2020-TIOL-NEWS-261, Dated: Thursday, November 05, 2020

ST - Main grounds raised by the petitioner is that the demand of service tax on the grounds mentioned in the impugned order is not in conformity with the proposals made in the show cause notice and that the notice is vague and without any details.

+ It is a settled proposition of law that a show cause notice, is the foundation on which the demand is passed and, therefore, it should not only be specific and must give full details regarding the proposal to demand, but the demand itself must be in conformity with the proposals made in the show cause notice and should not traverse beyond such proposals.

+ In the show cause notice issued to the petitioner there is a proposal to demand service tax on manpower recruitment or supply agency; management, maintenance or repair services; works contract; and commercial or industrial construction. To such a show cause notice, the petitioner gave his objections on 14.11.2014, stating that all the proposals are vague and bereft of any particulars, since the show cause notice does not indicate the exact amount of service demanded under the respective services and accordingly sought for details.

+ However, in the impugned order dated 25.02.2016, the demand for service taxes were made for a) site formation and clearance, excavation, earth moving and demolition services; b) works contract service; c) maintenance and repair service for the road works done.

+ Apparently, the demand of service under the aforesaid heads were not specifically proposed in the show cause notice dated 13.10.2014. Furthermore, the petitioner had expressed his inability to raise his objections to the show cause notice since the notice did not indicate the respective services under which the proposal for demand of service tax was made. However, without adhering to his objections, the impugned adjudication order has been passed.

+ The very purpose of the show cause notice issued is to enable the recipient to raise objections, if any, to the proposals made and the Authority concerned are required to address such objections raised. This is the basis of the fundamental Principles of Natural Justice. In cases where the consequential demand traverses beyond the scope of the show cause notice, it would be deemed that no show cause notice has been given, for that particular demand for which a proposal has not been made.

+ The impugned adjudication order cannot be sustained since it traverses beyond the scope of the show cause notice and is also vague and without any details. Accordingly, such an adjudication order without a proposal and made in pursuant of a vague show cause notice cannot be sustained.

+ Order-in-Original dated 25.02.2016 is quashed. However, the first respondent is granted liberty to issue a fresh show cause notice giving details of the proposed demand for the respective services, atleast within a period of 30 days.

ST - The appeal of M/s Go Airlines, challenging the recovery of Rs. 56,58,312 along with interest thereon under section 75 of FA, 1994, besides imposing penalty of like amount under section 78 and Rs. 10,000 under section 77, is limited to the finding therein that the impugned activity conforms to section 65(105)(zh) of Finance Act, 1994 and not to that in section 65(105)(zzzze) of Finance Act, 1994 as claimed by the appellant - It is common ground that the appellant is a recipient of service, provided by M/s Radixx Solutions International Inc., USA, to whom the first payment under the contract was made on 27th June 2006 and that the appellant had discharged tax liability of Rs. 28,01,753 on payments effected after 16th May 2008 with the incorporation of 'information technology software' among the taxable services - The liability, for the period of dispute from 26th July 2006 to 31st August 2009, was fastened upon them by the operation of the legal fiction in section 66A that deemed the recipient as provider to accord jurisdiction for collection of tax on services procured from outside India - The total liability for the period was partly adjusted from the voluntary payment of Rs. 16,85,335 towards the dues from 15th November 2006 to 20th July 2007 - As the self-assessed payment of Rs. 28,01,753 has been discharged, the amount in dispute is restricted to Rs. 28,56,559 - It is contended by appellant that self-assessment to tax, on incorporation of 'information technology software service' in section 65(105)(zzzza), is ample evidence of their diligence in discharge of tax liability to exclude the possibility of having contemplated evasion of tax - In terms of the activity that is sought to be taxed by these two entries, the connection with electronic data processing is unmistakable - Considering the mechanism incorporated in two definitions to render the activity functional, the minor differences between them should have led to a similar speculative reasoning on the part of appellant and the deliberate discard of applicability after initial discharge of tax liability should have been justified in proceedings instead of relying upon decisions of the Tribunal rendered subsequent to the period of dispute - The discharge of tax liability after incorporation of new levy occurred during the investigations and, therefore, does not obtain for themselves the halo of diligence - The impugned order has imposed penalty of Rs. 56,58,312 under section 78 of FA, 1994 - It is seen that appellant has been discharging tax liability since 16th May 2006 and, with payment of taxes amounting to Rs. 16,85,335 at some stage before ceasing to do so in July 2007, the unpaid dues is limited to Rs. 28,56,559 - Accordingly, while upholding the impugned order as being consistent with the law, the penalty under section 78 of Finance Act, 1994 is capped at this amount - The appeal is, therefore, dismissed save for this modification: CESTAT

