IN THE HON’BLE HIGH COURT OF JUDICATURE AT

ALLAHABAD

In Central Excise Appeal No.______of 2009

M/S COMFORT CARS

Appellant

Vs.

COMMISSIONER OF CENTRAL EXCISE, KANPUR

Respondent

MEMORIAL FOR THE APPELLANT

THE 1ST RAJA RAM AGRAWAL MEMORIAL NATIONAL TAX MOOT COURT COMPETITION 2009
Table of Contents i

TABLE OF CONTENTS

LIST OF ABBREVIATIONS...................................................................................................iii

INDEX OF AUTHORITIES.....................................................................................................v

Table of Statutes.....................................................................................v

Table of books........................................................................................v

Dictionaries...........................................................................................v

Table of Cases......................................................................................vi

STATEMENT OF JURISDICTION........................................................................................... xii

STATEMENT OF FACTS.......................................................................................................xiii

SUMMARY OF PLEADINGS...................................................................................................xv

PLEADINGS AND AUTHORITIES

CONTENTION 1: THAT THE APPELLANT WAS NOT LIABLE TO PAY SERVICE TAX ON THE

AMOUNT RECEIVED AS REIMBURSEMENT BY IT FROM THE PTO’S. .....................................1

CONTENTION 2: THAT THE APPELLANT COULD NOT BE ASSESSED TO SERVICE TAX BY

INVOKING THE EXTENDED PERIOD OF LIMITATION ……………………............…………….4

CONTENTION 3: THAT BEFORE THE AMENDMENT IN THE DEFINITION OF TOUR OPERATORS,

THE SUPPLEMENTARY SERVICES PROVIDED BY TOUR OPERATORS COULD NOT BE SAID TO BE

TAXABLE……………………………………………………………………………..……….11

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MEMORIAL FOR THE APPELLANT
Table of Contents ii

CONTENTION 4: THAT THE CIRCULAR CANNOT CREATE TAX LIABILITY AND THE TRIBUNAL
WAS NOT JUSTIFIED IN RELYING UPON THE CIRCULAR DATED 23.08.2007 ISSUED AFTER THE

DISPUTED PERIOD.....................................................................................................................17

PRAYER....................................................................................................................................20

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MEMORIAL FOR THE APPELLANT
List of Abbreviations iii

LIST OF ABBREVIATIONS

1. AC Appeal Court
2. AIR All India Reporter
3. ALT Andhra Law Times
4. All. Allahabad
5. Anr. Another
6. A.P. Andhra Pradesh
7. Asstt. Assistant
8. Bang. Bangalore
9. Cal. Calcutta
10. CCE Commissioner of Central Excise
11. CEGAT Custom, Excise and Gold Appellate Tribunal
12. CESTAT Customs, Excise and Service Tax Appellate Tribunal
13. Ch. App. Chancery Appeal
14. CIT Commissioner of Income Tax
15. CLT Commissioner of Sales Tax
16. Co. Company
17. Co.op Co-operative
18. Comm. Commissioner
19. CTR Current Tax Reporter
20. CWT Commissioner of Wealth Tax
21. DB Division Bench
22. Del Delhi
23. ECR Excise and Customs Reporter
24. ELT Excise Law Times
25. F.C.R. Family Court Reporter
26. Guj. Gujarat
27. HC High Court
28. Hon’ble Honourable
29. ITO Income Tax Officer
30. ITR Income Tax Reports

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MEMORIAL FOR THE APPELLANT
List of Abbreviations iv

31. Kar. Karnataka

32. K.B. Kings Bench
33. Ltd. Limited
34. Mad. Madras
35. NTN National Tax News
36. Ors Others
37. PC Privy Council
38. PLR Punjab Law Reporter
39. PTO’s Principal Tour Operators
40. Pg. Page
41. Punj. Punjab
42. ¶ Paragraph
43. SC Supreme Court
44. SCC Supreme Court Cases
45. SCR Supreme Court Reports
46. SCW Supreme court Weekly
47. Sc.L.R. Supreme Court Law Reporter
48. STC Sales Tax Cases
49. STR Sales Tax Reports
50. STT Sales Tax Tribunal
51. Sec Section
52. Tri. Tribunal
53. Vol. Volume
54. V/S Versus

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MEMORIAL FOR THE APPELLANT
Index of Authorities v

INDEX OF AUTHORITIES

TABLE OF STATUTES
• The Central Excise Act, 1944.
• The Constitution of India.
• The Finance Act, 1994.
• The Finance Act 2004.
• The Indian Contract Act, 1872

TABLE OF BOOKS

• GABHAWALLA SUNIL, TREATISE ON SERVICE TAX, 7th Ed., 2008 Vol 1& 2
• MITTAL J.K, THE LAW, PRACTICE & PROCEDURE OF SERVICE TAX ,
Bharat, 9th Ed.,2004.
• GUPTA S.S., TAXMANN’S SERVICE TAX , TAXMAN, Vol 1& 2
• AGGARAWAL ROHINI, SERVICE TAX LAW AND PRACTICE , Eastern Book
Company
• JUSTICE MALLICK, COMMENTARIES ON INDIAN CONTRACT ACT, KAMAL
LAW HOUSE
• BASU DURGA DAS, CONSTITUTIONAL LAW OF INDIA, Lexis Nexis
Butterworths Wadhwa , 8th Ed.
• SUBRAHMANYAN & SINGHAL, INDIAN CONTRACT ACT, The Law Book
Company (P) Ltd. , 3rd Ed.

DICTIONARIES

• GARNER BRAYAN ., BLACK’S LAW DICTIONARY, 7th Ed., WEST GROUP , ST.
PAUL , MINN
• AIYAR P.R., The Law Lexicon, 2nd Ed. Wadhwa & Company, (Nagpur 1999)

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MEMORIAL FOR THE APPELLANT
Index of Authorities vi

TABLE OF CASES
~A~B~

A.P. State Co-Op.Rural Irrigation Corporation Ltd. v. Co- Operative tribunal and Ors.
2007 (1) ALT 239
Addl. Commissioner of Income Tax, Delhi-I v. Mrs. Avtar Mohan Singh (1982) 27 CTR
(Del) 32
Ahmedabad Urban Development Authority v. Sharda Kumar Jayanti Kumar
Parawalla AIR 1992 SC 2038
Akbar Badruddin Jaiwani v. Collector AIR 1990 SC 1579
Anand Nishikawa Co. Ltd. v. CCE 2005 (188) ELT 149 : 2 STT 226 : AIR 2005 SCW
4923 (SC)
Anwar Hasan Khan v. Mohammad Shafi And Ors. AIR 2001 SC 2984
Apex Electricals (P.) Ltd. v. UOI 1992 (61) ELT 413 (Guj)
Ashok Service Centre & Another Etc v. State Of Orissa AIR 1983 SC 394
Ashutosh Swain and Ors. v. State Transport AIR 1985 SC 493
Assessing Authority-cum-Excise and Taxation Officer v. East India Cotton Mfg. Co.
Ltd. [1981] 48 STC 239 (SC)
Auckland Jute Co. Ltd. v. Tulsi Chandra Goswami 1949 F.C.R. 201
B.S. Refrigerator Ltd. v. Commissioner of Service Tax, Bangalore 2006 (4) STR 103
(Tri.- Bang.)
Babulal Bhuramal v. Nandram Shivram AIR 1958 SC 677
Balkrishan Gupta and Ors. v. Swadeshi Polytex Ltd. and Anr AIR 1985 SC 520
Balsara Extrusions v. CCE 2001 (131) ELT 586 (CEGAT)
Bimal Chand v. State of M.P. AIR 1971 SC 517

~C~
C.A. Abraham v. I.T.O. Kottayam AIR 1961 S.C. 609
C.I.T v. Kulu Valley Transport Co. (P) Ltd 77 ITR 518 SC
C.I.T. v. Mr. P. Firm Muar AIR 1965 SC 1216
Cadila Laboratories v. CCE AIR 2003 SCW 1115 : 152 ELT 262 (SC)
Candian Eagle Oil Co. v. R.- (1946) AC. 119

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MEMORIAL FOR THE APPELLANT
Index of Authorities vii

