2012 (7) TMI 740 - AT - Service Tax

Appellate Tribunal overturns service tax demand, emphasizing procedural fairness and reasonable hearing

The Appellate Tribunal CESTAT, Bangalore allowed the appeal, setting aside the orders confirming the service tax demand, interest, and penalty. The matter ... Dis allowance of Cenvat Credit - 'vehicle insurance, AMC on Xerox machines, housekeeping by management' - SCN issued proposing confirmation service tax demand and imposition of penalties - Held that:- the show-cause notice itself does not list out all the disputed services and uses, phrases like 'activities like' and 'the input services including' - there appears to be no formal stand taken in the reply contesting the demand proposed in the show-cause notice as the emphasis was only on waiving penal proceedings in view of the fact that respondent-assessee has paid the entire disputed amount with interest in PLA - set aside the order of the Commissioner (Appeals) and that of the original authority and remand the matter to the original authority to give specific findings on the issues raised in the show-cause notice. Issues:Appeal against order confirming service tax demand, interest, and penalty - Admissibility of service tax credit on certain services - Contesting service tax liability - Applicability of penalty - Nexus between services and manufacturing activities.Analysis:The appeal before the Appellate Tribunal CESTAT, Bangalore involved the Department challenging the order of the Commissioner (Appeals) regarding the confirmation of a service tax demand, interest, and penalty. The respondent, a manufacturer of transmission tower parts, was availing credit of service tax paid on input services. An audit revealed that certain services like vehicle insurance, AMC on Xerox machines, and housekeeping were not eligible for credit. Despite paying the disputed amount, a show-cause notice was issued for recovery, interest, adjustment of payments, and imposition of a penalty.The original authority confirmed the service tax demand, interest, and penalty, which was later set aside by the Commissioner (Appeals) based on a Tribunal decision. The Department argued that the respondent did not dispute the service tax liability initially, while the respondent contended that their payment did not imply acceptance of liability. They contested the show-cause notice and emphasized the nexus between services and manufacturing activities.The Tribunal observed that while the respondent paid the disputed amount, the Department continued pursuing the matter through the show-cause notice. The Tribunal noted discrepancies in the handling of the case by the original authority and the Commissioner (Appeals), especially regarding the contested demand and lack of specific discussions on the services in question. The Tribunal highlighted the need for formal findings on the issues raised in the show-cause notice and the importance of following procedural rules.Ultimately, the Tribunal decided to set aside the orders of both the Commissioner (Appeals) and the original authority, remanding the matter for specific findings on the disputed services. The respondent was granted an opportunity to submit additional evidence, and the original authority was instructed to reevaluate the case after providing a reasonable hearing to the respondent.In conclusion, the appeal was allowed by way of remand, emphasizing the importance of addressing all issues raised in the show-cause notice and ensuring procedural fairness in the adjudication process.