2017 (3) TMI 181 - AT - Service Tax

Tribunal nullifies Service Tax order due to lack of proper notification

M/s Balaji Contractor Versus Commissioner of Central Excise Jaipur-II

The Tribunal set aside the order demanding Service Tax from the appellant for services provided, as the reclassification of services under new categories ... Scope of SCN - SCN proposed demand of Service tax under the category of 'cargo handling services', however, first appellate authority without prior notice to the appellant, changed the category of taxable services and confirmed part of the demand under the new categories - Held that: - the tax entry of each type of service has got legal implications with reference to tax liability, classification, quantification, exemption, abatement etc. It is for this reason, the assessee should be put to notice about the correct classification under which the demand was sought to be made, so that defence can be made to reply for such allegation - in the present proceeding, no such proposal to demand Service tax in GTA services or manpower supply service has been made by the department - the impugned order which travelled beyond the scope of show cause notice is not sustainable on this legal ground alone - appeal allowed - decided in favor of appellant. Issues:Non-payment of Service Tax on services provided by the appellant; Correct classification of taxable services; Legal sustainability of changing tax categories without prior notice.Analysis:The case involved a dispute regarding the non-payment of Service Tax by the appellants for services rendered to a specific entity. The original authority issued six show cause notices demanding Service tax under the category of 'Cargo handling services.' The original authority confirmed a substantial Service tax liability along with penalties. On appeal, the Commissioner (Appeals) restricted the demand amount under different categories and set aside the penalties imposed. The appellant contended that the change in tax categories by the first appellate authority without prior notice was legally unsustainable, citing a decision of the Hon'ble Karnataka High Court in a similar case.The appellant argued that the impugned order exceeded the scope of the show cause notices by confirming Service tax under new categories without prior notification. The appellant emphasized the importance of being informed about the correct classification to defend against such allegations. The Revenue argued that the nature of services was detailed in the show cause notices, and correct classification could be determined by the adjudicating authority.Upon examination, the Tribunal noted that the show cause notices specifically sought to demand Service tax under the category of Cargo Handling Services, which was confirmed by the original authority. However, the first appellate authority reclassified the services under new categories without prior notice to the appellant. The Tribunal emphasized that the correct classification of services has legal implications on tax liability and defense preparation. As the department did not propose demanding Service tax under the new categories, the impugned order was deemed unsustainable, following the precedent set by the Hon'ble Karnataka High Court.Consequently, the Tribunal found that the impugned order could not be sustained due to the lack of proper notice and set it aside, allowing the appeal in favor of the appellant.