OIO No. 23/JC/2012

Date: 29.02.2012

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OFFICE OF THE COMMISIONER OF CUSTOMS & CENTRAL EXCISE
RACE COURSE RING ROAD, RAJKOT-360001
F.NO.V.ST/15-307/Adj/2010 / By RPAD/HAND DELIVERY
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Order in Original NO.
23/JC/2012 / vkns”k dh frfFk
Date of Order:- / 29.02.2012
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Date of Issue:- / 06.03.2012
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Passed by: / ,e- KkulqUnje
संयुक्तआयुक्त
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In the matter of / M/s.Arjanbha Derajbha & Sons,
Vill: Mojap,
Post, Mitapur,
Distt. Jamnagar
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Show Cause Notice No. & Date. / SCN No.V.ST/AR-JMR/JC/263/2010 dated 18.10.2010

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1.This copy of order is granted free of charges to the person to whom it is issued.

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2.Any person deeming himself aggrieved by this order may appeal against this order to the Commissioner (Appeals), Customs & Central Excise, Central Excise Bhavan, Race Course Ring Road, Rajkot.

3-vihy dk QkeZ ,l-Vh-&4 nks izfr esa Hkjk tk, ,oa mlds lkFk fu.kZ; dh izfrfyfi ;k lsokdj fu;e] 1994 dh dye 8 esa fofufnZ"V vuqlkj vkns'k ds fo:) vihy dh izfrfyfi gksuh pkfg,A

3.The Appeal should be filed in form ST-4 as per Rule 8 of Service Tax Rules, 1994 and it shall be signed by the person as specified in Rule 3 (2) of the Central Excise (Appeals) Rules, 2001.

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4.The appeal should be filed within three months from the date of receipt of this order. [Section 85 of the Finance Act, 1994].

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5.The appeal should be accompanied by:

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(a)Copy of this order which should bear court fee stamp as prescribed under Schedule 1 of Article 6 of the Court Fee Stamp Act, 1870, as under:

(i) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls de gks rks :i;s 00-25 gksA

(i)If the amount or value of subject matter is rupees fifty or less, then Rs.0.25;

(ii) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls v/khd gks rks :i;s 00-50 gksA

(ii) If such amount exceed Rs.50, then, Rs.0.50 paisa.

¼c½ vihy izfrfyfi ftl ij :i;s 2-50 dh dksVZ Qh LVsEi gksuh pkfg,A

(b) A copy of the appeal should also bear a court fee stamp of Rs.2.50.

6. lsok dj ]naM ¼isuYVh½ vkfn ds Hkqxrku dk izek.k A

Proof of payment of duty, penalty etc., should also be attached to the original form of appeal.

BRIEF FACTS OF THE CASE:

M/s. Arjanbha Derajbha & Sons, Village: Mojap, Post, Mitapur, Distt. Jamnagar (hereinafter referred to as "Noticee”) are engaged in providing various services to M/s. Tata Chemicals Ltd, Mithapur which are chargeable to Service Tax under the category of “Cargo Handling Services”, “Cleaning Activity Services” and “Manpower Recruitment and Supply Services” since 2005-06. The Noticee were registered with the Service Tax department under the category of “Manpower Recruitment Services” and were holding Registration No. JMN/MRA-541/S.Tax/2003-04 dated 01.03.2004, which was surrendered by them in 2006. They have not paid any Service Tax and filed periodical returns thereof.

2.Whereas, during the course of audit of M/s. Tata Chemicals Ltd, Mithapur, it was noticed that the Noticee have provided services of “loading wagons, covering of tarpaulin in cement plant and supply chain department” at the factory of M/s. Tata Chemicals Ltd., Mithapur, which appear to be services as specified under the Finance Act, 1994. Accordingly jurisdictional Service Tax authorities started investigation and called for information from the noticee vide letters bearing no. JMN/S.Tax/FAR-I-22/08-09 dated 19.11.2008, 15.12.2008 and 21.01.2009. However, the Noticee could not produce the relevant documents and failed to submit the data showing the details of services rendered to M/s. Tata Chemicals Ltd, Mithapur. To quicken the pace of investigation, the jurisdictional service authorities called for information from M/s. Tata Chemicals Ltd, Mithapur about the various services rendered by the noticee and the details of payment made to the Noticee. In reply M/s. Tata Chemicals Ltd, Mithapur, vide their letter dated 19.03.2009 submitted the details of the services provided by the noticee to them.

