REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1618  OF 2005

Commissioner  of Central Excise, Vadodara-I ….Appellant

Versus

M/s Gujarat Carbon & Industries Ltd. ....Respondents

WITH

Civil Appeal No. 1077 of 2006 Civil Appeal No. 1173 of 2006 Civil Appeal No. 3172 of 2007 Civil Appeal No. 3464 of 2006 Civil Appeal No. 3556 of 2007 Civil Appeal No. 3557 of 2007 Civil Appeal No. 3558 of 2007 Civil Appeal No. 3565 of 2007 Civil Appeal No. 3629 of 2007 Civil Appeal No. 6424 of 2005 Civil Appeal No. 7144 of 2005 Civil Appeal No. D. No.10930 of 2006

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

Civil Appeal No.         D.No.10930/2006       

1. Delay condoned. Appeal Admitted.  

2. In  these  appeals  common  points  are  involved  and

therefore they are disposed of by this common judgment.  

3. Challenge  in  each  case  is  to  the  judgment  of  various

Benches of Customs, Excise & Service Tax Appellate Tribunal

(in  short  ‘CESTAT’).  The  respondents  in  each  case  had

engaged  the  services  of  transport  operators.   They  were  in

other words availers of service and not service providers. The

Central  Excise  Authorities  issued  notice  asking  them  to

explain as to why penalty should not be imposed upon them

under the provisions of Sections 76 and 77 of Chapter V of the

Finance Act, 1994 for alleged contravention of the provisions

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of Sections 70, 76 and 81 of the said Chapter and as to why

interest  should  not  be  recovered  from  them  for  delayed

payment of service tax as provided under the aforesaid Act.

Relying on a decision of this Court in  Laghu Udyog Bharti &

Ors. v.  Union of India (1999 (112) ELT 365) the show cause

notice was dropped. In the said case, it was held that service

availers  are  not  required  to  pay  service  tax  under  the

provisions of the Finance Act.  In some cases the orders were

reviewed under Section 84 of the said Act on the ground that

Section 117 of the Finance Act, 2000 validates retrospectively

the provisions of sub-clause (xii) of clause (d) of sub-rule (1) of

Rule 1 of Service Tax Rules, 1994.  As a sample case, we refer

to the factual scenario of Civil Appeal No.1618 of 2005.  The

factual  scenario  is  that  Commissioner  was of  the  view that

according  to  Section  117  of  the  Finance  Act,  2000

notwithstanding anything contained in any judgment, decree

or order of any court, tribunal or other authority , sub-clause

(xii) and sub-clause (xvii) of clause (d) of sub-rule (1) of Rule 2

of  the  Service  Tax  Rules,  1994  as  they  stood  immediately

before  the  commencement  of  the  Service  Tax  (Amendment)

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Rules, 1998 shall be deemed to be valid as if the said clause

had  been  in  force  at  all  material  times.   In  view  of  the

aforesaid retrospective  amendment,  the order of  the Deputy

Commissioner was reviewed. A show cause notice was issued

seeking to review the order. After considering the reply of the

respondent-assessee the Commissioner demanded service tax

on the gross amount of  transport charges paid by it  to the

goods transport operators excluding insurance charges during

the  period  16.11.1997  to  1.6.1998  alongwith  interest  for

delayed payment of service tax required to be paid under the

Finance Act, 1994.  

4. The Tribunal referred to Section 73 of the Finance Act

which reads as follows:

“Section 73 (a)- The Assistant Commissioner of Central  Excise  or,  as  the  case  may  be,  the Deputy Commissioner of Central   Excise  has reason to believe that by reason of omission or failure on the part of the assessee to make a return  under  Section  70  for  any  prescribed period  or  to  disclose  wholly  or  truly  all material  facts  required  for  verification  of  the assessment  under  Section  71,  the  value  of taxable  service  for  that  quarter  has  escaped

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assessment  or  has  been  under  assessed,  or any sum has erroneously been refunded, or  

(b)  notwithstanding  that  there  has  been  no omission or failure as mentioned in Clause [a] on  the  part  of  the  assessee,  the  Assistant Commissioner of Central Excise or, as the case may  be  Deputy  Commissioner  of  Central Excise has, in consequence of information in his possession, reason to believe that the value of  any  taxable  service  assessable  in  any prescribed period has escaped assessment or has  been  under-assessed,  or  any  sum  has erroneously been refunded, he may, in cases falling under Clause (a), at any time within five years, and in cases falling under Clause (b), at any time within six months from the date for filing the return, serve on the assessee a notice and proceed to assess or reassess the value of the taxable service.”

5. The Tribunal referred to a decision in the case of  L.H.

Sugar Factories Ltd. v.  CCE, Meerut-II (2004 (165) ELT 161)

where under similar circumstances the show cause notice was

issued. It was held that during the relevant period Section 73

takes in only the case of assessees who are liable to file return

under  Section 70.  The  liability  to  file  return is  cast  on the

assessees only under Section 71-A which was introduced in

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the Finance Bill, 2003.  Thus, during the period in question

no notice could have been issued under Section 73 for non

filing of return under Section 70. According to the Tribunal,

the service receiver was not required to file any return under

Section  70  of  the  Finance  Act,  1994  prior  to  2003.  The

Tribunal accordingly quashed the order demanding service tax

from the respondents-service availers.  Similar view has been

expressed in the connected cases.

6. According to learned counsel for the revenue, the view of

CESTAT  is  clearly  unsustainable,  because  of  retrospective

operation of the provisions.    

7. Learned counsel for the respondents on the other hand

supported the respective judgments of the Tribunal.  

8. It  is  to  be  noted  that  in  an  identical  case  in

Commissioner  of  Central  Excise,  Meerut-II v.  L.H.  Sugar

Factories Ltd. and Ors. (2005 (13) SCC 245), this Court agreed

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with similar conclusions of the Tribunal. In the said case, the

conclusions of the Tribunal were as follows:  

“The above would show that even the amended Section 73 takes in only the case of assesses who are liable to file return under Section 70. Admittedly, the liability to file return is cast on the  appellants  only  under  Section  71A.  The class of persons who come under Section 71A is not brought under the net of Section 73. The above  being  the  position show cause  notices issued  to  the  appellants  invoking  section  73 are not maintainable.”     

9. In  view  of  what  has  been  stated  in  L.H.  Sugar’s case

(supra) we do not find any merit in the present appeals which

are accordingly dismissed.  

…………………………………..J. (Dr. ARIJIT PASAYAT)

………………………..………….J. (Dr. MUKUNDAKAM SHARMA)

New Delhi, August 18, 2008

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