F.No. V2(TICS) 33/STC-III/2012

F.No. V2(TICS) 33/STC-III/2012

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F.No. V2(TICS) 33/STC-III/2012

M/s Gujarat Energy Development Agency, 4th Floor, Block No.11/12, Udyog Bhavan, Sector-11, Gandhinagar -382047 (hereinafter referred to as “the appellant”) has filed an appeal along with Stay application, against Order-in-original No.AHM/STX/003/ADC/083/11 dated 09.12.2011 (hereinafter referred to as “the impugned order”) passed by Additional Commissioner, Central Excise and Service Tax, Ahmedabad-III (hereinafter referred to as “the adjudicating authority”).

2.Brief facts of the case is that, the appellant have collected `2,85,12,500 from their clients during the period 2006-07 to 2010-11 towards transfer fee and issuance of commissioning certificate. The appellant have collected`25,000 per MW to maximum of `2.50 lacs towards transfer fee and for issuance of commissioning certificate to their client in respect of the wind mill. Before issuance of said commissioning certificates, the officers of the appellant have visited respective wind farm site to witness the generation of electricity from the wind turbine generators.It has been noticed that the appellant have provided taxable services, which fall under the category of “Technical Inspection and Certification Services”. Therefore, a Show Cause Notice F.No.V.STC/15-52/Off/OA/ 2011-12 dated 20.09.2011 was issued to the appellant: (i) proposing to consider the gross amount of `2,85,12,500 recovered by them as value of taxable service under the category ‘Technical Inspection and Certification Services’ under Section 67 of the Finance Act, 1994;(ii) demanding an amount of `33,10,323 under the provisions of Section 73 of the Finance Act, 1994 invoking extended period as per proviso to sub-section(1) of Section 73 of the Act, ibid; (iii) proposing to recover interest under Section 75 of the Act ibid; (iv) proposing to impose penalty on the appellant under Section 76 of the Finance Act, 1994 for failure to pay the liable Service Tax; (v) proposing to impose penalty under Section 77 of the Finance Act, 1994 as they had failed to follow all the procedure as prescribed under the Act ibid and Rules made there under and (vi) proposing to impose penalty under Section 78 of the Finance Act, 1994 for concealing the value of taxable services provided by the appellant with an intent to evade payment of Service Tax.

3.The adjudicating authority vide the impugned order confirming demand of Service Tax amounting to `33,10,323 under the provisions of Section 73 of the Finance Act, 1994 by invoking extended period as per proviso to Sub-Section (1) of Section 73 of the Act ibid. The appellant was directed to pay interest under Section 75 of the Finance Act, 1994. The

adjudicating authority has imposed penalty under Section 76, 77 and 78 of the Finance Act, 1994.

4.1.Being aggrieved, the appellant has filed the present appeal alongwith stay application against the impugned order on the grounds that the nature of the fee collected from the developer was more of a license fee collected by them in the capacity of an authority to issue a certificate on verification of certain documents; that the activity of the appellant has nothing to do with the Technical Inspection and Certification because they have not possessed any special technical expertise; that the appellant is a nodal agency of Government of Gujarat established for spreading useful knowledge in various fields of energy and help various units to establish to install the wind power project.

4.2.The appellant has further contended that they are eligible to claim benefit of Cum Duty value for calculation of Service Tax liability involved in the matter and they have also claimed that they are entitled to avail Cenvat credit on input services utilized for providing the said service involved in the present matter; that they also argued that invocation of extended period of demand and imposition of penalties are not sustainable, in support of their claim they have relied upon the following judgments:-

Tamil Nadu Housing Board-1994 (74) E.L.T.9 (SC),

Markfed Refined Oil & Allied Indus- 2009 (243) E.L.T.A91 (P&H),

On Dot Couriers & Cargo Ltd - (2006) 6 STJ 337(Tri.-New Delhi),

Gujarat Water & Sewerage Board-(1989) AIR 973(SC),

Ram Krishna Travels P. Ltd-(2007) TMI-977(Tri.-Mumbai) Landmark Automobile P. Ltd Vs CST, Ahmedabad

5. Appellant was asked to deposit 25% of Service tax confirmed, vide Stay order No. 04/(AHD-III)/2012 dated 07.05.2012 under Section 35F of the Central Excise Act, 1944. Instead of complying the conditions of the Stay order, the appellant have filed a miscellaneous application for reconsideration ofthe Stay order. Thereafter personal hearing was again held on 06.09.2012 when Shri Rashmin Vaja, Advocate appeared on behalf of the appellant and reiterated the submissions in the grounds of appeal and the written submissions.

