High Court of KeralaDivision Bench2018-09-03Appeal disposed of; demand not to be proceeded ...

V.P. Khader v. Commissioner for Central Excise, Service Tax and Customs

Case / Petition Number:C.E.Appeal.No.14/2018

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: K. Vinod Chandran
Ashok Menon
Judgment Date: 2018-09-03
Court Decision / Holding: C.E Appeal disposed of. The Court held that the Assessing Officer could not impose tax given the FAA’s finding of no taxable transaction, and directed that the demand be not proceeded with, subject to the appellant paying Rs. 25,000 to the Chief Minister’s Relief Fund within one month; failure to pay would permit recovery.
Final Disposition: Appeal disposed of; demand not to be proceeded with subject to payment of Rs.25,000 to Chief Minister’s Relief Fund within one month; non-payment would permit recovery.

Parties to the Case

Appellants / Petitioners

V.P. Khader

Respondents

Commissioner for Central Excise, Service Tax and Customs, Kochi

Legal Representation & Advocates

Counsels for Petitioners

• Sri. John Joseph Vettikad

Counsels for Respondents

• Sri. Sreelal N. Warrier, Standing Counsel

Case Synopsis & Summary

V.P. Khader, a contractor who ran a canteen inside Hindustan Newsprint Ltd.’s premises, challenged a series of assessments under the Finance Act, 1994 which treated his services as ‘out-door catering services’ liable to tax. He argued that no outdoor catering was carried on; the canteen functioned within the employer’s premises, serving its employees, and therefore did not fall within the taxable definition. Five assessment orders were issued; the First Appellate Authority partly affirmed some appeals while rejecting one on delay, a decision not challenged by the Department. The Tribunal dismissed the appeals, prompting Khader to file C.E. Appeal No.14/2018 before the Kerala High Court. The core issue was whether the assessee could be taxed when the FAA had found him not to be engaged in out-door catering services and that finding had been accepted by the Department. The appellant relied on precedents including CIT Madrass v. V. P. Firm Muar and Mathuram Agrawal v. State of Madhya Pradesh to argue that non-taxable income cannot be taxed; the Respondent invoked Singh Enterprises and Amchong Tea Estate to contend that delayed appeals cannot be condoned beyond statutory periods. The High Court held that there was no taxable transaction and the Assessing Officer could not impose tax on the FAA finding. The appeal is disposed of with a direction to refrain from recovery, subject to a Rs.25,000 donation to the Chief Minister’s Relief Fund within one month; failure to pay would allow recovery.

Provisions of Law Cited

Finance Act, 1994

Legal Doctrines & Maxims

Equity is out of place in tax law
A creature of statute
Tax cannot be levied on non-taxable income; no estoppel against tax statutes

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellant contends that the contract for running the canteen within Hindustan Newsprint Ltd’s premises involves internal catering, not ‘out-door catering’ taxable under the Finance Act, 1994. There is no outdoor service, and the FAA’s finding that the transaction is not taxable should be accepted by the Tribunal. The reliance on CIT Madrass v. V. P. Firm Muar and Mathuram Agrawal is to emphasize that non-taxable income cannot be taxed and that equity cannot override statute. The High Court should not uphold tax demands where the underlying transaction is not taxable; if necessary, it should excise the demand and direct charitable contribution as a balancing measure, which is permissible in light of hardship and equity, while keeping the statutory framework intact.

Contentions of Respondents

The Revenue argues that Mathuram Agrawal is not applicable here since the issue concerns challenging the charging section’s validity. Relying on Singh Enterprises and Amchong Tea Estate, the Department contends that condonation of delay beyond the statutory period cannot be allowed; the appellate authorities and the Tribunal are creatures of statute, and the court should not extend beyond the prescribed period. The FAA’s finding that the transaction is not within ‘out-door catering’ should be respected as a factual determination, and the Department’s acceptance of that finding supports tax non-levy in this case.

Cited Precedents (4)

