Union of India versus Amit Kumar Maheshwari

From: http://www.taxmann.net/Datafolder/flash/flashjud28012009_2.htm


HIGH COURT OF RAJASTHAN, JODHPUR BENCH

Union of India

v.

Amit Kumar Maheshwari

N.P. GUPTA AND KISHAN SWAROOP CHAUDHARI, JJ.

CENTRAL EXCISE APPEAL NOS. 70 & 74 OF 2006 AND 3, 26 & 54 OF 2007

DECEMBER 8, 2008

Section 80 of the Finance Act, 1994, read with section 37B of the Central Excise Act, 1944 - Penalty - Not to be imposed in certain cases - Whether Extraordinary Taxpayer Friendly Scheme issued vide D.O.F. No. 137/39/2004-CX-4 dated 20-9-2004 cannot be said to be statutory notification issued in exercise of power under section 37B and was only an administrative instruction issued to provide benefit to persons who had earlier failed to register themselves with department - Held, yes - Whether in view of above scheme, even if a person comes forward to apply for registration, and pays all arrears of tax and interest, before cut off date, i.e., 30-10-2004, he is conferred immunity from any sort of penalty - Held, yes - Whether, therefore, in that view of matter it cannot be said, that such immunity should be denied to person who had already got himself registered before promulgation of that Scheme - Held, yes [Paras 8, 9 & 42]

Circulars & Notifications : Government of India, Ministry of Finance D.O.F. No. 137/39/2004-CX4, dated 20-9-2004

Facts

The CBEC through Circular dated 20-9-2004 issued an amnesty scheme. The assessees were registered before promulgation of that scheme. They deposited their tax amount along with interest before expiry of the period provided in the aforesaid Amnesty Scheme, being 30-10-2004. However, penalty proceedings were initiated against the assessees. When the matters came before the Tribunal, it held that the assessees were entitled to the benefit of the scheme and, thus, the penalty imposed was set aside.

On appeal :

Held

There was no scheme, rather it was only a communication in the form of D.O. letter, from the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise and Customs, addressed to the Chief Commissioners, and enclose therewith certain proformas of application for registration, acknowledgement and declaration. [Para 7]

If the said scheme, or the communication dated 20-9-2004 is read in conjunction with section 37B, it is clear that same is not covered by section 37B. The communication emanated from the Hon’ble Finance Minister, who had launched extraordinary taxpayer friendly scheme, while section 37B does not envisage launching of any such scheme, rather it comprehends powers of the Board (Central Board of Excise and Customs) wherever it considers it necessary or expedient so to do, for the purpose of uniformity in the classification of excisable goods, or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions. In addressing communication dated 20-9-2004 the Central Excise Board had not even purported to consider any expediency or necessity, for the purpose of uniformity with respect to levy of duties of excise on such goods, to issue such orders, instructions and directions. Simply because the desire of the Hon’ble Finance Minister was published through conduit pipe of the Central Excise Board, it did not have the effect of clothing it with statutory powers, or to attach to it statutory efficacy available consequent upon section 37 and section 37B. Thus, it could not be said to be statutory notification, issued in exercise of powers under section 37B. [Para 8]

It was only an administrative instruction, issued by the Hon’ble Finance Minister, purportedly, to provide benefit to the persons, who earlier failed to register themselves with the department, and in substance was intended to cast the net of service tax wider and wider, and in order to augment the revenue, the concessions provided in the communication were sought to be thrown open. Obviously, therefore, the communication had to be read, interpreted, understood, and appreciated, with this spirit, viz., to provide benefit to the defaulters on the one hand, and to cast the net of service tax wider and wider, so also to augment the revenue, on the other hand. [Para 9]

With this preface, it might also be noticed that the term ‘Scheme’ as such has very many parameters to be complied with, while in the present case the communication simply conveyed launching of some extraordinary taxpayer friendly scheme, and no such scheme had seen the light of the day, except that communication, which only enclosed therewith certain proformas. As such it could not be said to be any ‘Scheme’, in true sense of the term. [Para 10]

