2 OIO No. 46/STC/AHD/ADC(JSN)/2013-14
BRIEF FACTS OF THE CASE
Intelligence was gathered that M/s. Raintech Industrial X-Ray Services situated at 1, D.K. Complex, Below Dena Bank, Maninagar (E), Ahmedabad {also hereby referred to as the noticee/firm} is engaged in business of providing Industrial X-Ray Services viz. Gamma Radiography Testing and Inspection and having Service Tax Registration No. AALFR8453MSD001 under category of “Technical Inspection and Certification Services” defined under section 65(105) (zzi) read with 65(108) and (109) of the Finance Act, 1994 and collecting applicable service tax from their client but not depositing in government account.
2. During the course of investigation, it was revealed that M/s. Raintech Industrial X-Ray Services was previously registered under Service Tax Registration No. AOZPP5346MST001 under taxable category of “Technical Inspection and Certification Agency Service” being a proprietor-ship firm and Shri Jayantibhai Tejabhai Patel was the Proprietor of M/s. Raintech Industrial X-Ray Services with a registered premises addressed at A/2/3, Lalbhai Centre, Opp. Aden Park Society, Laxminarayan Char Rasta, Maninagar (E), Ahmedabad 380 008. Thereafter, the above Proprietor, Shri Jayantibhai Tejabhai Patel converted M/s. Raintech Industrial X-Ray Services as partnership firm with 5 other partners viz. Shri Riteshbhai J. Patel, Shri Vijaykumar Shantilal Nagar, Shri Shantilal Pithabhai Nagar, Shri Jaydev Shantilal Nagar and Shri Durgaprasad Shamro Bagde from February, 2010 and got their new service tax registration No. AALFR8453MSD001 under taxable service category of “Technical Inspection and Certification Agency Service” on 10.05.2010. M/s. Raintech Industrial X-Ray Services (Proprietorship) vide their letter dated 27.03.2010 has applied for surrender of Service Tax Registration No. AOZPP5346MST001.
3. Letters were issued to M/s. Raintech Industrial X-Ray Services on 29.03.2011, 21.04.2011, 07.06.2011 and 10.06.2011. As no reply had been received, letter dated 20.07.2011 was issued to all the partners of M/s. Raintech Industrial X-Ray Services requesting them to submit records / documents related to service tax. Shri Shantilal Pethabhai Nagar, Shri Vijaykumar Shantilal Nagar and Shri Jaydev Shantilal Nagar vide letter dated 01.08.2011 have jointly submitted documents relating to M/s. Raintech Industrial X-Ray Services for both Proprietor-ship firm and Partnership firm. Vide the letter dated 01.08.2011, the other partners of M/s. Raintech Industrial X-Ray Services have informed that the partnership firm has been dissolved with effect from 30.11.2010 vide dissolution deed dated 08.12.2010 and all the service tax liabilities have to be borne by Shri Jayantibhai T. Patel as per para 3 of dissolution deed dated 08.12.2010.
4. In view of the above, letters dated 12.07.2012 and summons dated 19.07.2012, 31.07.2012, 27.09.2012, 22.10.2012, 08.01.2013, 05.03.2013 and 17.04.2013 had been issued to Shri Jayantibhai T. Patel, Proprietor of M/s. Raintech Industrial X-Ray Services, Ahmedabad with a request to submit relevant documents / information and directed to appear for recording of a statement. However, the summons issued were returned back from the postal authorities indicating remark as “REFUSED”.
5. As the correspondences made with Shri Jayantibhai Tejabhai Patel, Proprietor of M/s. Raintech Industrial X-Ray Services, Ahmedabad had been returned from postal authorities indicating “REFUSED”, searches were conducted at 3 different premises viz. (i) A/2/3, Lalbhai Centre, Opp. Aiden Park Society, Laxminarayan Char Rasta, Maninagar (East), Ahmedabad (ii) No. 9, Matru Bunglow, Express Highway, C.T.M., Ahmedabad and (iii) No. 1, Matrubhumi Apartment, Near Jaitul Park Society, Bhaipura Road, Maninagar (East), Ahmedabad. During the course of search, documents/records pertaining to service tax were found at No. 9, Matru Bunglow, Express Highway, C.T.M., Ahmedabad and the same were seized / recovered under panchnama dated 11.09.2013.
