2023 (4) TMI 871 - AT - Service Tax

Appeal overturns tax demand due to notice non-compliance and business transfer

The appeal sought to overturn an order confirming a service tax demand of Rs.10,85,70,355/- due to the noticee's failure to respond to a show cause notice ... Demand of service tax with interest and penalty - the business of the partnership firm M/s. Patel Enterprises was taken over by M/s. Dee Vee Projects Ltd. and in response to the show cause notice issued to M/s. Dee Vee Projects Ltd, facts, including facts relating to M/s. Patel Enterprises, had been stated - case of Revenue is that since a separate show cause notice had been issued to M/s. Patel Enterprise, a reply should have been filed and a representative should also have appeared on the date fixed - HELD THAT:- It is no doubt true that separate notices were issued to M/s. Patel Enterprises and M/s. Dee Vee Projects Ltd, but in view of the peculiar facts and circumstances of the case that the business of M/s. Patel Enterprises was taken over by M/s. Dee Vee Projects Ltd on April 01, 2013; the period involved in both the show cause notices is 2013-14 and 2014-15, similar allegations have been made; and the fact that the demand raised against M/s. Dee Vee Projects Ltd has been dropped by an order dated November 10, 2022, it appears appropriate to remand the matter to the Adjudicating Authority so as to enable the appellant to submit a reply to the show cause notice and also appear on the date to be fixed by the Adjudicating Authority. Appeal allowed. Issues involved: The appeal seeks to quash the order confirming the demand of service tax amounting to Rs.10,85,70,355/- with interest and penalty. The main issue revolves around the failure of the noticee to respond to the show cause notice and appear for the personal hearing. Another issue is the transfer of business from one entity to another and the implications on the show cause notice.Issue 1: Failure to Respond to Show Cause Notice The order passed by the Principal Commissioner confirmed the demand of service tax as the noticee, M/s. Patel Enterprises, did not submit any reply to the show cause notice despite multiple opportunities. Additionally, the noticee did not attend the personal hearing despite being provided with five opportunities.Issue 2: Transfer of Business and Show Cause Notice A separate notice was issued to M/s. Dee Vee Projects Ltd. for the same period and on the same allegations as M/s. Patel Enterprises. It was revealed that the business of M/s. Patel Enterprises was taken over by M/s. Dee Vee Projects Ltd. on April 01, 2013. While a reply should have been filed by M/s. Patel Enterprises and its representative should have appeared for the hearing, it was not done due to a misunderstanding that the reply filed by M/s. Dee Vee Projects Ltd. sufficed. The demand against M/s. Dee Vee Projects Ltd. was subsequently dropped.Decision: Considering the peculiar circumstances where both entities received separate notices but were interconnected due to the business transfer, the matter is remanded to the Adjudicating Authority. The appellant is directed to submit a reply to the show cause notice within eight weeks. The Adjudicating Authority is instructed to expedite the decision concerning the period 2013-14 and 2014-15. The impugned order is set aside, and the appeal is allowed with the mentioned observations.