Mr. J.K Mittal, Ms. Vandana and Mr. Mukesh Mittal Choudhary, Advs v. UNION OF INDIA ORS

Judgment

1. The writ petitioner impugns the Show Cause Notice1 dated 17 October 2019 issued by the respondents in purported exercise of powers conferred by the First Proviso to Section 73(1) of the Finance Act, 19942. 2. Apart from Mr. Mittal, learned counsel who represented the

writ petitioner and Mr. Singla, learned counsel who appeared for the respondents, we also had the benefit of hearing Mr. Kunal, learned 1 SCN 2 Act Signature Not Verified W.P.(C) 16771/2022 Digitally Signed By:KAMLESH KUMAR Signing Date:20.02.2025 18:31:05 counsel, who had been appointed by the Court as the Amicus. 3. With the aid of the learned amicus, we have gone through the detailed and chronological list of dates as well as the compilation of judgments which have been placed for our consideration. For the purposes of analysing the challenge which stands raised, we deem it apposite to take note of the following undisputed facts which emerge from the record. 4. The challenge to the impugned SCN of 17 October 2019 constituted the fifth of a series of SCNs which had been issued by the respondents holding the petitioner exigible to tax under the service tax regime that prevailed. The levy of service tax was asserted to stand attracted in respect of amounts expended by the petitioner for meeting operational costs of overseas offices as well as for payments received for arranging and operating outbound tour services. It was the case of the petitioner that the aforesaid services would not fall within the ken of Section 65(105)(n) of the Act and that consequently, the amount so expended or received was exempt. 5. For purposes of clarity, Mr. Kunal has placed for our consideration the series of SCNs which appear to have been issued to the writ petitioner raising identical allegations. The details of those SCNs are extracted hereinbelow: SN. Period in Impugned SCN Date of filing ST-3 Return

1. April 2014 September 2014 22 Oct 2014 (Original) Normal Limitation u/s 73(1)** 22 Apr 2016 (18 months) Extended Limitation u/s 73(4) (5 Years) 22 Oct 2019 Demand (Rs.) 24,11,129

2. October 2014 to March 2015 24 Apr 2015 (Original) 24 Oct 2016 (18 months) 24 Apr 2020

3. April 2015 September 2015 23 Oct 2015 (Original) 20 Jul 2017 (18 months) Signature Not Verified W.P.(C) 16771/2022 Digitally Signed By:KAMLESH KUMAR Signing Date:20.02.2025 18:31:05

4. October 2015 to March 2016

5. April 2016 September 2016

6. October 2016 to March 2017

7. April 2017 June 2017 20 Jan 2016 (Revised) 22 Apr 2016 (Original) 25 Oct 2016 (Original) 27 Oct 2016 (Revised) 25 Apr 2017 (Original) 22 July 2017 (Revised) 15 Aug 2017 (Original) 27 Sep 2017 (Revised) 20 Jan 2021 22 Apr 2021 27 Oct 2021 22 Oct 2017 (18 months) 27 Apr 2019 (30 months) 22 Jan 2020 (30 months) 22 Jul 2022 24,71,439 23,19,379 27 Mar 2020 (30 months) 27 Sep 2022 8,83,302 Total

