K.T. Murukan S/o Thampu Pillai v. Commissioner (Appeals-I), Office of the Commissioner of Central Excise, Customs & Service Tax (Appeals-1) Calicut

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **FRIDAY, THE 2ND DAY OF DECEMBER 2016/11TH AGRAHAYANA, 1938** ## **WP(C).No. 35591 of 2016 (Y)** **----------------------------** **PETITIONER(S): -------------** **K.T.MURUKAN S/O. THAMPU PILLAI,CHENAMBAM KUZHIYIL P.O CHATHAMANGALAM, KOZHIKODE** **BY ADV. SRI.C.P.MOHAMMED NIAS** **RESPONDENT(S):** **--------------** **COMMISSIONER (APPEALS-I)** **OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE CUSTOMS & SERVICE TAX (APPEALS-1) C.R BUILDING, I.S PRESS ROAD, COCHIN 680 018** **BY ADVS. SRI.B.RAJESH (KOTTAYAM)SC, SRI.SREELAL N. WARRIER, SC, CENTRAL BOARD OF EXCISE &A** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02-12-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **MLG** ## **WP(C).No. 35591 of 2016 (Y)** ## **----------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **-----------------------** **EXHIBIT P1 TRUE COPY OF THE SHOW CAUSE NOTICE C NO 101/2010 ST DATED 06-07-2010 EXHIBIT P2 RUE COPY OF THE ORDER-IN-ORIGINAL DATED 01-06-2012 EXHIBIT P3 TRUE COPY OF THE ORDER-IN-REVIEW DATED 10-09-2012 EXHIBIT P4 TRUE COPY OF THE APPEAL FILED IN FORM NO ST-4 ALONG WITH THE DELAY CONDONATION PETITION EXHIBIT P5 TRUE COPY OF THE ORDER-IN-APPEAL NO 179/ST/CLT/2012 DATED 25-08-2016 EXHIBIT P6 TRUE COPY OF THE ORDER-IN-APPEAL NO 167/ST/CLT/202(D) DATED 31-08-2016 RESPONDENT(S)' EXHIBITS NIL -----------------------** **//TRUE COPY//** **P.S TO JUDGE** ## **MLG** ## **A.M.SHAFFIQUE, J * * * * * * * * * * * *** W.P.C.No.35591 of 2016 ---------------------------------------Dated this the 2[nd] day of December 2016 ## **J U D G M E N T** Petitioner challenges Ext.P5 order dated 25/08/2016 of the Commissioner (Appeals) by which an appeal filed by the petitioner had been rejected as barred by limitation. 2. The short facts involved in the writ petition would disclose that the petitioner claims to be an A-Grade Electrical Contractor engaged in electrical works. The petitioner had undertaken various contracts with effect from 10/09/2004. Services carried out by the petitioner relating to erection was also included as a taxable service. In the meantime, the petitioner was served with Ext.P1 show cause notice dated 06/07/2010 by which the petitioner was called upon to show cause as to why action should not be taken against him under the Finance Act, 1994 for non-payment of service tax for a period from 16/06/2005 to 30/09/2009 and why penalty should not be imposed on the petitioner. According to the petitioner, he had filed necessary objection. However, the Adjudication Officer had passed Ext.P2 order dated 01/06/2012 by which the petitioner was mulcted with W.P.C.No.35591/2016 2 the liability to pay service tax of Rs.10,47,796/- along with other charges, penalty etc. The petitioner preferred an appeal against Ext.P2 order on 01/10/2012 with a delay of 43 days which was dismissed. The Department also filed a review which was rejected as per Ext.P3 order dated 10/09/2012. The department, thereafter, filed an appeal which is dismissed as Ext.P6 dated 31/08/2016. 3. The petitioner had raised two specific contentions. One is that the initiation of proceedings by the authority is beyond the period of limitation as prescribed under Section 73(1) of the Finance Act, 1994 (hereinafter referred to as 'the Act') and there was no reason to invoke the proviso to Section 73(1) of the Act to enlarge the period of limitation by five years. The second contention urged is that the petitioner had undertaken the contract for five builders who had already collected the service tax component from the petitioner's bill and they, having accounted for the same, there was no obligation on the part of the petitioner to pay any amount as service tax. At best, the liability was only upto Rs.60,000/- for which no tax is payable as the petitioner comes within the exempted limit. W.P.C.No.35591/2016 3 4. There is no dispute about the fact that the appeal filed by the petitioner was beyond the period of limitation. Petitioner submits that the petitioner is left without any remedy on account of dismissal of the appeal. According to the petitioner, when the amount of service tax which was payable for the five contracts was already collected by the petitioner's principals and is available in their books of accounts, it is illegal on the part of the respondent authorities to have mulcted the petitioner with the liability. Further, the petitioner has given a statement, as early as on 26/10/2007 and all particulars relating to the contracts had been disclosed. In so far as the Department does not have a case in the show cause notice or in the impugned order Ext.P2 that the petitioner had suppressed any facts or that the petitioner had contravened any provision of law, the proceeding was clearly barred by limitation. 5. On the other hand, the learned Standing Counsel appearing on behalf of the respondent submits that the writ petition is not maintainable and that the question of limitation was also considered by the original authority in Ext.P2 order by W.P.C.No.35591/2016 4 invoking the proviso to Section 73(1) of the Act. It is also contended that when the appeal has been rejected, there is no reason why this Court should entertain this writ petition under Article 226 of the Constitution of India. It is a settled position of law that if a person does not avail of the alternate remedy under the Statute and it is barred by limitation, under normal circumstances, this Court will not interfere. However, if it is shown that the order impugned is arbitrary or patently illegal and unreasonable, certainly this Court, in exercise of power under Article 226 of the Constitution of India, can interfere. This is a case where the petitioner has two specific contentions. One is that proceeding initiated against the petitioner is barred by limitation. There is no dispute about the fact that show cause notice had to be issued by the Department during the relevant time, i.e. within one year from the relevant date which apparently is the date on which the petitioner ought to have filed return or paid service tax. The show cause notice dated 06/07/2010 had been issued for the period from 16/06/2005 to 30/09/2009. If we go by limitation, the show cause notice for the period from 16/06/2005 is clearly barred