2020 (2) TMI 815 - HC - Service Tax

Court sets aside CESTAT order, allows new Show Cause notice, deems 2008 order ineffective

COMMISSIONER, GST AND CENTRAL EXCISE, GST BHAWAN Versus M/s BSNL

The court found the CESTAT's order unsustainable, setting it aside and interfering with the Show Cause notice. The appellant was permitted to issue a new ... Levy of Service tax - Whether the tribunal was correct in accepting the contention of the respondent BSNL that service tax is leviable on the actual receipts and not the gross receipts? - HELD THAT:- Section 35C of the Central Excise Act, 1944 confers jurisdiction upon the Appellate Tribunal to pass such orders which are indicated therein, including orders confirming, modifying or annulling the decision or order appealed against. However, Section 35C of the Act of 1944, does not confer any jurisdiction upon the learned Tribunal to carryout assessment of the tax liability and records its own conclusion on that behalf. Thus, a function which has to be left to the assessing authorities had been undertaken by the learned CESTAT in a manner, which is, impermissible in law, more so, when such an exercise was not attempted even by the Commissioner of Central Excise. Moreover, no justification whatsoever has been offered in the impugned order dated 13- 12-2018 as to the reason why the appeal preferred by the appellant herein was rejected. The impugned order dated 13-12-2018 is held to be unsustainable in the eye of law and the same is accordingly, set aside - Appeal allowed - decided in favor of appellant. Revenue permitted to issue fresh SCN - Such demand, if any, raised by the appellant, shall clearly specify and exclude the “non-taxable” services from the gross receipt and also indicate the period as well as the particulars of the SSA to which the same relates to. Issues Involved1. Maintainability of the appeal.2. Legality of the Show Cause notice dated 28-03-2003.3. Assessment of service tax liability on gross receipts vs. actual receipts.4. Jurisdiction of the CESTAT in carrying out the assessment of tax liability.5. Deficiencies in the Show Cause notice and adjudication process.Detailed AnalysisMaintainability of the AppealThe appellant filed a single appeal against the common judgment and order dated 13-12-2018 of the CESTAT, which disposed of two appeals. The respondent raised no objection to the maintainability of the composite appeal. Hence, the court proceeded to dispose of the appeal on merits.Legality of the Show Cause Notice Dated 28-03-2003The Show Cause notice demanded Rs. 3,47,49,000/- from BSNL for the period from 01-12-1997 to 31-03-2000, alleging a shortfall in service tax payment. The notice lacked specific particulars for each Secondary Switching Area (SSA) and failed to differentiate between taxable and non-taxable services. This lack of specificity made it difficult for the respondent to respond appropriately.Assessment of Service Tax Liability on Gross Receipts vs. Actual ReceiptsThe central issue was whether service tax should be levied on gross receipts or actual receipts. The appellant contended that service tax should be on gross receipts, while the respondent argued that only taxable services should be considered. The CESTAT reconciled accounts and found that BSNL had short-paid Rs. 52.88 lakh but had made an excess payment of Rs. 74.20 lakh, concluding no more service tax was payable.Jurisdiction of the CESTAT in Carrying Out the Assessment of Tax LiabilityThe CESTAT carried out its own assessment of the tax liability, which the court found impermissible under Section 35C of the Central Excise Act, 1944. The Tribunal should not have undertaken the assessment, a function reserved for assessing authorities.Deficiencies in the Show Cause Notice and Adjudication ProcessThe Show Cause notice was deficient as it clubbed demands for different SSAs without providing specific details. The Commissioner of Central Excise reduced the demand from Rs. 3,47,49,000/- to Rs. 2,77,65,000/- but did not clarify whether the demand included non-taxable services. The CESTAT's reconciliation and assessment were also found to be beyond its jurisdiction.ConclusionThe court found the CESTAT's order dated 13-12-2018 unsustainable and set it aside. The Show Cause notice dated 28-03-2003 was interfered with. However, the appellant was allowed to issue a fresh Show Cause notice, clearly specifying and excluding non-taxable services from the gross receipt and indicating the period and particulars of each SSA. The respondent could avail all procedural safeguards under the law. The order dated 28-08-2008 was rendered ineffective. The appeal was disposed of accordingly.