Service tax demand of Rs.2,69,401 set aside due to vague notice lacking specific service category details

CESTAT Kolkata set aside service tax demand of Rs.2,69,401/- against appellant for 2006-07 to 2009-10. The tribunal held the SCN was vague as it failed to specify the particular service category under which tax was demanded, making the demand unsustainable. Additionally, no service tax was payable on insurance commission from Bajaj Alliance per Board Circular, reimbursements where appellant acted as pure agent, or TDS refunds as no provision exists under service tax act. Consequently, interest and penalty demands were also unsustainable. Appeal allowed.

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Issues:
The appeal against the Order-in-Appeal upholding service tax demands, except penalty under Section 76 of the Finance Act, 1994.

Issue 1: Specific demand of service tax under a particular category

The Appellant argued that the demand of service tax was not sustainable as the specific category of service was not mentioned in the Show Cause Notice or Order-in-Original. Citing a Tribunal case, it was noted that the failure to specify the sub-clause under which the service tax falls renders the demand unsustainable. The Tribunal held that the defect in the notice cannot be cured by observations of the adjudicating authority. Consequently, the demand of service tax, interest, and penalty was deemed unsustainable.

Issue 2: Demand of service tax on Insurance Commission

The Commissioner (Appeals) confirmed the demand on Insurance Commission received from Bajaj Alliance. However, the Appellant relied on a Board Circular stating that the service tax is to be paid by the Insurance Company, not the agent. The Tribunal found that based on the Circular, no service tax was payable by the Appellant on the Insurance Commission amount received.

Issue 3: Demand of service tax on Reimbursement of expenses

The demand on reimbursements received by the Appellant was questioned, as they acted as a pure agent and raised invoices in the name of the principal. The Tribunal observed that the exact amount spent on behalf of the principal was reimbursed, leading to the conclusion that the demand of service tax on reimbursed expenses was not sustainable.

Issue 4: Demand of service tax on TDS refund

Service tax was demanded on the TDS refund, which was contested as there is no provision under the service tax act to demand service tax on TDS refund. The Tribunal held that the demand on this count was not sustainable. As the overall demand was deemed unsustainable, the question of demanding interest and imposing a penalty did not arise. Consequently, the impugned order was set aside, and the appeal filed by the Appellant was allowed.

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