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					                                                                                       OIO No. 58/JC/2012
                                                                                         Dated :11.05.2012


                        lhek “kqYd ,oa dsUnzh; mRikn “kqYd vk;qDrky;]
                                  dsUnzh; mRikn “kqYd Hkou]
                                jsl dkslZ] fjax jksM jktdksV-360001
                  OFFICE OF THE COMMISIONER OF CUSTOMS & CENTRAL EXCISE
                            RACE COURSE RING ROAD, RAJKOT-360001
F. No.V.ST/15-253/Adj/2011                By RPAD/HAND DELIVERY

Ekwy vkns”k Lka.                           vkns”k dh frfFk                                    11.05.2012
                                           Date of Order:-
Order in Original NO.
 58 /JC/2012                               tkjh djus dh frfFk                                 11.05.2012
                                           Date of Issue:-
                                                                       ,e- KkulqUnje
vkns”kdrkZ dk uke :                                                        संयक्त आयक्त
                                                                              ु     ु
Passed by:
                                                              ds0 m-0 “kqYd vk;qDrky;]
                                                                      jktdksV
ds lanHkZ esa :                            M/s AVB Handling,
In the matter of                           Office No. 15, Ground Floor,
                                           Gokul Park,
                                           Plot No. 356, Ward No. 12-B,
                                           Gandhidham
dkj.k crkvksa uksfVl la-                   SCN No.V.ST/AR-G’dham/JC/171/2011 dated 26.09.2011

&frfFk
Show Cause Notice No. & Date.

 1-       ;g izfrfyfi ml O;fDr dks futh mi;ksx ds fy, fu%'kqYd nh xbZ gSA ftls ;g tkjh fd;k x;k
 gSA
 1.       This copy of order is granted free of charges to the person to whom it is issued.

 2-     bl vkns'k ls ;fn dksbZ O;fDr vlarq"V gS rks bl vkns'k ds fo:) fuEufyf[kr dks vihy dj
 ldrk gSA&vk;qDr ¼vihy½ lhek ,oa dsUnzh; mRikn 'kqYd] jsl dkslZ fjax jksM jktdksVA
 2.      Any person deeming himself aggrieved by this order may appeal against this order to the Commissioner
 (Appeals), Customs & Central Excise, Central Excise Bhavan, Race Course Ring Road, Rajkot.

 3-     vihy dk QkeZ ,l-Vh-&4 nks izfr esa Hkjk tk, ,oa mlds lkFk fu.kZ; dh izfrfyfi ;k lsokdj
 fu;e] 1994 dh dye 8 esa fofufnZ"V vuqlkj vkns'k ds fo:) vihy dh izfrfyfi gksuh pkfg,A
 3.       The Appeal should be filed in form ST-4 as per Rule 8 of Service Tax Rules, 1994 and it shall be signed by
 the person as specified in Rule 3 (2) of the Central Excise (Appeals) Rules, 2001.

 4-     ikVhZ }kjk bl vkns'k dks O;fDrxr izkIr fd, tkus dh rkjh[k ls ;k Mkd }kjk izkfIr dh rkjh[k
 ls rhu eghus ds vanj vihy Qkby dh tkuh pkfg,A
 4.      The appeal should be filed within three months from the date of receipt of this order. [Section 85 of the
 Finance Act, 1994].

 5.     blds lkFk fuEufyf[kr dkxtkr gksuh pkfg,A
 5.       The appeal should be accompanied by:

 ¼v½ ,slk vkns'k dh izfrfyfi ;k nwljs dh d izfrfyfi ftl ij uhps n'kkZ, v?khu fu/kkZfjr dksVZ
 dh Qhl LVsEi gksuh pkfg,A
 (a)     Copy of this order which should bear court fee stamp as prescribed under Schedule 1 of Article 6 of the
 Court Fee Stamp Act, 1870, as under:
 (i) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls de gks rks :i;s 00-25 gksA

 6. lsok dj ]naM ¼isuYVh½ vkfn ds Hkqxrku dk izek.k A
 Proof of payment of duty, penalty etc., should also be attached to the original form of appeal.

 BRIEF FACTS OF THE CASE :




                                                                                                     Page 1 of 18
                                                              OIO No. 58/JC/2012
                                                                Dated :11.05.2012

      M/s. AVB Handling, Office No. 15, Ground Floor, Gokul Park, Plot No.
356, Ward No. 12-B, Gandhidham (hereinafter                  referred    to   as   the
"Noticee”)     are   engaged   in    providing   services   falling   under   Section
65(105)(k) of the Finance Act, 1994 under the category of “Manpower
Recruitment or Supply Agency Service”, since 2006-07. The noticee have
obtained service tax registration under the taxable category of “Manpower
Supply”   on    26.06.2006     and    are   holding   Service    Tax    Registration
Certificate No. AR/GIM/MRA-019/06-07.


2.    During the course audit of the records of the noticee, it was noticed
that they were engaged in supplying of manpower to various parties for
carrying out cargo handling work for import cargo as well as export
cargo. However, while supplying manpower to cargo handling agents for
export cargo they did not charge or pay service tax. It was also learnt
that the noticee had changed and replaced a couple of invoices already
issued by them for the period 2006-07 to falsely establish that they had
carried out work of Cargo handling and not the manpower supply and had
thereby tried to evade service tax liability. Accordingly, on the basis of the
said information, an inquiry was initiated against the noticee.


