2016 (9) TMI 1138 - AT - Service Tax

Tribunal overturns tax order; Deputy Commissioner lacked jurisdiction; Doctrine of Merger applied; retrospective tax ruled out

M/s Secon Surveys (P) Ltd. Versus The Commissioner of Service Tax, Bangalore And Commissioner of Central Excise & Service Tax Versus M/s Secon Surveys (P) Ltd.

The Tribunal allowed the appellant's appeal, setting aside the Deputy Commissioner's order imposing service tax, interest, and penalties. The Tribunal ... Validity of Deputy Commissioner and Commissioner (Appeals) order - Doctrine of Merger - jurisdiction of the same to adjudicate a demand notice involving the amount more than ₹ 5,00,000/- - all the services covered by the impugned order became taxable services only from 16.6.2005 by virtue of Finance Act, 2005 which introduced new services in relation to survey and map making services - ignorance of legal principles of Doctrine of Merger - Held that:- the Deputy Commissioner lacks jurisdiction to pass the order and all the proceedings before him is void ab initio. Secondly, the order passed by the Deputy Commissioner is also bad in law as he did not have the pecuniary jurisdiction to pass adjudication order at the relevant time which is clear from the Board s circular dated 1.10.2003. Further, we also find that by Doctrine of Merger, the order passed by the Deputy Commissioner no longer survive and therefore, to review an order which does not exist in law is not permitted by law, more so when review order is passed much after order passed by the Commissioner (Appeals). We also find that the Department has also filed appeal against the Order-in-Appeal. In view of these facts and circumstances, we are of the considered opinion that the impugned order is bad in law and we set aside the same. - Decided in favour of appellant Issues Involved:1. Classification of services provided by the appellant as 'Consulting Engineer' services.2. Jurisdiction and authority of the Deputy Commissioner to adjudicate the demand.3. Applicability of the Doctrine of Merger.4. Legality of the review show-cause notice issued by the Commissioner.5. Imposition of service tax, interest, and penalties on the appellant.Issue-wise Detailed Analysis:1. Classification of Services:- The appellant, M/s Secon Surveys (P) Ltd., contested that their activities such as land surveying, geo-tech investigations, and other related services did not fall under the category of 'Consulting Engineer' services. The Department initially alleged that these services were taxable under Section 65(25) of the Finance Act, 1994.- The Deputy Commissioner, in the Order-in-Original dated 16/7/2004, concluded that land survey was not covered under 'Consulting Engineer' prior to 26.2.2002 and that geo-tech investigations were covered only from 1.7.2003 under 'technical testing, analysis, inspection, and certificate services'.- The Commissioner (Appeals) upheld that land survey did not fall under 'Consulting Engineer' even after 26.2.2002 and set aside the demand for turnkey projects and composite consulting services.- The Tribunal found that the services became taxable only from 16.6.2005 under 'survey and map-making' as per Finance Act, 2005, and thus, the service tax could not be charged retrospectively.2. Jurisdiction and Authority:- The appellant argued that the Deputy Commissioner lacked jurisdiction to adjudicate demands involving amounts exceeding Rs. 5,00,000 as per Board’s Circular No. 752/68/2003-CX dated 1-10-2003.- The Tribunal agreed that the Deputy Commissioner did not have the pecuniary jurisdiction to pass the adjudication order, rendering the proceedings void ab initio.3. Doctrine of Merger:- The appellant contended that the original adjudication order had merged with the Order-in-Appeal passed by the Commissioner (Appeals) on 31.8.2004, and thus, the Commissioner could not review an order that no longer existed independently.- The Tribunal upheld this argument, stating that the review of an order which had merged with the appellate order was not legally sustainable.4. Legality of Review Show-Cause Notice:- The appellant argued that the review show-cause notice issued by the Commissioner under Section 84 of the Finance Act, 1994, was without authority as the original order had merged with the appellate order.- The Tribunal found that the review proceedings initiated by the Commissioner were not legally sustainable due to the Doctrine of Merger and the lack of jurisdiction.5. Imposition of Service Tax, Interest, and Penalties:- The Deputy Commissioner’s Order-in-Original confirmed a demand of Rs. 1,48,41,374/- and imposed interest and penalties.- The Commissioner (Appeals) set aside the demands related to land survey, turnkey projects, and composite consulting services but upheld the demand for pure consultancy services.- The Tribunal set aside the impugned order, stating that the Deputy Commissioner lacked jurisdiction and the review proceedings were legally infirm. Consequently, the penalties and interest imposed were also set aside.Conclusion:The Tribunal allowed the appeal of the assessee, setting aside the impugned order, and dismissed the appeal of the Revenue. The Tribunal concluded that the Deputy Commissioner lacked jurisdiction, the Doctrine of Merger applied, and the review show-cause notice was without authority. The Tribunal also found that the services became taxable only from 16.6.2005, and thus, no retrospective service tax could be imposed.