CESTAT Dismisses Appeal Applying Res Judicata After Service Tax Dept Withdraws Writ Petition for Recalculation of Interest [Read Order]

The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has dismissed the Service tax appeal applying Resjudicata. It was found by the tribunal that the writ petition was dismissed as withdrawn due to rework needed on interest Calculation.

M/s Yamuna Prasad & Brothers, the Appellant is registered with the department and is engaged in providing taxable services under the category of Manpower Recruitment Agency, Cargo Handling Services, Maintenance & Repair Service, Construction Services in respect of Commercial or Industrial Buildings and Civil structures, Site Preparation and Clearance, Cleaning Services.

It was gathered from M/s Hindalco Industries Ltd. Renukoot, Sonebhadra, that in respect of various services received by them from various service providers including the appellant, they have made the payments to the service providers during the period 2005-06 to 2009-10.

Based on the information received revenue was of the view that the appellant had not paid the service tax, amounting to Rs 7,87,427/- (including cess) during the said period, by suppressing the value of taxable service provided by them.

A Show Cause Notice was issued to the appellant, the service tax amounting to Rs. 7,87,427/- (Service Tax Rs. 7,68,543/- + Education Cess Rs. 15,371/-+ Secondary & Higher Education Cess Rs. 3,513/-) should not be demanded and recovered from them along with appropriate Interest under the proviso to Section 73(1) of the Act read with Section 75 of the Finance Act.

Penalty should not be imposed upon them under the erstwhile Section 75A read with Section 77 of the Act for violation of Section 69 of the Act/rule 4 of the Rules. Penalty should not be imposed upon them under Section 77 of the Act for violation of Section 70 read with rule 7 of the Rules, in case of each default. Penalty should not be imposed upon them under Section 76 of the Act for violation of Section 68 of the Act read with Rule 6 of the Rules. Penalty should not be imposed upon them under Section 78 of the Act. 

On further going through the facts of the case and the material available on record, I find that it is an admitted fact that the appellants did not contest the Show Cause Notice dated 22.10.2010 on merits

The appellants are aggrieved because the Service tax amount of Rs. 10,45,027/- paid by Hindalco to the appellants has also been included in the gross turnover concerning the demand for service tax. The appellants have admitted submission of a chart to the adjudicating authority for the calculation of tax.

The appellant has during the period before 16.06.2005, issued invoices, claiming the service tax from their service recipient. During the period before 16.06.2005 appellant as per his submission has collected a service tax of Rs 30,172/- on the taxable value of Rs 462239.00. As the appellant was himself charging and collecting the service tax, even before 16.06.2005, the claim for deduction made by the appellant for deducting this value from the taxable value cannot be acceded to.

Thus the gross value of taxable service on which the demand of service tax is made, after allowing the deductions in respect of PF, Bonus and Service Tax paid by M/s Hindalco, as per the chart submitted by the appellant comes to Rs 63,90,554.77/-. The demand has been made by taking a table value of Rs 64,41,735/-. We do not find much difference in the taxable value determined by the department for making the demand and the taxable value that can be determined based on the chart submitted by the appellant.

It was evident that while allowing the appellant to withdraw the writ petition, the dispute was confined only to the calculation of interest as is clear from the order dated 2-8-2004 itself which specifically referred to the averments made in Paragraphs 6 and 7. In Paragraph 6 particularly, Respondent No. 1 made some remarks about the calculation of the interest and stated that it needed re-calculation.

Therefore, after the dismissal of the said writ petition as withdrawn, the only issue that remains for consideration was how much interest is payable and the correct calculations thereof.

Consequently in the second writ petition, when the appellant as well as its counsel knew that the issue as to whether the interest is payable or not on other grounds had already been foreclosed in the earlier writ petition, the counsel for the appellant did not make any submission about the aforesaid plea raising the issue in Show Cause Notice and limited his prayer from the date from which the interest was to be paid.

A two-member bench of  Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) held that “when this issue was raised and abandoned in the first writ petition which was dismissed as withdrawn, the principles of constructive res judicata which is laid down under Order 23 Rule 1 of the Code of Civil Procedure, 1908, and which principles are extendable to writ proceedings as well as held by this Court in “Sarguja Transport Service v. State Transport Appellate Tribunal, M.P., Gwalior and Others”  would be applicable.”

The bench dismissed the appeal. Shri Atul Gupta, Advocate appeared for the Appellant and Shri Manish Raj, Authorised Representative appeared for the Respondent.

To Read the full text of the Order CLICK HERE

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