By TIOL News Service

NEW DELHI, SEPT 20, 2013 : IT is very easy to issue Show Cause Notice in service tax cases. All you have to do is reproduce the provisions of the definition of a particular service and raise a demand on the income asking the assessee to show cause as to why the service tax should not be demanded with interest and penalties, preferably under extended period, when the normal period is over.

But in this case, the Tribunal was not kind enough to take such notices into cognizance and quashed the same.

The appellant urged that the show cause notices were incoherent and did not spell out what relevant ingredients of the relevant statutory provision apply to the service provided, to warrant attribution of the liability; and since the initial step for initiation of proceedings leading to the adjudication order being unsustainable, the adjudication must fail, for violation of due process and transgression of principles of natural justice.

After hearing both sides, the Tribunal held:

Business Auxiliary Service is defined to mean any of the activities enumerated in clauses (i) to (vi) or the residuary clause (vii). Each of the clauses (i) to (vi) are substantially distinct from each other. To illustrate, sub-clause (i) enumerates promotion or marketing or sale of goods produced or provided by or belonging to the client; and clause (iv) specifies procurement of goods or services, which are inputs for the clients. While there could be an occasional overlap, in the sense that an activity may fall within more than one clause, the activities specified in clauses (i) to (vi) are essentially distinct.

The show cause notice has failed to specify in which specific clause, the activity of the petitioner falls; nor has characterized the activity with reference to the distinct attributes of any clause.

The show cause notices were issued on the basis of a prima facie assumption by Revenue that the assessee was assessable to levy of service tax for providing BAS. The reasons for such prima facie assumption of Revenue were however not specified in the show cause notices. Mere extraction of the entire provisions of Section 65(19) of the Act does not fulfill the requirement.

On the aforesaid analysis, the show cause notices are invalid. This infirmity is incurable; these show cause notices are therefore quashed.

However, the Tribunal granted liberty to Revenue to initiate proceedings afresh, by issuance a fresh show cause notice, clearly setting out the reasons, but in accordance with law.

(See 2013-TIOL-1394-CESTAT-DEL)