3.    During the course of inquiry, a statement of Shri Bheraram Harjibhai
Gujar, Proprietor of the noticee was recorded on 27.04.2011, wherein, he
inter alia stated that they had started M/s. AVB Handling, Gandhidham since
2006-07; that they carried out work of supply of labourers; that the
labourers/workers supplied by them carried out work of their clients; that
the labour supplied by them carried out work in three shifts at Kandla Port
for various parties; that they were preparing bill for the labour charges on
the basis of shift and/or weight, i.e. unit of work; that for supplying a
labourer they normally charged Rs.100/- to Rs.150/- per one person for one
shift; that the charges for the female labourers were less as compared to the
male labourers; that they had obtained Service Tax Registration bearing no.
AR/GIM/MRA-019/06-07 under the category of ‘Manpower Supply’; that they
have filed all the ST-3 returns during the period from 2006-07 to 2010-11;
that the labourers supplied by them were used by their customers for both
types of work i.e. the work of export of goods as well as for import of goods;
that there are approximately 50 labourers working with them and as and
when necessary they used to engaged more labourers.



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                                                        OIO No. 58/JC/2012
                                                          Dated :11.05.2012

3.1   On being asked, he further stated that they had neither charged
service tax nor paid the same on invoices issued for labourers supplied for
work of export before June-2010, because they believed that service tax for
supplying labourers was not required to be paid, as they have carried out
such type of work on the basis of weight; that they have charged and paid
service tax on all the invoices issued after July-2010, as they carried out
work of labour supply in port area and as per the new definition of Port
Services, they were required to pay service tax on all the invoices issued
under the category of Port Service; that they have not applied for service tax
registration under the category of Port Service till the date of recording of
the statement; that they paid service tax under the category ‘Manpower
Supply’ during the year 2010-11. He assured to apply for service tax
registration for the category of port service. He further stated that they had
obtained service tax registration under the category of Manpower Supply,
after consulting their consultant and as per his advice they had paid
whatever service tax was required to be paid and had also observed the
laws; that being a business man they were not aware of law in toto.



3.2   On being asked about Invoice No. 537, 538, 539 dated 18.01.2011
and Invoice No. 601 to 605 dated 10.02.2011, which were issued in the
name of M/s. Shakti Clearing Agency, Gandhidham and remained unsigned,
he stated that the same were changed by him and again issued showing the
description of the work carried by him on the basis of Metric ton and the
name of the service receiver was changed as M/s. Vinayak Logistic, which
was the sister concern of M/s. Shakti Clearing.     During the course of his
statement he submitted copy of Service Tax Registration Certificate dated
26.06.2006, copies of ST-3 returns filed by them during the period from
2006-07 to 2010-11, copies of Audited Balance Sheet and Profit & Loss
Account for the year 2006-07 & 2008-09, copies of Income Tax Returns for
the period from 2006-07 to 2009-10 and copies of provisional Balance Sheet
and Profit & Loss account for the Financial Year 2010-11, Income Ledgers for
the Financial Years 2008-09 & 2010-11 and copies of invoices issued during
the Financial Year 2006-07, 2008-09 & 2010-11 and assured to produce
remaining missing invoices within next seven days. As regard the invoices
issued for the Financial Year 2007-08 & 2009-10, he stated that they had
not carried out any activity during the said years, hence, they have not
issued any invoices during the said years, and therefore he could not submit
the same.

                                                                  Page 3 of 18
                                                            OIO No. 58/JC/2012
                                                              Dated :11.05.2012

4.      During   the   course   of   inquiry,   a   statement   of   Shri   Chandan
Chhaganbhai Maheshwari, Director of M/s. Maheshwari Handling Pvt. Ltd.,
Plot No. 640, 12-C, Gandhidham was recorded on 06.04.2011, wherein, he
inter alia stated that they have business connection with M/s. AVB Handling,
Gandhidham since the year 2006; that M/s. AVB Handling was providing
them the services of Supply of Labourers and Workers; that M/s. AVB
Handling charged on the basis of per labour supplied to them; that the rate
of labourers/workers usually varied from Rs.50 to Rs.125 per labourer per
day; that depending upon the circumstances and nature of work, M/s. AVB
Handling sometime charged on the basis of weight i.e. Rs.15 to 25 per
metric tons as labour charges; that the labourers provided by them were
generally used inside port area for jetty cleaning, plot cleaning, hatch
trimming etc.; that M/s. AVB Handling were not charging any service tax on
the bill raised; that M/s. AVB Handling has provided service to them by
supplying labour-force only. He submitted the Ledger of M/s. AVB Handling
for the period from 2005-06 to 2010-11 and sample invoices/bills raised by
M/s. AVB Handling. On being asked about providing of labourers by M/s. AVB
Handling in the case of MOP, MAP and DAP i.e. various types of fertilizers, he
stated that such items were imported and the invoices in respect of the said
items were of imported goods only.


