2015 (1) TMI 810 - HC - Service Tax

Validity of Show-cause Notice - Two show cause notices dated 21.4.2010 and 20.4.2011 were issued for the period April 2008 to March 2011 alleging that the assesee had provided Business Auxiliary Service and had failed to remit tax on amounts received for providing such service Did the Tribunal fall into error in rejecting the Revenue s appeal, holding that the Show Cause Notices in question were not in accordance with law - Held that - Object and purpose of SCN is to inform the recipient of the allegations against him so that he can meet them effectively and is not prejudiced by manifestly vague notice which leaves him confused and unable to answer/reply. The assessee must be given a reasonable and real opportunity and made aware as to what he has to meet. But, the notice cannot be read as a legislative enactment which is to the point, precise and required to show exceptional lucidity. What is required to be seen is whether the allegations made have been conveyed and set forth, to enable the recipient/assessee to get an opportunity to defend himself against the charges. Notice should not suffer from obscurity and unintelligibility as to deny a fair and adequate chance to the recipient/assessee to get himself fully exonerated and avoid incidence of tax. What transpired after the notice was served, conduct of the parties thereafter, hearing given, are all factors that have to be examined to ascertain as to any prejudice was caused resulting in an arbitrary and unjust decision. Principle of prejudice resulting from vagueness and uncertainty has to be examined in pragmatic and a reasonable manner. No substantial question of law arises for consideration in the present appeal. It is not possible to agree with the said submission. As noticed above, substantial question of law was framed on 4th April, 2014. Tribunal in the impugned order has held that the show cause notices itself were vague and in violation of the principles of natural justice, and has set aside the order-in-original, which was passed. The show cause notices, averment made therein and principle of prejudice caused was not considered in proper legal perspective. Tribunal has not disposed of the appeal filed by the respondent-assessee on merits in respect of the findings given by the Commissioner of Service Tax, holding that the activities were taxable under the head Business Auxiliary Services . - Matter remanded back - Decided in favour of Revenue.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of the Show Cause Notices under Section 65(19) of the Finance Act, 2005.
3. Tribunal's rejection of Revenue's appeal on grounds of natural justice.
4. Determination of whether the services in question fall under 'Business Auxiliary Services'.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appellant-revenue filed an application seeking condonation of a 38-day delay in filing the appeal. The delay was attributed to the time taken by authorities to process and examine the impugned order and the subsequent misplacement of annexures in the office of the Standing Counsel. Considering these factors, the court condoned the delay and disposed of the application accordingly.

2. Validity of the Show Cause Notices under Section 65(19) of the Finance Act, 2005:
The Tribunal had quashed the show cause notices dated 21-4-2010 and 20-4-2011 on the grounds that they did not specify the sub-clause of Section 65(19) of the Finance Act, 2005, thereby rendering them bad in law. The Tribunal observed that the notices were issued on the prima facie assumption that the activities were assessable as service tax under 'Business Auxiliary Services', but the reasons for such assumption were not specified. The mere extraction of the entire provision of Section 65(19) did not fulfill the legal mandate.

3. Tribunal's Rejection of Revenue's Appeal on Grounds of Natural Justice:
The Tribunal allowed the appeal of the respondent-assessee, holding that the show cause notices were invalid due to the violation of principles of natural justice. The Tribunal noted that the notices did not provide sufficient details for the assessee to understand and respond to the allegations. However, the High Court found that the Tribunal was not right in quashing the notices, as the relevant facts and provisions of Section 65(19) were set out in the notices, and personal hearings were given. The court emphasized that the object of the show cause notice is to inform the assessee so that they can make submissions and bring relevant facts on record.

4. Determination of Whether the Services in Question Fall Under 'Business Auxiliary Services':
The Commissioner of Service Tax in the order-in-original had concluded that the services provided by the assessee were taxable under 'Business Auxiliary Services' as defined in clauses (vi) and (vii) of Section 65(19) of the Finance Act. The Commissioner noted that the services were consumed by the customers of the assessee's clients, who were themselves service providers, thereby falling under the taxable service category BAS. The High Court found that the show cause notices did inform the assessee of the contention of the revenue and their stance, and the specific agreements sought to be taxed were mentioned.

Conclusion:
The High Court concluded that the Tribunal was incorrect in quashing the show cause notices on the grounds of natural justice. The court held that the substantial question of law arises for consideration and decision. The case was remanded to the Tribunal, allowing the respondent-assessee to contend that the findings of the Commissioner were incorrect and to place additional evidence on record. The parties were directed to appear before the Tribunal on a specified date, and the appeal was disposed of with no costs. The observations made in the decision were not to be treated as binding findings on the merits of the case.

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