufacturer of concentrates. It sells the concentrates to various,,,,,,
bottlers within India. The bottlers purchase the concentrates, which is the essential ingredient for the manufacture of beverages. The",,,,,,
bottlers sell their final products beverages in their respective territories. As a common practice in any industry, to increase the sale of their",,,,,,
final products viz., beverages, the bottlers carry out various types of marketing activities for increasing and sustaining the sale of their",,,,,,
products viz., beverages. The business of the bottler and the business of Coca-Cola India Pvt. Ltd. Is inextricably linked to each other as",,,,,,
any increase in the sale of beverages automatically results in increase in the sale of concentrates, which is an essential ingredient in the",,,,,,
manufacture of beverages, we agreed with the bottlers to share the cost of expenditure of their marketing activities. Hence it is an expense",,,,,,
in our hands and not an income as erroneously construed by the Department in the SCN. For this reason alone, the demand of service tax",,,,,,
made on us is liable to be dropped.,,,,,,
Even though it is not relevant for this impugned SCN to justify whether the amounts received by the bottlers (in India) are taxable or not,,,,,,
in their hands, for the purpose of better understanding of the business transactions we wish to submit the following:-",,,,,,
Our bottlers purchase concentrate from Coca-Cola India Pvt. Ltd. (CC/PL), and use the concentrate for manufacture of beverages. The",,,,,,
sale or purchase of concentrate is on principal to principal basis and the bottlers do not render any service to CC/PL. The bottlers do not,,,,,,
promote the sale of CCIPL's products viz., concentrate as the concentrates cannot be sold to any ultimate consumer and can only be used",,,,,,
for making beverages. Whatever marketing or promotion activities carried out by the bottlers are for the purpose of promoting their,,,,,,
products only viz., beverages and not for promoting the sale of any products of CC/PL. In this case there is no relationship of service",,,,,,
provider and client between the bottler and CC/PL.,,,,,,
Our bottlers are the owners of the beverages manufactured out of concentrates sold by M/s. Coca-Cola India Pvt. Ltd. The Excise duty,,,,,,
on the beverages manufactured by them is paid by them. The bottlers sell the goods to various distributors and realize the sale proceeds.,,,,,,
They have the ownership of the goods viz., beverages manufactured by them.",,,,,,
The ""marketing support"" appearing in the profit and loss account represents the discounts/share of cost borne by us in relation to",,,,,,
marketing expenses incurred by the bottlers and since bottlers did not provide any service, they have not charged any fees for the same,",,,,,,
and accordingly no service tax paid by them (meaning bottlers).,,,,,,
The notice proceeds on an erroneous assumption that in the instant case we have rendered ""Business Auxiliary Services"" by providing",,,,,,
the service of promotion or sale of goods on behalf of the client. There is a basic error in issuing the above SCN for the following reasons:,,,,,,
CC/PL has not rendered any service to or charged any fees from any bottler in India in respect of such Marketing, Advertising and Sales",,,,,,
Promotions.,,,,,,
There is no receipt of money y CC/PL and it is only an expense in the hands of the company. Hence no service tax can be levied in the,,,,,,
hands of CC/PL.,,,,,,
The amounts have been taken from the schedules to the Balance sheets which discloses ""transactions between related parties"". This does not",,,,,,
automatically mean that CC/PL has received the money. It only simply states that CC/PL and HCCBPL are related parties in respect of that,,,,,,
transaction.,,,,,,
CC/PL has no relationship of a service provider and client viz., the bottlers in India to whom the amounts wee paid.",,,,,,
The transaction does not fall under the ambit of ""Business Auxiliary Service"" as there is no service involved. The bottlers purchase",,,,,,
concentrate from Coca-Cola India Pvt. Ltd., and use it in the manufacture of beverages. They do not promote or sell the concentrates which",,,,,,
are not marketable to the ultimate consumers. Our relationship with the bottler is that of a seller and purchaser of concentrates and no,,,,,,
more. Hence the notice is liable to be dropped only on this ground alone and we are not liable to Service tax under ""Business Auxiliary",,,,,,
Service"" as alleged in the SCN.""",,,,,,
To the appellants' above submissions, the adjudicating authority records his analysis and findings in para 47 of the impugned order as under:-",,,,,,
Whereas, I find that on perusal of a copy of the Trial balance for the period 2008-09, Ledger account of M/s Hindustan Coca Cola",,,,,,
Beverages Pvt. Ltd., regarding the payment of service tax on Market Support the party submit that ""Market Support"" appearing in the profit",,,,,,
and Joss account represents the discounts! share of cost borne by the party in relation to marketing expenses incurred by the bottlers and,,,,,,
since bottlers did not provide any service and accordingly not charged any fees for the same, no service tax has been paid. However, is it",,,,,,
worth mentioning here that the party is service provider as they have shown this amount in their Balance sheets for providing ""Market",,,,,,
Support"" and are, therefore, liable to pay service tax.""",,,,,,
