ORDER
S.L. Peeran, Member (J)
1. The appellants are required to pre-deposit service tax amount of Rs. 2,61,35,485/- and like sum of penalty under Section 78 of the Finance Act, 1994, besides penalty of Rs. 1000/- under Section 77 of the said Act and penalty @ Rs. 100/- per day under Section 76 of the said Act. The appellants are covered under the net of service tax under the category of ‘Steamer Agency Service’ and ‘Customs House Agency Service’. Their Head Office is at Cochin and they are having branch offices at 19 locations all over India. They have centralized registration for Steamer Agency – Tramp operations at Cochin covering all their branch offices. They also provide Line Agency Services from their Mumbai and Delhi offices and service tax is being paid at Mumbai, based on registration obtained at Mumbai under Steamer Agency Service. During the course of the audit conducted by Internal Audit Wing of Central Excise, Cochin Commissionerate, it was found that they were not paying service tax on certain income shown as “Other Income” in their Profit and Loss Accounts. The assessee claimed eligible deduction on the ground that this amount is only security deposits which are returnable and has no link or connection with the service rendered by them. Therefore the service tax cannot be levied on them. This prayer has been rejected. The Commissioner in his Order-in-Original in Paragraph 13 has agreed that the assessee was eligible to be exempted from the taxable value provided proper documentary evidences are maintained and produced. However he has rejected their prayer to grant deduction on the plea that they have not produced the documentary evidence during the personal hearing.
2. The learned Sr. Counsel appearing for the appellants submits that the impugned order is unsustainable in law for the various grounds. He submits that the Commissioner should not have rejected their plea on the ground that they did not produce the documentary evidence. He submits that in terms of the show cause notice, the facts are very clear that the security deposit should be returned and this fact had been reflected in the subsequent Profit and Loss Accounts. He submits that there are no documents to substantiate this fact. He relies on the this Bench Final Order No. 1082/2006 dated 16.06.2006 in the case of B.S.R. Refrigeration Ltd. v. Commissioner of Service Tax, Bangalore. He also referred to this Bench Stay Order No. 1394 to 1397/2006 dated 30.11.2006 in the case of Indus Motor Co. Pvt. Ltd. and AVG Motors Ltd. v. CCE, Cochin. He points out that in both the cases, the facts are identical to the present case. He also points out that all the facts were known to the Department and therefore, the demands are clearly barred by time. He submits that the Revenue had proceeded in the matter subsequent to the explanation brought out by amendment to the Finance Act and the show cause notice has been issued subsequently. Therefore in terms of the Apex Court judgment rendered in the case of Laghu Bharati v. Union of India 1998 (112) ELT 365 (S.C.), the demand cannot be sustained as the explanation was inserted in the retrospective amendment of the Finance Act, 2000 which was not supported by the show cause notice issued before the amendment. This point has been dealt with by this Bench in the case of B.S.R. Refrigeration Ltd. (supra) and the appeal has been allowed. The ratio of the said decision is clearly applicable to the present case.
3. The learned JDR for the Revenue defends the impugned order and submits that the appellants have not pleaded any financial hardship and therefore, they should pre-deposit the duty amount.
4. On a careful consideration of the submissions made by both the sides, we notice that the Revenue had proceeded in the matter subsequent to the explanation brought out by amendment to the Finance Act and the show cause notice has been issued subsequently to project the demand. The period in question is earlier to the amendment to the Finance Act. In terms of the Tribunal judgment in the case of L.H. Sugar Factories Ltd. v. CCE which has been affirmed by the Apex Court as reported in 2005 (187) ELT 5 (S.C.) the demands are not sustainable on this count. Further more, the plea raised by the appellants that the security deposits which were shown as “Other Income” are returnable and is returned subsequently. The same was reflected in the Profit and Loss Accounts. In view of the having strong case in favour of the assessee, prima facie the stay application is allowed by granting waiver of pre-deposit of the amount and staying its recovery till the disposal of the appeal. As the amount involved in the matter is more than 05 Crores including the penalty, the appeal is listed for out of turn hearing on 11th June 2007.
5. The Miscellaneous application raising the additional grounds will be taken into consideration at the time of final hearing.
(Pronounced and dictated in the open court)