2010 (10) TMI 384 - AT - Service Tax

Demand - Business Auxiliary Service (BAS) - The Commissioner however proceeded to pass an ex-parte order stating that the appellants were given three chances and that they had resorted to dilatory tactics - Denial of hearing was clear violation of its statutory right and also involved violation of principles of natural justice - Commissioner should not have decided the show cause notice without hearing the assessee since the appellant had sought adjournment of the hearing on the date of hearing though the Commissioner received the same after the date fixed for hearing - Appeal is allowed by way of remand

Summary

Issues: Appeal against service tax liability confirmation, imposition of penalties under various sections of the Finance Act, 1994, violation of principles of natural justice in passing the impugned order without hearing the appellant.

Analysis:

1. Service Tax Liability Confirmation and Penalties Imposed: The appeal was filed by M/s. Tata Motors Insurance Services Ltd. (TMISL) against the confirmation of service tax liability by the Commissioner for the period July 2003 to September 2005 under Business Auxiliary Service (BAS). The Commissioner confirmed an amount of Rs. 29,42,451/- as due along with applicable interest and imposed penalties under Sections 75, 76, 77, and 78 of the Finance Act, 1994. Notably, a penalty of Rs. 35 lakhs was imposed on TMISL under Section 78 of the Act. The activities of TMISL, including receiving commissions from finance and insurance companies, were found to constitute BAS under Section 65(19) of the Act. TMISL engaged in these activities without intimating the Department and without following statutory formalities, leading to the demand for payment of service tax.

2. Violation of Principles of Natural Justice: The appellant challenged the impugned order on various grounds, including the contention that they had already discharged the tax liability by paying Rs. 6,84,254/-. It was argued that no further liability remained. A crucial issue raised in the appeal was the lack of a hearing before the Commissioner passed the order. The appellant had requested a personal hearing but was provided with a choice of three dates, which was considered insufficient. The Commissioner proceeded to pass an ex-parte order despite the appellant seeking an adjournment on the last date indicated in the notice. This was the first adjournment sought by the appellant, and the denial of a proper hearing was deemed a violation of their statutory rights and principles of natural justice.

3. Judgment and Remand: After hearing both sides, the Tribunal noted that the impugned order was passed without affording the appellant an opportunity to be heard. The Commissioner rejected the request for adjournment received after the hearing date and proceeded to pass the order. The Tribunal found this action to be in violation of the principles of natural justice. Consequently, the Tribunal vacated the impugned order and directed the Commissioner to decide the dispute afresh following the principles of natural justice. The appeal was allowed by way of remand, emphasizing the importance of providing a fair hearing before making decisions in matters of taxation and penalties.

This detailed analysis of the legal judgment from the Appellate Tribunal CESTAT, Bangalore highlights the issues involved, the arguments presented, and the Tribunal's decision regarding the service tax liability confirmation, imposition of penalties, and the violation of principles of natural justice in the case.