It is evident that the adjudicating authority has not undertaken any analysis of the appellants' submissions and merely records a fiat that the appellants,,,,,,
are liable to pay service tax in spite of taking note of the appellants' submissions that they did not provide such services and merely reimbursed a part,,,,,,
of marketing expenses. On the other hand, the appellants have been able to show that these amounts were actually expenses at their hands, which is",,,,,,
also evident from the various schedules of profit and loss account, where they have been booked as expenses. Obviously, therefore, these expenses",,,,,,
cannot be relating to the services rendered by the appellants also because if the appellants had actually rendered any such service, it would have",,,,,,
generated an income for them and not expenses.,,,,,,
Regarding amount of Rs.4,93,54,11,607/- shown as outstanding balance against Mic. Hindustan Coca Cola Beverages Pvt. Ltd. (HCCBPL), the",,,,,,
adjudicating authority in para 47 of the impugned order records the appellants' submissions ""that this amount represents the outstanding sale price to be",,,,,,
recovered from M/s. HCCBPL towards sale of concentrate and not for any Service. Further the purpose of corporate guarantees given by M/s.,,,,,,
CC/PL and M/s. HCCBPL, the appellants submit that these guarantees have been given against the income tax demands by the /TAT.",,,,,,
We find that the adjudicating authority does not controvert these submissions in any manner and simply moves on.,,,,,,
Regarding the component of demand under the category ""Service Provided"" the appellants' submissions are recorded in para 54 (of the impugned",,,,,,
order) which is reproduced as under:-,,,,,,
M/s. CC/PL vide their submissions interalia submitted in respect of the said service that this is in respect of export of services provided",,,,,,
by CC/PL to International Auditors Inc., USA (hereinafter referred to as “IAIâ€). IAI is a company incorporated under the laws of USA",,,,,,
and situated at Atlanta, Georgia in United States of America. CC/PL has been engaged by IAI vide an agreement dated 14th May, 2009 to",,,,,,
conduct corporate audits of various international subsidiaries of The Coca-Cola Company, USA. These international subsidiaries are",,,,,,
situated in various foreign countries as well as in India. The order for these services is placed by IAI and the money for rendering such,,,,,,
services are received in US dollars from IAI. The services had been rendered outside the country and the report is used outside the country,",,,,,,
it is an export of service and accordingly no service tax is /eviable in respect of the export of services. """,,,,,,
The appellants submitted that the amount of Rs.4,74,11,597/- was in respect of services rendered outside India and this amount was received in",,,,,,
convertible foreign currency and therefore admittedly that will not be leviable to tax. They also added that for the amount of service rendered to,,,,,,
HCCBPL in India for which reimbursements were received from HCCBPL, they have paid service tax along with interest for the years 2009-10,",,,,,,
2010-11 and 2011-12. Regarding this component of the impugned demand, the adjudicating authority after recording the submissions of the appellants",,,,,,
in para 54 quoted above, writes the following three paras (Nos.55, 56, & 57) which are reproduced below:-",,,,,,
Whereas, the party vide their letter dated 21.09.10, however, submitted the details of Advertising and Sales Promotion for the period",,,,,,
2008-09 and 2009-10 only. On scrutiny of the same it is revealed that service tax has been charged by the service provider and paid by the,,,,,,
party. Details for the period 2005-06 to 2007-08 were not provided by the party. The party also submitted the details of the Expenses in,,,,,,
Foreign currency for the period 2005-06 to 2008-09. However, the party did not offer any comments on the leviability and payment of",,,,,,
service tax on it.,,,,,,
On perusal of the same it is observed that these payments were made by the party for the services received by the party during the,,,,,,
impugned period on which, the party was required to pay service tax under reverse charge mechanism.",,,,,,
Further, I find that as brought out in the impugned Show Cause Notice, the services of management consultancy were brought into",,,,,,
Service Tax net w.e.f. 16.10.98 and Section 65(65) of the Act, as it stood prior to 1-05-06, defined the term 'management consultant' as",,,,,,
follows:,,,,,,
'Management consultant means any person who is engaged in providing any service, either directly or indirectly, in connection with the",,,,,,
management of any organization in any manner and includes any person who renders any advice, consultancy or technical assistance,",,,,,,
relating to conceptualizing, devising, development, modification, rectification or up gradation of any working system of any organization.'",,,,,,
And whereas the definition of management consultant w.e.f. 1.5.06 reads as follows:,,,,,,
Management consultant means any person who is engaged in providing any service, either directly or indirectly, in connection with the",,,,,,
management of any organization in any manner and includes any person who renders any advice, consultancy or technical assistance in",,,,,,
relation to financial management, human resources management, marketing management, production management, logistics management,",,,,,,