It is the consistently established legal position, laid down by various Tribunals of the country, that in those cases, where the assessee was registered even before the commencement of the Amnesty Scheme, and had paid all dues of tax and interest before the cut off date given in the scheme, being 30-10-2004, he would be entitled to the benefit of the Amnesty Scheme. And, therefore, there was no occasion for instant High Court to unsettle the settled position, and now gave rise to upheaval, to generate litigation, even in the matters, which stood closed. [Para 38]

Even if the matter on merits was considered the communication dated 20-9-2004 was only an administrative instruction issued for the benefit of the service providers, who volunteered to get themselves registered, and had discharged all their liabilities of tax and interest, up to the cut off date, for providing immunity from penalty. That was beneficial part of the instruction for the service providers, while it was sought to be beneficial to the State, i.e. the revenue, viz., it was intended to cast the net of the service tax wider and wider, and to augment the revenue. Thus, the instruction was calculated with the motive to benefit both sides, the service provider as well as the revenue, and as such, was not a taxing statute. Therefore, it was required to be implemented in the manner, which was not discriminatory, and which was reasonable, obviously to both the parties. [Para 39]

If considered from that stand point, when the person who has not got registered till issuance of the communication, if is intended to be given the benefit of immunity from penalty, the person who has already got himself registered, and is in the default of payment of interest or tax, cannot be denied the immunity from penalty, provided of course, he strictly complies with the requirement of the communication, with regard to deposit of the amount, positively before the cut off date. [Para 40]

The communication was of 20-9-2004. In some judgments it had been referred to as 22-9-2004, while in some judgments it had been referred to as 23-9-2004. There might be a controversy, as to what was the starting point of the scheme, i.e., 20-9-2004 or 23-9-2004, or from the date the person concerned came in knowledge of it. The significance of that confusion was that if the interpretation sought to be projected by the revenue was taken, and if it was considered that the scheme commenced on 23-9-2004, then even the person, who might have got himself registered on 21-9-2004, and happened to be defaulter, would have to be denied the benefit of immunity, or even the person who got himself registered on 22-9-2004, and was a defaulter, would have to be denied the benefit of immunity, while on the other hand if it was taken to have commenced on 20-9-2004, then such person would get the benefit of immunity. Thus, the person even without knowledge of the scheme may have got himself registered on 21-9-2004, and would be in dilemma as to whether he was to get benefit of the immunity or not, such interpretation could not be put on the Amnesty Scheme. Obviously the communication dated 20-9-2004 did not prescribe the precise starting point of time of the scheme. [Para 41]

Carrying the things further logically, if the scheme was taken to have commenced on 20-9-2004, then the benefit was available to the person who gets himself registered on 20-9-2004, despite being defaulter for any length of time. The benefit could not be denied to a person who may be merely technically defaulter, and who in good sense, thought it proper to get himself registered on 19-9-2004 itself, and did not allow his default to continue for one more day. The interpretation sought to be projected by the revenue did not, thus, stand the scrutiny. On the other hand, a proper reading of the communication only showed that it was intended to provide immunity to the defaulters, who chose to deposit the arrears of tax and interest by the cut off date, and obviously, since for payment or deposit of the amount, the formalities of registration and declaration were necessary, the forms had been enclosed with the communication, and it had been directed that the declaration would be accepted, and they would be given spot registration without any sort of questions. Much of the stress laid on the requirement of submitting declaration could not be accepted for the simple reason that the forms were prescribed under the relevant Rules of Service Tax itself, the Application Form being ST-1, Acknowledgement also forming part of the same form. So far declaration proforma was concerned, if it were to be read, it would show that it was only in the nature of forwarding letter of the application for registration, and nothing beyond that. Thus, all that this so-called scheme meant was that even if a person came forward to apply for registration, and had paid all arrears of tax and interest, before cut off date, he was conferred with immunity from any sort of penalty. In that view of the matter, it cannot be said that the immunity should be denied to the person who had already got himself registered. [Para 42]

It was clearly mentioned that the scheme aimed to register all service providers on the basis of declaration, and with this, with conjunctive words ‘and who had earlier failed to register themselves’. The words ‘having earlier failed to register’ cannot be confined to mean earlier to 20-9-2004, or 23-9-2004, but are required to mean, or construed to mean, ‘who failed to register at appropriate time as required by the Act’. [Para 43]

