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Gujarat Pulses Manufacturing Association An Association Of Pulse Mills v/s Union Of India

    Special Civil Application No. 23042 of 2017
    Decided On, 15 March 2018
    At, High Court of Gujarat At Ahmedabad
    For the Appellant: Amal Paresh Dave, Paresh M. Dave, Advocates. For the Respondent: Nirzar S. Desai, Advocate.

Judgment Text

Akil Kureshi, J.

1. The petition has a longish history. We may briefly record the same.

2. The petition is filed by Gujarat Pulses Manufacturing Association, Vasad and its members. They have challenged a circular dated 26.2.2010 issued by the Central Board of Excise and Customs ("CBEC" for short) making certain clarifications in the service tax regime pursuant to the budget of the financial year 2010-2011. They have also challenged individual show cause notices issued by the adjudicating authorities of Anand and Vasad seeking to recover unpaid service tax from the petitioners on transportation of Tur Dal with interest and penalty.

3. Case of the petitioners is that after introduction of service tax on transportation services to be collected through reverse charge mechanism, the Central Government had exempted such tax on transportation of specified goods under notification no.33/2004 dated 3.12.2004. In such notification, the Central Government exempted "taxable service provided by a goods transport agency to a customer, in relation to transport of fruits, vegetables, eggs or milk by road in a goods carriage, from the whole of service tax leviable thereon under section 66 of the Act". According to the petitioners, relying on the relevant entries of the Central Excise Tariff Act where Tur Dal was clubbed with vegetables, all transporters, producers and even the department carried an impression that the said exemption notification no.33/2004 dated 3.12.2004 would cover within its sweep also transportation of Tur Dal. No service tax was therefore, paid for transportation of such goods, none recovered or demanded by the department.

4. CBEC issued a further notice no.4/2010 dated 27.2.2010 by which the earlier exemption notification dated 3.12.2004 was amended to include pulses along with all other existing products contained in the said notification. Simultaneously, CBEC also issued impugned clarificatory circular dated 26.2.2010 in which in context of fresh exemptions being granted, it was stated as under :

"5. Exemptions

5.1 The following exemptions from service tax are being provided with effect from 27th February, 2010 namely.


At present exemption from service tax is available to transport of fruits, vegetables, eggs or milk by road by a goods transport agency. The scope of exemption is being expanded by including food grains and pulses in the list of exemption goods (Notification No. 4/2010S. T. , dated 27th February, 2010 refers)"

5. Thus by virtue of the said exemption notification no. 4/2010 dated 27.2.2010, the service tax on transportation of Tur Dal was fully exempted. This circular however, opened up the question of levying such service tax on transportation of Tur Dal for the past period. One plausible approach would be, now that the exemption was specifically granted, it would necessarily mean that prior to such exemption under notification dated 27.2.2010, the levy of service tax on transportation of Tur Dal was not covered by exemption notification dated 3.12.2004. If the demand of the department for recovering the unpaid service tax being within the normal period of limitation, this issue would undoubtedly assume importance.

6. On or around 9.8.2012, the Assistant/Additional Commissioners of Central Excise, Customs and Service Tax, Vasad and Anand issued several separate show cause notices to the members of the petitioner no.1 Association who are engaged since long in the business of transportation and in particular, transportation of Tur Dal. One such show cause notice dated 9.8.2012 is produced at Annexure-J.

7. Previously, present petitioners in view of such factual background approached this Court by filing Special Civil Application No.13335/2012 and connected petitions. They had advanced a case that prior to exemption notification dated 27.2.2010, the trade as well as the department carried a bona fide belief that Tur Dal was included in earlier exemption notification dated 3.12.2004. It was only upon the fresh exemption notification dated 26.2.2010 being issued that position underwent a major change. Even after issuance of such notification at places other than Vasad and Anand, no action was being taken by the departmental authorities for recovering such unpaid service taxes. This is true not only for the State of Gujarat but across the country. The petitioner therein therefore, had opposed the show cause notice proceedings. In view of such peculiar background, the Court permitted the petitioners to approach the Chief Commissioner of Central Excise and Customs, Vadodara, by making representation, expecting that he could take a uniform decision.