3.To know the nature and quantum of services rendered a summons was issued to the Noticee on 28.09.2010 to appear on 04.10.2010. However, he appeared on 13.10.2010. A statement of Shri Khetabha Arjanbha Sumaniya, Partner and Authorised Signatory of the Noticee was recorded on 13.10.2010 wherein he inter alia stated that M/s. Arjanbha Derajbha & Sons was a partnership firm, having total two partners including himself and he was authorised signatory of the firm and was responsible for all the work of the firm; M/s. Arjanbha Derajbha & Sons was started in 1999 and was doing the work of M/s. Tata Chemicals Ltd, Mithapur only; they were mainly doing the job of collecting the spillage finished goods like soda ash and salt from the factory area and loading area and cleaning the area and putting the spillage material in the plastic bags and stitching the bag and then stacking the bags; they also carried out work of cleaning the empty railway wagon and after loading goods sealing the railway wagon; they also carried out work of covering the goods with tarpaulin and also supply man power for factory work as and when required; they did not know whether Service Tax was payable on those services; they were never informed by M/s. Tata Chemicals about the Service Tax liability; they have not collected and paid Service Tax for the period 2005-06 to 2009-10 and also not paid Service Tax for the current year i.e. 2010-11 till date; however, they were engaged in the work of man power supply during the year 2003-04, and obtained Service Tax registration no. JMN/MRA-541/S.Tax/2003-04 on 01.03.2004; they paid Rs. 3747/- as penalty vide three challans and also submitted copies of three challans; after taking registration in 2003-04, they have not paid any Service Tax and not filed returns; they also surrendered the said registration vide letter dated 30.03.2006 to the Service Tax, Jamnagar office and submitted a copy of the said letter. He also submitted copies of profit & loss account and balance sheet for the year 2005-06 to 2008-09 and assured to submit the same for the year 2009-10 within three days, as the accounts for the said year till date were not finalized. He also submitted work wise income for the year 2006-07 to 2009-10 and the figures for 2009-10 (upto January only). He further stated that copies of income ledgers for the year 2005-06 to 2009-10 and invoices for the last 5 years were not readily available and assured to submit the same within three-four days.

4.Whereas, it appeared that the Noticee during his statement dated 13.10.2010 submitted the copies of Profit & Loss Account for the year 2005-06 to 2008-09 and also submitted details of bill wise income for the year 2006-07 to 2009-10 (upto Jan-10). However, they did not submit the copies of invoices for the year 2005-06 to 2009-10 and any accounts for the year 2009-10. Due to non-submission of documents by the noticee, the Service Tax calculation was done considering the total income shown in the Profit & Loss Account for the year 2005-06 to 2008-09 and income shown in the bill wise details submitted by the noticee for the year 2009-10 (upto Jan-10) as the taxable income.

5. Whereas, from the statement of the partner of the Noticee, it appeared that the Noticee had rendered the services of cargo handling at the factory premises of M/s. Tata Chemicals Ltd, Mithapur by carrying out work of stacking of bags. It appeared that the activities carried out by the Noticee squarely falls under the category of “Cargo Handling Service” as defined in Section 65 (23) of Finance Act, 1994 which is reproduced below:-

“"cargo handling service” means loading, unloading, packing or unpacking of cargo and includes,—

(a) cargo handling services provided for freight in special containers or for non-containerized freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and cargo handling service incidental to freight; and

(b) service of packing together with transportation of cargo or goods, with or without one or more of other services like loading, unloading, unpacking,

but does not include, handling of export cargo or passenger baggage or mere transportation of goods;”

6.A person satisfying the definition of ‘Cargo handling service” is liable to pay Service Tax in respect of the ‘taxable service’ as defined in the Finance Act, 1994. For this purpose, Section 65 (105) (zr) of the Finance Act, 1994 is relevant, which defines that “taxable service” means any service provided or to be provided - to any person, by a cargo handling agency in relation to cargo handling services.

7. Whereas, from the statement of the partner of the Noticee and the details of the work done by them, it appeared that the Noticee had also rendered the services of supply of man power for the factory work i.e. weighbridge servicing, chemical wagon loading, etc., to M/s. Tata Chemicals Ltd, Mithapur. The activities carried out by the Noticee squarely falls under the category of “Manpower Recruitment or Supply Agency Service” as defined in Section 65 (68) of Finance Act, 1994 which is reproduced below:-

“"manpower recruitment or supply agency” means any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to any other person.”

8.A person satisfying the definition of ‘Manpower recruitment or supply agency’ is liable to pay Service Tax in respect of the ‘taxable service’ as defined in the Finance Act, 1994. For this purpose, Section 65 (105) (k) of Finance Act, 1994 is relevant, which defines that “taxable service” means any service provided or to be provided -to any person, by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise.

9. Whereas, from the statement of the partner of the Noticee and the details of the work done by them, it appeared that the Noticee had also rendered the services of godown cleaning, wagon cleaning etc. to M/s. Tata Chemicals Ltd, Mithapur. It appears that the activities carried out by the Noticee falls under the category of “Cleaning Activity Service” as defined in Section 65 (24b) of Finance Act, 1994 which is reproduced below:-

““cleaning activity” means cleaning, including specialized cleaning services such as disinfecting, exterminating or sterilizing of objects or premises, of —

(i) commercial or industrial buildings and premises thereof; or

(ii) factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and premises thereof, but does not include such services in relation to agriculture, horticulture, animal husbandry or dairying;”

10.A person satisfying the definition of ‘Cleaning Activity Services’ is liable to pay Service Tax in respect of the ‘taxable service’ as defined in the Finance Act, 1994. For this purpose, Section 65 (105) (zzzd) of Finance Act, 1994 is relevant, which defines that “taxable service” means any service provided or to be provided – to any person, by any other person in relation to cleaning activity.

