Lawson Travels & Tours (I)(P) Ltd. vs C.C.E., Cus. & S. Tax

Dr. Manjula Chellur, C.J.

Heard learned counsel for petitioner and also learned Standing Counsel for respondent Department. The entire issue revolves round whether Tribunal erred in upholding the penalty under Sections 76 and 78 of the Finance Act of 1994. The issue admittedly pertains to billing statements of appellant from April, 2000 to March, 2004. It is also not in dispute that only on 11-6-2004, the company remitted an amount of Rs. 3 lakhs towards part payment of Service Tax due from them. As a matter of fact, notice was sent to the Manager of the company directing him to appear before the Senior Intelligence Officer, Directorate General of Central Excise Intelligence, Regional Unit, Kochi, which had information and material for opining that appellant/assessee was evading Service Tax at a large scale.

After giving opportunity to explain and also taking into account the entire material produced, the first appellate authority opined that correct Service Tax for the taxable service was not paid during April, 2000 to March, 2004. They also did not file periodical returns for the said period i.e. April, 2000 onwards, therefore, penalties under Sections 76 and 77 of the Finance Act of 1994, were liable to be imposed. The details of the material placed and the findings are at paragraph 15.1 which explains clearly what was the material forthcoming and whether the appellant was able to prove with respect to the defence regarding refund claim, etc. Paragraph 15.1 reads as under:

"The allegation in the S.C.N, is that M/s. Lawson Travels & Tours (I) Pvt. Ltd., Trivandrum contravened the provisions of Sections 68, 70 and 78 of the Finance Act, 1994 and Rules 6 and 7 of Service Tax Rules, 1994 by not paying the correct Service Tax for the taxable services provided by them during the period April, 2000 to March, 2004, by not filing the prescribed returns and also by wilfully suppressing the value of taxable services. In the defence the party has not disputed the fact of non-payment of correct Service Tax or the liability to tax, but has disputed the quantity. According to them at least 30-40% of the invoice amount was not collected whereas the Show cause Notice was prepared based on the amounts shown in the invoices. They have also contended that they had received Rs. 19,05,285 as refund from Air India and Sri Lankan Airlines by way of credit note for the accounting years 2002-03 and 2003-04 and these amounts were not taken into consideration for calculating the tax liability by the department. I observe that the above fact was not brought to the notice of the investigating officers. In the reply dated 4-5-2005, they had stated that the copies of credit notes were available with them for producing before the adjudicating authority. In their letters dated 6-6-2005 and 20-6-2005 they requested for more time to produce the credit notes as the same were not received from the Airlines. However, in the reply statement dated 23-11-2005 they produced copies of the ST3 returns for the period 4/2000 to 3/2004 (8 nos.) only stated to have been prepared on the basis of actual receipt. They have not produced copies of the credit notes or any other evidence for the refund or for the actual receipt claimed by them. In the absence of any convincing proof the claim with respect to the above refund cannot be entertained. The contention that correct duty was not paid due to certain technical problems and they had not collected the tax from their customers also do not merit consideration as the tax liability is on the service provider. As per Section 67 Explanation 1(d) of Finance Act, 1994 read with Notification 22/97-S.T., dated 26-6-1997 the Air Travel Agents (ATAs) have to pay Service Tax on the commission amount received from Airlines. As per Rule 6(7) of the Service Tax Rules, 1994 ATAs have an option to pay an amount calculated at the rate as a percentage of the basic fare as mentioned in Para 5 supra and option once exercised shall apply uniformly in respect of all the booking and shall not be changed during a financial year. Since they had opted for the percentage upto March, 2002 and on the basis of commission received from April, 2002 onwards, the tax liability is worked out accordingly and they are liable to pay the Service Tax as demanded in the SCN. Whatever amount they have paid towards the above liability can be adjusted towards the demand. Interest under Section 75 ibid is also payable by the noticee."

Therefore Additional Commissioner opined that Service Tax was not at all paid and further suppressed the actual value of taxable services violating provisions under Sections 68 and 70 read with Rules 6 & 7 of the Service Tax Rules of 1994, hence liable for penalty under Sections 76 and 78.

This came to be challenged before the first appellate authority and first appellate authority, as per Annexure A3 order, dated 22-10-2007, proceeded to opine that the Financiers v. C.C.E., Jaipur 2007 (8) S.T.R. 7 (Tribunal of Delhi deserves to be applied, hence proceeded to modify the order-in-original and the appeal was disposed of. Again this came to be challenged by the Department before the Appellate Tribunal. Appellate Tribunal by referring to the judgment of Assistant Commissioner v. Krishna Poduval - 2006 (1) S.T.R. 185 (Ker.) opined that in the light of jurisdictional High Court judgment, there was no justification for the first appellate authority to set aside the orders of the assessing authority and accordingly the appeal filed by Revenue was allowed. Aggrieved by the same, this appeal is filed by the appellant/assessee.

What we notice is, the liability to pay Service Tax is in accordance with the Finance Act, 1994, as the taxable services involved in the matter was for the period from April, 2000 to March, 2004. The decision of this High Court referred above in Krishna Poduval''s case (supra) was also prior to Finance Act, 2008, which made a remarkable distinction between Sections 76 and 78 of Service Tax Act. As the period in question relates prior to Finance Act, 2008, the assessing authority and later the Tribunal were justified in placing reliance on Krishna Poduval''s case (supra) by the High Court of Kerala. We find no good reason to opine that both Sections 76 and 78 are not applicable to the case of the appellant. On the other hand, we find, at the relevant point of time prior to Finance Act, 2008, penalty could be imposed under both the provisions and it is for appellant/assessee to convince authorities concerned by evidence that they are not liable to pay Service Tax and that there is justification in the defence raised by them regarding refund of the amounts. Accordingly, the appeal is dismissed.