5.      It appeared that the noticee failed to submit all the invoices issued by
them for the Financial Years 2006-07 to 2010. On the basis of invoices
submitted by the noticee, it was seen that the income shown in the Profit &
Loss Account was higher than the invoices provided by them for the
Financial Year 2006-07, 2009-10 and 2010-11 and the income shown in the
Profit & Loss Account was less than the invoices provided by them for the
Financial Year of 2007-08 & 2008-09. Year-wise figures of amount of invoice
submitted are as under:
                                                                     (Amt. in Rs.)
                                                                Amount of Invoice
     Financial                   Income as per Profit &
                  Annexure                                          submitted
       Year                        Loss account (Rs.)
                                                                      (Rs.)
     2006-07       Ann-I                         11091416          10965913
     2007-08      Ann-II                          2106973           2171602
     2008-09      Ann-III                        14977420          15016150
     2009-10      Ann-IV                          2006951                  0
     2010-11      Ann-V                          27540526          26322816
                     Total                      57723286          54476481




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                                                           Dated :11.05.2012

6.    It further appeared that the noticee failed to produce copies of all the
invoices issued by them for the aforesaid period and also failed to produce
any documentary evidence to prove on which invoices they have not paid
service tax. Therefore as per Section 72 of the Finance Act, 1994, the
amount of income equivalent to the amount of income shown in their Profit
& Loss Account was required to be reckoned for the purpose of arriving at
the total taxable value for demanding service tax on the differential value on
which they had not paid service tax.


7.    It appeared from the statement of the proprietor of the noticee that
they were engaged in rendering of the service of Supply of Labourers and
the labourers supplied by them carried out work for their clients as
instructed by their clients. The noticee was also preparing bill for the labour
charges on the basis of working shift and/or per unit weight.          It also
appeared that they had obtained registration for service tax under the
category of ‘Manpower Supply’ and they had filed all the ST-3 returns during
the period from 2006-07 to 2010-11 under the same category.


7.1   It also appeared from the statement dated 06.04.2011 of Shri
Chandan Chhaganbhai Maheshwari, Director of M/s. Maheshwari Handling
Pvt. Ltd., Gandhidham – one of the service recipients -        that M/s. AVB
Handling (the noticee) had provided service of supplying labour force only. It
appeared that the noticee were not engaged in the work of cargo handling
as being made out by them but their work actually was supply of manpower
to carry out the work as per the directions given by the customers or clients.


7.2   It also appeared from the facts stated hereinabove, that the noticee in
order to cover up and camouflage their actual nature of service provided by
them changed/replaced their invoices, already issued, showing description
and nature of the work carried out by them from “per labour” to “per metric
ton” basis to evade service tax liability, projecting as if that the said work
carried out by them was meant for export of goods and hence eligible for
exemption from the service tax, under the category of Cargo Handling
Services for export goods. It appeared that the noticee were actually
providing services of “Man Power Supply” and not “Cargo Handling” as
attempted to be shown by them, by tampering and doctoring invoices/bills
already issued. Thus, changing/replacing/tampering invoices and / or issuing
invoices showing description of the goods as “per metric ton” can not

                                                                   Page 5 of 18
                                                               OIO No. 58/JC/2012
                                                                 Dated :11.05.2012

change classification/category that service provided by them was of
Manpower Supply. On scrutiny of the invoices submitted by the noticee, it
also appeared that in many invoices, the service was provided in relation to
import of goods. However, in such cases also, the noticee had not charged
or paid service tax. Therefore their claim to categorize the service provided
by them under Cargo Handling Service, meant for export, is nothing but
fraudulent misrepresentation of the facts of the case and services rendered
by them.


8.   It appeared that the definition of ‘Man Power Supply’ as provided in
the Act, does not state as to how and in which mannner the bill/invoice has
to be issued/prepared for collecting service charge and how the description
of the work has to be shown in the invoices. For the sake of convenience and
efficacy, if the invoices were issued on ‘per metric ton’ or ‘per unit of the
work’ basis for the labourers supplied by them, it can not be said that the
noticee provided cargo handling service. It appeared that they were
supplying manpower to their clients, out of the dedicated team of manpower
maintained by them and their clients used such labour force as per their
requirement and wish. This fact had also been admitted by the proprietor of
the noticee in his statement dated 27.04.2011. Thus, it appeared that the
services rendered by the noticee were appropriately classifiable under the
category of “Man Power Recruitment & Supply Agency Services” and not
under any other category.


9.   It appeared from the paras supra that the noticee had rendered the
services of ‘Manpower Supply’ service to various clients, which is a taxable
activity and is classifiable under the category of “Manpower Recruitment or
Supply Agency” as defined under Section 65(105)(68) of the Finance Act,
1994. The definition of the same reads as below:-


             Section 65(68) "manpower recruitment or supply
             agency” means any person engaged in providing any
             service, directly or indirectly, in any manner for
             recruitment or supply of manpower, temporarily or
             otherwise, to any other person.”


     A     person   carrying   out   activities   satisfying    the   definition   of
‘Manpower Recruitment or Supply Agency’ is liable to pay service tax in
respect of the ‘taxable service’ as defined in the Finance Act, 1994.
Section 65 (105) (k) of Finance Act, 1994 defines,               “taxable service”
                                                                        Page 6 of 18
                                                                      OIO No. 58/JC/2012
                                                                        Dated :11.05.2012

means any service provided or to be provided – to any person, by a
manpower recruitment or supply agency in relation to the recruitment or
supply of manpower, temporarily or otherwise, in any manner.


