J.B.PARDIWALA

1. By way of this writ application under Articles 226 of the Constitution of India, the petitioner a partnership concern, engaged in the business of manufacturing and sale of cut and polished diamonds seeks to challenge the legality, validity and propriety of show-cause notice No.11/Commr./2011-12 issued by Commissioner, Service Tax-I, Mumbai, and thereby calling upon the petitioner to show cause as to why total Service tax of Rs.4,10,47,026/- (including service tax Rs.3,98,87,631/-, Education Cess of Rs.7,97,752/- and Higher Secondary Education Cess of Rs.3,61,643/-) should not be recovered under the proviso to Section 73 Clause 1 of the Finance Act, 1994 read with Section 68 and Section 66A of the Finance Act, 1994 read with Rule 3(iii) of the Taxation of Services (provided from Outside India and received in India) Rules, 2006 alongwith interest under Section 75 of the Act and penalty under Section 76, 77 and 78 of the Act.

2. Facts shortly stated be thus:

2.1 The petitioner is a partnership concern engaged in the business of manufacturing and sale of cut and polished diamonds. As per the case set up by the petitioner the rough diamonds are imported at Surat and are thereafter processed to produce polished diamonds in the production unit at Surat.

2.2 The department received information through their intelligence that the petitioner was remitting foreign currency to companies based outside India, for the service rendered by such foreign companies in the course of purchase of rough diamonds. Information also revealed that the petitioner was not paying service tax on such services received by them from outside India as is necessary under the provisions of Section 66A of the Finance Act, 1994.

2.3 On being called for, the petitioner submitted details of commission paid to M/s. Goldie International Ltd., London, U.K. in respect of purchase of the rough diamonds for the period from 2006-07 to 2010-11 vide letters dated 26.11.2007, 28.10.2008, 21.11.2008, 18.05.2009 and 07.06.2011. Petitioner vide letter dated 07.06.2011 also furnished details of value Added Service (VAS) paid to M/s. DTC.

2.4 On completion of the investigation, the department reached to the conclusion as under:

(A) The petitioner without obtaining service tax registration, have received 'Business Auxiliary Services' provided by M/s. Goldie International Ltd and have paid them consideration in foreign currency, as commission for their services, which is taxable with effect from 18.04.2006 on reverse basis in terms of Section 66A of the Finance Act, 1994 read with Rule 3(iii) of the Taxation of Services (provided from Outside India and received in India) Rules, 2006,

(B) The petitioner without obtaining service tax registration received 'Business Support Services' provided by DTC and paid them consideration in foreign currency, as 'Professional fees' towards the Value Added Services (VAS) provided by M/s. DTC, which is taxable with effect from 01.05.2006 on reverse basis in terms of Section 66A of the Finance Act, 1994 read with Rule 3(iii) of the Taxation of Services (provided from Outside India and received in India) Rules, 2006,

(C) The petitioner failed to declare the receipt of these taxable services to the jurisdictional officer and suppressed the correct nature of taxable services received by them with the intention to evade payment of Service Tax on the value of such taxable services,

(D) The petitioner failed to pay Service Tax of Rs.1,47,29,070.00 Edu.Cess of Rs.2,94,581.00 and Higher Secondary Edu.Cess of Rs.1,33,469.00 as detailed in Annexure A1 to this notice, on the 'Business Auxiliary Services' received by them from M/s. Goldie International Ltd. during the period from 18.04.2006 to 31.03.2011,

(E) The petitioner failed to pay Service Tax of Rs.2,51,58,561.00, Edu.cess of Rs.5,03,171.00 and Higher Secondary Edu.cess of Rs.2,28,174.00 as detailed in Annexure A2 to this notice, on the 'Business Support Services' received by them from M/s. DT