2023 (9) TMI 1012 - AT - Service Tax

Tribunal orders appeal restoration for non-compliance, instructs de novo order within 90 days

The Tribunal set aside the dismissal of the appellant's appeal for non-compliance with a stay condition and directed the case to be restored to the first ... Non-payment of service tax - consultancy engineering services - no order passed on the stay petition filed by the appellant - appellant contend that the first appellate authority has grossly mis-directed himself by referring to an order dated 07.02.2013, which was non-existent and non-applicable to the appellant since admittedly, the date of personal hearing itself was 08.10.2013 at 02:45 p.m. HELD THAT:- The contentions of the Ld. Advocate agreed upon since the said order referred to by the lower appellate authority in OISP No. 24/2013(M-IV) dated 07.02.2013 is non-existent; even if it is in existence, the same cannot be made applicable to the appellant since the very first date of hearing itself is in October i.e., 08.10.2013 - thus, the impugned dismissal order by the first appellate authority can never sustain, There is no discussion on merits and hence, it is deemed proper to restore the case back to the file of the first appellate authority for passing a de novo order on merit alone. It goes without saying that the first appellate authority shall adhere to the principles of natural justice thereby affording reasonable and time-bound opportunities to the appellant before passing the de novo order - Appeal disposed off by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the first appellate authority properly dismissed the appeal for non-compliance with a conditional stay order allegedly dated 07.02.2013 when (a) that order was not placed on record or was non-applicable to the appellant, and (b) the first date of hearing recorded was 08.10.2013. 2. Whether the impugned dismissal for non-compliance of the stay order can be sustained in the absence of a substantive adjudication on the merits of demands relating to Service Tax, extended period invocation under the proviso to Section 73(1) of the Finance Act, 1994, interest under Section 75, and penalties under Sections 76 and 78. 3. Whether the matter should be remitted for de novo consideration by the first appellate authority with directions regarding adherence to principles of natural justice and time-bound disposal. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of dismissal for non-compliance with stay order (existence/applicability of stay) Legal framework: Administrative power of appellate authority to conditionally grant stay and to dismiss appeals for non-compliance with such conditions; requirement that the order relied upon for dismissal be applicable and incorporated into proceedings. Precedent treatment: No judicial precedents were cited or applied by the first appellate authority in the impugned order; the Tribunal examined the record to determine whether the conditional stay order relied upon was on the file or applicable to the appellant. Interpretation and reasoning: The Tribunal found that the first appellate authority referred to an order dated 07.02.2013 (OISP No. 24/2013(M-IV)) as the basis for dismissal but that such an order was non-existent on the record before it or, if extant, could not apply to the appellant because the appellant's first recorded date of hearing before the first appellant authority was 08.10.2013. The Tribunal held that it is impermissible to dismiss an appeal for non-compliance with a stay condition when (a) the stay order relied upon is not in the file or produced, and (b) the alleged condition could not have been communicated or required prior to the appellant's first hearing date. Ratio vs. Obiter: Ratio - dismissal for non-compliance cannot be sustained where the conditional stay order relied upon is not placed on record or is inapplicable to the party against whom dismissal is recorded. Obiter - none additional on this point. Conclusion: The impugned dismissal on the ground of non-compliance with the referenced stay order is unsustainable and must be set aside. Issue 2 - Necessity of merits adjudication where substantial tax demand and extended period invoked Legal framework: Revenue invoked demand for Service Tax and Education Cess, alleged extended period applicability under proviso to Section 73(1) of the Finance Act, 1994, interest under Section 75, and penalties under Sections 76 and 78; Board Circular No.254/1/2003-CX.4 dated 25.04.2003 was relied upon in the Show Cause Notice regarding export of services and conditions to be satisfied for non-levy. Precedent treatment: The adjudicating authority in the original order accepted that for one client the activity was manpower supply and thus not subject to Service Tax, while confirming demand for other clients because the appellant did not contest those parts; the first appellate authority did not adduce any merits discussion in the impugned dismissal. Interpretation and reasoning: The Tribunal observed that there was no discussion on merits by the first appellate authority due to the procedural dismissal. Given that the original adjudication addressed distinct factual/legal questions (e.g., whether particular transactions were consultancy services or merely manpower supply, compliance with Board Circular conditions, and whether extended period applied), the Tribunal determined that those issues require de novo consideration by the first appellate authority. The Tribunal emphasized that factual determinations (nature of services, consumption/merger of services, maintenance of records to prove export conditions) and legal conclusions (applicability of extended period and penalties) must be examined afresh with opportunity for the parties to be heard. Ratio vs. Obiter: Ratio - where an appellate authority dismisses an appeal procedurally without deciding contested substantive issues, those substantive issues remain open and must be considered de novo on appeal. Obiter - observations on specific factual findings in the original adjudication (e.g., manpower supply finding) are not treated as final since the first appellate authority must re-examine the record. Conclusion: Substantive demands and legal questions (classification of services, compliance with export conditions, extended period, interest and penalties) are left open for fresh adjudication; the first appellate authority must determine these on merits. Issue 3 - Remand, directions on natural justice, and time-bound disposal Legal framework: Principles of natural justice require that a litigant be given a reasonable and time-bound opportunity of hearing before adverse orders; appellate authorities are required to pass reasoned decisions after affording such opportunities. The Tribunal has jurisdiction to set aside irregular dismissals and remit matters for de novo decision. Precedent treatment: The Tribunal applied the established administrative law principle that absence of a hearing or basing dismissal on an inapplicable or unproduced order warrants remand for fresh hearing and decision. Interpretation and reasoning: The Tribunal directed restoration of the appeal to the first appellate authority for de novo adjudication and specifically required adherence to natural justice - reasonable and time-bound opportunities - and reciprocal cooperation by the appellant (no unnecessary adjournments). In light of the prolonged period in dispute (2003-05), the Tribunal imposed a definitive timeline of ninety days from receipt of the remand by the jurisdictional Commissionerate for disposal of the appeal by the first appellate authority. Ratio vs. Obiter: Ratio - when an appeal is remitted for de novo adjudication after setting aside an irregular dismissal, the appellate authority must observe principles of natural justice and may be directed to conclude the matter within a stipulated reasonable period. Obiter - the Tribunal's admonition to the appellant to cooperate and avoid unnecessary adjournments. Conclusion: The matter is remitted for de novo consideration by the first appellate authority with mandatory adherence to natural justice; the appellate authority is directed to decide the appeal within ninety days. All substantive contentions remain open for determination on merit.