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Raj Commodities V/S Commissioner (Appeals) Central Excise, Jaipur-I

    Service Tax Appeal No. 53014 of 2015 (Arising out of Order-in-Appeal No. 128 (SLM) ST/JPR/2015 dated 23.04.2015 passed by the Commissioner (Appeals), Central Excise, Jaipur-I)
    Decided On, 08 January 2020
    At, Customs Excise Service Tax Appellate Tribunal Principal Bench New Delhi
    By, THE HONORABLE JUSTICE: DILIP GUPTA (PRESIDENT) AND THE HONORABLE JUSTICE: BIJAY KUMAR
    By, MEMBER
    For Petitioner: N.B. Maheshwari, Chartered Accountant And For Respondents: Sanjay Jain, Authorized Representative


Judgment Text

1. This appeal is directed against the order dated 31.03.2015 passed by the Commissioner, Central Excise (Appeals), Jaipur, by which he has modified the order dated 22.07.2013 passed by the Adjudicating Authority against the Appellant. In the impugned order, the Commissioner (Appeals) has held that demand of service tax prior to 16.05.2008 is not sustainable, and therefore, the demand of Rs. 5,08,592/- that was confirmed by the original adjudicating authority has been set aside. However, the remaining portion of the demand amounting to Rs. 14,10,983/- pertaining to the period from 16.05.2008 onwards has been sustained. The penalty, which was imposed has also been sustained in the said order on account of the fact that the Appellant had collected the service tax but failed to deposit the same in the Government Exchequer. It has also been observed that the Appellant, although registered under the Service Tax Act in respect of other services, failed to mention about collection of service tax in respect of disputed service in the ST-3 Return filed by it to the Department, and so invocation of the extended period of limitation was justified. Being aggrieved, the Appellant is in appeal before this Tribunal.

2. Brief facts of the case are that the Appellant is engaged in providing Forward Contract Service as per Section 65 of Finance Act, 1994 (hereinafter referred to as the Finance Act). It did not include the turnover/transaction charges under taxable fees, while discharging service tax. The Appellant, as a member of Committee of the National Commodities exchange collected the turnover/transaction charges on the brokerage charges/commission since the commencement of its business. The Appellant has been paying service tax on the gross brokerage amount but did not pay service tax on turnover/transaction charges on actual and did not include it in the gross amount charged for the purpose of payment of service tax under Section 67 of the Finance Act. Therefore, a show cause notice dated 13.04.2012 was issued to the Appellant for recovery of the short levied service tax on account of non-inclusion of said turnover/transaction charges for the purpose of calculation of gross amount charged under provisions of Section 67 of the Finance Act. The show cause notice was adjudicated upon by the original adjudicating authority and the same culminated in the impugned order.

3. Learned Advocate on behalf of the appellant submits as under;

(i) That the Appellant is providing service from 2006 onwards. The service tax was not leviable on the services of recognized association services upto 15.05.2008 and as such the Appellant did not recover any service tax on turn over charges from its clients. The turnover charges/transaction charges were recovered from the clients during that period and were deposited with the Commodity Exchange treating them as pure reimbursement expenses and as such no service tax was paid for these amount.

(ii) That the services of the commodity exchanges came into existence with effect from 16.05.2008, as clarified by CBEC Circular F No. 137/57/2006 CX4 dated 18.05.2007. The Appellant had collected the charges as turnover/transaction charges on behalf of commodity exchanges and remitted the same to MCEI (Multi Commodity Exchange of India, NCDEC (National Commodity Derivative Exchange of India).

(iii) That the Appellant has not availed any Cenvat Credit in terms of Cenvat Credit Rules, 2004 (hereinafter referred to as the Rules) on turnover/transaction charges by the exchange.

(iv) That anti-evasion team of Central Excise collected an amount of Rs. 5,05,892/- and Rs. 2,82,745/- towards the payment of interest although the same was not payable in terms of paragraph 13 of impugned order.

(v) That the learned Commissioner (Appeal) has ignored and erred on basic facts and passed the impugned order without adjusting of input is credit in terms of credit rules.