10.     Whereas, it appeared that the noticee had rendered services totally
amounting        to       Rs.5,77,23,286/-         and     realized       total     amount        of
Rs.5,23,09,418/-, as calculated from the total billed amount and amount of
sundry debtor shown in profit & loss account for the year 2006-07 to 2010-
11. The details are as under:
                                                                                   (Amt. in Rs.)
       Financial Year     2006-07        2007-08   2008-09    2009-10       2010-11       Total
       Closing Balance
       of Sundry
       Debtor in the
       year previous
 A     F.Y.                         0    4602905    2731264   3425425       1507860
       Billed / Sales
       Amount as per
       Balance Sheet /
       P & L for
 B     current F.Y.       11091416       2106973   14977420   2006951      27540526    57723286
       Closing Balance
       of Sundry
       Debtor in the
 C     current F.Y            4602905    2731264    3425425   1507860       5413868
       Realised
       amount in the
       year current
 D     F.Y (A+B-C)            6488511    3978614   14283259   3924516      23634518    52309418



11.     From facts stated above and the provisions of the law, it appeared that
the noticee had rendered services under the category of ‘Manpower
Recruitment or Supply Agency Service’ to various clients during the period
from     2006-07         to    2010-11      and    had    realized    a    total    amount        of
Rs.5,23,09,418/-, as income thereof.                     However, the noticee had paid
service tax on total amount of Rs.3,96,24,558/- only, during the period from
April-2006 to March-2011, as reflected in the ST-3 returns filed by them
during the said period.             Thus, it appeared that the noticee had not paid
service tax on the differential amount of Rs.1,26,84,860/-, which was
required to be paid by them along with interest. Year-wise details of the
same are as tabulated below:
                                                                           (Amt. in Rs.)

                                            Amount on which they      Differential Amount
                              Amount
      Financial Year                        have paid service tax      on which Service
                              realised
                                             as per ST-3 Returns         Tax is payable

        2006-07                6488511                     5524514                    963997
        2007-08                3978614                      838195                   3140419
        2008-09               14283259                    11996934                   2286325
        2009-10                3924516                     1208320                   2716196
                                                                                     Page 7 of 18
                                                               OIO No. 58/JC/2012
                                                                 Dated :11.05.2012

      2010-11          23634518                 20056595                3577923
       Total           52309418                 39624558               12684860


      Thus, it appeared that the noticee failed to pay the applicable service
tax amounting to Rs.14,92,988/-, on the said differential amount received
by them for rendering services for Supply of Manpower to various clients.
The service tax of Rs.14,92,988/- payable on the differential taxable value
was calculated as per the Annexure – B attached to the show cause notice.


12.   Whereas, it appeared that the noticee at no point of time disclosed
to the Department, in any manner, that they were short paying service
tax. This fact was only unearthed during the course of audit and
subsequently when full-fledged inquiry was initiated against them and
when the statement of proprietor of the noticee was recorded on
27.04.2011      and   he   admitted   the   facts   therein.    The   noticee   also
replaced/altered and tampered with the description shown in the invoices
to misguide the investigation and to cover up their service being provided
under Manpower Supply Service. In view of the above, it appeared that
the noticee had deliberately suppressed the material facts from the
department, so as to avoid payment of service tax. It, therefore,
appeared to be a fit case for invoking extended period under the
provisions of Section 73(1) of the Finance Act, 1944. Accordingly, service
tax of Rs.14,92,988/- is liable to be recovered from the noticee under
proviso to Section 73(1) of the Finance Act, 1994 along with interest
under Section 75 of the Finance Act, 1994.


13.   Further as per Section 68 of the Finance Act, 1994, ‘every person
providing taxable service to any person shall pay service tax at the rate
specified in Section 66 in such manner and within such period as may be
prescribed’. The manner and period of payment of Service Tax has been
prescribed under Rule 6(1) of the Service Tax Rules, 1994. In the present
case, it appeared that the noticee had not paid the service tax in the rate,
manner and period prescribed, which was resulted into non payment of
service tax amounting to Rs.14,92,988/- as detailed in paras supra, and
thereby contravened the provisions of Section 68 of the Act, read with
Rule 6 of the Service Tax Rules, 1994.


14.   Further, as per Section 70 of the Finance Act, 1994, ‘every person
liable to pay the service tax shall himself assess the tax due on the

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                                                               Dated :11.05.2012

services provided by him, and furnish a return in such form and in such
manner and at such frequency as may be prescribed’. The form, manner
and frequency of return are prescribed under Rule 7 of the Service Tax
Rules, 1994. In the present case, it appeared that the noticee had failed
to assess the tax properly due on the services provided by them, as
discussed in paras supra, and also failed to file correct ST-3 during the
period from 2006-07 to 2010-11 and thereby appeared to have violated
the provisions of Section 70 of the Finance Act, 1994 read with Rule 7 of
the Service Tax Rules, 1994.