6. On scrutiny of the documents recovered under panchnama dated 11.09.2013 from the premises of No. 9, Matru Bunglow, Express Highway, C.T.M., Ahmedabad, it was revealed that Shri Jayantibhai T. Patel was the Proprietor of M/s. Raintech Industrial X-Ray Services, Ahmedabad and holding service tax registration No. AOZPP5346MST001 and engaged in providing Industrial X-Ray Services under category of “Technical Inspection and Certification Services” as defined under section 65(108) of the Finance Act, 1994. It was further revealed that M/s. Raintech Industrial X-Ray Services, Ahmedabad had filed their Service Tax Returns for the Financial year 2007-08 to 2009-10. In the ST-3 Return for the year 2008-09 (April – September and October – March) and 2009-10 (April – September and October – March), he had shown his taxable income as NIL in the relevant rows and column of the said ST-3 Returns. However, the Financial Records i.e. Profit and Loss Account / Balance Sheet and IT returns for the financial year 2008-09 and 2009-10 apparently showed that M/s. Raintech Industrial X-Ray Services had earned income of Rs. 24,05,150/- and Rs. 47,94,469/- respectively.
7. Further, it was revealed that Shri Jayantibahi T. Patel, Proprietor of M/s. Raintech Industrial X-Ray Services, Ahmedabad had converted his firm into partnership firm alongwith with 5 other partners w.e.f. 01.02.2010. And, M/s. Raintech Industrial X-Ray Services, Ahmedabad had got its Service Tax registration No. AALFR8453MSD001 w.e.f. 10.05.2010 and had not filed any service tax return. M/s. Raintech Industrial X-Ray Services (Partnership firm) had been dissolved w.e.f. 30.11.2010 vide dissolution deed dated 08.12.2010. In para 3 of the dissolution deed dated 08.12.2010, service tax liability was to be borne by Shri Jayantibhai T. Patel. The financial records seized/recovered vide panachama dated 11.09.2013, revealed that the income was Rs. 6,50,016/- and Rs. 22,62,503/- for the period 2009-10 (February and March) and 2010-11 (upto November, 2010) respectively for the above partnership firm. It was further revealed that during the period they had continuously collected service tax and paid service tax of Rs. 28,746/- vide challan No. 00001 dated 02.08.2010 but not filed any ST-3 return.
8. Further, it was revealed that after dissolution of partnership firm of M/s. Raintech Industrial X-Ray Services, Shri Jayantibhai T. Patel, had continued the firm M/s. Raintech Industrial X-Ray Services as a Proprietor – ship firm w.e.f. December, 2010 and neither deposited service tax nor filed ST-3 Return. As per the Profit and Loss Account / Balance Sheet and Income Tax Returns, it revealed that the income earned by M/s. Raintech Industrial X-Ray Services, Ahmedabad was Rs. 33,84,184 and Rs. 7,56,138 for the period 2010-11 (from December, 2010 and onwards) and 2011-12 respectively.
9. A statement of Shri Jayantibhai T. Patel, Proprietor / Partner of M/s. Raintech Industrial X-Ray Services, Ahmedabad was recorded on 15.10.2013 under Section 14 of Central Excise Act, 1944 read with Section 83 of the Finance Act, 1944 wherein he interalia stated that he was proprietor of M/s. Raintech industrial X-ray Service, A-2/3, LAL BHAI CENTRE, OPP. EDEN PARK SOCIETY, MANINAGAR, Ahmedabad upto January 2010 and thereafter, they have formed a Partnership company in February, 2010 consisting of six partners namely Shri Riteshbhai J. Patel, Shri Jayantibhai T. Patel, Shri Vijaykumar Shantilal Nagar, Shri Shantilal Pithabhai Nagar, Shri Jaydev Shantilal Nagar and Shri Durgaprasad Shamro Bagde; that both the proprietorship & partnership company were registered with the Service Tax department having registration no. AOZPP 5346M ST001 & AALFR 8453M SD001 respectively under the category of “Test, Inspection & Certification Service”.