procurement and management of information technology or resources or other similar areas of management.""",,,,,,
And whereas, subsection 65(90)(r) of the Act, as on 01.10.02 reads as under:",,,,,,
'Taxable service means any service provided to a client, by a management consultant in connection with the management of any",,,,,,
organization, in any manner:'",,,,,,
And whereas, subsection 65(105)(r) of the Act, w.e.f. 16.06.05 as amended reads as under;",,,,,,
'Taxable service mans any service provided to a client, by a management consultant in connection with the management of any organization,",,,,,,
in any manner;'""",,,,,,
It is evident that paras 55 to 57 are totally irrelevant vis-a-vis the contents of para 54 and the appellants contentions regarding the component of,,,,,,
impugned demand relating to ""Service Provided"" are not even adverted to, leave along analysed and findings recorded thereon. Indeed, in view of the",,,,,,
contents of the above-quoted para 54 and in the absence of any evidence to the contrary, the appellants' contentions in this regard are in no way",,,,,,
untenable. In the case of Cox and Kings India Ltd. Vs. CST, Delhi [2014 (35) STR 817 (Tri. - Del.)], CESTAT held to the effect that for services",,,,,,
provided and consumed outside Indian territory, the consideration received is not liable to service tax.",,,,,,
With regard to the component of demand relating to ""income from lease of property"", the appellants made the following submissions as recorded in",,,,,,
paras 58 and 59 (in the ""Discussions and Findings"" portion of the adjudication order), which are reproduced below:-",,,,,,
M/s CC/PL vide their submissions intera/ia submitted in respect of the said service that again the Department has erroneously",,,,,,
construed this as Income from lease property whereas this is an expense in the hands of CC/PL. ''The company has taken various warehouse,,,,,,
premises under operating lease agreements. These are cancel/able and are renewable by mutual consent on mutually agreed terms. Lease,,,,,,
payments for the year, included under Rent charges, amounting to Rs.90,12,7871- (previous year 87,89,420)"". It is clear from the above",,,,,,
notes that it is an expense in the hands of the company.,,,,,,
It is submitted that CC/PL do not own any property in India except the plant premises at Perungut, Pune, wherein the concentrate for",,,,,,
beverage bases are manufactured. The entire property is owned by CC/PL and no part of it has been let out to anybody. This plant is owned,,,,,,
by CC/PL and it is registered under Central Excise where we manufacture concentrate and sell it to different bottlers in India Other than,,,,,,
this there is no property owned by CC/PL or leased/sub-leased by CC/PL to any other company from where any income from lease of,,,,,,
property is earned by the company.""",,,,,,
Having thus recorded the appellants' submissions, the adjudicating authority in subsequent paras (60, 61, 62, 63 and 64) merely reproduced the legal",,,,,,
definitions relating to ""renting of immovable property service"": ""supply of tangible goods for use in India"" and ""Business Auxiliary Service"" and",,,,,,
thereafter simply moved on to the next component of demand namely ""Income from Lease Vehicles"" without even a whisper of any analysis and",,,,,,
finding about the sustainability of this component of demand relating to what is called ""Income from Lease of Property"". This is nothing but a cavalier",,,,,,
and careless attitude on full display. The appellants actually showed with reference to their profit and loss account that these were their expenses,",,,,,,
which were incurred on leasing the immovable property for their use. Thus they were the recipient of the said service and therefore the question of,,,,,,
they being liable to pay service tax is preposterous; it not being a case of import of service inviting reverse charge mechanism.,,,,,,
Similarly, with regard to the component of the impugned demand under ""Income from Lease of Vehicles"", the appellants made the following",,,,,,
submissions as duly recorded in paras 65 & 66 (in the,,,,,,
Discussions and Finding"" portion of the adjudication order), which are reproduced below:-",,,,,,
M/s CC/PL vide their submissions interalia submitted in respect of the said service that similarly, again in this case the Deparlment has",,,,,,
erred in treating this as an income of the company whereas it is an expense of the company. In Notes to accounts for the year 2009-10,,,,,,
under Para 5(ii) it is stated as follows: ""The company has taken vehicles under operating lease agreements. These are cancel/able and are",,,,,,
renewable by mutual consent on mutually agreed terms. Lease payments for the year, included under Rent charges are Rs.19,90,1871-",,,,,,
(previous year 12,83,012). It is clear from the above notes that it is an expense in the hands of the company whereas it is treated",,,,,,
erroneously as income of the company by the Deparlment. Similar notes are appearing for the balance years under dispute.,,,,,,
CC/PL has taken vehicles on lease for its employees and for its business purposes from various operators. However, this figure has",,,,,,
been construed erroneously as income from lease of vehicles and service tax demanded on us. Hence the demand raised on this ground is,,,,,,
also liable to be dropped.""",,,,,,
After recording the above submissions, the adjudicating authority does not take any trouble to record even an iota of finding thereon. Needless to say",,,,,,