15.   In view of the foregoing paras, it appeared that the noticee have
contravened the following provisions of the Act and rules made thereunder:

      (i)    the provisions of Section 68 of the Finance Act, 1994, read with
             Rule 6 of the Service Tax Rules, 1994, inasmuch as they have
             not discharged their service tax liability on the                amounts
             received by them; and
      (ii)   Section 70 of the Finance Act, 1994, read with Rule 7 of the
             Service Tax Rules, 1994 in as much as they failed to assess their
             correct tax liability and also failed to file correct returns;


16.   In view of the above, it appeared that the noticee had not paid Service
Tax of Rs.14,50,625/-, Education Cess of Rs.29,013/- & Secondary & Higher
Secondary     Education     Cess    of   Rs.13,350/-,     totally   amounting      to
Rs.14,92,988/-, and therefore the same appeared to be recoverable under
proviso to Section 73(1) of the Finance Act, 1994 along with interest under
Section 75 of the Finance Act, 1994. It also appears from the facts stated
hereinabove that the noticee had suppressed the material facts from the
department with intent to evade the payment of service tax and also,
contravened various provisions of the Act/ Rules, as mentioned in paras
supra and therefore, have rendered themselves liable for penal action under
Section 76, Section 77 & Section 78 of the Finance Act, 1994.



17.   Therefore,     a    show     cause     notice     bearing     no.     V.ST/AR-
GND/JC/171/2011 dated 26.09.2011 was issued to M/s. AVB Handling,
Office No. 15, Ground Floor, Gokul Park, Plot No. 356, Ward No. 12-B,
Gandhidham, Kutch, asking them to show cause to the Joint Commissioner,
Central Excise, H.Q., Rajkot having office at 6th Floor, Central Excise Bhavan,
Race Course Ring Road, Rajkot within 30 days from the receipt of this notice
                                                                          Page 9 of 18
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                                                                Dated :11.05.2012

as to why: -

         (i)     Service Tax of Rs.14,50,625/-, Education Cess of Rs.29,013/- &
                 Secondary & Higher Secondary Education Cess of Rs.13,350/-,
                 totally amounting to Rs.14,92,988/- (Rs. Fourteen lakh Ninety
                 Two thousand, Nine hundred Eighty Eight only), should not be
                 recovered under Section 73(1) of the Finance Act, 1994;
         (ii)    Interest at the applicable rate on the said amount of Service tax,
                 should not be recovered from them under Section 75 of the
                 Finance Act, 1994;
         (iii)   Penalty should not be imposed upon them under Section 76 of
                 the Finance Act, 1994;
         (iv)    Penalty should not be imposed upon them under Section 77 of
                 the Finance Act, 1994;
         (v)     Penalty should not be imposed upon them under Section 78 of
                 the Finance Act, 1994;



DEFENCE SUBMISSION AND PERSONAL HEARING


18.        The noticee has not furnished any written defence reply.         However
they were given opportunities for personal hearing vide letter 18.01.2012,
intimating the dates 15.02.2012, 16.02.2012, 17.02.2012, vide letter dt.
24.02.2012 intimating the dates 05.03.2012, 06.03.2012, 07.03.2012, vide
letter     dt.   12.03.2012    intimating   the   dates   20.03.2012,   21.03.2012,
22.03.2012 and vide letter dt. 16.04.2012 intimating the dates 30.04.2012,
01.05.2012, 02.05.2012. However even after giving them four opportunities
across a two/three day period no authorized person turned up for the
personal hearing.


DISCUSSION AND FINDINGS:



19.      I have carefully gone through the facts of the case on record. Since
the noticee have neither filed any written reply nor appeared for a personal
hearing, I am deciding the case based on the records on file.



20.      I find that the noticee have registered themselves with the Service
Tax Department on 26.06.2006 under the category of service ‘Manpower
Supply’ and are having Registration No. AR/GIM/MRA-019/06-07.

                                                                        Page 10 of 18
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                                                           Dated :11.05.2012



21.   During the course of investigation, it was observed that the noticee
were engaged mainly in supply of labours to their clients to carry out the
work at Kandla Port for which the noticee were preparing bills for the labour
charges on the basis of shift and/ or weight i.e. unit of work. The noticee
had started the business of supply of labours to various clients since 2006-
07 and for this they normally charged Rs.100/- to Rs.150/- per one person
for one shift.


21.1 It is observed that Shri Bheraram Harjibhai Gujar, Proprietor of the
noticee in his statement dated 27.04.2011 has stated that the noticee were
engaged in the business of supply of labours/ workers to various clinets for
carrying out work in three shift at Kandla Port and the noticee were
registered with the service tax department under the category of ‘Manpower
Supply’ Service. He has also stated that they have filed all the ST-3 Returns
during the period from 2006-07 to 2010-11.         He has admitted that the
labourers supplied by them were used by their customers for both type of
work i.e. the work of export cargo of goods as well as for import of goods.
He has further stated that they had neither charged service tax nor paid the
same for work of export before June-2010 because they believed that
service tax for supplying labourers was not required to be paid as they have
carried out such type of work on the basis of weight. He has stated that
they have charged and paid service tax on all the invoices issued after June-
2010 as they carried out work of supply of labour supply in Port Area and as
per the new definition of Port Service, they were required to pay service tax
on all the invoices issued under the category of Port Service.


21.2 It is further observed Shri Chandan Chhaganbhai Maheshwari,
Director of M/s Maheshwari Handling Pvt. Ltd., to whom the noticee were
supplying labourers / workers, in his statement dated 6.4.2011 has stated
that the noticee were providing the service of labourers / workers and for
that they have charged Rs.50 to Rs.125 per labour per day. He has also
stated that depending upon the circumstances and nature of work, the
noticee sometime charged on the basis of weight i.e. Rs.15 to Rs.25 per
metric ton as labour charges.        He has further stated that the labourers
provided to them were generally used inside port area for jetty cleaning,
plot cleaning, hatch trimming etc.