Cape Brandy Syndicate v. Commissioner of Inland Revenue (1921) 1 KB 64

CCE v. Ballarpur Industries Ltd. (2007) 11 STT 6 (SC)
CCE v. Damnet Chemicals (2007) 216 ELT 3 (SC)
CCE v. Moti Laminates P Ltd. 1997 (96) ELT 191 (CEGAT)
Chandra Prakash Tiwari v. Shakuntala Shukla, (2002) 6 SCC 127
Chandra Shipping and Trading Services v. The Commissioner of Central Excise and
Customs 2009 [13] S.T.R. 655
CIT v G.V. Venugopal 2005 144 TAXMAN 784 (Mad)
CIT v Schell Internantional (2005) 278 ITR 630 (Bombay)
CIT v. Naga Hills Tea Co Ltd AIR 1973 SC 2524
CIT v. NC Budharaja AIR 1993 SC 2529
CIT v. P.V.A.L. Kulandagan Chettiar, (2004) 6 SCC 235
Collector of Central Excise, Hyderabad v. Chemphar Drugs and Liniments, Hyderabad
(1989) 2 SCC 12
Collector of Estate Duty v. R. Kanakasabai 89 ITR 251 SC
Commissioner of I.T. v. Karamcnand Premchand Ltd., Ahemadabad AIR 1960 S.C.
1175 : 1960 (3) S.C. 727
Commissioner Of Income-Tax v. Claggett Brachi & Co. Ltd. [1975] 100I TR 46 (AP)
Commissioner of Sales Tax, Uttar Pradesh v Modi Sugar Mills Limited AIR 1961 SC
1047
Commissioner of Service Tax , Mumbai v. Gama Consultancy Pvt Ltd 2006 (4) STR 591
(Tri-Mumbai)
Commissioner of Service Tax v. Skematic Consultants 2007 [7] S.T.R. 575
Commissioner v. Nahar Industrial Enterprises Ltd. 2007 (7) STR 26 (Tri. -Del.)
Commr. of Income Tax v. National Taj Traders AIR 1980 SC 485
Commr. of Income Tax v. Shahzada Nand & Sons 60 ITR 392 SC
Continental Foundation Jt Venture v. CCE (2007) 216 ELT 177 (SC)
Controller of Estate Duty v. Kantilal Trikamlal [1976] 105 ITR 92 (SC)
Co-operative Marketing Society Ltd. v. Commissioner, Sales Tax (1972) 29 STC 619
(All.)
Corporation of the City of Victoriyav. Bishop of Vancouver Island AIR 1921 PC 240
Cosmic Dye Chemical v. Collector of Central Excise, Bombay 1989 (43) E.L.T 195 (S.C.)
CWT v. Smt. Shakuntala Devi Dalmia (2008) 172 Taxman 162 (All HC DB

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MEMORIAL FOR THE APPELLANT
Index of Authorities viii

~D~E~G~H~

Dehradun Club Limited v. CCE 2007 [7] S.T.R. 519

Dilip N Shroff v. Jt CIT (2007) 11 Taxman 218 : 291 ITR 519 (SC)
Doypack Systems Pvt. Ltd. Vs. Union of India (UOI) and Ors. AIR 1988 SC 782
Dr. Birendra Kumar Nayak And Ors. v. The Registrar, Utkal University 99 (2005) CLT
228
Ellerman Lines Ltd. v. CIT AIR 1972 SC 524
ETA Engineering Ltd. v. Commissioner 2006 (3) STR 429: 2004 (174) ELT 19 (Tribunal
–LB)
Fendoch Investment Trust Co. v. Inland Revenue Commissioners (1945) 2 All ER 140
Gammon Far Chems Ltd. v. CCE 1994 (71) ELT 59 (CEGAT)
Glaxo Smithkline Pharmaceuticals v. CCE (2005) 1 STT 37 (CESTAT)
Gopal Zarda Udyog v. CCE 2005 (188) ELT 251 (SC)
Gopilal J. Nachani v. Trac Industries and Components AIR 1978 Mad. 134
Gufic Pharma P Ltd. v. CCE (1996) 85 ELT 67 (CEGAT)
Gursahai Saigal v. C.I.T. AIR 1963 SC 1062
H. Veerabhadrappa v. Commissioner of Commercial Taxes, Bangalore and Ors. [1963]
14 STC 919 (Kar)
Hindustan Steel Ltd v. State of Orissa 1978 (2) E.L.T. 159

~I~K ~L~

Income-Tax Officer v. T.S. Devinatka Nadar [1968] 68 ITR 252 (SC) : AIR 1968 SC 623
India Cements Ltd. v. Commissioner 2007 (7) STR 569 (Tri.-Chennai)
India International Centre v. Commissioner Of Service Tax [2007] 9 STT 473
Innamuri Gopalan v. State of AP 1964 SCR (2) 888
IT. Commissioner, Patiala v. Shahzada Nand & Sons AIR 1966 SC 1342
ITO v. Nadar AIR 1968 SC 623
ITO v. S. Radha Krishnan, (2001) 9 SCC 406
J. K. Cotton Spinning and Weaving Mills Co. Ltd. v. State of U.P. AIR 1961 SC 1170
Jagdish Singh v. Lt. Governor Delhi And Others AIR 1997 SC 2239

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MEMORIAL FOR THE APPELLANT
Index of Authorities ix

Jaiprakash Industries v. CCE AIR 2002 SCW 4840

Karbala Trust v. CCE Trivandrum 2006 (2) STR 339 (Tribunal –Bangalore)
Kitson v. King (P. S.) and Son, Ltd. (1919) 36 T. L. R. 162
Krishan Kumar v. State of Rajasthan AIR 1992 SC 1789
KULCIP Medicines (P) Ltd. v. Commissioner of Central Excise, Delhi-III 2006 (1) STR
36
Lamb (W T.) & Sons v. Goring Brick Co. (1932) K. B. 710
Laxmi v. Amrit B Co. AIR 1962 Punj. 56
Livingstone v. Ross. 1901 AC 327
Lubri-Chem Industries Ltd. v. Collector 1994 (73) ELT 257 (SC)
Lucknow Development Authority v. M.K. Gupta AIR 1994 SC 787

~M~N~0~

M K Kotecha v. CCE AIR 2005 SC 1147 : 179 ELT 261 (SC)

M/s Lilasons Breweries v. State of MP AIR 1992 SC 1393
Malbar Management Services Pvt. Ltd. v. Commissioner of Service Tax 2008-TMI-3439
Maruti Udyog Limited 2002 (143) ELT 686
Mathuram Agarwal v. State of Madhya Pradesh and Ors., AIR 2000 SC 109
Micheline Tyre Co. v. Macfarlane (Glasgow) Ltd. (1917) 55 Sc L. R. 35
Motilal Padampat Sugar Mills Co. Ltd. v. State of UP (1979) 118 ITR 326 (SC)
Murray and Company v. The Government of Madras [1970] 25 S.T.C. 323
Mysore State Road Transport Corporation v. Mirja Khasim Ali Beg AIR 1977 SC 747
Nat Steel Equipments Private Ltd v. Collector; 1988 (34) E.L.T. 8 (S.C.)
Oswal Woollen Mills v. The State Of Punjab, 1995 111 PLR 72

~P~R~

Padmini Products v. Collector of Central Excise 1989 (43) E.L.T. 195 (SC)
Pahwa Chemicals Private Ltd. v. Commissioner 2005 (189) E.L.T. 257 (S.C.)
Prevention and Control of Water Pollution v. A.P. Rayons Ltd., AIR 1989 SC 611
Punjab Beverages Pvt. Ltd. v. Suresh Chand AIR 1978 SC 995
R.R.D. Tex Pvt. Ltd. v. Commissioner 2007 (8) S.T.R 186 (Tri.-Chennai)
R.S. Raghunath v. State Of Karnataka And Anr, AIR 1992 SC 81

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MEMORIAL FOR THE APPELLANT
Index of Authorities x

Rajasthan Spinning and Weaving Mills And Commissioner of Customs and Central
Excise v. Lanco Industries Ltd. (2009) 224 CTR (SC) 1
Ram Krishna Travels Pvt. Ltd v. Commissioner of C. Ex. Vadodara [2007] 6 STR 37
(Tri-Mumbai)
Ramply (India) Ltd. v. CCE (2007) 216 ELT 129
Ranka Wires v. CCE 2005 (187) ELT 374 (CESTAT), Pioneer Electronics v. CCE 2005
(189) ELT 71 (CESTAT)
Re Nevill, Ex parte White, (1871) 6 Ch. App. 397

