2010 (10) TMI 348 - AT - Service Tax

Demand of tax along with interest and penalty u/s 76, 77 and 78 - Business Auxiliary Services - The impugned order confirms the demand against the appellant under the category Business Auxiliary Services without specifying which specific sub-clause covered the activities rendered by UTL Hence, no tax liability can be confirmed against a person without putting him/it on notice as to its liability - It is essential that the liability is indicated in the notice with reference to the specific statutory provision. In the instant case, the impugned proceedings did not allege at the show-cause notice stage or find at the adjudication stage the specific provision under which the services rendered by UTL are classifiable . The Commissioner suggests that the activity of the appellant could be classified variously under clause (iii) of section 65(19) as service rendered on behalf of a client, as of a commission agent or, under clause (vii), as maintenance of accounts - The Commissioner does not give a finding as to the sub-clauses (i) to (vi) of section 65(19) to which maintenance of accounts related if the services fell under clause (vii) - Moreover, there were no such proposals in the show-cause notice - Find that no tax liability can be confirmed against any person unless the same is specifically alleged in the show-cause notice - Hence, hold that the impugned demand is not legally sustainable - Consequently, the demand of interest and penalty is also not sustainable.

Summary

Issues Involved:
1. Classification of services under "Business Auxiliary Services."
2. Invocation of the extended period for demanding service tax.
3. Validity of proceedings in light of principles of res judicata.
4. Specificity and clarity of the show-cause notice.
5. Privity of contract and agency relationship.
6. Validity of the demand, interest, and penalties imposed.

Issue-wise Detailed Analysis:

1. Classification of Services under "Business Auxiliary Services":
The Commissioner classified the services rendered by UTL under "Business Auxiliary Services" as per section 65(105)(zzb) of the Finance Act, 1994. The services included operating e-Seva counters for utility bill payments, issuance of certificates, and licenses. The Commissioner concluded that UTL provided services to Director e-Seva and received consideration, thereby falling under the broad heading of "Business Auxiliary Services." However, the Commissioner failed to specify which sub-clause of section 65(19) the services fell under, leading to ambiguity.

2. Invocation of the Extended Period for Demanding Service Tax:
The Commissioner rejected UTL's plea that the extended period could not be invoked, reasoning that the show-cause notice did not invoke the extended period for a 'subsequent period.' UTL argued that the proceedings were on the same set of facts as earlier proceedings where the demand was set aside, and thus, invoking the extended period was not justified. The Tribunal found that the activities were already intimated to the department in 2005, and the show-cause notice was issued in 2008, making most of the demand time-barred.

3. Validity of Proceedings in Light of Principles of Res Judicata:
UTL contended that the impugned proceedings violated the principles of res judicata, as earlier proceedings on the same services were decided in their favor. The Tribunal noted that the earlier orders were accepted by the Committee of Commissioners, and no new facts had emerged to justify fresh proceedings. Thus, the Tribunal agreed with UTL that the proceedings were contrary to judicial discipline.

4. Specificity and Clarity of the Show-Cause Notice:
UTL argued that the show-cause notice did not specify the precise liability or classify the services under any specific sub-clause of section 65(19). The Tribunal held that the show-cause notice must clearly indicate the liability with reference to specific statutory provisions. The lack of specificity in the notice rendered the demand unsustainable.

5. Privity of Contract and Agency Relationship:
UTL argued that there was no privity of contract between them and the citizens or the participating entities, and they did not act as an agency for either party. The Commissioner had treated UTL as a commission agent without establishing a contractual relationship. The Tribunal found that the impugned order did not provide a clear finding on whose agency UTL was acting, making the classification as a commission agent flawed.

6. Validity of the Demand, Interest, and Penalties Imposed:
The Tribunal found that the demand under "Business Auxiliary Services" was not legally sustainable due to the lack of specificity in the show-cause notice and the time-barred nature of the demand. Consequently, the demand for interest and penalties was also deemed unsustainable.

Conclusion:
The Tribunal allowed the appeal filed by UTL, setting aside the demand, interest, and penalties imposed by the Commissioner. The proceedings were found to be in violation of principles of res judicata, lacked specificity, and were time-barred for most of the period in dispute.