2017 (6) TMI 57 - AT - Service Tax

Tax Tribunal Invalidates Demands Due to Flawed Show Cause Notices

The Tribunal upheld the decisions of the Commissioner (Appeals) and the adjudicating authorities, setting aside the demands against the assessees. The ... Validity of SCN - non-speaking order - classification of services rendered by appellant - it was contended that the SCN did not specify the correct classification of services and the demand was vague and therefore not legal and proper - Revenue was of the view that that copies of statement showing the payment details by various units of NLC to the concerned assessees had been annexed to the SCN. In the circumstances, the assessees cannot contend that they were not aware of the reasons for demand of service tax - Regarding non-mentioning of the services provided by the assessees on which service tax had been demanded, it is argued that the assessees were very well aware of the services in which they were involved and hence this cannot be taken as an excuse - extended period of limitation. Held that: - None of the SCNs indicate the reasoning for proposing tax liability, the services alleged to have been provided by the assessee and the individual liability of each of such service. Nor is there any worksheet forming part of the notice or as an annexure. Sadly, all these notices merely refer to the amount received by the assessees from NLC for the dispute period and have thereupon directly proceeded to calculate the service tax liability thereon on the basis of whole order - As it is practically not feasible to adhere to the normal procedure of issuing summons, collecting agreement copies and recording statements, considering the volume of work, show cause notices were issued to the contractors based on the data received from M/s. NLC indicating the service provided as the service for which they had registered themselves or the service as deduced from the data received from M/s. NLC. The entire process of issue of show cause notices was done in a very hasty and slipshod manner without giving any raison detre for demanding service tax on the various activities deduced by department to have been provided by the respondents/assessees - The show cause notices do not also indicate the list of the activities provided by the department, or justify all these activities fall within the ambit of taxable services for the purposes of the Finance Act, 1994 or indicate specifically the separate tax liabilities demanded on each such individual taxable service. Such short comings and deficiencies in the show cause notices are uncurable defects which will inevitably cast a shadow on the proceedings that have emanated from it - the demands of tax that may have been resultant of these proceedings will fail, ab initio. The Hon’ble CESTAT in the case of Hi-Cons Building Products Vs. Commr. Of C.Ex. & Cus.&S.T., Cochin [2011 (1) TMI 714 - CESTAT, BANGALORE] has held that Since the adjudication order is silent on the exact services rendered by the assessee, we consider it fit to set aside the impugned order. Any infirmity in the SCN cannot be bridged by adjudication proceedings and order passed by the adjudicating authority and first appellate authority. All the appeals filed by the department do not have any merit - appeal dismissed - decided against Revenue. Issues Involved:1. Validity of Show Cause Notices (SCNs)2. Classification of Services3. Burden of Proof4. Invocation of Extended Period5. Adequacy of Evidence and DocumentationDetailed Analysis:1. Validity of Show Cause Notices (SCNs):The primary issue revolves around whether the SCNs issued to the assessees were valid and legally sufficient. The Tribunal found that the SCNs were vague and lacked specific details regarding the classification of services and the basis for the demand. The SCNs did not provide a clear breakdown of the amounts with reference to each service rendered by the assessees, which is a critical requirement. The Tribunal noted that the SCNs merely referred to the total amount received by the assessees from NLC without specifying the individual tax liabilities for each service. This lack of clarity and specificity in the SCNs was deemed a fundamental flaw, rendering the notices invalid.2. Classification of Services:The Department contended that the services provided by the assessees fell under categories such as Management, Maintenance or Repair Service, Commercial or Industrial Construction Service, and Manpower Recruitment or Supply Agency Service. However, the Tribunal found that the SCNs did not clearly specify under which category each service provided by the assessees fell. The Tribunal emphasized that proper classification is essential for determining the tax liability and that the failure to provide specific classifications in the SCNs was a significant deficiency.3. Burden of Proof:The Tribunal highlighted that the burden of proof lies with the Department to clearly specify the services rendered and the corresponding tax liabilities. The Department's approach of issuing bulk SCNs based on data received from NLC without detailed verification and classification of services was criticized. The Tribunal noted that the Department's reliance on generalized statements and lack of detailed evidence made it difficult for the assessees to defend themselves effectively.4. Invocation of Extended Period:The Tribunal also addressed the issue of the extended period for raising demands. The Department argued that the extended period was applicable due to the assessees' failure to disclose the full value of taxable services. However, the Tribunal found that the Department was aware of the services provided by the assessees as early as 2006. The Tribunal concluded that there was no suppression of facts by the assessees, and therefore, the invocation of the extended period was not justified.5. Adequacy of Evidence and Documentation:The Tribunal examined the adequacy of the evidence and documentation provided by the Department. It was noted that the statements from NLC, which formed the basis for the demands, were not provided to the assessees along with the SCNs. Additionally, the Tribunal found that the statements did not include a detailed breakdown of the services and the corresponding tax liabilities. The Tribunal emphasized that the lack of detailed evidence and documentation undermined the validity of the demands.Conclusion:The Tribunal upheld the decisions of the Commissioner (Appeals) and the adjudicating authorities, setting aside the demands against the assessees. It was concluded that the SCNs were fundamentally flawed due to their vagueness, lack of specific classifications, and inadequate evidence. The Tribunal emphasized that such deficiencies in the SCNs were incurable and rendered the demands invalid. The appeals filed by the Department were dismissed, reaffirming the importance of clarity and specificity in tax demands and the adherence to due process in issuing SCNs.