~S~T~

S.K. Verma v. Industrial Tribunal AIR 1981 SC 422

Sangamitra Services Agency v. Commissioner of Central Excise, Chennai 2007 (8) STR
233
Sarwan Singh v. Kasturi Lal AIR 1977 SC 265
Saturday Club Ltd. v. Asstt. Comm., Service Tax Cell 2005 (180) ELT 437 (Cal) : 2006
[3] S.T.R. 305
Scott Wilson Kirkpatrick (I) Pvt. Ltd. v. Commissioner of Service Tax 2007 (5) STR 118
(Tri.- Bang.)
SK Traders v. Additional Commisioner, Trade Tax & Additional Commissioner
(Assessment), Trade Tax 2007 NTN (8 DPH) – 221
Smt. Shirisht Dhawan v. Shaw Brothers 1992 (1) SCC 534
Sri Krishna Das v. Town Area Committee, (1990) 3 SCC 645
State of Orissa v. Narain Prasad AIR 1997 SC 1493
State of Madras v. Cement A. & C. Organisation (1972) 29 STC 114 (SC)
State of Punjab v. Jullunder Vegetables Syndicate AIR 1966 SC 1295
State of West Bengal v.O.P. Lodha & anr, M/S. Chowringhee Sales Bureau Private Ltd.
AIR 1997 SC 2021
State Trading Corporation v. CTO AIR 1963 SC 1811
Sultana Begum v. Prem Chand AIR 1997 SC 1006
Sumeet Industries Limited v. Commissioner O C. Ex., Surat 2004 (164) ELT 335(Tri
Mumbai)
Sun Export Corp v. Collector of Customs 1997 6 SCC 564
Surat Municipal Corporation v. Commissioner 2006 (4) STR 44 (Tribunal Delhi)

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MEMORIAL FOR THE APPELLANT
Index of Authorities xi

Sutlej Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal, Calcutta AIR
1991 SC 218
Syndicate v. I.R.C. (192) 1 KB 65 at 71
Tamil Nadu Housing Board v. Collector 1990 (74) ELT 9 (SC)
Tamilnadu Housing Board v. CCE 1995 Supp (1) SCC 50: 1994 (74) ELT 9 (SC) : 55
ECR 7
The Commissioner of Income Tax, West Bengal-I, Calcutta v. M/s. Vegetable Products
Ltd. 88 ITR 192 SC
The Commissioner of Service Tax Commissionerate v. C Ahead Info Technologies India
Pvt. Ltd 2009 [14] S.T.R. 803
Towle (John) and Co v. White, (1873) 29 LT 78

~U~V~
Umayhal Achi v. Lakshmi Achi and Ors. 1945 F.C.R. 1
Union of India v. Rajasthan Spinning and Weaving Mills And Commissioner of
Customs and Central Excise v. Lanco Industries Ltd. (2009) 224 CTR (SC) 1
Unique Resin Industries v. CCE 1995 (75) ELT 861 (CEGAT)
University of Allahabad v. Amritchand Tripathi AIR 1987 SC 57
Vaddeboyina Tulasamma v. Vaddeboyina Sesha Reddi AIR 1977 SC 1944
Venkataramana Devaru and Ors. v. State of Mysore AIR 1958 SC 255
Vetcare Alltech Pvt. Ltd. vs Cce 2004 (116) ECR 373 (Tri.-Chennai)

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MEMORIAL FOR THE APPELLANT
 Statement of Jurisdiction xii

STATEMENT OF JURISDICTION

THE APPELLANT HAS APPROACHED THE HON’BLE HIGH COURT OF ALLAHABAD UNDER

THE JURISDICTION PROVIDED FOR IN SECTION 35G1 OF THE CENTRAL EXCISE ACT, 1944.

PRAYING AGAINST THE ORDER OF CUSTOM EXCISE AND SERVICE TAX APPELLATE

TRIBUNAL DATED 31.05.2009 AND IS THUS NOT BARRED BY LIMITATION.

1
Section 35G, Central Excise Act, 1944- Appeal to High Court
(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or
after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of nay
question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), if
the High Court is satisfied that the case involves a substantial question of law.
(2) The Commissioner of Central Excise or the other party aggrieved by any order passed by the Appellate
Tribunal may file an appeal to the High Court. [In accordance with provided provisions]
(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall
formulate that question.
(4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing
of the appeal, be allowed to argue that the case does not involve such question:
Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to
hear, for reason to be recorded, the appeal on any other substantial question of law not formulated by it, if it is
satisfied that the case involves such question.
(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon
containing the grounds on which such decision is founded any may award such cost as it deems fit.
(6) The High Court may determine any issue which-
a. Has not been determined by the Appellate Tribunal
b. Has been wrongly determined by the Appellate Tribunal, by reason of a decision on such
question of law as if referred to in sub section (1).
(7) When an appeal has been filed before the High Court, it shall be heard by a bench of not less than two
judges of the High Court, and shall be decided in accordance with the opinion of such judges or of the
majority, if any, of such judges.
(8) Where there is no such majority, the Judges shall state the point of law upon which they differ and the
case shall, then, be heard upon that point only by one or more of the other judges of the High Court and such
point shall be decided according to the opinion of the majority of the judges who have heard the case
including those who first heard it.
(9) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908, relating to
appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.

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MEMORIAL FOR THE APPELLANT
Statement of Facts xiii

STATEMENT OF FACTS

I
M/s. Comfort Cars is a small proprietorship concern providing tour operator services with its
head office at Agra, from where it regularly files its service tax returns.

II

The definition of tour operators under Section 65(115) of the Finance Act was amended by
Finance Act No.2 of 2004. But the Taxable Service for tour operators as per Section 65(105)
remained unamended.

III

The large tour operators are called Principal Tour Operators (PTO’s), who pay service tax on
the entire amount received from the clients.

IV

Comfort Cars has an agreement with these large operators to provide vehicles to the
guests/tourists who visit India from abroad, and it pays service tax on the value of the
vehicles provided by them.

At times, Comfort Cars also provides certain services known as supplementary services to
the guests, which includes arranging for tickets for visiting the monuments, providing porter
services, guides, arranging for food etc. These supplementary services are provided on
reimbursement basis from PTO’s.

VI

In January 2007, service tax officials carried out a survey at the premises of Comfort Cars,
whereby in October 2007, a show cause notice was issued by the Commissioner, Central
Excise and Service Tax, Kanpur proposing to levy service tax and penalty on Comfort Cars in
respect of the value of various supplementary services provided by it for the period of

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MEMORIAL FOR THE APPELLANT
Statement of Facts xiv

1.4.2002 to 31.3.2007. The total value of proposed service tax came to Rs. 1 Crores. A
penalty of Rs. 25 Lakhs was also proposed.

VII

M/s. Comfort Cars contested the proposed levy. It cooperated in all the proceedings and
provided the officials with all the material demanded by them. However, the Commissioner,
Central Excise and Service Tax, Kanpur, passed the order confirming the demand of service
tax and penalty on the petitioner.

VIII

CESTAT dismissed further appeal preferred by Comfort Cars by relying upon the
definition of taxable service under Section 65(105) of the Finance Act and a Circular,
dated 23.8.2007 , issued by the Tax Research Unit of the Central Board of Excise and
Customs (CBEC).

IX

Aggrieved by the CESTAT order, Comfort Cars has preferred an appeal before the
High Court of Judicature at Allahabad.

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MEMORIAL FOR THE APPELLANT
Summary Of Pleadings xv

SUMMARY OF PLEADINGS

1. THAT THE APPELLANT WAS NOT LIABLE TO PAY SERVICE TAX ON THE
AMOUNT RECEIVED AS REIMBURSEMENT BY IT FROM THE PTO’S.

The PTO’s as service providers used to cater to the needs of the foreign tourists by providing
them with suitable tour options. To fulfil this, the services of appellant were availed who in
return charged the entire amount from the PTO’s which was taxable by them. Thus, the
appellant was an agent of the PTO’s in terms of the services provided. No service tax should
be levied on the amount so given by the PTO’s to the appellant as reimbursement because the
PTO’s are already paying tax on it as part of the gross amount utilized by them for providing
the services and any other amount so levied would amount to the same amount being doubly
taxed. It is against the principle of taxation to tax the same person twice, here the principle
i.e. the PTO’s and the agent i.e. the appellant cannot be charged on the same amount so
received twice. The amount received as reimbursement was the amount which was already
included in the total price of the packaged tour which was already being effectively taxed.

2. THAT THE APPELLANT COULD NOT BE ASSESSED TO SERVICE TAX BY

INVOKING THE EXTENDED PERIOD OF LIMITATION.

The appellant here has always extended their co-operation with the authorities. Moreover, it
has to be kept in mind that mere non declaration of facts would in no manner amount to
suppression of facts. The appellants were under a bona fide belief that there is no tax liability
whatsoever imposed on them for which they should be paying the tax, there was no intention
either on their part to evade tax as they were under bona fide belief that the entire amount is
being taxed from the PTO’s. It is also pertinent to note that there cannot be any penalty
imposed on the appellant unless proven that the default was accounted by deliberate fraud,
collusion or by suppression of facts. Since, the appellant her is guilty of none of them, no
penalty should be levied on them.

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MEMORIAL FOR THE APPELLANT
Summary Of Pleadings xvi

3. THAT BEFORE THE AMENDMENT IN THE DEFINITION OF TOUR

OPERATORS, THE SUPPLEMENTARY SERVICES PROVIDED BY TOUR
OPERATORS COULD NOT BE SAID TO BE TAXABLE.