10. He further stated that he had started a firm viz. M/s. Rain-Tech Industrial X-Ray Service in 2007 and the same was converted into partnership firm in February, 2010; that the partnership firm was dissolved vide dissolution deed dated 08.12.2010 and thereafter he continued his business in Proprietorship for some period. Thereafter, the same business was continued with all the equipments in the name of M/s. Sun Industrial Radiography Services which has been started by his son and he is authorised for all the day-to-day matter including its service tax related matters; that the Inspection certification can be given by a person with license given by BARC (Bhabha Atomic Research Centre), Mumbai and he had the license from BARC; that his son is not holding any license from BARC which is mandatory for rendering the above services.
11. He further stated that as a proprietor, he had filed ST-3 Returns regularly for the year 2008-09 and 2009-10, wherein the taxable value had been shown as NIL; that he had filed the ST-3 return for the first and second half of 2008-09 on 23rd April, 2009; that he had intentionally shown such wrong information in his ST-3 returns with malafide intention of evasion of service tax; that he had collected the service tax from the customers continuously since inception of his firm but he had not deposited the service tax amount to the Government account; that their firm was also making agreement/ contracts with some of the customers for rendering the above services. He stated that he had not correctly mentioned his income against the value of taxable service in my ST-3 returns filed but he agreed with the fact that income shown in income tax return/P&L and Balance Sheet, is the consideration received against the above taxable service rendered to his customers; that he had short paid/ not paid the service tax on the income received against the service rendered by both the firms; that the income against service rendered and service tax liability in respect of the above firms is as under:-
(1) M/s. Raintech Industrial X-Ray Services - Proprietor – Shri Jayantibhai Tejabhai Patel
Year / Value of taxable Services provided / Service tax payable / Service tax paid / Differential service tax required to payBasic / Ed. Cess / S. & H.S. Ed. Cess / Total
2008-09 / 24,05,150 / 2,88,618 / 5,772 / 2,886 / 2,97,276 / 0 / 2,97,276
2009-10 / 47,94,469 / 4,79,447 / 9,589 / 4,795 / 4,93,831 / 0 / 4,93,831
2010-11 (from December, 2010) / 33,84,184 / 3,38,418 / 6,768 / 3,384 / 3,48,570 / 0 / 3,48,570
2011-12 / 7,56,138 / 75,614 / 1,512 / 756 / 77,882 / 0 / 77,882
(2) M/s Raintech Industrial X-Ray Services - Partnership firm
Year / Value of taxable Services provided / Service tax payable / Service tax paid / Differential service tax required to payBasic / Ed. Cess / S. & H.S. Ed. Cess / Total
2009-10 01.02.2010 to 31.03.2010 / 6,50,016 / 65,002 / 1,300 / 650 / 66,952 / 28,746 / 38,206
2010-11 (upto 30.11.2010) / 22,62,503 / 2,26,250 / 4,525 / 2,262 / 2,33,037 / 0 / 2,33,037
12. Regarding above tabulated figure, he stated that the same was arrived from the total of the summary of the invoices raised for the taxable services rendered by their firms wherein an element of service tax separately mentioned and also appropriately charged on the consideration, already received. He further confirmed that the amounts shown above are true and correct; that all the income earned by him was from the taxable services rendered in the category of “Test, Inspection & Certification Service”; that he had not rendered any other taxable service and not earned any income thereof; that he is fully aware of the provisions regarding becoming an offence under Service tax Law i.e. Service tax collected from the customer but not deposited in the government exchequer. He agreed to pay Rs. 12,17,558/- as a liability of M/s. Raintech Industrial X-Ray Services (Proprietorship firm) for the financial year 2008-09 to 2011-12 (excluding income received during partnership firm) and Rs. 2,71,243/- as a liability of M/s. Raintech Industrial X-Ray Services (Partnership firm) for the financial year 2009-10 (February and March) and 2010-11 (upto November, 2010) and in confirmation of his service tax liability, he had made payment willingly for Rs. 1 Lakhs vide Challan No. 00001 dated 11.10.2013; that he had not rendered any taxable service during 2012-13 in M/s. Raintech Industrial X-Ray Services (both Proprietor and Partnership) and not earned any income thereof.