ST - The assessee is registered for providing taxable services of "Construction Service" under Section 65(105)(zzq) of FA, 1994 - During audit, it appeared that assessee paid the service tax by utilizing cenvat credit for the month of March 2006 and had also availed the abatement of 67% on total taxable value under Notfn 12/2003-ST in violation of Notfn 01/2006; assessee is liable to pay Service Tax and education cess during the month March 06 - With regards to availability of exemption contained in notfn 01/2006 to the assessee, Commissioner finds that the contention of assessee is not correct because the Notfn 15/2004 automatically gets nullified after the introduction of notfn 01/2006; therefore the question of availment of notfn 15/2004 and notfn 01/2006 for the month of March 2006 does not arise; even though the cenvat credit pertained to the period only upto 28.02.2006 the same is not eligible for utilization for the month of March 2006 and onwards - The issue is no longer res integra; there is no provision under Notfns 1/2006 or 15/2004 that such credit legally availed prior to 1.3.2006 under the provisions of CCR, 2004, would lapse - Therefore, the assessee is eligible to utilise cenvat credit, availed by them, on inputs/input services, prior to 1.3.2006 - To that extent, demand is not sustainable - Coming to the second issue of demand of Service Tax, in terms of Section 65 (30) (a) of FA, 1994 r/w Section 65 (105) (zzzh), for the period from 16.06.2005 to 30.09.2007, commissioner relies on the case of M/s. Rohan Builder 2008-TIOL-1355-CESTAT-BANG to hold that the service provided by developer in the case of such tripartite agreement is liable to service tax; the assessee is a service provider rendering services of "construction of residential complexes" and is therefore liable to pay service tax on the said service - What is to be seen is whether the contract was a service contract simplicitor or a works contract - The contracts are composite contracts and therefore, not leviable to service tax before 1.6.2007 - The SCN proposes to demand service tax on construction of residential complexes service after 1.6.2007, even though they are works contracts being composite in nature - Therefore, service tax demand after 1.6.2007 also cannot be confirmed - The department cannot traverse beyond the SCN - For that reason, the Tribunal also cannot confirm the duty for a period after 1.6.2007 under construction of residential complexes service - As the issue is decided on merits, no reason found to record findings on the issue of limitation: CESTAT

- Appeal allowed: BANGALORE CESTAT

CX - The present appeal was filed by the assessee against rejection of refund claim, filed by it under the CCR 2004 - The assessee's refund claim was rejected on grounds of limitation, whereas the refund claim had been filed within the proper time frame - The assessee claimed there to be some ambiguity in Notfn No 27/2012-CE (N.T.) and that the limitation should only be applied to cases after issue of notification 14/2016-C.E. (N.T) .

Held - The Clause 3(b) of Notification 27/2012 clearly prescribes that as section 11B of the Central Excise Act, 1994 will be applicable to all claims made under Rule 5 - Vide notification 14/2016-CE (N.T.) dated 01/03/2016, the clause 3(b) was replaced - It is seen that as far as the manufacturer is concerned, there is no chang - However in the case of service provider certain relaxation is granted - In the present case, the assessee is a manufacturer and, therefore, there is no ambiguity - The refund claim relates to the period June to August, 2015 and the same was filed on 22nd September, 2017 which clearly beyond the scope of limitation prescribed u/s 11B of the Central Excise Act, 1944 - Hence there is no error in the rejection of refund claim: CESTAT

Cus - The assessee-company imported a consignment of CRGO Steel Sheets/ Coils through various ports - These consignments were seized by the Customs Department - SCN was issued to the assessee, proposing to confiscate the goods on certain grounds - An adjudication order followed and the assessee filed the present appeal against the same.

Held - In the present case the ADG, Adjudication, DRI Mumbai, was acting as adjudicating authority, and has made this record of personal hearing as adjudicating authority. Also by stating "As regards request for testing, it was informed to them that the same was considered and found to be not acceptable, in view of the fact of the case and evidences placed before the adjudicating authority.", he has made a determination and have rejected the request for testing of the consignment made by the assessee - Any such determination during the course of adjudication by the adjudicating authority is an order passed by the passed by the adjudicating authority and is within the purview of section 129A(1)(a) against which the appeal lies to this Tribunal - The Tribunal does not agree with the manner in which the adjudicating authority dealt with the assessee's request for testing of the products - Hence the matter needs to be considered in more serious manner and proper reasons to be assigned, because in any judicial/ quasi judicial proceedings, the effected party has the right to lead the evidence in the manner which suits to him best - Any order which is contrary to this basic principle has to be more considered and reasoned - Hence the case is remanded back to the adjudicating authority for reconsideration: CESTAT