The entire purpose behind introducing amendments to a provision shows a certain lacunae in
the older one. In the present matter, amendment in the definition of tour operators implies
that the supplementary services were not taxable under the older provisions and hence there
was a need to pioneer such an amendment. Under the definition of taxable services as well
which has remained unamended not all the services in relation to the tour operators falls well
within the ambit of taxability. It is submitted that the definition of tour operators has to be
read in consonance with that of taxable services to effectively determine what exactly are the
taxable services so provided by the tour operators. Thus, the taxability in the new definition
indicates a genuine ambiguity in the older provision which excluded the taxability of tour
operators with regards to the supplementary services provided.

4. THAT THE CIRCULAR CANNOT CREATE TAX LIABILITY AND THE TRIBUNAL

WAS NOT JUSTIFIED IN RELYING UPON THE CIRCULAR DATED 23.08.2007

ISSUED AFTER THE DISPUTED PERIOD.

The Constitution of India, grants that no tax can be levied or collected except by authority of
law. Moreover, the power of imposing tax cannot be delegated and created via any bye-laws,
notifications or circulars by the taxing authorities. The reliance placed on the circular by the
CESTAT is not justified for the reason that primarily, it is not capable of creating any tax
liability and secondly, the PTO’s have already been paying the tax on the entire amount and
until the definition was amended there existed nothing to impose a liability on proprietors like
Comfort Cars.

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 1

PLEADINGS AND AUTHORITIES

CONTENTION 1: THAT THE APPELLANT WAS NOT LIABLE TO PAY SERVICE

TAX ON THE AMOUNT RECEIVED BY IT FROM THE PTO’S.

Section 182 of the Indian Contract Act, 1872 defines the terms “Agent” and “Principal” as
follows:

‘An “agent” is a person employed to do any act for another or to represent another in
dealings with the third person. The person for whom such act is done, or who is so
represented, is called the “principal”.’

In an agency one person (principal) employs another person (agent) to represent him or to act
on his behalf, in dealings with a third person. The agent may be expressly or impliedly
authorised to do an act on behalf of the principal.2 For creation of an agency no formal
document is required. It may be express or implied and by words and conduct also. It is not
necessary that the contract of agency is to be set out in writing.3 In order to ascertain whether
the relation of agency exists, the true nature of the agreement or the exact circumstances of
the relationship between the alleged principal and agent have to be taken into consideration.4
It all depends upon the construction, purport and intention of the parties under agreement
entered into between them.5

In the facts of the present case, the present assessee/appellant were acting in the capacity of
an agent of the PTO and were getting reimbursed for the expenses incurred by it for the

2
Section 186, Indian Contarct Act, 1872: “The authority of an agent may be expressed or applied.”
3
Laxmi v. Amrit B Co. AIR 1962 Punj. 56
4
Re Nevill, Ex parte White, (1871) 6 Ch. App. 397, Towle (John) and Co v. White, (1873) 29 LT 78,
Livingstone v. Ross. 1901 AC 327, Micheline Tyre Co. v. Macfarlane (Glasgow) Ltd., (1917) 55 Sc L. R.
35, Kitson v. King (P. S.) and Son, Ltd. (1919) 36 T. L. R. 162, Lamb (W T.) & Sons v. Goring Brick Co.
(1932) K. B. 710
5
A.P. State Co-Op.Rural Irrigation Corporation Ltd. v. Co- Operative tribunal and Ors. 2007 (1) ALT
239

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 2

supplementary services. The actuality that the present assessee/appellant was acting as an
agent for the PTO’s is clear from the fact that the bills issued by the assessee/appellant were
on the basis of the actual cost incurred and no excess amount was received from the PTO’s.
Moreover, it is pertinent to mention herein that the service tax on the amount of the
supplementary services was already being paid by the PTO’s and thus there was no tax
evasion as the principal of the present appellant/assessee i.e. the PTO’s were paying tax on
the said amount.

It is humbly submitted before this Hon’ble Court that the liability of the agent and that of the
principal is co-extensive6, and is unexceptionable.7 The department cannot make the
assessment on both the agent and the principal.8 If the assessment is done on both the agent
and the principal then it would amount to double taxation,9 which arises only when the
assessee is the same.10 Service tax is attracted when there are two parties. One cannot give
service to himself per se.

In the present case, the assessee/appellant is acting in the capacity of an agent on behalf of the
PTO’s and thus the amount of the supplementary services can be made subject to service tax
either in the hands of the principal i.e. the PTO’s or the agent i.e. the present

6
P. Ramanatha Aiyar, The Law Lexicon, 2nd Ed. 2004 Co-extensive: Coinciding in limits, Gopilal J. Nachani
v. Trac Industries and Components AIR 1978 Mad. 134 held that, “The word ‘co-extensive’ is an objective
for the word ‘extent’.”
7
Murray and Company v. The Government of Madras [1970] 25 S.T.C. 323, State of West Bengal v.O.P.
Lodha & anr, M/S. Chowringhee Sales Bureau Private Ltd. AIR 1997 SC 2021, H. Veerabhadrappa v.
Commissioner of Commercial Taxes, Bangalore and Ors. [1963] 14 STC 919 (Kar), State of Madras v.
Cement A. & C. Organisation (1972) 29 STC 114 (SC), Co-operative Marketing Society Ltd. v.
Commissioner, Sales Tax (1972) 29 STC 619 (All.) held that, “the liability of an agent is no doubt co
-extensive with the principal. It would, therefore, follow that if the principal is not liable to tax, the agent also
may not be liable thereto.”
8
Commissioner Of Income-Tax v. Claggett Brachi & Co. Ltd. [1975] 100I TR 46 (AP) held that, “It is true
that the department cannot make the assessment on both the agent and the principal. If they exercise the-
option of making the assessment on the agent,' the authorities cannot make an assessment on the principal.”
9
CIT v. P.V.A.L. Kulandagan Chettiar, (2004) 6 SCC 235, at page 240, held that, “The traditional view in
regard to the concept of “double taxation” is that to constitute double taxation, objectionable or prohibited,
the two or more taxes must be (1) imposed on the same property, (2) by the same State or Government, (3)
during the same taxing period, and (4) for the same purpose.”
Sri Krishna Das v. Town Area Committee, (1990) 3 SCC 645, at page 653 held that, “Double taxation in
the strict legal sense means taxing the same property or subject matter twice, for the same purpose, for the
same period and in the same territory. To constitute double taxation, the two or more taxes must have been
(1) levied on the same property or subject matter, (2) by the same government or authority, (3) during the
same taxing period, and (4) for the same purpose.”
10
ITO v. S. Radha Krishnan, (2001) 9 SCC 406, at page 406 held that, “The question of double taxation must
be decided having regard to who the assessee is. If the assessee is different, the question of double taxation
would not arise.”

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 3

appellant/assessee.11 The PTO’s have paid service tax on the amount of the reimbursement of
actual cost of supplementary services paid to the assessee/appellant. Thus, the said amount if
made subject to service tax in the hands of the present appellant/assessee would amount to
double taxation as the present appellant/assessee being agent of the PTO’s unite their identity
with that of their principal who have paid tax on the said amount.

It is therefore humbly submitted before this Hon’ble Court that the present appellant/assessee
was receiving the reimbursement of the actual expenses from its principals incurred for the
supplementary services. Such amount received as reimbursement of the actual expenses
received from the principals cannot be held to be liable to service tax.12 The reimbursement
of expenses cannot be included in the value of services provided.13

Thus it is prayed that the present appellant/assessee was acting as an agent of their principals
i.e. the PTO’s and received reimbursement of actual expenses incurred on which the PTO’s
have paid the service tax and thus the assessee is not liable to pay service tax on the same.

11
Saturday Club Ltd. v. Asstt. Comm., Service Tax Cell 2005 (180) ELT 437 (Cal), 2006 [3] S.T.R. 305,
Dehradun Club Limited v. Cce 2007 [7] S.T.R. 519, India International Centre v. Commissioner Of
Service Tax [2007] 9 STT 473 held that, “law is well-settled by now that in between the principal and agent
when there is no transfer of property, available question of imposition of service tax cannot be made
available. Income-tax is applicable if there is an income. Sales tax is applicable if there is a sale. Service tax
is applicable if there is a service. All three will be applicable in a case of transaction between two parties.
Therefore, principally there should be existence of two sides/entities for having transaction as against
consideration. In a members' club there is no question of two sides. 'Members' and 'club' both are same
entity One may be called as principal when the other may be called as agent, therefore, such transaction in
between themselves cannot be recorded as income, sale or service as per applicability of the revenue tax of
the country.”
12
Malbar Management Services Pvt. Ltd. v. Commissioner of Service Tax 2008-TMI-3439, Scott Wilson
Kirkpatrick (I) Pvt. Ltd. v. Commissioner of Service Tax 2007 (5) STR 118 (Tri.- Bang.)
13
Sangamitra Services Agency v. Commissioner of Central Excise, Chennai 2007 (8) STR 233, B.S.
Refrigerator Ltd. v. Commissioner of Service Tax, Bangalore 2006 (4) STR 103 (Tri.- Bang.)

