2012 (7) TMI 24 - AT - Service Tax

CESTAT Bangalore: Show Cause Notice Timing Key in Tax Cases

The Appellate Tribunal CESTAT, Bangalore ruled in favor of M/s. Goetze TP (India) Ltd., holding that the demand for Service Tax was not sustainable as the ... Demand of Service Tax on Clearing and Forwarding services received - period from 16.07.1997 to 31.08.1999 - show cause notice on 22.04.2004 – Held that:- demand is not sustainable since the show cause notice was issued under Section 73 of Finance Act, 1994 and on the day on which show cause notice was issued, the Section 73 was not applicable in respect of short levy arising in respect of the ST - 3 returns filed under Section 71A – In favor of assessee Issues:1. Service Tax liability on Clearing and Forwarding services.2. Applicability of Section 73 of Finance Act, 1994.3. Interpretation of relevant judicial decisions.4. Validity of show cause notice issued before the amendment of Section 73.Analysis:1. The Appellate Tribunal CESTAT, Bangalore dealt with the issue of Service Tax liability on Clearing and Forwarding services received by M/s. Goetze TP (India) Ltd. The Commissioner (Appeals) held that the demand for Service Tax of Rs. 4,96,356/- was not sustainable as the show cause notice was issued under Section 73 of Finance Act, 1994, which was not applicable at the time of issuance. The Revenue appealed this decision.2. The Tribunal considered the arguments presented by both sides. The Revenue contended that the decision of the Tribunal in LH Sugars Factories Ltd. v. CCE was confirmed by the Supreme Court in a short order, but a subsequent detailed argument in Chief CCE v. Sundaram Fasteners Ltd. resulted in the appeal being admitted. It was noted that Section 73 was amended to include Section 71A on 10.09.2004.3. The Respondents relied on the Supreme Court decision in CCE v. L.H. Sugar Factories Ltd. and argued that it applied to the present case. They distinguished the Tribunal decision in CCE v. Mangalam Cement Ltd. based on the timing of the show cause notice in relation to the amendment of Section 73. The Tribunal also referenced the Larger Bench decision in Aqauta Sugar & Chemicals v. CCE.4. The Tribunal analyzed the issue of the sustainability of the show cause notice issued in April 2004, considering the subsequent amendment of Section 73 on 10.09.2004 to incorporate Section 71A. Citing the observations of the Supreme Court in L.H. Sugar Factories Ltd., the Tribunal dismissed the appeal, emphasizing that show cause notices issued before the amendment were not maintainable. The Tribunal also referred to the decision in Samruddhi Cement Ltd. v. CCE to support its conclusion.5. Based on the judicial precedents and the interpretation of relevant legal provisions, the Tribunal concluded that the appeal filed by the Revenue lacked merit and was rejected. The decision highlighted the importance of the timing of the show cause notice in relation to legislative amendments affecting the applicability of Section 73 of the Finance Act, 1994.