                                                                 Page 11 of 18
                                                         OIO No. 58/JC/2012
                                                           Dated :11.05.2012

22.   It is observed from the statement of the proprietor of the noticee that
they were engaged in rendering of the service of supply of labourers who
carried out work for their clients as per instruction of their clients.    The
noticee were raising bills for the labour charges on the basis of working shift
and /or per unit weight.     Further, from the statement of Shri Chandan
Chhaganbhai Maheshwari, Director of M/s Maheshwari Handling Pvt. Ltd.,
Gandhidham-one of the service recipient, it is observed that the noticee had
provided service of supplying of labour force only.


23.   It is seen that the noticee in order to cover up the actual nature of
service provided by them from “per labour” to “per metric ton” basis to
evade service tax liability, projecting as if that the said work carried out by
them was meant for export of goods and hence eligible for exemption from
the service tax, under the category of ‘Cargo Handling Service’ for export
goods. I find that the proprietor of the noticee in his statement dated
27.04.2011 has admitted the fact that they have changed invoice bearing
nos. 537, 538, 539 dated 18.01.2011 and invoice bearing nos. 601 to 605
dated 10.02.2011 in the name of M/s Vinayak Logistic by showing the
description of the work carried out by them on the basis of Metric Ton,
which were actually issued in the name of M/s Shakti Clearing Agancy.       In
fact, the noticee were actually providing services of “Manpower Supply” and
not “Cargo Handling” as attempted to be shown by them, by tempering
invoices / bills already issued. Therefore, changing / replacing/ tampering
invoices or issuing invoices showing description of the goods as “per metric
ton” can not change classification /category of service from “Manpower
Supply” to “Cargo Handling Service”.    It is also seen that in many invoices,
wherein service was provided in relation to import of goods, the noticee had
not charged or paid service tax. Hence the noticee’s claim to categorize the
service provided by them under Cargo Handling Service, meant for export,
is nothing but misrepresentation of the facts of the case and services
rendered by them. To appreciate the issue better, I reproduce the definition
of ‘Manpower Recruitment & Supply Agency Service’ as defined under
Section 65(68) of the Finance Act, 1994:


            Section 65(68) "manpower recruitment or supply
            agency” means any person engaged in providing any
            service, directly or indirectly, in any manner for
            recruitment or supply of manpower, temporarily or
            otherwise, to any other person.”


                                                                  Page 12 of 18
                                                                OIO No. 58/JC/2012
                                                                  Dated :11.05.2012

        A   person   carrying   out   activities   satisfying    the     definition   of
‘Manpower Recruitment or Supply Agency’ is liable to pay service tax in
respect of the ‘taxable service’ as defined in the Finance Act, 1994.
Section 65 (105) (k) of Finance Act, 1994 defines,                 “taxable service”
means any service provided or to be provided – to any person, by a
manpower recruitment or supply agency in relation to the recruitment or
supply of manpower, temporarily or otherwise, in any manner.


23.2 The definition of Manpower Supply as provided in the Act, does not
state as to how and in which manner the bill/ invoice has to be issued /
prepared for collecting service chargeand how the description of the work
has to be shown in the invoices. Further, invoices issued on ‘per metric ton’
or ‘per unit of work’ basis for the labours supply cannot be said the noticee
was providing cargo handling service. The proprietor of the noticee in his
statement dated 27.04.2011 has admitted the fact that they were supplying
manpower to various clients who used this manpower as per their
requirement.    Therefore, I hold that the services rendered by the noticee
are rightly classifiable under the category of ‘Manpower Recruitment &
Supply Agency Service’ as defined under Section 65(68) of the Finance Act,
1994.       It is observed from the records that the noticee had rendered
services totally amounting to Rs.5,77,23,286/- and realized total amount of
Rs.5,23,09,418/- as calculated from the total billed amount and amount of
sundry debtor shown in Profit & Loss Account for the               year 2006-07 to
2010-11. However, the noticee have paid the service tax on total amount
of Rs.3,96,24,558/- only, during the period from April-2006 to March-
2011m as reflected in the ST-3 returns filed by them during the said period.
Thus, the noticee have not paid service tax of Rs.14,92,988/- on the
differential amount of Rs.1,26,84,860/-, as tabled below-
                                      TABLE
                                                            (Amt. in Rs.)
                           Amount on                             Rate     Service Tax
                                            Differential
                           which they                            of S.      payable
                                            Amount on
Financial      Amount       have paid                            Tax
                                           which Service
  Year         realised    service tax
                                               Tax is
                           as per ST-3
                                             payable
                             Returns
2006-07         6488511        5524514            963997        12.24%          117994
2007-08         3978614         838195           3140419        12.36%          388156
2008-09        14283259       11996934           2286325        12.36%          282590
2009-10         3924516        1208320           2716196        12.36%          335722
2010-11        23634518       20056595           3577923        10.30%          368526
 Total        52309418       39624558          12684860                       1492988


                                                                          Page 13 of 18
                                                             OIO No. 58/JC/2012
                                                               Dated :11.05.2012

       Therefore, I decide that the noticee are liable to pay the above
amount of service tax of Rs.14,92,988/-.


