2024 (4) TMI 532 - AT - Service Tax

Appeal Granted: Missing Service Category in Notice Nullifies Tax Demand and Penalties, Providing Appellant Relief.

NPS Construction Versus Commissioner of CGST & Central Excise, Pondicherry

The Tribunal set aside the impugned order, allowing the appeal due to the lack of specification of the service category in the show cause notice. The ... Scope of SCN - SCN does not mention the category of service under which the demand is raised - Violation of principles of natural justice - HELD THAT:- On perusal of the SCN as well as the order-in-original, it is noted that the category of service has not been mentioned at all. It is merely stated that from the statements recorded from persons of M/s Neyveli Lignite Corporation, various services in the nature of “Management, Maintenance or Repair Services, Manpower supply Agency Services and Commercial or Industrial Construction Services” have been provided by the appellant. On perusal of the annexure to the show cause notice, it is seen that there is nothing mentioned as to the category of service. The annexure merely states the description of work done in the invoices. The adjudicating authority, while confirming the demand, has not made any discussion as to what is the amount that would fall under each category of service or whether the entire amount falls within one category of service. The Hon’ble Supreme Court in the case of Commissioner of Central Excise, Vs. M/S Brindavan Beverages (P) Ltd. [2007 (6) TMI 4 - SUPREME COURT] has observed that the show cause notice, being the foundation of litigation, has to contain the necessary details so as inform the assessee to defend the allegations. In the case of CCE & ST Pondicherry Vs. A.M. Manickam [2017 (6) TMI 57 - CESTAT CHENNAI], the Tribunal had occasion to consider the demand of service tax on show cause notices issued to various persons who had provided services to M/s Neyveli Lignite Corporation. The Tribunal observed that these show cause notices did not contain any mention of the category of service and therefore the demand was set aside. Since the department has not mentioned the category of service in the show cause notice as well as the order-in-original much prejudice has been caused to the appellant. The proceedings are therefore vitiated and the demand cannot sustain. The impugned order is set aside - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a demand of service tax can be sustained when the show cause notice and adjudicating order do not specify the category of service under which the tax is sought to be levied. 2. Whether omission to identify service category in the show cause notice causes prejudice to the assessee and vitiates the proceedings. 3. Whether precedent requiring specificity in show cause notices is applicable to demands based on invoices and third-party statements without categorical allegations in the notice. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of demand where show cause notice and adjudication omit service category Legal framework: Show cause notice is the foundation of litigation and must contain necessary details to inform the assessee of the case to enable effective defence; service tax liability must be founded on a clear identification of the taxable service category. Precedent Treatment: The Court relied on the principle established by higher authority that an inadequately particularised show cause notice is vitiated; the Tribunal also referenced a prior decision addressing similar notices issued in respect of services rendered to the same principal, where absence of service categorisation led to setting aside the demand. Interpretation and reasoning: The show cause notice and annexures here merely recited descriptions of work in invoices and statements of the contracting entity without allocating amounts to specific service categories or explaining how each receipt attracts tax. The adjudicating authority confirmed demand without discussing which portions of receipts fell within any particular service head or whether the total amount purportedly taxed was attributable to one or multiple categories. Ratio vs. Obiter: Ratio - A show cause notice that fails to specify the category of service sought to be taxed and lacks allocation of amounts to service categories vitiates the proceedings and the ensuing demand. Obiter - Observations reiterating the importance of particulars in notices where invoices exist but no categorical allegation is made. Conclusions: The demand cannot be sustained because the foundational document (show cause notice) and the adjudicating order omitted the service-category identification and allocation necessary for the assessee to defend; the omission caused prejudice and rendered the proceedings invalid. Issue 2: Prejudice from omission to identify service category and its effect on proceedings Legal framework: Natural justice and principles of fair opportunity to defend require that allegations in a show cause notice be specific enough to enable the assessee to meet them; material particulars must be furnished when liability is contested. Precedent Treatment: The Court applied settled authority holding that lack of detail in a notice - particularly absence of specific allegations - vitiates the notice and relief follows for the assessee. Interpretation and reasoning: Because the notice did not indicate under which of the alleged service heads the receipts were taxable or quantify the amounts attributable to each category, the assessee was unable to advance a focussed defence (for example, to assert that particular items - such as certain road works - were exempt). This lacuna prevented effective contestation of liability. Ratio vs. Obiter: Ratio - Omission of service-category specification in the show cause notice constitutes prejudice sufficient to set aside the demand. Obiter - Illustration that some receipts may have been for exempt work, which could only be effectively raised if the departmental case had been specified. Conclusions: The omission caused material prejudice to the assessee's defence; on that basis the proceedings are vitiated and the demand must be set aside. Issue 3: Applicability of prior decisions where departmental case rests on invoices and third-party statements without categorical allegations Legal framework: When departmental allegations derive from invoices and third-party statements, the department must still articulate the legal basis and categorical identification of services in the notice to meet requirements of fair notice and enable contest. Precedent Treatment: The Tribunal followed prior decisions where analogous show cause notices (arising from services rendered to the same contracting entity) were found deficient for lack of service categorisation and those demands were set aside. Interpretation and reasoning: Evidence (invoices, statements) alone does not cure the deficiency of an unspecific notice; the adjudicating authority must translate documentary evidence into a clear allegation of liability under a specified service head and address allocation of amounts. Without that step the assessee is denied the chance to rebut classifications or claim exemptions. Ratio vs. Obiter: Ratio - Documentary provenance of the demand does not obviate the requirement of specificity in the show cause notice; prior analogous decisions are applied and followed. Obiter - Comment that departmental reliance on invoices requires corresponding articulation in the notice as to the legal characterisation of each invoiced item. Conclusions: Prior rulings are applicable and were followed; mere reliance on invoices and third-party statements does not validate a demand where the show cause notice lacks categorical allegations-such demands must be set aside. Overall Conclusion The Tribunal held that because the show cause notice and adjudicating order failed to specify the category(ies) of service and did not allocate amounts to any service head, the proceedings were vitiated for causing prejudice to the assessee; the impugned demand, interest and penalties could not be sustained, and the impugned order was set aside with consequential relief.