The Telangana High Court while granting relief to the M/s. National Remote Sensing Agency (NRSA) as it has had no Intention to Evade Service Tax imposed Rs. 10,000 Cost of GST Department.
The Respondent-assessee, National Remote Sensing Agency is an autonomous body under the Department of Space and Research. The respondent is an organization established with the object of capturing Satellite Data Reception, Processing, Dissemination and application of Satellite Data in harnessing natural resources and also supporting various agencies of Government which are involved in launching of Satellite like ISRO and other Space centres concerned with designing of Satellite launch vehicles by receiving data from the Satellites launch, processing and disseminating the same to the user agency including Defence establishments on behalf of the Government of India.
The NRSA claimed that it received certain grants from Department of Space for upgradation of its facilities for carrying out research projects like remote sensing application machine, integrated machine for sustainable development and large scale mapping of the country provided to ISRO for development of payload for future Satellites; identification of earthquake affected area, carrying out aerial photography over the flood affected area and fertilizer requirement using remote sensing. Thus, it is contended that there is no service to third parties as these are in-house projects for the same department under which they are working.
The NRSA did not find favour with the Commissioner viz., appellant-Revenue, who confirmed the proposals made in the show cause notice in relation to demand of service tax under the category of photography services and scientific and technical consultancy services rendered, including penalties and interest, while accepting the contention of the respondent-NRSA in relation to non-liability to service tax on consideration received as grant for in-house project.
The Tribunal held that the respondent is liable to pay service tax under the category of photography services and scientific or technical consultancy services; that having regard to the fact that the respondent-NRSA is a Governmental organization run by Bureaucrats and Scientists, none of whom have any personal interest in evading service tax, it cannot be concluded that the respondent had committed fraud or collusion or willful misstatement or suppression of facts with an intent to payment of evade service of tax. Thus, the Tribunal held that the extended period of limitation cannot be invoked and demand for the normal period of limitation would only survive. In so far as imposition of penalty under Section 78 of the Finance Act, 1994, the Tribunal also held that there is no evidence of willful suppression of facts with an intent to evade payment of service tax, and it is a fit case to invoke Section 80 of the Finance Act to waive penalties imposed under Section 78 of the Act.
Mr. B. Narayan Reddy, the Senior Standing Counsel appearing for the appellant-Revenue contended that the Tribunal ought not to have interfered with the Order- in-Original, since the respondent did not comply with the statutory tax provision; but for the intervention of the department, the respondent did not come forward for paying service tax; thus, there was suppression of material facts, a precondition for invoking the extended period of limitation under Section 73(1) of the Finance Act. Similarly, it is also contended that the Tribunal ought not to have invoked the provisions of Section 80 of the Act suo motu to waive all the penalties imposed without existence of a reasonable cause for failure to pay service tax.
The division bench of Justice Ramachandra Rao and Justice T. Vinod Kumar there is no incentive for the respondent-NRSA to resort to evasion of tax which could result either in the profits soaring higher or any individual being benefited. On the other hand if there existed a liability, the respondent could have factored the same in its budget proposals and sought for release of more funds from the Government to discharge its liability. Thus, it is only flow of funds from one pocket to the other pocket of the Government and would not result in any gain either to the organization or to any individual.
“It is absurd to even suggest that the respondent had suppressed facts with an intent to evade payment of tax, and mulct it with payment of service tax by invoking the extended period of limitation,” the court added.
The court held that The focus of the organizations like the respondent-NRSA is definitely not on either resorting to tax evasion or tax planning which would benefit the establishment, but is focused in its core activity of research and assisting the other agencies of Government in various projects. The said fact was completely lost sight by the appellant-Revenue while passing the Order-in-Original, which however, has been rightly taken note by the Tribunal.
The court directed the Appellant Revenue to pay costs of Rs. 10,000/- to Telangana High Court Legal Services Committee within six weeks.
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