6. I have carefully gone through the grounds given in appeal and stay

application, and further submissions made by the appellant as well as the

documents available on record. The issue to be decided is whether the

amount collected by the appellant from their clients towards transfer fee and issuance of commissioning certificate is liable for service tax or not.

7. I find that the appellants are a Government of Gujarat Organisation engaged in the promotion and popularisation of Renewable Energy and Energy Conservation in the state of Gujarat. The appellant have received an amount of `2,85,12,500 under the head of “transfer fees” for the period from 2006-07 to 2010-11. I find that the appellant received the income under the head of transfer fee inclusive of commissioning charge of the wind farm that is transferred to a client of the Windmill developer. The transfer of the MW capacity to the client of the developer is to be given on verification of various documents submitted by the client. After the transfer of capacity to the client, the electrical installations are inspected and verified by the Chief Electrical Inspector and then the officers of the appellants visit the wind farm site and after satisfying/witnessing the generation of electricity from the wind turbine generators, issued the commissioning certificate to their clients. They received the charge as transfer fee inclusive of the commissioning charge of the wind farm and showing the income in their books and accounts as ‘transfer fees’.

I find that, the appellant are collecting ` 25,000 per MW to maximum of `2.50 lakhs towards transfer fee and for issuing commissioning certificate to their clients in respect of the wind mill. Receiving an amount for the said activities performed by the appellant with regard to Inspection, Commissioning and Examination of the generation of electricity from the wind turbine generators are squarely falling under the taxable Service under the “Technical Inspection and Certification Service. “Technical Inspection and Certification” defined under Section 65(108) of the Finance Act, 1994 reads as “Technical Inspection and Certification” means inspection or examination of goods or process or material or information technology software or any immovable property to certify that such goods or process or material or information technology software or immovable property qualifies or maintains the specified standards, including functionality or utility or quality or safety or any other characteristic or parameters, but does not include any service in relation to inspection and certification of pollution levels”. The said service is taxable with effect from 01.7.2003 as per Notification No.7/2003-ST dated 20.6.2003.

8. It is an admitted fact that the appellant has collected the fee from the client in the capacity of an authority to issue a certificate for

verification of the transfer documents and checking the working condition of the machines. The definition of Taxable Service “Technical Inspection and Certification” as stipulated under Section 65(108) of the Finance Act, 1994, does not specify that the agency or person providing the service should have expertise on such service. As such the contention put forth by the appellant that the services provided by them can not be classified as taxable service under “Technical Inspection and Certification Service” since they have not possessed any special technical expertise, is not sustainable. In view of the above, I find that, the order of the adjudicating authority confirming the recovery of service tax alongwith interest is just and proper.

9. As regards the benefit of “cum tax value” as pleaded by the appellant in their grounds of appeal, I find that the adjudicating authority has held that the appellant had suppressed material facts by way of not disclosing the receipt of taxable amount to the department, with malafide intention in order to evade Service Tax. I find that the invocation of larger period of limitation in the present appeal has not been disputed, as such, the present matter is pertaining to the case of the deliberate Service Tax evasion and hence, the benefit of cum-duty price can not be extended to the appellant. In this regard, I rely upon judgment of Hon’ble Tribunal, Delhi reported at 2011 (268) E.L.T. 369 (Tri. - Del.) in the case of M/s Pinkline Exim P. Ltd., V/s Commissioner of C. Ex. Jaipur-I. The Hon’ble Tribunal has held that benefit of cum duty price can not be extended in the cases of deliberate duty evasion by clandestine clearances. The relevant extract of the same are as under:-

“4.3 It has been pleaded that in accordance with the ratio of Hon’ble Supreme Court’s judgment in case of CCE, Delhi v. Maruti Udyog Ltd. reported in 2002 (141) E.L.T. 3 (S.C.) the price of the fabrics on which duty has been demanded, must be treated as cum duty price and assessable value must be calculated by permitting abatement of duty from the price. Tribunal in cases of Asian Alloys Ltd. v. CCE-III reported in 2006 (203) E.L.T. 252 (Tri. - Del.) and Sarla Polyester Ltd. v. CCE, reported in 2008 (222) E.L.T. 376 (Tri. - Ahmd.) has held that the ratio of Hon’ble Supreme Court’s judgment in case of CCE, Delhi v. Maruti Udyog Ltd. is not applicable to the cases of deliberate duty evasion by clandestine clearances. Therefore this plea of the Appellant is also not acceptable.”