4. Learned Advocate relied upon the following decisions;

a. Reliance securities Ltd. vs. CST, Mumbai-II: (2019)20 GSTL 265 (Cestat, Mumbai).

b. Sarovar Hotels Pvt. Ltd. vs. CST, Mumbai : (2018)10 GSTL 72 (Cestat, Mumbai)

c. Jet Airways(India) Ltd. vs. Commissioner [(2017) 7 GSTL J35 (SC)] and various other judgments on the issue.

d. Regarding the penalty imposed on the appellant reliance has been placed on the decision in Indian Hotels Company Ltd. vs Commissioner of Service Tax, Mumbai-I [(2016) 41 STR 913 (Tri.-Mum)] wherein it is held that the issue being of classification, no mens rea is involved and so penalty under Section 78 of Finance Act cannot be imposed.

5. Learned Departmental Representative on behalf of Revenue submits that in this case the Appellant had collected and retained the service tax amount, and therefore, the order does not suffer from any infirmity. The Commissioner (Appeal) in the impugned order has set aside the demand for the period prior to 16.05.2008. He, therefore, argued for upholding of the impugned order.

6. We have heard learned Advocate on behalf of the Appellant and learned Departmental Representative on behalf of Revenue.

7. The issue involved in this case is regarding the levy of service tax on the turnover/transaction charges which has been imposed on the Appellant under the provisions of Section 65 of the Finance Act. The Appellant does not dispute the liability of payment of service tax after 16.05.2008. However, the Appellant is aggrieved by the non-consideration of its prayer regarding the benefit of Cenvat Credit on the input services used by the Appellant. In this regard, we find that the issue has been clarified by the Central Board of Excise and Customs vide Circular dated 18.05.2017. Paragraph 4 of the Circular is reproduced as under;

"4. The board is of the view that the activities of the Exchanges and their clearing houses as mentioned above cannot be simply, called the 'online information and database access retrieval service' or 'provisions and transfer of information and data processing'. While it is true that the Exchanges/clearing houses do process, exchanges/transfer and provide online data during the course of their business, the same is (i) only incidental to ensure transaction of stocks/commodities and their settlement, and is not the principal service provided by the Exchanges and their clearing houses (ii) no separate charges are collected for information and data processing or access/retrieval by the Exchanges/clearing houses during the course of such trading. The transaction charges collected by the Exchanges are based on the quantum (in money value) of transaction in stock or commodity, as the case may be, and not on the volume of data interchanged/accessed retrieved. Similarly, these services do not fall under the business auxiliary service, as these are not performed on behalf of any other person. These services would also not fall under the category of services provided by 'clubs and association' as the Exchanges and clearing houses are corporate bodies which provide service to investor through a registered member as against to its own members. Thus, though the above stated activities of the Exchanges/clearing houses are in the nature of 'services', they do not fall under the category of any of the existing taxable services."
8. This has also been clarified further by the Circular dated 17 September, 2010. The relevant paragraph 5 is also reproduced as under;

"5. From the above it is clear that in case the expense is the liability of the service provider it has to be included in the taxable value. In case it is the liability of the service receiver and the service provider pays the same acting as a pure agent then such amount is not includible in the taxable value."
9. The two Circulars clarify that turnover/transaction charges are liable to be included for the purpose of computation of service tax. The circulars are in conformity with the provisions of Section 67 of the Finance Act. The order passed by the Commissioner, therefore, does not suffer any infirmity on this ground. Regarding extending the benefit of the Cenvat Credit, the settled legal position is in favour of the Appellant as is clear from the decisions referred to above. The Appellant is entitled to avail Cenvat Credit on the i

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nput service used in providing output service. The Commissioner (Appeal) has, however, not granted the availment of Cenvat Credit to the Appellant, to which the Appellant was entitled to in terms of the Cenvat Credit Rules after the verification of the records. 10. As far as the levy of interest and imposition of penalty is concerned, the Appellant is liable to pay the same in terms of the provisions of Section 76, 77 and 78 of the Act, as in spite of having collected the amount representing service tax it failed to deposit the same with the Department. Accordingly, that portion of the order is sustained. 11. In view of above, we remand the matter back to the adjudicating authority to consider the benefit of Cenvat Credit to the Appellant in terms of Credit Rules. The remaining portion of the impugned order is sustained. The Appeal is, accordingly, allowed in part to the extent indicated above.
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