8. The petition was accordingly disposed of by an order dated 10.10.2012. The petitioners filed their first representation before the Chief Commissioner on 18.10.2012. This was followed by several other representations. In one such later representation, the petitioners also urged the authorities to involve CBEC who could as well issue exemption notification to obviate the difficulties arising out of such peculiar circumstances. On 13.11.2017, petitioner no.1 was informed by the department that CBEC has refused to exercise powers under section 11C of the Central Excise Act granting exemption. At that stage, the petitioners have once again approached the Court challenging the clarificatory circular dated 27.2.2010 as well as the impugned show cause notices.

9. The show cause notices have been issued sometime in August/September 2012 whereas the amendment in the notification dated 3.12.2004 was made on 27.2.2010. After such date, in any case, by virtue of such amendment, transportation of Tur Dal would invite no service tax. Presumably, therefore, in all the show cause notices, the authorities have invoked the extended period of limitation. In other words, all the show cause notices engage the period of demand of duty which is beyond 18 months from the date of issuance of show cause notice which was the normal period of limitation prescribed under the statute at the relevant time. We have therefore, examined whether in facts of the case such extended period of limitation could be invoked. If answer of this question is clear and emerges from the established facts, it would be futile to ask the petitioners to submit to the jurisdiction of the adjudicating authority. In other words, on admitted facts, if it can be gathered that the show cause notices are beyond the period of limitation, the authority would lack jurisdiction to issue such notices and in such a case, it would be unnecessary to relegate the petitioners before the adjudicating authorities.

10. With this limited scope in mind, we may revisit the facts. Till the year 2010 when the exemption notification dated 27.2.2010 came to be issued, no service tax was being levied on transportation of Tur Dal. This was on the basis that the trade as well as the department carried a belief that the existing exemption notification dated 3.12.2004 already covered such product when it referred to vegetables and accordingly no service tax was levied on such activity. The petitioners have made specific averments in this respect in the petition which have not been denied by the respondents in their reply. With issuance of exemption notification dated 27.2.2010, it is possible to argue that such exemption would be available only from the date of notification and for the period prior to notification, service tax would have to be levied. This observation would have to be confined to the normal period of limitation prescribed under section 73 of the Finance Act, 1994. Subsection( 1) thereof provides that where any service tax has not been levied or paid or has been shortlevied or shortpaid or erroneously refunded, the competent authority within eighteen months (at the relevant time. now substituted by 30 months) from the relevant date, serve notice on the person chargeable with the service tax or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Proviso to subsection( 1) permitted the competent authority to invoke extended period of limitation under certain circumstances and reads as under :

"Provided that where any service tax has not been levied or paid or has been shortlevied or shortpaid or erroneously refunded by reason of

(a) fraud;

(b) collusion; or

(c) wilful misstatement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this subsection shall have effect, as if, for the words thirty months the words five years had been substituted."

11. In plain terms, normal period of limitation under subsection( 1) of section 73 for recovery of unpaid or shortpaid, service tax at the relevant time was eighteen months. Such period could however be extended to five years, if such service tax was not paid or shortpaid by reason of fraud, collusion, willful misstatement, suppression of facts or contravention of any other provisions or the rules under the said Act with intent to evade payment of service tax. The willful and conscious evasion of duty is the requirement for invoking the extended period of limitation. In the present case, such elements are totally missing. As noted, across the country, the trade did not pay service

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tax on transportation of Tur Dal till 2010 nor did the department raise any demand disputing the interpretation of the trade that the product Tur Dal was already included in the exemption notification. That being the position, nowhere the non payment of tax can be corelated to fraud, collusion, willful misstatement, suppression of facts or contravention of the statutory provisions by the petitioner with the intent to evade payment of duty. The show cause notices thus which seek to levy such duty for the period beyond the normal period of eighteen months of limitation therefore, cannot survive. 12. All impugned show cause notices are therefore, quashed with one cautionary note however. We have all along approached the issue from the angle that all the show cause notices seek to recover unpaid service tax for the period beyond eighteen months from date of issuance of show cause notices. If there is any show cause notice which covers the period within eighteen months, these directions and observations will not apply. 13. Petition is disposed of.