2019 (2) TMI 2100 - HC - Central Excise

Validity of show-cause notice issued by the department on the basis of drat audit report - HELD THAT - The show-cause notice which was issued by the department was presumably issued on the basis of the notion that the assessee was liable to tax on the amount so received by it - Rule 6 of the Service Tax Rules 1994 makes it abundantly clear that the service tax is payable on an amount which is received and not on an amount which may be received in future. The conclusion drawn by the Tribunal that the show-cause notice is bad and not in accordance with Rules is therefore correct. The question of law is therefore answered in favour of the assessee and against the department - appeal dismissed.

Summary

Issues:
Validity of show-cause notice based on draft audit report under Central Excise Act, 1944.

Analysis:
The High Court heard an appeal filed by the department against a CESTAT order. The key question was whether a show-cause notice issued by the department based on a draft audit report was sustainable. The court examined Rule 6 of the Service Tax Rules, 1994, which specifies the timeline for payment of service tax. The court noted that service tax is payable on the amount received, not on future amounts. The Tribunal's conclusion that the show-cause notice was incorrect and not in line with the rules was upheld. Consequently, the question of law was decided in favor of the assessee and against the department. The appeal was dismissed by the court.