11.During the scrutiny of invoices / documents submitted by the Noticee, it was observed that the Noticee had rendered the following services to M/s. Tata Chemicals Ltd. The year-wise details are as under:-

Year / Description of services / Amount of total Income as per the Profit & Loss Account / Details submitted by the Noticee
2005-06 / Cargo Handling Services
Man power recruitment and
supply service
Cleaning services / Rs. 29,10,666/-
2006-07 / Cargo Handling Services
Man power recruitment and
supply service
Cleaning services / Rs. 30,33,235/-
2007-08 / Cargo Handling Services
Man power recruitment and
supply service
Cleaning services / Rs. 23,77,493/-
2008-09 / Cargo Handling Services
Man power recruitment and
supply service
Cleaning services / Rs. 27,07,030/-
2009-10
(upto Jan-10) / Cargo Handling Services
Man power recruitment and
supply service
Cleaning services / Rs. 31,28,100/-

12.From the above, it appeared that the Noticee had rendered services under the category of Cargo Handling Service, Cleaning Activity Service and Manpower Recruitment or Supply Service to M/s. Tata Chemicals Ltd, Mithapur during the period 2005-06 to 2009-10 (upto Jan-10) and received Rs. 1,41,56,524/- as total income. Therefore, it appeared that the Noticee failed to pay the applicable Service Tax amounting to Rs. 16,28,027/- on the said taxable services.

13.Whereas, it appeared that the Noticee, at no point of time, disclosed to the department in any manner that they were providing taxable services and were liable to pay Service Tax. This fact was disclosed only when the statement of partner and authorized signatory of the Noticee was recorded on 13.10.2010. Thus, it appeared that the Noticee had deliberately suppressed the material facts from the department, so as to avoid the payment of Service Tax. Not paying Service Tax at any point of time and not obtaining Service Tax registration clearly shows their malafide intention of evading the payment of Service Tax. Therefore, extended period of five years was required to be invoked under provisions of Section 73 of the Finance Act, 1994. Therefore, the short payment of Service Tax of Rs. 16,28,027/- was required to be recovered along with interest from the Noticee under Section 73(1) of the Finance Act, 1994 read with Section 67, 68 & 75 of the Finance Act, 1994.

14.As per Section 69 of the Finance Act, 1994, ‘every person liable to pay the Service Tax under this Chapter or the rules made there under shall, within such time and in such manner and in such form as may be prescribed, make an application for registration’. In the present case, it appeared that the Noticee had not applied for registration during the relevant period under any service category as discussed above and thereby violated the provisions of Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994.

15.As per Section 70 of the Finance Act, 1994, ‘every person liable to pay the Service Tax shall himself assess the tax due on the services provided by him, and furnish a return in such form and in such manner and at such frequency as may be prescribed’. The form, manner and frequency of return are prescribed under Rule 7 of the Service Tax Rules, 1994. In the present case, it appeared that the Noticee had not assessed the tax due, properly, on the services provided by them, as discussed in para supra, and also not filed any returns during the year 2005-06 to 2009-10 and thereby violated the provisions of Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994.

16.Further as per Section 68 of the Finance Act, 1994, ‘every person providing taxable service to any person shall pay Service Tax at the rate specified in Section 66 in such manner and within such period as may be prescribed’. The manner and period of payment of Service Tax has been prescribed under Rule 6(1) of the Service Tax Rules, 1994. In the present case, it appeared that the Noticee had not paid the Service Tax in the rate, manner and period prescribed, which has resulted in non payment of Service Tax amounting to Rs. 16,28,027/- as detailed above, and thereby contravened the provisions of Section 68 of the Act, read with Rule 6 of the Service Tax Rules, 1994.

17.In view of the foregoing paras, it appeared that the Noticee had contravened the provisions of the Act and rules made there under as below:

(i) The provisions of Section 66 of the Finance Act, 1994 inasmuch as they have not discharged their tax liability on appropriate amount in connection to the services provided by them to their clients;

(ii) The provisions of Section 67 of the Finance Act, 1994 inasmuch as they have not made correct assessment of tax on the amount received by them;

(iii)The provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994 inasmuch as they have not discharged their Service Tax liability on the correct amount received by them;

(iv)Section 69 of Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994 inasmuch as they failed to obtain Service Tax registration at material time;

(v)Section 70 of the the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994 inasmuch as they failed to assess their correct tax liability and also failed to file returns.

18.Whereas, it appeared that the Noticee had not paid Service Tax, Education Cess & Secondary & Higher Secondary Ed. Cess total amounting to Rs. 16,28,027/- by due date and the same was required to be recovered under Section 73(1) of the Finance Act, 1994 alongwith interest under Section 75 of the Finance Act, 1994. It also appeared that they had suppressed the material facts from the department with intent to evade the payment of Service Tax and also, contravened various provisions of the Act/ Rules as mentioned in para-supra and therefore, they were liable for penalty under Section 76, 77 & 78 of the Finance Act, 1994.