13. Further, he stated that he had intentionally refused to receive numerous letters/ summons sent by the service tax department to avoid submission of documents/ records of his firms, to present himself before the investigating officer and to evade service tax liability; that their partnership firm has been formed on 01.02.2010 which has been dissolved vide partnership dissolution deed dated 08.12.2010 and as per condition no. 10 mentioned at page 8 of the dissolution deed, all the liabilities as regards to service tax payment has to be borne by him; that he is only responsible person for payment of service tax liability in respect of partnership firm.
14. Letter was issued to M/s. Welspun Corp. Ltd., Bharuch, a major service recipient of M/s. Raintech Industrial X-Ray Services, Ahmedabad requesting them to furnish details of service received. M/s. Welspun Corp. Ltd., Bharuch vide their letter dated 17.10.2013 have submitted summary of invoices raised by M/s. Raintech Industrial X-Ray Services, Ahmedabad and payment made by them. And, also submitted copies of Invoices raised by M/s. Raintech Industrial X-Ray Services. The invoices received from M/s. Welspun Corp. Ltd., Bharuch showed that M/s. Raintech Industrial X-Ray Services, Ahmedabad had shown specifically and collected amount as Service Tax.
15. As per the provision of Section 65 (108) of the Finance Act, 1994 the term “Technical Inspection and Certification” means :
“ inspection or examination of goods or process or material or information technology software or any immovable property to certify that such goods or process or material or information technology software or immovable property qualifies or maintains the specified standards, including functionality or utility or quality or safety or any other characteristic or parameters, but does not include any service in relation to inspection and certification of pollution levels”.
Further, Technical Inspection and Certification Agency as defined in Section 65(109) means
“any agency or person engaged in providing service in relation to technical inspection and certification”
16. Whereas it appeared that M/s. Raintech Industrial X-Ray Services, Ahmedabad was started from 2007 as a proprietorship firm, Shri Jayantibhai T. Patel was the Proprietor of the said firm. M/s. Raintech Industrial X-Ray Services, Ahmedabad was holding service tax registration No. AOZPP 5346M ST001 and filed service tax returns upto 2009-10. For the year 2008-09 and 2009-10 M/s. Raintech Industrial X-Ray Services (Proprietorship firm) has filed ST-3 Return showing their taxable income as NIL and he had not deposited any service tax. Further, M/s. Raintech Industrial X-Ray Services, Ahmedabad was converted into partnership firm since from February, 2010. During May, 2010, M/s. Raintech Industrial X-Ray Services, Ahmedabad (Partnership firm) got their service tax registration No. AALFR 8453M SD001. However, they had only paid service tax of Rs. 28,746/- and not filed any ST-3 Return. M/s. Raintech Industrial X-Ray Services (Partnership firm) had been dissolved w.e.f. 30.11.2010 vide dissolution deed dated 08.12.2010 and in para 3 at Page 4 of the said dissolution deed dated 08.12.2010, Shri Jayantibhai T. Patel has to borne all tax liability of M/s. Raintech Industrial X-Ray Services (Partnership firm) on it’s dissolution.