6. It would be relevant to note that while the impugned SCN was 80,85,249 issued for the period of April 2014 to June 2017, the time periods at serial numbers 6 and 7 of the chart handed over by the learned amicus i.e. the period of October 2016 to June 2017 would fall within the general period of limitation, and would thus be covered by the judgment of the Customs, Excise and Service Tax Appellate Tribunal3. 7. The principal question which was canvassed for our consideration was whether the extended period of limitation and which rests on an allegation of service tax having been not levied or paid or having been short-levied or short-paid by reason of fraud, collusion, wilful misstatement or suppression of facts, could be said to have been attracted. 8. On a perusal of the various SCNs which preceded the one which is presently impugned before us, we find that the subject matter 3 Tribunal Signature Not Verified W.P.(C) 16771/2022 Digitally Signed By:KAMLESH KUMAR Signing Date:20.02.2025 18:31:05 of contestation had remained the same. The aforesaid SCNs had ultimately culminated in the passing of Orders-in-Original adverse to the writ petitioner. Undisputedly, traversing through the statutory mechanism of appeals, the matter ultimately reached the Tribunal. The Tribunal rendered its judgment on 30 September 2022 holding in favour of the writ petitioner on merits as would be manifest from the following passages which form part of its decision: “13. In the light of the submissions proffered by both sides, it is necessary for us to examine the provisions of Finance Act, 1994. The impugned taxable service is that 'provided or be provided' '(n) to any person, by a tour operator in relation to a tour;' in section 65 (105) of Finance Act 1994 with "'tour operator" means any person engaged in the business of planning, scheduling, organising or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by anymore of transport, and includes any person engaged in the business of operating tours in a tourist vehicle or a contract carriage by whatever name called, covered by a permit granted under the Motor Vehicles Act, 1988 (59 of 1988) or the rules made there under.' in section 65(115) of Finance Act, 1994. As far as the present dispute is concerned, the expansion in the definition effected from 16th May 2008 is not relevant. Furthermore, the definition of "'tour" means a journey from one place to another irrespective of the distance between such places;' in section 65(113) of Finance Act, 1994 is also not germane.

14. The change in the statutory provision has added elements to the activity that makes for being 'tour operator' and, in both the unamended and amended version, entirety of performance in India is the criterion for subjecting the consideration to tax. That is the only conclusion that can be arrived at from perusal of Export of Service Rules, 2005 which categorizes the scheme of export in terms of the enumeration of 'taxable service' in section 65(105) of Finance Act, 1994. The adjudicating authority has, instead, dilated on section 65(115) as the foundation of the demand and erroneously so. Signature Not Verified W.P.(C) 16771/2022 Digitally Signed By:KAMLESH KUMAR Signing Date:20.02.2025 18:31:05

15. We do not have to venture beyond the findings, viz., '29.16 In this connection, I observe that for treating an activity an export the assessee has to fulfil/ all the conditions of the Export of Services Rules, 2005. I find that rule 3(2) of the Export of Services Rules, 2005 has laid down the condition of receipt of the consideration in foreign currency whereas this condition has not been fulfilled in respect of outbound tours performed by the Indian tourists as the consideration for the same has been received in Indian rupees. Further, as regards the taxability of foreign tourists , as already discussed, the assessee has provided services of planning, scheduling, organizing or arranging tours (when may include arrangements for accommodation, sightseeing or other similar services) to the foreign tourists within India since at the time of the provision of aforesaid service the service provider and the service recipient, both were in India and the service also flew within the country and so the place of supply of service remained in India and hence the services provided by them within India are well covered under 'Tour Operator service'. I find that it is a fact that the definition of the term 'Tour Operator' as amended vide Finance Act, 2004 has two parts as under; "tour operator" means

3. any person engaged in the business of planning, scheduling, organizing or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport,

4. and includes any person engaged in the business of operating tours in a tourist vehicle covered by permit granted under the Motor Vehicles Act, 1988 (59 of 1988) or the rules the rules made there under;' in the impugned order which has sweepingly rejected the claim of services rendered to customers paying in convertible foreign currency as beyond the pale of exemption with the specious finding that customer was present in India when the service was rendered. Insofar as service taxable under section 65(105)(n) of Finance Act, 1994 is concerned, it did not appear to have dawned on the adjudicating authority that Export of Service Rules, 2005 does not base the exemption on place of the customer. The assumption that payment, if any, was received in local currency from Indian tourists is also not evidenced by any details in the show cause notice or subsequent ascertainment in the impugned order which has, but for Signature Not Verified W.P.(C) 16771/2022 Digitally Signed By:KAMLESH KUMAR Signing Date:20.02.2025 18:31:05 tabular presentation of the final confirmation of demand, not referred to the service rendered or disaggregation of value of services ineligible to be considered as exports. taxable value/tax and

16. As the consideration claimed to have been received in pursuance of exports has not been controverted in the impugned order, neither the issue of liability of interest on demand that has not fructified nor the contention relating to inapplicability of the decision of the Tribunal in Cox & Kings India Ltd has to be decided upon in this appeal.