10. As regard, contention made by the appellant about suppression of facts,I observe that ‘suppression of facts’, the phrase implies that

withholding of information is suppression of facts. P. Ramanatha Aiyar’s Concise Law Dictionary [1997 Edition Reprint 2003 – page 822] defines the phrase lucidly and accurately as – Where there is an obligation to speak, a failure to speak will constitute the “suppression of fact” but where there is no obligation to speak, silence cannot be termed “suppression”. It is manifestly clear from this that intention to evade payment of service tax is implied in the suppression of facts. Since the appellant was liable to self assess the liability to pay service tax, they had an obligation to furnish the correct and complete information about the nature of services as well as value of services whether taxable or otherwise. I uphold that the adjudicating authority has correctly invoked the extended period since this is a case of improper assessment amounting to deliberate non-declaration and suppression of vital information with a willful intention to evade payment of service tax.

11. I also hold that as the lapse on the part of appellant only came to light consequent to departmental intervention by way of audit of their records. I find that penalty under Section 78 ibid has been imposed on the appellant for suppressing and not disclosing the value of taxable services with an intent to evade duty. The adjudicating authority has clearly explained in the impugned order that the elements of wilful mis-statement and suppression of facts are present in the case of the appellant with clear intention to evade payment of Service Tax.On going through the defence submitted by the appellant, I find that there is substance in the finding of the adjudicating authority as the incidence of non-payment of Service Tax was revealed only consequent upon audit of the records of the appellant by the Audit. The facts would have remained suppressed, had the lapse not come to the notice of audit. Accordingly, I uphold the imposition of penalty under Section 78 of the Finance Act, 1994 on the appellants as imposed in the impugned order.

12.As regards the imposition of penalty under Section 77 of the Finance Act, 1994, the same has been imposed for failure to file complete ST-3 returns for the year. I find that the appellant had failed to reflect the value of the impugned services in their returns rendering the same as incorrect and incomplete. I, therefore uphold the penalty imposed on the appellant under Section 77 of the Finance Act, 1994.

13. As regards the imposition of penalty under Section 76 of the Finance Act, 1994 for failure to pay Service Tax within the stipulated time,prior to 10.5.2008, the settled position was that penalties could be imposed under

the both Section 76 ibid as well as Section 78 ibid provided that ingredients of both the Sections are present in a case. I find that the adjudicating authority has correctly imposed penalty on the appellant under Section 76 of the Finance Act, 1994 for failure to pay Service Tax within the stipulated time. I therefore uphold the penalty imposed on the appellant under Section 76 of Finance Act, 1994. I also find that the facts and circumstances of the cases relied by the appellant in the grounds of appeal is different to that of the present case and therefore not sustainable.

14. In view of the above, I find that, the appellant’s appeal is liable to be rejectedon merits as discussed. As the appellant has not compliedthe stay order dated, 07.05.2012, the impugnedorder isalso liable to be rejected for non-compliance of Section 35F of the Central Excise Act, 1944. The miscellaneous application filed by the appellant for reconsideration of the Stay Order is not sustainable for the reasons discussed above and is therefore, liable to be rejected.

15. In view of the above facts and discussions, I uphold the impugned order and reject the appeal, stay application and miscellaneous application filed by the appellant.

Sd/- 28.09.2012

(SUNILKUMAR SINGH)

COMMISSIONER (APPEAL-III),

CENTRAL EXCISE, AHMEDABAD.

Attested,

(Prasanna K Swami)

Superintendent (Appeal-III)

Central Excise, Ahmedabad.

BY R.P.A.D.

To

M/s Gujarat Energy Development Agency,

4th Floor, Block No.11/12, Udyog Bhavan,

Sector-11, Gandhinagar -382047.

Copy to:-

  1. The Chief Commissioner of Central Excise, Ahmedabad.
  2. The Commissioner of Central Excise, Ahmedabad-III.
  3. The Additional Commissioner of Central Excise, Ahmedabad-III.
  4. The Asst. Commissioner of Central Excise, Gandhinagar.
  5. The Asstt. Commr. (Systems), Ahmedabad-III for uploading the order on the Website.
  6. Guard file.
  7. P.A.file.
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