Swamy Sons (Agencies) Private Limited vs The Assistant Commissioner of Central Excise and Service Tax

Anand Byrareddy, J.—Heard the learned counsel for the petitioner and the learned counsel for the respondents.

The petition is considered for final disposal even at this stage, having regard to the facts of the case.

The petitioner is a private limited company said to have been established in the year 1990 and has its registered office at Hyderabad and is carrying on a Clearing and Forwarding Agency (hereinafter referred to as ''the CFA'', for brevity) and it has its godowns and branches in various places in India, including a godown at Hubli, for acting as Forwarding Agency for and on behalf of M/s. Colgate Palmolive India Limited, from the year 2006 onwards. It is a taxable service for the purpose of levy of service tax as per the Finance Act, 1994. To undertake the said activity, the petitioner required registration under the Service Tax at its office in Hyderabad, including Centralised Registration from the period from 1999 onwards. The Centralised Registration permits any assessee to pay the service tax at one place, though the activity may be carried on in several places. The petitioner had availed the benefit of the Centralised Registration for the purposes of discharging its service tax liability for all the CFA activity carried through various depots situated throughout the country. The CFA activity commenced in Hubli godown of the petitioner from February 2006 and the applicable service tax was also included in the service tax payments that were made at Hyderabad, in view of the Centralised Registration granted to the petitioner. The petitioner claims to have informed the jurisdictional Service Tax Authorities in Hyderabad about the operations of CFA being carried out in various locations vide a letter dated 7.7.2006, addressed to the Superintendent of Service Tax, Habsiguda, Hyderabad. The Hubli godown was not specifically included in the Centralised Registration and therefore, a letter dated 27.07.2006 was said to have been submitted, which was duly acknowledged as on 29.09.2006, inter-alia, requesting the inclusion of the godowns at Hubli. Notwithstanding the same, the petitioner had included the entire amounts received for the activity of CFA being carried out at Hubli depot and also discharged the liability to pay the applicable service tax, after making payment by utilising the eligible Cenvat Credit and also in cash, vide various challans. It is further claimed that thereafter half-yearly returns were also filed in the prescribed Form ST-3, at Hyderabad, particularly covering the period from April 2006 to September 2006 and further by attaching a worksheet specifically indicating the activities at the Hubli Godown. However, this request to include the Hubli Godown in the Registration Certificate issued at Hyderabad was made vide letter dated 27.07.2006 itself, but the same was actually endorsed only on 27.02.2007.

From the above, it is contended that prima facie, it was evidenced that the petitioner had taken steps to include all its CFA activities at various depots, including the one at Hubli. However, an investigation was said to have been undertaken by the Superintendent (Preventive), Hubli Division, who had visited the godown and the branch at Hubli on 18.07.2006. A statement is said to have been recorded on 23.08.2006, of the then Manager of the said Hubli depot, wherein he had furnished the records and documents for the commission amount received for undertaking CFA activities in the said Hubli godown covering the period from February 2006 to July 2006 and that the amount worked out to Rs. 18,23,400/-, on which the service tax had not been paid by the Hubli depot and that no registration has been obtained and further that the carrying on of the said CFA activities was not included in the Registration Certificate obtained by the main office at Hyderabad and that the documentary evidence of the service tax paid if any, for the said transaction at Hubli godown would be ascertained and intimated to the Department thereto. The Manager of the Hubli Depot had apparently ascertained the position regarding payment of service tax at Hyderabad and copies of the documents evidencing the same were said to have been submitted to the Investigating Officers. However, no specific acknowledgement had been obtained.

In this situation, the petitioner was under the bona-fide belief that since necessary clarification had been furnished, the entire matter had been set at rest and therefore, was oblivious of any proceedings that were in fact being taken.

After six years, it transpires that the Hubli godown branch had received a letter dated 19.06.2013 issued by the Superintendent of Service Tax, Range-A, Hubli. It was then noticed that an order-in-original No. 57/2007 dated 24.12.2007 had been passed laying a demand for the service tax payable in respect of CFA activities at Hubli. It is this which is the subject matter of the present petition.

It is sought to be canvassed that on account of a communication lapse, the demand has been raised on the petitioner and proceedings have been taken without the petitioner becoming aware of the same and it is in this background that the petitioner seeks appropriate reliefs.

The petition is contested and statement of objections are filed to assert that there was a show cause notice issued to the petitioner as early as on 27.02.2007 as to why service tax of Rs. 2,10,785/- for the period from February 2006 to July 2006 should not be demanded. But, there was no reply to the same. Opportunities of hearing had been granted over several months from September 2007 to November 2007, which have been duly acknowledged by the Manager at Hubli. It is after waiting for considerable time that the Adjudicating Authority has passed the order on 24.12.2007 and it is pursuant to the same that the demands have been raised on the petitioner. There is no illegality committed by the Department, in the absence of the petitioner having replied to the show cause notice and not having participated in the proceedings by producing the necessary documents to establish that service tax if any had been paid for the period from February to July 2006. It is in this context that the statement of objections in a detailed fashion seeks to justify the demand.

However, it is not in dispute that the service tax for the corresponding period in respect of the CFA activities at Hubli of the petitioner has been paid. It is the lapse on the part of the petitioner in not furnishing the necessary particulars at the appropriate stage before the appropriate authority which has led to the proceedings being initiated and apparently, has also caused the Department much time and effort in proceeding with the same even though there was no liability outstanding. Hence, it would be even be appropriate if the petitioner should compensate the Department for the time and effort that has gone into the proceedings on account of the lapse of the petitioner.

However, the petition is allowed. Annexures "A" and "B" are held to be null and void and are accordingly quashed.