24.    On careful study of the circumstances of the case, it is seen that the
noticee is registered with the service tax department under category
‘Manpower     Supply’.      The    noticee    have   collected    an    amount    of
Rs.5,23,09,418/- for providing ‘manpower supply’ service,              however they
have paid service tax on the value of Rs.3,96,24,558/- only. They have not
paid service tax on the differential amount of Rs.1,26,84,860/- which comes
to Rs.14,92,988/-. The noticee have also failed to file correct ST-3 Returns
for the relevant period. This came to the knowledge of the department only
when audit of their records was carried out by department and subsequently
investigation was initiated against them and statement of the proprietor of
the noticee and statement of director of one of the service recipient were
recorded. They have failed to disclose wholly and truly all the material facts
to the department.       Hence, it is clear that the noticee have deliberately
suppressed the taxable value of Rs.1,26,84,860/- with a willful intention to
evade payment of Service Tax for the period 2006-07 to 2010-11, and
evaded the payment of Service Tax amounting to Rs.14,92,988/-. As per
Section 73 of the Finance Act, 1994 when there is a suppression of facts
with intent to evade payment of service tax, extended period is invokable.
Hon. High Court of Gujarat, in the case of CCE, Surat-I Vs. Neminath Fabrics
Pvt. Ltd. – 2010 (256) ELT 369 (Guj.), held that –


      Demand - Limitation - Extended period - Knowledge of Department, effect -
      Suppression admitted but Tribunal held demand as barred by limitation
      importing concept of knowledge of Department, as submitted - Proviso to
      Section 11A(i) of Central Excise Act, 1944 provides for a situation
      whereunder provisions of sub-section (i) ibid recast by legislature extending
      period within which SCN issued - Proviso cannot be read to mean that because
      there is knowledge, suppression which stands established disappears -
      Concept of knowledge, by no stretch of imagination, can be read into the
      provisions - Suppression not obliterated, merely because Department
      acquired knowledge of irregularities. - What has been prescribed under the
      statute is that upon the reasons stipulated under the proviso being satisfied,
      the period of limitation for service of show cause notice under sub-section (1)
      of Section 11A, stands extended to five years from the relevant date. [paras
      15, 16, 20]

       Section 73 of the Finance Act, 1994 and section 11A of the Central
Excise Act, 1944 are pari material and hence the judgment is squarely
applicable to the present case.
                                                                        Page 14 of 18
                                                           OIO No. 58/JC/2012
                                                             Dated :11.05.2012



        In view of the above, I conclude that the suppression clause is
properly invoked in the present case and for the same reason; the noticee is
liable for imposition of penalty under section 78 of the Finance Act, 1994.


25.     With regard to the demand of interest, I find that the noticee has so
far not paid the service tax due to the exchequer. Section 75 of the Finance
Act, 1994 provides that every person liable to pay service tax in accordance
with the provisions of section 68 or the rules made thereunder, who fails to
credit the tax or nay part thereof to the account of the Central Government
within the period prescribed, shall pay simple interest at such rate fixed by
the Central Government by notification, for the period by which such
crediting of the tax or any part thereof is delayed. Thus, it is clear that
interest is chargeable from an assessee who has withheld the payment of
any tax as and when it is due and payable. Interest is compensatory in
character as held by the Hon’ble Supreme Court in the case of Pratibha
Processors Vs. Union of India reported in 1996 (88) E.L.T. 12 (S.C.). In
Pratibha Processors (supra), the Hon’ble Apex Court held as follows:


         “13. In fiscal Statutes, the import of the words – “tax”, “interest”,
         “penalty”, etc. are well known. They are different concepts. Tax
         is the amount payable as a result of the charging provisions. It is
         a compulsory exaction of money by a public authority for public
         purposes, the payment of which is enforced by law. Penalty is
         ordinarily levied on an assessee for some contumacious conduct
         or for a deliberate violation of the provisions of the particular
         statute. Interest is compensatory in character and is imposed on
         an assessee who has withheld payment of any tax as and when it
         is due and payable. The levy of interest is geared to actual
         amount of tax withheld and the extent of the delay in paying the
         tax on the due date (emphasis supplied). Essentially, it is
         compensatory and different from penalty – which is penal in
         character.”


        Thus, interest is chargeable from the noticee for the period for which
they have withheld the tax payable.



26.     Since the noticee has delayed payment of service tax due, the noticee
appears liable to be penalized under section 76 of the Finance Act, 1994,
also.

        The use of the words, “who fails to pay such tax, shall pay, in addition
to such ….… a penalty which shall not be less than two hundred rupees for

                                                                    Page 15 of 18
                                                          OIO No. 58/JC/2012
                                                            Dated :11.05.2012

every day during which such failure continues….” in section 76, ibid indicates
that it was an in-built provision in the statute itself for payment of penalty at
a specified scale for every day for delay, in addition to the tax and interest,
leviable thereon under section 75 of the Finance Act, 1994. The words “shall
pay” as used in section 76 of the Finance Act, 1994, in regard to penalty on
account of non-payment of tax within the stipulated time indicate that the
penalty there under has to be paid mandatorily by the tax payer.



27.   Regarding imposition of penalty under Section 77 of the Finance Act,
1994, I find that the noticee have not filed correct ST-3 returns for the
period under dispute though they are well aware of the provisions of law,
being registered with the department under said category of service and for
such contraventions; penalty under Section 77 of the Finance Act, 1994 is
imposable.



