2009 (3) TMI 42 - AT - Service Tax

Appellant submit that SCN invoked Section 11 of CEA to demand the service tax not paid - submission that demand was wrongly confirmed under an irrelevant section i.e. under Section 66(1) of Service Tax Act, 1994 as Section 66(1) of the Finance Act is the charging section and not a Machinery for recovering tax not paid further larger period has been invoked without substantiating the allegation of suppression demand is not sustainable owing to the deficiencies in the proceedings

Summary

Issues:
Demand of service tax under Section 66(1) of the Service Tax Act, 1994; Penalties imposed under various sections; Invocation of larger period for recovery; Validity of Show Cause Notice invoking Section 11 of the Central Excise Act.

Analysis:

1. The impugned order affirmed the demand of service tax of Rs.17,450/- under Section 66(1) of the Service Tax Act, 1994 for taxable service falling under "security agency services" rendered by the appellants from March 1999 to October 2000. The penalties imposed were modified by the Commissioner (Appeals), reducing them significantly. The appellants challenged the order on various grounds, including incorrect application of penalty sections and invoking the wrong statute for demand confirmation.

2. The appellants argued that the Show Cause Notice incorrectly proposed to demand the service tax under Section 11 of the Central Excise Act, while penalties were imposed under sections of the Finance Act, 1994 instead of the Service Tax Act, 1994. They contended that the demand under Section 66(1) of the Finance Act, 1994 was improper as it is the charging section, not for tax recovery. Additionally, they disputed the invocation of a larger period without proving suppression of facts.

3. The learned SDR countered that tax recovery within five years was permissible for cases of short-payment or non-payment due to incomplete tax returns. However, the Tribunal found fundamental flaws in the proceedings, noting the incorrect invocation of Section 11 of the Central Excise Act in the Show Cause Notice and the unsustainable demand confirmation under Section 66(1) of the Finance Act, 1994. As the demand of service tax was deemed unsustainable, the impugned order was vacated, and the appeal was allowed with consequential relief, if any.

This detailed analysis highlights the key legal arguments, procedural errors, and the Tribunal's rationale for setting aside the impugned order based on the deficiencies in the proceedings and incorrect application of statutory provisions.