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 4

CONTENTION 2: THAT THE APPELLANT COULD NOT BE ASSESSED TO

SERVICE TAX BY INVOKING THE EXTENDED PERIOD OF LIMITATION.

In the present case the service tax officials carried out a survey at the premises of Comfort
Cars. In October 2007, a show cause notice was issued by the commissioner, Central Excise
and Service tax, Kanpur proposing to levy service tax and penalty on Comfort Cars in respect
of the value of various supplementary services provided by it for the period from 1.4.2002 to
31.3.2007. The total value of proposed service tax came to Rs. 1 Crores. A penalty of Rs. 25
Lakhs was also imposed. It cooperated in all proceedings and provided with all the materials
demanded by them.14

The burden of proof lies on the department to prove that there was suppression of facts.15

Non declaration does not amount to suppression of facts

According to the CESTAT when an existing tariff definition remains same, introduction of
new tariff entry would imply that the coverage under new Tariff was not covered by the
earlier entry16. When new category is introduced, it means that the service was not taxable
under old category. In the present matter the supplementary services were brought under the
scope of tour operator services by the amendment in Finance Act in 2004.17

Therefore, it is very clear that these services were not taxable before the amendment. After
amendment also these services are not taxable, since, Comfort Cars are providing these
services as agents.

Thus, Comfort Cars have not defaulted in payment of Service Tax. Therefore, there is no
wilful suppression on part of Comfort Cars. In other words there can be no suppression of

14
Fact Sheet ¶ 8
15
Chandra Shipping and Trading Services v. The Commissioner of Central Excise and Customs 2009 [13]
S.T.R. 655
16
Glaxo Smithkline Pharmaceuticals v. CCE (2005) 1 STT 37 (CESTAT)
17
Finance Act No. 2 of 2004

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 5

facts if facts which are not required to be disclosed are not disclosed.18 The fact about
supplementary services does not need to be disclosed since they do not affect the Service Tax
payable by Comfort Cars for the abovementioned reasons.

It is also pertinent to note that there has to be a positive act on part of the assessee. A failure
to declare something does not amount to wilful suppression or mis-declaration.19 Hon’ble
Supreme Court had held20 that when the law requires an intention to evade payment of duty
then it is not mere failure to pay duty that would attract liability. It must be something more
i.e the assessee must be aware that the duty was leviable and thereby must deliberately avoid
paying duty. It was made more stringent by use of the word intent. In other words the
assessee must deliberately avoid payment of duty which is payable in accordance with law.

In the present matter, the Appellant did not know about Service Tax liability in respect of
supplementary services and were under genuine impression that these supplementary services
were not covered by the definition of Tour Operator service. Mere detection by the
department does not mean that non-payment was with intention to evade unless the
department brings out clear facts that the appellant was in the know that Service Tax was
payable on such services but still the assessee chose not to pay the tax in order to evade the
same.21

The appellant here has not deliberately defaulted in paying service tax but, has done so under
a bona fide belief that such supplementary services does not fall under the definition of
taxable services of tour operators given under section 65(105) of the Finance Act.

18
Smt. Shirisht Dhawan v. Shaw Brothers 1992 (1) SCC 534, Apex Electricals (P.) Ltd. v. UOI - 1992 (61)
ELT 413 (Guj), followed in Unique Resin Industries v. CCE 1995 (75) ELT 861 (CEGAT), same view in
Gammon Far Chems Ltd. v. CCE - 1994 (71) ELT 59 (CEGAT), Gufic Pharma P Ltd. v. CCE - (1996)
85 ELT 67 (CEGAT), CCE v. Moti Laminates P Ltd. 1997 (96) ELT 191 (CEGAT), Balsara Extrusions
v. CCE 2001 (131) ELT 586 (CEGAT), Ranka Wires v. CCE 2005 (187) ELT 374 (CESTAT), Pioneer
Electronics v. CCE 2005 (189) ELT 71 (CESTAT)
19
Pahwa Chemicals Private Ltd. v. Commissioner 2005 (189) E.L.T. 257 (S.C.), Continental Foundation
Jt. Venture v. Commissioner of Central Excise (2007) 10 SCC 337, Collector of Central Excise,
Hyderabad v. Chemphar Drugs and Liniments, Hyderabad (1989) 2 SCC 12, Rajasthan Spinning and
Weaving Mills And Commissioner of Customs and Central Excise v. Lanco Industries Ltd. (2009) 224
CTR (SC) 1, Tamilnadu Housing Board v. CCE 1995 Supp (1) SCC 50, 1994 (74) ELT 9 (SC), 55 ECR
7, Lubri-Chem Industries Ltd. v. Collector 1994 (73) ELT 257 (SC), M K Kotecha v. CCE AIR 2005 SC
1147, 179 ELT 261 (SC), Padmini Products v. CCE 1989 (43) ELT 195 (SC), Jaiprakash Industries v.
CCE AIR 2002 SCW 4840, Cadila Laboratories v. CCE AIR 2003 SCW 1115, 152 ELT 262 (SC), Gopal
Zarda Udyog v. CCE 2005 (188) ELT 251 (SC).
20
Tamil Nadu Housing Board v Collector of Central Excise , Madras 1994 (74) E.L.T. 9 (S.C.)
21
2009 (14) STR 803

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 6

Bona fide belief

In an analogous case, the party was under the bona fide belief that training in relation to SAP
was not taxable22. They thought that there was an exemption for 'vocational training services'.
It was also clear that the party did not have any intention to evade Service Tax and they were
under bona fide belief that they would not be liable for the said Service Tax. The court held
that it did not amount to wilful suppression of facts.

The assessee also has a similar case wherein it is under a bona fide belief that they are not
liable to pay service tax on supplementary services.

The court has also held that wherever there is the scope for believing that the goods are not
excisable to duty and therefore, no license is required to be taken out23, then the extended
period of limitation for demand under section 11A is inapplicable. This court has held that
these ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take
out license which is not due to any fraud, collusion or wilful mis-statement or suppression of
fact or contravention of any provision is not sufficient to attract the extended period of
limitation. For invoking the extended period of five years limitation , duty could not have
been paid, short levied or short paid or erroneously refunded because of either any fraud ,
collusion or wilful mis-statement or suppression of facts or contravention of the act or rules
made there under. These ingredients postulate a positive act. Therefore, failure to pay duty or
take out license is not necessarily due to fraud, collusion or wilful mis-statement or
suppression of facts or contravention of any of the provisions of the act.

From the above decision it can be appreciated that the Commissioner was completely wrong
while observing that the requirement of mens rea is not necessary for the contravention of the
provisions of the Finance Act, 1994. He has violated the established principle of law that
penalty can be imposed only where the assessee has evaded tax deliberately as held by the
Supreme Court. Since the appellants were under bona fide belief that credit was available to

22
The Commissioner of Service Tax Commissionerate v. C Ahead Info Technologies India Pvt. Ltd 2009
[14] S.T.R. 803
23
Padmini Products v. Collector of Central Excise 1989 (43) E.L.T. 195 (SC)

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 7

them, the above observations made by the hon’ble Supreme Court are applicable in the
present case on behalf of the appellant.

No intention to evade tax

It has been held that extended period of five years is inapplicable in the absence of proof of
suppression of facts.24

That where assessee had fully cooperated with the department during the investigation and
paid25 the demand by revenue, it was not a case of deliberate evasion. Since Appellant also
fully cooperated with the department and made the on account payment of Service Tax which
was due on it, the ratio of this judgment is squarely applicable to the present case as well.

For extended period of limitation, intent to evade tax should be present26 Service tax is an
indirect tax. Its burden is to be borne by the service recipient and not by service provider. In
the present context had appellant been aware of its service tax liability, it would have
collected the amount of service tax from relevant service recipient i.e. PTO’S and deposited
the same with the Government. Thus role of appellant is that of an intermediary. Appellant
had no vested interest in not depositing the amount of service tax. In other words there is no
guilty intention on part of the Appellant.

