PUNJAB EX-SERVICEMEN CORPORATION Vs. CCE

JUDGEMENT

(1.) THE Appellant is a corporation established by the Government of Punjab under Punjab Ex -Servicemen Corporation Act, 1978 (hereinafter referred to as PESCO Act) for welfare and rehabilitation of ex -servicemen in the state. One of the activities of the Appellant is deploying ex -servicemen for providing security service to their clients. When the 'Security Agency Service' became taxable w.e.f. 16/10/98, the Appellant Applied for service tax registration and were issued a registration certificate on 07/12/98. Since even after obtaining service tax registration, the Appellant neither paid service tax nor were they filing any returns, they were asked by the Revenue vide letter dated 29/07/99 to file the half yearly ST -3 returns, to which the Appellant, vide letters dated 04/08/99 and 28/03/03 replied that being an organization set up by the Punjab Government for welfare and rehabilitation of ex -servicemen, they, not having any profit motive, are not a 'commercial concern' and hence are not liable to pay the service tax. The Revenue, however, vide letters dated 30/04/03 and 14/07/03 clarified to the Appellant that they have to pay the service tax. The Appellant were asked by the Revenue vide letter dated 08/08/03 to pay the service tax for the past period from October 1998 to March 2003 with interest. In response to the Revenue's direction, the Appellant paid a total service tax of Rs. 1,41,06,096/ - during September 2003 to 01/03/04 period for October 1998 - December 2002 period under five TR -6 challans. For ascertaining the correctness of the tax paid, the Revenue vide letters dated 02/12/03 and subsequently vide letter dated 17/03/04 asked the Appellant to furnish total amount received from the clients during October 1998 - March 1999, 1999 -2000, 2000 -2001, 2001 -2002 and 2002 -2003 (upto December 2002) period, which was supplied in April 2004. On the basis of the information supplied by the Appellant, the Revenue issued show cause notice dated 22/04/04 to the Appellant demanding short paid service tax amounting to Rs. 55,07,238/ - (50,60,070 for October 1998 - March 1997 period and remaining amount for 2001 -2002 and 2002 -2003 period), alongwith interest and proposing imposition of penalty, under Section 76, 77 and 78 of the Finance Act, 1994. The Deputy Commissioner vide order -in -original dated 29/11/04 confirmed the service tax demand of Rs. 55,07,238/ - under Section 73(2), alongwith interest and imposed combined penalty of Rs. 55,07,238/ - under Section 76, 77 and 78 of the Act. The Deputy Commissioner's order was upheld by CCE (Appeals) vide order -in -appeal dated 25/04/05 and CCE (Appeals)'s order was upheld by the Tribunal vide order -in -appeal No. 385/06 -ST dated 06/10/06. The Appellant filed a civil writ petition before Hon'ble Punjab & Haryana High Court against the Tribunal's order dated 06/10/06 and among other points, one point raised was that the Tribunal, while considering their appeal, did not consider the ground of limitation which had been raised in the appeal. Hon'ble High Court, vide order dated 19/02/07 remanded the matter to Tribunal with the following directions -

(2.) HEARD both the sides.

(3.) THE first point of dispute is as to whether the demand for service tax for the period from October 1998 to December 2002 raised vide show cause notice dated 22/04/04 is within time or the same is time barred. The Appellant's contention is that since in this case the correspondence between the Appellant and the Revenue on the question as to whether the Appellant are liable to pay the service tax was going on since July 1999 and there has been a long correspondence on the question of Appellant's liability to pay the service tax between the Appellant and the Revenue, the conditions for invoking longer limitation period of i.e. wilful misstatement, suppression of fact, fraud etc. do not exist and therefore the longer limitation period under Section 73 is not applicable and as such the entire demand is time barred. We do not agree with this contention of the Appellant. Section 73(1), as it existed during the period of dispute i.e. during the period prior to 10/09/04 is reproduced below: