ORDER
Jyoti Balasundaram, Member (J)
1. The delay in filing the appeals by M/s. Puriflair India Pvt. Ltd. and Dinesh Pharmaceuticals Pvt. Ltd. is condoned in view of the explanation offered by the applicants that time was required by them for collecting details from goods transport operators in order to work out their tax liability and in view of the fact that the same explanation has been accepted by the Tribunal in the case of Videocon Narmada Electronics Ltd. v. CCE, Baroda (Order No. CI/2540/WZB/2002, dated 14-8-2002.)
2. Now I take up the stay applications for hearing. All the above captioned applications for waiver of pre-deposit of amounts (as per Annexure A) arise out of the different Orders-in-Appeal passed by the Commissioner of Central Excise in terms of Section 84 of the Finance Act, 1944, directing all the applicants to work out service tax payable by them during the period from 16-11-1997 to 1-6-1998 and pay the same along with the interest till date of the payment of the service tax at the prescribed rate and directing them to file ST-3 returns for the said period in the prescribed form.
3. The brief facts are that the show cause notices were issued requiring the applicants to pay service tax for goods transport operators’ service provided to them for the period 16-11-97 to 1-6-98 since they had neither applied for registration with Central Excise Authorities nor paid the service tax and hence there was a contravention of Sections 68 and 70 of the Finance Act, 1994. The notices directed them to furnish quarterly return in form ST-3 and proposed recovery of interest for the delayed payment and proposed penal action under Sections 76, 77 and 79 of the Finance Act, 1994. Prior to the issue of the notices, the validity of Rule 2(d)(xvii) of Service Tax Rules, 1944 was challenged before the Hon’ble Supreme Court and prior to the adjudication of the notices, the Apex Court held in the case of Laghu Udyog Bharti v. Union of India that the Rule was ultra vires of the Act and accordingly quashed the Rule. In view of the Supreme Court judgment, the Deputy Commissioner, vide the various Orders-in-Original, dropped the show cause notices. The Commissioner of Central Excise directed issue of notices for revision of the orders of the Dy. Commissioner, in view of the retrospective amendment of Service Tax Rules by Section 117 of the Finance Act, 2000, which states that ‘notwithstanding anything contained in any judgment, decree or order or any Court, Tribunal or other authority, sub-clause (xii) and (xvii) of clause (d) of sub-rule (1) of Rule 2 of Service Tax Rules, 1944 as they stood immediately before the commencement of the Service Tax (Amendment) Rules, 1998 shall be deemed to be valid as if the said sub-clause had been in force at all material times. In the present impugned orders, the Commissioner has held that in view of the retrospective validation of the Service tax, all the applicants were required to pay Service tax on the gross amount of the transport charges, excluding insurance charges, paid by them to the goods transport operator. He directed the applicants to work out the tax payable and pay the same along with interest. The applicants have worked out the amounts as per Annexure A and have filed the present applications for waiver of pre-deposit and stay of recovery.
4. It is the contention of the ld. counsel Shri J.C. Patel that the validation in terms of Section 117 does not empower the department to recover service tax during the period in dispute but only empowers recovery of service tax refunded in pursuance of the Supreme Court judgment in the case of M/s. Laghu Udyog Bharti. He submits that in the absence of any provisions in the validation Act to hold that it validates levying and collecting service tax during the period from November, 1997 to June, 1998, it would be in contravention of Article 265 of the Constitution of India as there did not exist any valid provision or authority of law for making such recovery, and in this connection, he relies upon the decision of the Apex Court in the case of District Mining Officer and Ors. v. Tata Iron and Steel Co. and Anr. . The next contention of the ld. counsel is that no liability is cast upon the applicants who availed of goods transport service to file a return and obtain registration and, therefore, there is no omission or failure on the part of the applicants in not filing the return, so as to apply the 5 year period provided for in Section 73 of the Finance Act, 1994 and submits that the demands in all these cases are barred by limitation as they were issued beyond the period of six months. Lastly, he submits that the notices do not propose recovery of service tax but only propose recovery of interest which according to him, is not payable if the tax itself is not payable, and for recovery of penalty, which has not been imposed by the Commissioner in revision, as per the relevant provisions of the Act. He, therefore, prays for waiver of pre-deposit of the amounts of service tax and interest.
5. The arguments of Shri Patel are adopted by Shri R.C. Saxena, counsel for the applicants M/s. Jayant Oil Mills Ltd.
6. The prayer is opposed by Shri P.K. Agarwal, DR. who submits that the notices state that the applicants were liable to pay service tax but have, not deposited the same and pleads that this may be construed as a proposal for recovery of service tax. He submits that validation provisions are wide enough to cover recovery of service tax as Section 117 clearly states that “any action taken or anything done or purported to have been taken or done at any time during the period commencing on and from the 16th day of July, 1997 and ending with the day, the Finance Act, 2000 receives the assent of the President shall be deemed to be valid and always to have been valid for all purposes, as validly and effectively taken or done”. He submits that Section 116 of the Finance Act, 2000 specifies that “an ‘assessee’ means a person liable for collecting the service tax and includes every person who pays or is liable to pay the freight for transportation of goods by road in relation to services provided by a goods transport operator” and that Section 116, therefore, authorises collection of service tax from service availer and, therefore, the decision of the Supreme Court in the case of District Mining Officer and Ors. v. Tata Iron and Steel Co. and Anr. cited supra is distinguishable on facts and in law. He submits that the period beyond six months has been correctly invoked as the applicants who availed of goods transport service were liable to pay tax in terms of Rule 2(1)(d)(xvii) of the Service Tax Rules, 1994 and since they failed to pay the tax, the period beyond six months is available to the department. He, therefore, prays that the applicants may be directed to deposit the amounts of tax together with interest.
7. I have carefully considered the rival submissions. The basic issue as to whether Section 117 of the Finance Act, 2000 empowers demands and collection of service tax from those who availed of goods transport service, cannot be determined at this interim stage and will be considered in detail only when the appeals are taken up for hearing. The plea of limitation is also debatable, having regard to the language of Rule 2(1)(d)(xvii) and Section 65(41)(M) and Sections 69 and 70 of the Finance Act, 1994. However, I see prima facie force in the plea of the applicants that the show cause notices do not call upon them to show cause against recovery and collection of service tax, although, the notices state that the assessees are required to pay service tax in accordance with Section 68 and they have failed to deposit the service tax, the assessees have been called upon to show cause only as to why penalty should not be imposed upon them under Sections 76, 77 and 81 of Chapter X of Finance Act, 1994 and why interest should not be recovered from them for delayed payment of service tax. In the absence of any proposal for demanding service tax, I waive the requirement of pre-deposit of the service tax amounts as set out in Annexure ‘A’ together with interest payable thereon and stay recovery thereof, pending these appeals which are now listed for hearing or l-11-2002.
(Dictated in Court)