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2018 Supreme(Bom) 2979
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Akil Kureshi, M.S. Sanklecha, JJ.
Nirmal Seeds Pvt. Ltd. - Appellant
Versus
Commissioner Of Central Excise, Nashik - Respondent
Central Excise Appeal No.238 of 2017
Decided On : 05-12-2018
Prakash Shah a/w Rajesh Ostwal, Jas Sanghavi I/b PDS Legal, for the Appellant; Pradeep S. Jetly a/w Amol Joshi, Advocates, for the Respondent
Headnote:
Finance Act, 1994 - Sections 83, 35G and 78 - Freight charges in - sale invoices - Show cause notice - Whether in the facts and circumstances of the case and in law, the Tribunal is justified in confirming the demand of service tax from the appellants on freight charges in terms of Rule 2(1)(d)(v) of Service Tax Rules, 1994 - Whether in facts and circumstances of case and in law, the Tribunal is correct in invoking extended period of limitation and upholding the imposition of equivalent penalty under Section 78 of the Finance Act, 1994 along with interest - appellant is engaged in production of seeds and fertilisers - Appellant supplies its said goods to its dealers, in turn sell it to the ultimate consumers time of entering into sale price of the goods includes freight charges to be paid by the appellant – Held, Case as in that case unlike in this case finding has been reached consignees were paying freight on its own behalf and not on behalf of the consignor as in this case - Basis of definition as provided in Rule 2(1) (d)(v) of the Service Tax Rules, the payment made by the agent would be a liability of the principal for the purposes of service tax - Extended period of limitation is concerned – Court find that once the authorities have found on facts that there was an arrangement arrived at between the parties so as to reduce the payment of service tax, invocation of extended period of limitation cannot be faulted with - It was held on facts that there was suppression - Nothing has been shown to us that on these facts, that the finding is perverse - appeal is dismissed
ORDER
Akil Kureshi, J. - This appeal under Section 83 of the Finance Act, 1994 r/w Section 35G of the Central Excise Act, 1944 (the Act) challenges the order dated 28th February, 2017 passed by the Customs, Excise and Service Tax Appellate Tribunal (the Tribunal).
2. The appellant has urged the following two questions of law for our consideration :
(i) Whether in the facts and circumstances of the case and in law, the Tribunal is justified in confirming the demand of service tax from the appellants on freight charges in terms of Rule 2(1)(d)(v) of Service Tax Rules, 1994?
(ii) Whether in the facts and circumstances of the case and in law, the Tribunal is correct in invoking extended period of limitation and upholding the imposition of equivalent penalty under Section 78 of the Finance Act, 1994 along with interest?
3. The appellant is engaged in production of seeds and fertilisers ("said goods" for short). The appellant supplies its said goods to its dealers, who in turn sell it to the ultimate consumers. At the time of entering into sale, the price of the goods includes freight charges to be paid by the appellant. The appellant has no separate written contract / agreement between itself and its dealers with regard to the sale including regarding payment of freight charges incurred while transporting the goods from its premises to the dealer''s premises.
4. During the course of audit, the Department noticed that in some of sale invoices issued by the appellant showed that they were deducting freight charges from the total invoice amount with a note that consignee to pay. On detail scrutiny of all the documents, it was found that the freight amount is reduced from the contract price on the ground that it was paid by the consignee i.e. the dealer. The show cause notice reproduced details of the sample invoices and the corresponding documents which form the basis of the showcause notice are as under :-
| Sr. No. | Invoice No. & Date | Name of Consignee | Subtotal amount in Invoice | Less freight charges shown in Invoice | Total bill amount shown in Invoice | Balance freight to pay shown in corresponding Dispatch cum Proforma Invoice | Freight reimbursement amount as shown in Freight reimbursement Ledger account |
| 1 | 00711 dated. 26.08.2009 | Rakonde K.S.K. Kinwat | 235412.50 | 3100 | 232313 | 3100 | 3100 |
| 2 | 00716 dated. 26.08.2009 | Shilpa K.S.K. Hadgaon | 126725.00 | 2800 | 123925 | 2800 | 2800 |
| 3 | 00717 dated. 26.08.2009 | Balaji Fertilisers, Dharmabad | 320975.00 | 2500 | 318475 | 2500 | 2500 |
| 4 | 02139 dated. 31.08.2009 | Umesh K.S.K. Aurangabad | 357408.00 | 4000 | 351408 | 4000 | 4000 |
From the above, it is the case of the Revenue that the appellant is reimbursing the freight amount to their consignees to the extent freight is paid by the consignee. Besides, it was also found that the appellant was also issuing credit notes for reimbursement of freight charges. Thus, the case of the Revenue is that the freight is ultimately paid by the appellant i.e. the consignor even in the cases where invoices show balance freight amount to be paid by the consignee dealer. This as the
