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AI Drafter - (New and Powerful) ✕
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) Whether the service tax demand could survive when it was founded on an audit objection already settled by the department. (ii) Whether the appellant was entitled to the benefit of the exemption notifications for erection, commissioning and installation service along with material supply, and whether penalty could be imposed.
Issue (i): Whether the service tax demand could survive when it was founded on an audit objection already settled by the department.
Analysis: The demand was initiated on the basis of an audit objection that had already been settled by the department before issuance of the show cause notice. On that factual matrix, the subsequent demand was not sustainable on the same objection and was also beyond limitation.
Conclusion: The demand could not be sustained on the basis of the settled audit objection and was time-barred.
Issue (ii): Whether the appellant was entitled to the benefit of the exemption notifications for erection, commissioning and installation service along with material supply, and whether penalty could be imposed.
Analysis: The agreement was read as requiring supply of material while rendering the service. On that basis, the appellant was held to have correctly availed the notified benefit and the tax demand was found unsustainable; once the demand failed, penalty also did not survive.
Conclusion: The appellant was held entitled to the notification benefit, the tax demand was set aside, and no penalty was leviable.
Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.
Ratio Decidendi: A demand founded on an audit objection already settled by the department cannot be sustained, and where the contractual arrangement covers supply of material in addition to service, the notified exemption benefit is available and penalty does not survive.
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