28.   Further, I find that the show cause notices cover the period from
2006-0 onwards. It is during this period that fifth proviso to Section 78 of
Finance Act, 1994 has been added w.e.f. 10.5.2008 through a legislative
amendment, providing that if penalty is payable under section 78 ibid, the
provisions of Section 76 shall not apply. As already held, in the facts and
circumstances of the case, penalty on the noticee is imposable under Section
76 as well as Section 78 of Finance Act, 1994. Now the question is which
legal provisions for imposition of penalty on the noticee would apply in the
case on hand in the backdrop of the fact that the impugned notice covers
the period running from 2006-07 onwards and fifth proviso to Section 78
providing that if penalty is payable under Section 78, the provisions of
Section 76 ibid, shall not apply, is added through a legislative amendment
mid-way, w.e.f. 10.5.2008. Since amendment to Section 78 by way of
insertion of the fifth proviso as aforesaid is not with retrospective effect, the
change has to have effect only prospectively. Therefore, Section 76 as well
as Section 78 would apply for the period upto 9.5.2008 and w.e.f.
10.5.2008, the provisions of Section 76 ibid, would not apply if penalty is
held payable under Section 78, and penalty under Section 78 alone shall be
payable by the noticee.


      As for the case on hand it is held that penalty is payable by the noticee
under Section 76 as well as Section 78 of the Finance Act, 1994 for the
period upto 9.5.2008 and with effect from 10.5.2008 only Section 78 of the
                                                                   Page 16 of 18
                                                             OIO No. 58/JC/2012
                                                               Dated :11.05.2012

Finance Act, 1994 be applicable in the facts and circumstances of the case.
Therefore the noticee is liable to penalty under section 76 as well as section
78 of the Finance Act, 1994 accordingly.


           In this case, since the noticee has failed to pay the tax within the due
date as indicated hereinbefore, penalty under Section 76, ibid, is imposable
for the period from 2006-07 to 09.05.2008 on the noticee at the rate
prescribed therein. Quantification of penalty payable under Section 76 ibid is
possible only when the noticee fully discharges the service tax liability
alongwith interest due on account of delayed payment of tax. However, as
specified in Section 76, ibid, penalty payable thereunder shall not exceed the
amount of service tax payable for the period from 2006-07 to 09.05.2008.


29.       In view of the above discussion, I pass the following order:



                                       ORDER



   (i)       I confirm and demand the service tax Rs.14,92,988/- (Rupees
             Fourteen Lakh Ninety Two Thousand Nine Hundred and Eighty Eight
             only) from M/s. AVB Handling, Gandhidham, under proviso to
             Section 73(1) of the Finance Act, 1994.
   (ii)      I order the Noticee M/s. AVB Handling, Gandhidham, to pay
             interest on the amount confirmed at Sl. No.(i) above, under the
             provisions of Section 75 of the Finance Act, 1994 at appropriate
             rate.
   (iii)     I impose a penalty of Rs.200 per day or two percent per month
             whichever is higher on M/s. AVB Handling, Gandhidham, on the
             service tax due and confirmed for the period from 2006-07 to
             9.5.2008 under the provisions of Section 76 of the Finance Act,
             1994 starting with the first day after the due date till the date of
             actual payment of service tax, provided that the total amount of
             the penalty payable shall not exceed the service tax due and
             confirmed for the period from 2006-07 to 9.5.2008.
   (iv)      For the service tax due and confirmed for the period from
             10.5.2008 onwards, no penalty is imposed under Section 76 of the
             Finance Act, 1994, as amended, in view of fifth proviso to Section
             78 inserted in Section 78 by the Finance Act, 2008 (18 of 2008)
             dated 10.5.2008.
                                                                      Page 17 of 18
                                                            OIO No. 58/JC/2012
                                                              Dated :11.05.2012

     (v)    I impose a penalty of Rs. 5000/- on M/s. AVB Handling,
            Gandhidham under the provisions of Section 77 of the Finance Act
            1994.
     (vi)   I impose a penalty of Rs.14,92,988/- (Rupees Fourteen Lakh
            Ninety Two Thousand Nine Hundred and Eighty Eight only) on M/s.
            M/s. AVB Handling, Gandhidham under the provisions of Section 78
            of the Finance Act, 1994. If the amount as determined under Sr.
            No. (i) above is paid within 30 days from the receipt of the order
            alongwith the interest payable then as per proviso to Section 78
            the penalty will be only 25% of the service tax determined at Sl.
            No. (i) above.   The benefit of reduced penalty shall be available
            only if the amount of penalty so determined has also been paid
            within the period of thirty days from the receipt of the order.




                                                       (M. GNANASUNDARAM)
                                                        JOINT COMMISSIONER
F. No.V.ST/15-253/Adj/2011

By Regd. Post A/D.

M/s. AVB Handling,
Office No. 15, Ground Floor,
Gokul Park,
Plot No. 356, Ward No. 12-B,
Gandhidham

Copy To:

1.   The Assistant Commissioner (RRA), Central Excise, Rajkot.
2.   The Deputy Commissioner, Service Tax Division, Rajkot.
3.   The Deputy Commissioner, Tax Recovery Cell, HQ, Rajkot.
4.   The Superintendent, Service Tax Range- Gandhidham.
5.   Guard file.




                                                                     Page 18 of 18

				
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