Also the supplementary services that Comfort Cars were providing to their client were on
reimbursable basis. The cost of these supplementary services is already included in the total
cost of the package tour that has been paid by the foreign tourists. Therefore Comfort Cars
under the bona fide belief that the tax on these services are paid by the principal tour operator
since they provide the supplementary services as agents did not pay tax on these services, as

24
Nat Steel Equipments Private Ltd v. Collector; 1988 (34) E.L.T. 8 (S.C.)
25
Maruti Udyog Limited 2002 (143) ELT 686
26
Union of India v. Rajasthan Spinning and Weaving Mills And Commissioner of Customs and Central
Excise v. Lanco Industries Ltd. (2009) 224 CTR (SC) 1, CCE v. Ballarpur Industries Ltd. (2007) 11
STT 6 (SC) – same view in Continental Foundation Jt Venture v. CCE (2007) 216 ELT 177 (SC), Anand
Nishikawa Co. Ltd. v. CCE 2005 (188) ELT 149, 2 STT 226, AIR 2005 SCW 4923 (SC) – quoted with
approval in CCE v. Damnet Chemicals (2007) 216 ELT 3 (SC)

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 8

it is well established that when the assessee acts on a bona fide belief it will not amount to
intention to evade tax27.

Also with regard to the circular that was issued, the appellant, Comfort Cars were negligent
about its existence and content. Even though ignorance of law is not an excuse for non-
payment of tax, there is no presumption that every person knows the law.28 A mere omission
or negligence would not constitute a deliberate act of ‘suppressio veri’ or ‘suggestio falsi’29

It is the general principle that so far as fraud and collusion is concerned it is evident that the
requisite intent, i.e., intent to evade duty is built into these very words. So far as misstatement
or suppression of facts is concerned, they are clearly qualified by the word "wilful" preceding
the words "misstatement or suppression of facts" which means with intent to evade duty. The
next set of words "contravention of any of the provisions of this Act or rules" are again
qualified by the immediately following words "with intent to evade payment of duty". It is,
therefore, not correct to say that there can be a suppression or misstatement of fact, which is
not wilful and yet constitute a permissible ground for the purpose of the proviso to Section
11-A. Misstatement or suppression of fact must be wilful. In the present case Comfort Cars
by merely not declaring that they were providing supplementary services do not show there
intention of evading tax. 30

No penalty should be imposed

No penalty should be imposed on defaulters unless the default is on account of deliberate

fraud, collusion, suppression of facts or wilful misstatement or contraventions of the
provisions of service tax with intent to evade payment of service tax. In the31 present matter
since there has been no wilful suppression therefore no penalty should be imposed on the

27
Akbar Badruddin Jaiwani v. Collector AIR 1990 SC 1579,Tamil Nadu Housing Board v. Collector 1990
(74) ELT 9 (SC)
28
CIT v Schell Internantional (2005) 278 ITR 630 (Bombay), Motilal Padampat Sugar Mills Co. Ltd. v.
State of UP (1979) 118 ITR 326 (SC)
29
Dilip N Shroff v. Jt CIT (2007) 11 Taxman 218, 291 ITR 519 (SC) – quoted in CWT v. Smt. Shakuntala
Devi Dalmia (2008) 172 Taxman 162 (All HC DB).Mere omission to declare does not mean suppression of
facts – Ramply (India) Ltd. v. CCE (2007) 216 ELT 129 (CESTAT 3 member bench)
30
Cosmic Dye Chemical v. Collector of Central Excise, Bombay 1989 (43) E.L.T 195 (S.C.)
31
Commissioner v. Nahar Industrial Enterprises Ltd. 2007 (7) STR 26 (Tri. -Del.), India Cements Ltd. v.
Commissioner 2007 (7) STR 569 (Tri.-Chennai), R.R.D. Tex Pvt. Ltd. v. Commissioner 2007 (8) S.T.R
186 (Tri.-Chennai), Commissioner of Service Tax v. Skematic Consultants 2007 [7] S.T.R. 575

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 9

assessee. As the assessee has not faulted with any deliberate defiance of law, no penalty can
be imposed.32

In a judgement by the Delhi Tribunal, it was held that appellant being a statutory government
body33, there could not be any mala fide intention to evade payment of service tax. It was a
case of omission on the part of the appellants, who were under bona fide belief that they were
not liable to pay service tax being a statutory government body. It was further held in this
case that penalty under section 7634 was not leviable in view of section 80 of the Finance act
1994.

Similarly in the current case there was omission on the part of Appellant to pay service tax
due to its bona fide belief that no service tax was payable by it in respect of supplementary
services provided by it to foreign tourists.

As per provisions of section 8035 no penalty should be imposed under Section 76, 77 & 7836
if the assessee proves that there was reasonable cause for the said failure. As Appellant was
prevented by reasonable cause and there was no wilful attempt to delay the payment of
service tax, no penalty should be imposed on it under aforesaid Sections 76, 77 and 78.37

Moreover the penalty can be set aside on the bona fide belief that the service tax is not
payable38. In this case the Appellant was rent-a-cab scheme operator and was liable to pay
service tax in the category of Rent-a-cab scheme operator. He failed to deposit service tax.
Appellant’s plea was that said service tax was exempted up to 31-3-2000 under notification
3/99-st and it was not deposited on bona fide belief that services continued to be exempted.
Commissioner (Appeals) observed that no evidence on record was found for suppression of
fact to evade payment of service tax. It was further held that bona fide belief is a reasonable
cause under Section 80 of Finance Act 1994. Hence penalty under Section 76 of the Finance

32
Sumeet Industries Limited v. Commissioner O C. Ex., Surat 2004 (164) ELT 335(Tri Mumbai)
33
Surat Municipal Corporation v. Commissioner 2006 (4) STR 44 (Tribunal Delhi)
34
Finance Act 1994
35
Ibid
36
Ibid
37
Ibid
38
Ram Krishna Travels Pvt. Ltd v. Commissioner of C. Ex. Vadodara [2007] 6 STR 37 (Tri-Mumbai)

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 10

Act was set aside.39Similarly in the present case, the Appellant had bona fide belief that
foregoing supplementary services provided by it did not fall within the ambit of any taxable
service. Thus drawing the analogy from this case penalty under Section 7640 should be set
aside.

In another decision, the appellant was a manufacturer of air conditioning system41 and
rendered drawing, design, technical consultancy services. Appellant’s services were held to
be covered by the scope of consulting engineer, and they fully cooperated with the
investigating officers during the course of investigation. It was held that since appellant was
under bona fide doubt whether its services under consideration were covered by Service Tax
in time. Therefore no penalty was imposable in terms of Section 80 of the Finance Act 1994
notwithstanding Sections 76 & 77 of the Finance Act. Appellant was placed in identical
situation as for the appellant they had reasonable doubt whether its supplementary services
were covered by Service Tax or not. Thus reasonable cause was there on the part of
Appellant in not depositing service tax in time in respect of its supplementary services during
the relevant period.

Thus it is prayed that there should be no extended period of limitation and also no penalty
should be imposed on the appellant on the above mentioned grounds.

39
Commissioner of Service Tax , Mumbai v. Gama Consultancy Pvt Ltd 2006 (4) STR 591 (Tri-Mumbai),
Karbala Trust v. CCE Trivandrum 2006 (2) STR 339 (Tribunal –Banglore), Hindustan Steel Ltd v.
State of Orissa 1978 (2) E.L.T. 159
40
Finance Act 1994
41
ETA Engineering Ltd. v. Commissioner 2006 (3) STR 429, 2004 (174) ELT 19 (Tribunal –LB)

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 11

CONTENTION 3: THAT BEFORE THE AMENDMENT IN THE DEFINITION OF

TOUR OPERATORS, THE SUPPLEMENTARY SERVICES PROVIDED BY THE
TOUR OPERATORS COULD NOT BE SAID TO BE TAXABLE.

In the present case Comfort Cars is a small proprietary concern providing tour operator
services. They primarily provide vehicle services to their guests. Sometimes they also provide
supplementary services such as arranging for tickets for visiting monuments, providing porter
services, guides, arranging for food etc.42 The definition of Tour Operators given under
43
section 65(115) has been amended in 2004.44 The earlier definition defined tour operators
as:

“Tour operator means any person engaged in the business of operating tours in a
tourist vehicle covered by a permit granted under the motor vehicles act, 1988 or the rules
made there under”

This was subsequently changed to:

“Tour operator means any person engaged in the business of planning, scheduling,
organizing or arranging tours (which may include arrangements for accommodation, sight
seeing or other similar activities) by any mode of transport and includes any person engaged
in the business of operating tours in a tourist vehicle covered by a permit granted under the
Motor Vehicles Act 1988 or the rules made there under.”

But the taxable service for tour operators has not been amended and reads as following:

“Taxable service means any service provided to any person by a tour operator in
relation to a tour”45

42
Fact Sheet¶ 6
43
Finance Act 1994
44
Finance Act No 2 of 2004
45
Section 65(105), Finance Act, 2004

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 12

The provision before amendment was confined only to transport and travelling services for
tourist vehicles covered by a permit under the Motor Vehicles Act.

