2016 (11) TMI 936 - AT - Service Tax

Classification of services - commercial and industrial construction service - business support service - rent-a-cab service - manpower recruitment and supply service excluded from the trifurcation of services - eligibility for escapement on the basis of the instruction - Held that - The adjudicating authority, while invoking section 80 of Finance Act, 1994 to drop the proposal for imposing penalties under section 76 and 78 of Finance Act, 1994, did not record reasonable cause for failure to pay the duty. The reasons cited would make it appear that the invoking of section 78 in the notice had no justification at all. If that were so, the resort to extended period for confirming tax liability is without basis. There is an apparent contradiction here. We also notice that noticee had made only partial payment of admitted tax liability. Considering the lacunae in the impugned order and that remedying of these lacunae will require re-examination of the submission of the noticee with reference to documentary evidence, we are of the opinion that the matter should be remanded back to the original authority for fresh consideration of all aspects. As the matter has been pending in adjudicatory and appeal process for almost seven years, the original authority is directed to complete the proceedings within three months of receipt of this order - appeal disposed off - matter remanded back.

Issues:
1. Re-classification of services and penalty imposition.
2. Taxability of consideration in the hands of subcontractor.
3. Error in computation and plea of limitation.
4. Scrutiny of agreement between parties.
5. Eligibility for exemption based on claims.
6. Imposition of penalties under the Finance Act.

Analysis:
1. The judgment involves an appeal regarding the re-classification of services and the imposition of penalties. The Revenue contested the re-classification of services, while the appellant challenged the non-imposition of penalties despite confirming the demand. The tribunal noted the adjudicating authority's acceptance of the noticee's trifurcation of consideration under different taxable services, excluding the 'manpower recruitment and supply service' as alleged in the show cause notice. However, the tribunal observed a lack of reasons for rejecting the classification proposed in the notice and highlighted the need for scrutiny of the agreement between the parties to ascertain conformity with the description of taxable services.

2. The appellant's appeal was based on the non-taxability of consideration in the hands of the subcontractor and errors in computation. The tribunal found that the adjudicating authority did not provide reasons for rejecting the proposed classification, leading to a lacuna in the order. The tribunal emphasized the need to address the lack of adducing reasons for the rejection of escapement available under relevant circulars, citing previous court decisions that dealt with similar issues. The tribunal recommended a re-examination of the submissions with reference to documentary evidence.

3. The appellant also raised a plea of limitation and errors in computation. The tribunal highlighted the need for the original authority to re-examine all aspects of the case due to lacunae in the impugned order. The tribunal directed the original authority to complete the proceedings within three months of receipt of the order, considering the prolonged pendency of the case in the adjudicatory and appeal process for almost seven years.

4. The judgment addressed the scrutiny of the agreement between the parties, emphasizing the importance of conformity with the description of taxable services under the Finance Act. The tribunal pointed out the lack of reasons for rejecting the proposed classification in the show cause notice, highlighting a patent lacuna in the impugned order.

5. The eligibility for exemption based on claims was also a crucial issue in the judgment. The tribunal noted that the impugned order allowed exemptions based on claims without sufficient documentary evidence to substantiate them. The tribunal recommended obtaining and perusing the necessary documentary evidence to validate the claims for exemption.

6. Lastly, the judgment discussed the imposition of penalties under the Finance Act. The tribunal observed that the adjudicating authority did not record reasonable cause for failure to pay the duty, leading to contradictions in the application of penalty provisions. The tribunal directed a re-examination of the penalties and the reasoning behind invoking penalty provisions, highlighting the need for a justifiable basis for imposing penalties.

In conclusion, the tribunal allowed both appeals by setting aside the impugned order and directed the original authority to adjudicate the matter afresh, considering the various lacunae and issues highlighted in the judgment.

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