Thus, considering the matter from any aspect whatever the view taken in CCE v. Mankodi Enterprises [2006] 3 STT 397 (Delhi - CESTAT) and Pankaj Oil Trading Corpn. v. CCE [2007] 9 STT 211 (New Delhi - CESTAT) could not be accepted, and the view taken in all other cases relied on by the assessees were required to be accepted. It was to be held, that the benefit of the circular dated 20-9-2004, did very much cover the case of the present assessees, as well. [Para 44]

Case review

Tele Tech Communication v. CCE [MANU/CE/8215/2007, dated 4-6-2007], Laxmichand Dharshi v. CCE [MANU/CM/7027/2006, dated 17-10-2006], AR.Sandeep C. Sikchi v. CCE [MANU/CM/353/2006, dated 4-9-2006], Arc. Dinesh Burad v. CCE & C [2008] 12 STT 47 (Mum. - CESTAT), CCE v. R.S. Vora [MANU/CM/334/2008, dated 27-6-2008], Care Electronics Ltd. v. CCE [2007] 10 STT 91 (Ahd. - CESTAT), CCE v. Kamlesh Kumar Agrawal [2008] 15 STT 490 (New Delhi - CESTAT), CCE v. R.K. Electronic Cable Network [2006] 3 STT 418 (New Delhi - CESTAT), Jay Security Services v. CC, CE & ST [2008] 15 STT 500 (Ahd. - CESTAT) and CCE v. Bharat Security Services & Worker’s Cont. [2007] 7 STT 13 (New Delhi - CESTAT) approved (para 44)

Pankaj Oil Trading Corpn. v. CCE [2007] 9 STT 211 (New Delhi - CESTAT) and CCE v. Mankodi Enterprises [2006] 3 STT 397 (New Delhi - CESTAT) disapproved (para 44).

Cases referred to

CCE v. Bharat Security Services & Worker’s Cont. [2007] 7 STT 13 (New Delhi - CESTAT) (para 4), Amit Kumar Maheshwari v. CCE [2006] 4 STT 303 (New Delhi - CESTAT) (para 4), CST v. Parson Tools & Plants AIR 1975 SC 1039 (para 12), Bharti Telecom Ltd. v. Commissioner of Customs AIR 2002 SC 74 (para 13), Union of India v. Wood Papers Ltd. [1990] 4 SCC 256 (para 15), CIT v. Modi Spg. & Wvg. Mills Co. Ltd. [1990] 53 Taxman 584 (SC) (para 16), Tele Tech Communication v. CCE [MANU/CE/8215/2007, dated 4-6-2007] (para 19), Laxmichand Dharshi v. CCE [2007] 7 STT 79 (Mum. - CESTAT) (para 20), AR. Sandeep C. Sikchi v. CCE [MANU/CM/353/2006, dated 4-9-2006] (para 21), Arc. Dinesh Burad v. CCE & C [2008] 12 STT 47 (Mum. - CESTAT) (para 22), CCE v. R.S. Vora [MANU/CM/334/2008, dated 27-6-2008] (para 23), Care Electronics Ltd. v. CCE [2007] 10 STT 91 (Ahd. - CESTAT) (para 24), CCE v. Kamlesh Kumar Agrawal [2008] 15 STT 490 (New Delhi - CESTAT) (para 25), CCE v. R.K. Electronic Cable Network [2006] 3 STT 418 (New Delhi - CESTAT) (para 26), Jay Security Services v. CC, CE & ST [2008] 15 STT 500 (Ahd. - CESTAT) (para 27), CCE v. Mankodi Enterprises [2006] 3 STT 397 (New Delhi - CESTAT) (para 27), Pankaj Oil Trading Corpn. v. CCE [2007] 9 STT 211 (New Delhi - CESTAT) (para 27), Soldiers Industrial Security Agencies v. CCE & C [2008] 12 STT 254 (Mum. - CESTAT) (para 27), CCE v. Industrial Army [2008] 16 STT 341 (New Delhi - CESTAT) (para 29) and C.K. Gangadharan v. CIT [2008] 172 Taxman 87 (SC) (para 37).

V.K. Mathur and Rishabh Sancheti for the Appellant. Vikas Balia and Tribhuvan Gupta for the Respondent.