It has been held that when an existing tariff definition remains same46, introduction of new
tariff entry would imply that the coverage under new Tariff was not covered by the earlier
entry. When new category is introduced, it means that the service was not taxable under old
category. In the present case the supplementary services were brought under the scope of tour
operator services by the amendment in finance act in 2004.47 Therefore it is very clear that
these services were not taxable before the amendment.

Also in a tax statute nothing is to be read in, nothing is to be implied. One can only look
fairly at the language used.48 The definition of tour operators before the amendment does not
include supplementary services it merely defines a tour operator as a person who provides
vehicle services to the clients therefore these supplementary services do not come within the
purview of the taxable service even though the definition of taxable service has remained the
same since the term used in the definition of taxable service is “ in relation to a tour” the
expression “in relation to” and “pertaining to” are words of limitation.49

In order to attract the levy, the services must be "in relation to50 clearing and forwarding
operations" and that the definition of "clearing and forwarding agent" makes it clear that all
services rendered by the clearing and forwarding agent are not within the scope of the levy;
the levy is limited to "clearing and forwarding operations.”

Drawing a corollary to this case taxable services are services provided by a tour operator in
relation to a tour and that the definition of tour operators makes it clear that all the services

46
Glaxo Smithkline Pharmaceuticals v. CCE (2005) 1 STT 37 (CESTAT),
47
Finance Act No. 2 of 2004
48
C.A. Abraham v. I.T.O. Kottayam- AIR 1961 S.C. 609 at p. 612, Assessing Authority-cum-Excise and
Taxation Officer v. East India Cotton Mfg. Co. Ltd. [1981] 48 STC 239 (SC), Cape Brandy Syndicate v.
Inland Revenue Commissiones, (1921) 1 K.B. 64, Gursahai Saigal v. C.I.T. AIR 1963 SC 1062,
Controller of Estate Duty v. Kantilal Trikamlal [1976] 105 ITR 92 (SC), C.I.T. v. Mr. P. Firm Muar
AIR 1965 SC 1216, Ahmedabad Urban Development Authority v. Sharda Kumar Jayanti Kumar
Parawalla AIR 1992 SC 2038, Syndicate v. I.R.C. (192) 1 KB 65 at 71, Candian Eagle Oil Co. v. R.-
(1946) AC. 119, Sutlej Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal, Calcutta AIR
1991 SC 218
49
Balkrishan Gupta and Ors. v. Swadeshi Polytex Ltd. and Anr AIR 1985 SC 520
50
KULCIP Medicines (P) Ltd. v. Commissioner of Central Excise, Delhi-III 2006 (1) STR 36

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 13

provided by the tour operator do not fall within the scope of tour operators. Therefore the
taxable services should be limited to tour operator services.

It is further submitted that etymological and plain meaning of the word "relation" is relation
by birth or relation by sacrament like marriage or relation in the form of business connection
or dealings. The present case Comfort Cars are providing are tour operators and as per the
definition of taxable services their taxable services are the services they provide in relation to
their tour. As per the definition of tour operators Comfort Cars are only providing vehicle
services. Whatever supplementary services Comfort Cars were providing to their clients they
were providing in the capacity of principal and agent therefore these supplementary services
do not fall within the purview of the definition of taxable services.

Also the term service has to be read in context of the enactment.51In the present case the term
service has been used in context of vehicle services provided by a tour operator in operating a
tour. Therefore the term any service would also not include the supplementary services
provided

Statute should be read as one.

It is also the settled law that words and phrases occurring in a Statute are to be taken not in
isolation or detached manner dissociated from the context but are to be read together and
construed in the light of the purpose and the object of the Act itself.52 It is a cardinal principal
of construction of a statute or the statutory rule that efforts should be made in construing the
different provisions, so that, each provision will have its play and in the event of any conflict
a harmonious construction should be given.53

Court has held in several cases that a construction that reduces one of the provisions to a
'dead letter' is not a harmonious construction as one part is being destroyed and consequently

51
Lucknow Development Authority v. M.K. Gupta AIR 1994 SC 787
52
Dr. Birendra Kumar Nayak And Ors. v. The Registrar, Utkal University 99 (2005) CLT 228
53
R.S. Raghunath v. State Of Karnataka And Anr, AIR 1992 SC 81

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 14

court should avoid such a construction.54 The essence of harmonious construction is to give
effect to both the provisions.55In the present case the definition of tour operators and the
definition of taxable services should be read together so as to get the true scope of taxable
services of the tour operators. If the definition of taxable services is not taken into account it
would amount to dead letter. There would be no purpose of providing such a definition. If
both the definitions are read together then these supplementary services would not come
under the purview of the taxable services.

Strict interpretation of fiscal statute

Moreover it’s a well recognized rule that the tax statutes should be interpreted strictly or that
there should be literal construction.56 The Supreme Court has laid down that:

"In construing a statutory provision the first and foremost rule of construction is
the literary construction. All that the court has to see at the very outset is what does the
provision say. If the provision is unambiguous and if from the provision the legislative intent
is clear, the court need not call into aid the other rules of construction of statutes. The other
rules of construction are called into aid only when the legislative intent is not clear."57

54
Jagdish Singh v. Lt. Governor Delhi And Others AIR 1997 SC 2239, Anwar Hasan Khan v.
Mohammad Shafi And Ors. AIR 2001 SC 2984, Corporation of the City of Victoriyav. Bishop of
Vancouver Island, AIR 1921 PC 240, Babulal Bhuramal v. Nandram Shivram, AIR 1958 SC 677, J. K.
Cotton Spinning and Weaving Mills Co. Ltd. v. State of U.P., AIR 1961 SC 1170, Sarwan Singh v.
Kasturi Lal, AIR 1977 SC 265, Mysore State Road Transport Corporation v. Mirja Khasim Ali Beg
AIR 1977 SC 747, Vaddeboyina Tulasamma v. Vaddeboyina Sesha Reddi AIR 1977 SC 1944, Punjab
Beverages Pvt. Ltd. v. Suresh Chand AIR 1978 SC 995, Commr. of Income Tax v. National Taj Traders
AIR 1980 SC 485, University of Allahabad v. Amritchand Tripathi AIR 1987 SC 57, Krishan Kumar v.
State of Rajasthan AIR 1992 SC 1789, Sultana Begum v. Prem Chand AIR 1997 SC 1006
55
Vetcare Alltech Pvt. Ltd. vs Cce 2004 (116) ECR 373 (Tri.-Chennai), Venkataramana Devaru and Ors.
v. State of Mysore AIR 1958 SC 255
56
CIT vs G. v. Venugopal [2005] 144 TAXMAN 784 (MAD), ITO v. Nadar AIR 1968 SC 623, S.K. Verma
v. Industrial Tribunal AIR 1981 SC 422, State Trading Corporation v. CTO AIR 1963 SC 1811, CIT v.
NC Budharaja AIR 1993 SC 2529, Cape Brandy Syndicate v. Commissioner of Inland Revenue (1921) 1
KB 64 [cited with approval in Income-Tax Officer v. T.S. Devinatka Nadar [1968] 68 ITR 252 (SC) : AIR
1968 SC 623, State of Punjab v. Jullunder Vegetables Syndicate AIR 1966 SC 1295, IT. Commissioner,
Patiala v. Shahzada Nand & Sons AIR 1966 SC 1342, Ashutosh Swain and Ors. v. State Transport AIR
1985 SC 493, Mathuram Agarwal v. State of Madhya Pradesh and Ors., AIR 2000 SC 109, Prevention
and Control of Water Pollution v. A.P. Rayons Ltd., AIR 1989 SC 611
57
Innamuri Gopalan v. State of AP 1964 SCR (2) 888

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 15

Taxing statutes should not be interpreted on any presumptions or assumptions58. The Court
must look squarely at the words of the statute and interpret them. It must interpret a taxing
statute in the light of what is clearly expressed; it cannot imply anything which is not
expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency.

The statute must be read in consonance with the scheme of the act.59 Therefore in the present
case the term in relation to must be interpreted strictly and in accordance with the definition
of tour operators given in the act.