17. In view of our conclusions supra, we set aside the impugned order and allow the appeal of assessee while dismissing the appeal of Revenue.”

9. It was in the aforesaid context that Mr. Mittal had contended that the invocation of the First Proviso to Section 73(1) of the Act was wholly untenable. Mr. Mittal submitted that the issue of whether the expenditure incurred for meeting operational costs of overseas offices and the payments received for arranging outbound tour services could be subjected to tax was the principal question on which the earlier four SCNs were based. The petitioner had taken the consistent position that those services would not fall within the ambit of the Act and had claimed exemption from taxation based on a notification issued by the respondents themselves. It was thus contended that it would be wholly impermissible for the respondents to assert that they were either unaware of the position as taken by the writ petitioner or that there was a suppression of material facts. 10. While, and from the chart which has been placed for our consideration by Mr. Kunal, we find the impugned SCN would fall within the extended period of limitation otherwise constructed in terms of the First Proviso to Section 73(1), the principal issue which arises is whether that provision could itself have been said to be Signature Not Verified W.P.(C) 16771/2022 Digitally Signed By:KAMLESH KUMAR Signing Date:20.02.2025 18:31:05 attracted. 11. Mr. Kunal, the learned amicus, submitted that once it was the conceded position of the respondents of the same and identical issue forming subject matter of the earlier SCNs’ proceedings and the adjudication which was undertaken in connection therewith, it would perhaps not be permissible for the respondents to assert a wilful suppression of facts and which constitutes the trigger for the application of the First Proviso to Section 73(1). 12. The learned amicus in this respect drew our attention to the following principles which had come to be laid down by the Supreme Court in P&B Pharmaceuticals (P) Ltd. v. Collector of Central Excise4 and which are extracted hereinbelow: “12. We have indicated above the facts which make it clear that the question whether M/s Pharmachem Distributors was a related person has been the Excise the subject-matter of consideration of Authorities at different stages, when the classification was filed, when the first show-cause notice was issued in 1985 and also at the stage when the second and the third show-cause notices were issued in 1988. At all these stages, the necessary material was before the authorities. They had then taken the view that M/s Pharmachem Distributors was not a related person. If the authorities came to the conclusion subsequently that it was a related person, the same fact could not be treated as a suppression of fact on the part of the assessee so as to saddle it with the liability of duty for the larger period by invoking proviso to Section 11-A(1) of the Act. So far as the assessee is concerned, it has all along been contending that they were not related persons, so, it cannot be said to be guilty of not filling up the declaration in the prescribed pro forma indicating related persons. The necessary facts had been brought to the notice of the authorities at different intervals from 1985 to 1988 and further they had dropped the proceedings accepting that M/s Pharmachem Distributors was not a related person. It is, therefore, futile to contend that there has been suppression of fact in regard to M/s Pharmachem Distributors being a related person. On that score, we are unable to uphold the invoking of the proviso to Section 11-A(1) of the Act for making the demand for the extended period.” 4 (2003) 3 SCC 599 Signature Not Verified W.P.(C) 16771/2022 Digitally Signed By:KAMLESH KUMAR Signing Date:20.02.2025 18:31:05

13. The view that came to be expressed by the Supreme Court in P&B Pharmaceuticals was again reiterated in Larsen & Toubro Ltd. v. Collector of Central Excise5 and we thus deem it appropriate to reproduce the following paragraphs from that decision: “14. Acts of fraud or suppression, it is well settled, must be specifically pleaded. The allegations in regard to suppression of facts must be clear and explicit so as to enable the noticee to reply thereto effectively. It was not the case of the Revenue that the activities of the appellant were not known to it. 15. Admittedly, when the first show-cause notice was issued, the extended period of limitation was not resorted to. A notice should ordinarily be issued within a period of six months (as the law then stood) i.e. within the prescribed period of limitation but only in exceptional cases, the said period could be extended to 5 years. When in the original notice, such an allegation had not been made, we are of the opinion that the same could not have been made subsequently as the facts alleged to have been suppressed by the appellant were known to them.