by limitation. But, then the notice W.P.C.No.35591/2016 5 had been issued invoking the proviso to sub Section (1) of Section 73 of the Act. There is no dispute about the fact that if there is a finding by the Department that the petitioner had suppressed facts or there was contravention of any provisions of this Chapter or of the Rules made thereunder with intent to evade payment of service tax as provided under Clauses (d) and (e) of the proviso to Section 73(1) of the Act, the Department will get a larger period of limitation, that is upto 5 years. But, the question as to whether they can invoke Clauses (d) and (e) of the proviso to Section 73(1) of the Act is a question of fact which requires sufficient materials. In other words, either show cause notice should contain sufficient materials to indicate that either the petitioner had suppressed facts or the petitioner had contravened any provisions of the Chapter with an intention to evade payment of service tax. The main case stated by the petitioner is that service tax amount had already been deducted by his principals and therefore he has no obligation to pay any service tax. Even otherwise, if we refer to the judgment, **Commissioner of Central Excise v. Bajaj Auto Limited** _[2010(13) SCC 117]_ , the Apex court had clearly held that non-filing of return will not amount to wilful suppression. W.P.C.No.35591/2016 6 ## Reference is made to paragraphs 15 to 19, which read as under: _“_ _**15.** Section 11-A of the Act empowers the Central Excise Officer to initiate proceedings where duty has not been levied or short-levied within six months from the relevant date. But the proviso to Section 11-A(1) provides an extended period of limitation provided the duty is not levied or paid or which has been shortlevied or short-paid or erroneously refunded, if there is fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty. The extended period so provided is of five years instead of six months. Since the proviso extends the period of limitation from six months to five years, it needs to be construed strictly. The initial burden is on the Department to prove that the situation visualised by the proviso existed. But the burden shifts on the assessee once the Department is able to produce material to show that the appellant is guilty of any of those situations visualised in the section._ _**16.** Interpreting this provision, this Court in CCE v. Chemphar Drugs and Liniments held: (when the period prescribed was six months_ W.P.C.No.35591/2016 7 _prior to it being made one year by the Finance Act, 2000 with effect from 12-5-2000): (SCC p. 131, para 9)_ _“9. … In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to sub-section (1) of Section 11-A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case.”_ W.P.C.No.35591/2016 8 _**17.** In Cosmic Dye Chemical v. CCE it is held: (SCC p. 119, para 6)_ _“6. Now so far as fraud and collusion are concerned, it is evident that the requisite intent i.e. intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word ‘wilful’ preceding the words ‘misstatement or suppression of facts’ which means with intent to evade duty. The next set of words ‘contravention of any of the provisions of this Act or Rules’ are again qualified by the immediately following words ‘with intent to evade payment of duty’. It is, therefore, not correct to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11-A. Misstatement or suppression of fact must be wilful.”_ _(emphasis supplied)_ _**18.** In Anand Nishikawa Co. Ltd. v. CCE this Court has observed: (SCC p. 759, para 27)_ _“27. … we find that ‘suppression of facts’ can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one_ W.P.C.No.35591/2016 9 _to do what he might have done and not that he must have done, would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression.”_ _(emphasis supplied)_ _**19.** In our view, on a reading of the relevant provision the extended period of limitation as provided by the proviso to Section 11-A(1) of the Act can only be invoked when there is a conscious act of either fraud, collusion, wilful misstatement, suppression of fact, or contravention of the provisions of the Act or any of the Rules made thereunder on the part of the person chargeable with duty or his agent, with the intent to evade payment of duty. In the present case, the Tribunal while considering this issue has not stated whether or not there were any such circumstances which would not allow the Revenue to invoke the extended period of limitation. It only observes in its order that since both the assessees are situated under the jurisdiction of the same division and as such it cannot be reasonable to conclude that the Revenue was not aware of the transactions. Since this is not_ W.P.C.No.35591/2016 10 _what is envisaged under the proviso to Section 11-A(1) of the Act, we cannot agree with the reasoning and the conclusion reached by the Tribunal.”_ Therefore, merely for the reason that a person did not pay service tax or did not file return does not amount to wilful suppression of facts to evade payment. That apart, the petitioner has a case that service tax amount had already been collected by his principals and they have accounted the same in their books of accounts. In the said circumstances, I am of the view that neither show cause notice nor Ext.P2 order contain any material to arrive at a finding that the Department was entitled to invoke proviso to Section 73(1) of the Act. Hence it requires a fresh consideration of the matter. 9. Coming to the second question, apparently the said objection of the petitioner also requires to be considered in accordance with law especially when a contention is raised that the principals of the petitioner have collected service tax from the petitioner. 10. Having regard to the aforesaid finding, I am of the view that denying the petitioner an opportunity to contest the matter W.P.C.No.35591/2016 11 on merits would amount to substantial injustice. Under such circumstances, I am of the view that this writ petition can be disposed of as under: i) Exts.P2 to P6 are set aside. ii) The original authority (Commissioner of Central Excise, Customs and Service Tax, Calicut Commissionerate) shall reconsider Ext.P1 show cause notice after giving an opportunity to the petitioner to submit his objections and fresh orders shall be passed in accordance with the procedure prescribed. (sd/-) **(A.M.SHAFFIQUE, JUDGE)** jsr