Intention of the legislature

For the true scope of taxable services of tour operators the intention of the legislature must
also be looked at. Intention of the legislature must be so deduced by exploring his intention at
the time when the law was made.60 Basic rule of interpretation requires that legislative intent
must be assessed in its proper perspective and from the words used in the Statute and
considering the context in which the provision has been enacted61

The court held that to us it is clear that the Legislature has deliberately omitted the word
'interest' from Section 20(5)62 and proviso thereto. For a limited purpose of collection and
recovery, the interest has been treated as tax under the Act. The deeming provision contained
in this part of the statute has a limited application. Else it was not necessary for the
Legislature to have amended Section 11D63 by the amending Act No. 26 of 1978 to insert the
expression 'or interest payable' in the said section. Similarly, if the Legislature intended that
the appeal filed under Section 2064 can be entertained only on payment of interest apart from

58
Commissioner of Sales Tax, Uttar Pradesh v Modi Sugar Mills Limited AIR 1961 SC 1047
59
Fendoch Investment Trust Co. v. Inland Revenue Commissioners (1945) 2 All ER 140, Ashok Service
Centre & Another Etc v. State Of Orissa AIR 1983 SC 394
60
Doypack Systems Pvt. Ltd. Vs. Union of India (UOI) and Ors. AIR 1988 SC 782, Auckland Jute Co. Ltd.
v. Tulsi Chandra Goswami 1949 F.C.R. 201, Umayhal Achi v. Lakshmi Achi and Ors. 1945 F.C.R. 1
61
Chandra Prakash Tiwari v. Shakuntala Shukla, (2002) 6 SCC 127
62
Punjab Sales Tax Act 1948
63
Ibid
64
Ibid

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 16

the amount of tax and the penalty, nothing prevented it from inserting a similar expression in
Section 20(5)65 and proviso thereto.66

Similarly, in this case the definition of tour operators was amended proves beyond reasonable
doubt that there was genuine ambiguity with regard to services covered within the definition
of tour operators. It is for that reason that the legislation sought to amend such definition so
as to bring the activities within the definition of tour operators. According to Section 67 of
Finance Act 1994, service tax is payable only on the value of the service provided. Services
provided are travelling. Therefore supplementary services provided do not fall within the
purview of the definition of taxable services of tour operators.

Moreover where there are two reasonable interpretation of taxing statutes or language of the
provision was imperfect, imprecise and deficient, the remedy lay in a legislative amendment,
as the court was unable to provide an adequate solution. The one in favour of the assessee has
to be accepted.67

Therefore, it is prayed that for the above mentioned reasons the supplementary services
provided before the amendment were not within the purview of taxable services.

65
Ibid
66
Oswal Woollen Mills v. The State Of Punjab, 1995 111 PLR 72
67
CIT v G.V. Venugopal 2005 144 TAXMAN 784 (Mad), CIT v. Naga Hills Tea Co Ltd AIR 1973 SC
2524 (see also Commr. of Income Tax v. Shahzada Nand & Sons 60 ITR 392 SC, C.I.T v. Kulu Valley
Transport Co. (P) Ltd 77 ITR 518 SC, The Commissioner of Income Tax, West Bengal-I, Calcutta v.
M/s. Vegetable Products Ltd. 88 ITR 192 SC, Collector of Estate Duty v. R. Kanakasabai 89 ITR 251
SC, Sun Export Corp v. Collector of Customs 1997 6 SCC 564, C.A. Abraham v. I.T.O. Kottayam AIR
1961 S.C. 609 at p. 612, Commissioner of I.T. v. Karamcnand Premchand Ltd., Ahemadabad AIR 1960
S.C. 1175 at 1182 : 1960 (3) S.C. 727 at 742

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 17

CONTENTION 4: THAT THE CIRCULAR CANNOT CREATE TAX LIABILITY

AND THE TRIBUNAL WAS NOT JUSTIFIED IN RELYING UPON THE
CIRCULAR DATED 23.08.2007 ISSUED AFTER THE DISPUTED PERIOD.

[4.1] Tax Liability cannot be created by Circulars

Tax Liability of a person is the amount of tax which the person owes.68 Article 26569 of the
Constitution stipulates that no tax can be levied or collected except by authority of law, which
means that only legislation passed either by Parliament or a State Legislature can impose a
tax. Thereby, the courts or the administration do not have a “creative power” to make things
or operations taxable through an analogical interpretation of the statute, in cases where it is
not established that the legislature intended them to be taxable. By process of interpretation,
the taxing authority cannot introduce any attenuation or relaxation to its effect, even if
justified by circumstances.

As a general rule, the levy of tax is not permissible even by a notification, rule or regulation
unless the legislature expressly authorises imposition of such levy. One of the disturbing
features in the administration of both direct and indirect taxes is the indiscriminate issue of
circulars by both the CBDT and the CBEC. Thus, circulars can be issued to remove any
unintended hardship to the taxpayer or to resolve a procedural problem. But in no case, can a
circular place the assessee in a worse position than he is under the statute.

It is submitted that, as per the provisions of the Constitution70 and many a legal
pronouncements71, no tax can be imposed72 by any bye-law or rule or regulation unless the
statute under which the subordinate legislation is made specially authorises the imposition
even if it is assumed that the power to tax can be delegated to the executive. The basis of the

68
<www.fairtax.org/site/PageServer> last visited on 09th August, 2009 at 2100 hrs
69
Article 265 of the Constitution of India states that, “No tax shall be levied or collected except by authority
of law.”
70
Supra note 2
71
Bimal Chand v. State of M.P. AIR 1971 SC 517
72
M/s Lilasons Breweries v. State of MP AIR 1992 SC 1393

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 18

statutory power conferred by the statute cannot be transgressed by the rule making authority.
A rule making authority has no plenary power. It has to act within the limits of the power
granted to it.73

There arises no question as to the taxability of the supplementary services i.e. the ones for
providing boarding and lodging arrangement, local sight seeing, guide services etc as the
PTO’s already included them in the entire packaged tour which it provided.74 The PTO’s pay
tax on the entire amount received from the tourists75 and then from it further reimburses76 the
appellant for supplementary services which it provided for.

[4.2] Tribunal shouldn’t have relied on the Circular dated 23.08.2007

The circular dated 23.08.2007 which was relied on by the CESTAT included within the
services of a tour operator apart from providing the basic service of transportation from one
place to another, services of providing boarding and lodging arrangement, local sight seeing,
guide services and wide range of other value added services provided by tour operators such
as providing for porters, booking of accommodation, arranging the visit to amusement park,
visit to the museum etc, thus, counting in the appellant as well for service tax being levied
upon for the supplementary services so provided.77

Though the circulars of the Central Board are not binding on the court78, yet, in general,
circulars are binding on the income tax authorities. But through them, the Board cannot
impose a burden on the tax-payer greater than what the statute provides as done by the
circular in question but it can relax the rigour of the law.79

The period of dispute for which the Department has levied tax along with the penalty is that
from 01.04.2002 to 31.03.2007, the abovementioned circular is dated 23.08.2007, which
indicates that the provision as laid down by the circular came out almost six months after the

73
State of Orissa v. Narain Prasad AIR 1997 SC 1493
74
Page 2, ¶ 2, Line 7, Fact Sheet
75
Page 2, ¶ 2, Line 1, Fact Sheet
76
Page 2, ¶ 2, Line 4-5, Fact Sheet
77
Page 3, ¶ 2, Fact Sheet
78
Ellerman Lines Ltd. v. CIT AIR 1972 SC 524
79
Addl. Commissioner of Income Tax, Delhi-I v. Mrs. Avtar Mohan Singh (1982) 27 CTR (Del) 32

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MEMORIAL FOR THE APPELLANT
Pleadings And Authorities 19

expiry of the assessment period. Moreover, since the circulars are incapable of creating tax
liability80 it should not be relied upon so as to sustain the fact that the appellant as per the
requirements of the circular should pay tax on the accompanying services which are rendered
by them to the tourists.

It is prayed that as there is no tax liability created by the circular, the justification of the
Tribunal in relying upon the same to come into effect retrospectively so as to include the
disputed period is highly erroneous.

80
SK Traders v. Additional Commissioner, Trade Tax & Additional Commissioner (Assessment), Trade
Tax 2007 NTN (8 DPH) – 221

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MEMORIAL FOR THE APPELLANT
Prayer 20

PRAYER

In the light of the facts of the case, issues raised, arguments advanced and authorities cited,

the Counsel for the Appellant humbly prays before this Hon’ble Court to kindly adjudge and

declare:

“THAT THE APPELLANTS ARE NOT LIABLE TO PAY SERVICE TAX ON THE AMOUNT RECEIVED AS
REIMBURSEMENT BY IT FROM THE PTO’S;

THAT THE APPELLANT COULD NOT BE ASSESSED TO SERVICE TAX BY INVOKING THE EXTENDED
PERIOD OF LIMITATION;

THAT, BEFORE THE AMENDMENT IN THE DEFINITION OF TOUR OPERATORS, THE

SUPPLEMENTARY SERVICES PROVIDED BY TOUR OPERATORS COULD NOT BE SAID TO BE
TAXABLE;

THAT, CIRCULARS CANNOT CREATE TAX LIABILITY AND THE TRIBUNAL WAS NOT JUSTIFIED IN
RELYING UPON THE CIRCULAR DATED 23.8.2007.”

Or to pass any other order or decree as this Hon’ble court may deem fit and for this act of

kindness, the Appellants as in duty bound, shall forever pray.

RESPECTFULLY SUBMITTED

Sd/-

COUNSEL FOR THE APPELLANT.

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MEMORIAL FOR THE APPELLANT