Case Name	Citation	Treatment	Explanation
CIT Madrass v. V. P. Firm Muar	AIR 1965 SC 1216	Positive	Used to support the principle that non-taxable income cannot be taxed and that equity cannot override a tax statute.
Mathuram Agrawal v. State of Madhya Pradesh	1999 SCC 667	Mentioned Only	Cited as a possible benchmark but stated not applicable to the charging/ultra vires issue in this case.
M/s. Singh Enterprises v. Commissioner of Central Excise	2008 3 SCC 70	Positive	Cited to illustrate limits on condonation of delay within statutory periods.
Amchong Tea Estate	2010 15 SCC 131	Positive	Cited alongside Singh Enterprises to reinforce the principle that delay condonation is constrained by statute.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **MONDAY ,THE 03RD DAY OF SEPTEMBER 2018 / 12TH BHADRA, 1940** **C.E.Appeal.No. 14 of 2018** **AGAINST THE ORDER/JUDGMENT IN ST 20090/2016 of CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE** ## **APPELLANT:** **V.P. KHADER AGED 60 YEARS, S/O PATTANI RAWATHER, RESIDINGAT CHAKIRAMTHODU HOUSE, CHORAPPADOM, KAIRADY P.O.,THIRUVAZHIYAD VILLAGE, CHITTOOR TALUK, PALAKKAD DISTRICT-678 510.** **BY ADV. SRI. JOHN JOSEPH VETTIKAD** ## **RESPONDENT:** **THE COMMISSIONER FOR CENTRAL EXCISE, SERVICE TAX AND CUSTOMS, IS PRESS ROAD, KOCHI-682 018.** **OTHER PRESENT SRI. SREELAL N WARRIER, SC** **THIS CENTRAL EXICISE APPEAL HAVING BEEN FINALLY HEARD ON 03.09.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** C.E.APPEAL.NO.14/2018 ::2:: ## J U D G M E N T ## Vinod Chandran, J The Central Excise appeal has been filed raising several questions of law. The facts to be noticed are that the appellant was a contractor conducting a canteen in the premises of M/s. Hindustan Newsprint Ltd. The appellant was assessed for various periods under the Finance Act, 1994, holding the services extended by the appellant to be “out-door catering services”. The appellant asserted that there was no out-door catering carried on. On a contract awarded for running a canteen for employees, the premises of M/s. HNL was handed over to the appellant wherein he cooked food and served it to the employees. 2. Five assessment orders were passed against the assessee, against which appeals were filed as is seen from Annexure B. The Commissioner of Central Excise, the First Appellate Authority C.E.APPEAL.NO.14/2018 ::3:: refused to consider one of the appeals for reason of it being delayed. The other appeals which were filed in time were considered and the appellant's case accepted. The Department has not challenged the order of the First Appellate Authority. Finding one of the appeals to be delayed, the same was rejected by the First Appellate Authority, against which the appellant approached the Tribunal. The Tribunal also rejected the appeal, against which the present appeal is filed. 3. The question of law according to us, arising from the order of the Tribunal is as follows: Whether the assessee could be made liable to tax or demand raised; since the assessee was not carrying on a taxable service and in the assessee's own case, the First Appellate Authority had found the assessee to be not engaged in out-door catering services, which finding of the First Appellate Authority has been accepted by the Department? C.E.APPEAL.NO.14/2018 ::4:: 4. The learned Counsel appearing for the appellant relied on CIT Madrass v. V. Mr.P Firm Muar [AIR (1965) SCC 1216] and . Mathuram Agrawal v. State of Madhya Pradesh[(1999)8 SCC 667] 5. The learned Sanding Counsel appearing for the Revenue would submit that Mathuram Agrawal ( supra ) would not be applicable,since there the question was with respect to the challenge against the charging section which was held to be ultra vires. The learned Standing Counsel would rely on (2008) 3 SCC 70 (M/s. Singh Enterprises v. Commissioner of Central Excise) and Amchong Tea Estate [(2010) 15 SCC 131] 6 . Singh Enterprises was relied on in Amchong Tea Estate ( both supra). The consideration therein was whether there could be condonation of delay, where the statute prescribes a specific period of limitation and also provides for the extended period in which the delay could be condoned. It was held that the Commissioner and the Tribunal being creatures of statute could not C.E.APPEAL.NO.14/2018 ::5:: have condoned such delay beyond the period provided for condonation. We are also of the opinion that there could have been no condonation of delay as such and the First Appellate Authority or the Tribunal could not have acted otherwise. 7. We are quite conscious of the fact that we are dealing with an appeal as provided under the statute, but that does not make us a creature of statute. The High Court exercising its extra-ordinary power, could also look into the hardship caused especially in the context of the Appellate Authority having found the specific transaction to be not taxable and not coming within the ambit of a taxable service under the Finance Act, 1994. Useful reference can be made to P.Firm Muar (supra), wherein it was held “if a particular income is not taxable under the Income Tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is statute (sic) (it must be 'taxable') or it is not, the Income Tax Officer has no power to impose C.E.APPEAL.NO.14/2018 ::6:: tax on the said income.” [the clarification within the brackets supplied by us]. In the present case, as we already noticed, there is no taxable transaction insofar as the transaction of the appellant having been held to fall outside the definition of out-door catering service, on which alone, the assessment was made under the Finance Act, 1994. 8. We are of the opinion that the Assessing Officer could not have imposed tax, especially on the finding rendered by the First Appellate Authority which is accepted by the Department. We direct that the demand made be not proceeded with on the following condition being complied. We notice that there was considerable delay in having filed the appeal, and in such circumstances we direct the appellant to pay an amount of Rs.25,000/- (Rupees Twenty Five Thousand only) towards the Chief Minister's Relief Fund of the Kerala State, upon which there would be no recovery effected on the demand raised on Annexure A. We make it clear that if such amounts are not paid within a period of one month and the receipt produced before the C.E.APPEAL.NO.14/2018 ::7:: respondent, the respondent would be entitled to proceed for recovery. C.E Appeal is disposed of. jma Sd /- K.VINOD CHANDRAN Judge Sd/ASHOK MENON Judge C.E.APPEAL.NO.14/2018 ::8:: ## **APPENDIX** ## **APPELLANT'S ANNEXURES** |**ANNEXURE A**|**: **|**TRUE COPY OF THE ORDER IN ORIGINAL NO.**| |---|---|---| |||**11/2009 ST PASSED BY THE DEPUTY**| |||**COMMISSIONER OF CENTRAL EXCISE, KOTTAYAM**| |||**DIVISION**| |**ANNEXURE B**|**: **|**TRUE COPY OF THE COMMON ORDER DT**| |||**02.07.02014 IN APPEAL NOS. 125/ST/CHN/2008,**| |||**261/ST/CHN/2009, 16/ST/CHN/2010,**| |||**121/ST/CHN/2011 AND 92/ST/CHN/2012 OF THE**| |||**COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND**| |||**SERVICE TAX (APPEALS)**| |**ANNEXURE C**|**: **|**THE CERTIFIED COPY OF THE ORDER OF THE**| |||**CUSTOMS, EXCISE & SERVICE TAX APPELLATE**| |||**TRIBUNAL, SOUTH ZONAL BENCH**| ## **RESPONDENT'S ANNEXURES: NIL** **//TRUE COPY//**