Service tax show cause notices challenged for defective service and CBIC verification failure; impugned demand set aside on voluntary payment.

Quasi-judicial proceedings were found defective for failure to demonstrate proof of service of show cause notices and for non-compliance with CBIC instructions on departmental verification, including indiscriminate issuance of duplicate SCNs. Lack of due process and absence of supervisory verification undermined the adjudication; appellant had made voluntary payment of the differential service tax and met discharge requirements. Consequent to these deficiencies and absence of proper verification, the impugned adjudication confirming demands, penalties and interest was set aside and the appeal allowed on the basis of voluntary payment into the government exchequer.

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Issues: (i) Whether the appellant is liable to pay service tax on the differential value of renting of immovable property services determined by reconciliation of ST-3 returns with ITR-TDS data for FY 2015-16; (ii) Whether the impugned appellate order dated 14.11.2023 upholding the original adjudication order confirming demands and penalties is correct.

Issue (i): Liability to pay service tax on the differential value derived from ITR-TDS versus ST-3 returns for FY 2015-16.

Analysis: The adjudication confirmed demand based solely on difference between ITR-TDS figures and ST-3 returns without independent documentary proof that taxable services were rendered, and adjudication proceeded ex parte without proof of valid service of the show cause notice in terms of statutory requirement. CBIC instructions requiring reconciliation and factual verification before issuing SCNs were applicable at the adjudication/appeal stage. The appellant made voluntary payment of the differential service tax into government account.

Conclusion: Liability as adjudged cannot be sustained on the basis relied upon by revenue; having regard to voluntary payment of the disputed amount, the appellant's tax liability as determined by the adjudication is effectively discharged for the purposes of relief.

Issue (ii): Correctness of the impugned appellate order upholding confirmation of demands and penalties.

Analysis: The impugned order affirmed the original order without adequate appreciation of whether the SCN had been validly served and without independent examination of documents or factual reconciliation as required by departmental instructions. The original authority had issued duplicate SCNs and adjudicated on ex parte basis without establishing proof of service, thereby raising natural justice concerns. The appellant's grounds and documentary position were not properly considered by the authorities below.

Conclusion: The impugned order is unsustainable and is set aside; the appeal is allowed in favour of the appellant.

Final Conclusion: The appellate relief granted sets aside the confirmation of demands and penalties and allows the appeal, the practical effect being that the disputed tax demand stands discharged by the appellant's voluntary payment and the departmental orders are vacated insofar as they confirm demands and penalties.

Ratio Decidendi: Valid service of show cause notice and proper factual verification (including reconciliation of ITR-TDS and ST-3 data) are indispensable for sustaining ex parte adjudication; failure to prove service and to follow verification instructions renders confirmation of demands and penalties unsustainable.

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