when the vehicles were taken on lease by the appellants, they were the recipient of service and therefore would not be liable to pay the impugned",,,,,,
service tax; it not being a case of import of the said service inviting reverse charge mechanism.,,,,,,
In the entire impugned order, the only paragraph dealing with the sustainability of invocation of extended period is paragraph 79 which (although",,,,,,
reproduced earlier) is again reproduced below:-,,,,,,
I find that the demand was raised on the basis of documents submitted by the parly as such it cannot be construed as erroneous. The",,,,,,
impugned SCNs are elaborative, categorical and cover all the Rules, Section, etc. The service tax amount payable is rightly demanded and",,,,,,
extended period proviso ts invokable for the reasons stated supra""",,,,,,
It is pertinent to mention that in the impugned order hardly any such reasons had been ""stated supra"". Obviously the ""analysis"" regarding invocability of",,,,,,
extended period is too cryptic and inadequate to arrive at a finding with regard thereto. Supreme Court in the case of Collector of Customs & Excise,,,,,,
Vs. HMM Ltd. [1995 (76) EL T 497 (SC)] held that for invoking extended period Show Cause Notice must contain an averment to that effect,,,,,,
pointing out specifically as to which of the various commissions and omissions stated in the proviso to Section 11A(1) of the Central Excise and Salt,,,,,,
Act, 1944 had been committed by assessee and adjudicating authority must specifically deal with assessee's contention in rebuttal thereof.",,,,,,
Seen in the light of the Supreme Court rulings in this regard, the adjudicating authority has obviously failed to meet even the minimum requirements",,,,,,
necessary to sustain the invocability of the extended period.,,,,,,
Para 78 of the impugned order is the only para dealing with the resort to best judgement method. This para is again reproduced below:-,,,,,,
In order to safeguard the revenue I find that Section 72 appears to be invokable. Section 72 of the Act provides the provisions of best",,,,,,
judgement, which stipulates that where an assessee;",,,,,,
(c) fails to furnish the return under section 70;,,,,,,
d) having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made there under, the Central",,,,,,
excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking",,,,,,
into all the relevant material which is available or which he has gathered shall by an order in writing, after giving the person an",,,,,,
opportunity of being heard, make the assessment of the value of taxable service to the best of his judgement and determine the sum payable",,,,,,
by the assessee or refundable to the assessee on the basis of such assessment. """,,,,,,
The said para 78 merely quotes Section 72 ibid and the adjudicating authority does not even hint as to how he arrived at the ""best judgement"" figures.",,,,,,
As is evident from the wordings of Section 72 ibid, the ""Best Judgement"" assessment involves a quasi-judicial process expressly requiring that the",,,,,,
person concerned should be given an opportunity of being heard. The adjudicating authority is completely non-speaking regarding the,,,,,,
methodology/reasons/grounds based on which he arrived at the ""best judgement"" figures adopted by him for levy of service tax. Obviously, the",,,,,,
adjudicating authority seems to equate ""best judgement"" with ""arbitrary judgement"" little realising that arbitrariness is an anathema in law. The",,,,,,
adjudicating authority is not even sure whether Section 72 is invokable as is evident from the word ""appears"" appearing the first sentence of para 78",,,,,,
quoted above. Needless to say, such arbitrary ""best judgement"" assessment of value is not sustainable quasi-judicially. However, in view of the",,,,,,
foregoing, quibbling over the so called ""best judgement"" figures is at best of academic interest.",,,,,,
In the context of this order, the following observations of the Supreme Court in the case of Union of India Vs. M.L. Capoor [AIR1974 SC 87] are",,,,,,
really appropriate:-,,,,,,
Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the",,,,,,
mind is applied to the subject matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus,,,,,,
between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly,,,,,,
just and reasonable.""",,,,,,
It is admittedly unusual to copiously and verbatim quote paragraphs after paragraphs from the adjudication order. However, it was felt necessary",,,,,,
in the present case to do so to drive home the point that the adjudicating authority has been highly and conspicuously non- speaking, non-reasoned,",,,,,,
arbitrary and cavalier while passing the impugned order. Non-application of mind (on the part of the adjudicating authority) is indeed writ bold and,,,,,,
large across the impugned order. Such orders adversely and severely impinge upon the public's trust in the public authorities and for that reason a,,,,,,
public authority displaying such egregiously irresponsible conduct and that too while performing quasi-judicial functions deserves to the put to costs.,,,,,,
Accordingly, we set aside the impugned order, allow the appeal and impose costs of Rs.25,000/- on the adjudicating authority who passed the",,,,,,
impugned order payable to the Prime Minister's National Relief Fund, within Four (4) weeks.",,,,,,
(Pronounced in the Open Court on 18.3.2015),,,,,,