2017 (1) TMI 1237 - AT - Service Tax

100% EOU - Principles of Natural Justice - Held that - Since the appellant did not file the reply to the show-cause notice and did not appear before the Commissioner at the personal hearing, the learned Commissioner proceeded to decide the case without the presence of the appellant on the basis of the records produced before the Commissioner and confirmed the demand and the penalties - this matter needs to be remanded back to the Commissioner with a direction to decide the case after complying the principles of natural justice and offer one more opportunity to the appellant to file the reply to the show-cause notice and if in spite of the opportunity, the appellant does not file the reply, the Commissioner will be at liberty to decide the case on the basis of documents available on record - appeal disposed off - matter on remand.

Summary

Issues:
Appeal against service tax demand, interest, and penalty for contravention of provisions of the Finance Act 1994.

Analysis:
The appeal challenged the Commissioner's order confirming a service tax demand of ?3,45,87,741 for the years 2008-09 to 2010-11, along with interest and penalty under the Finance Act. The appellant, a 100% EOU engaged in mining and export of Iron Ore, was found to have discrepancies in declaring iron ore transport charges in their Balance Sheet and ST-3 Returns. Despite multiple opportunities, the appellant failed to clarify the differences, citing reasons related to the seizure of company documents by Income Tax and CBI departments. The Commissioner proceeded with the case in the appellant's absence and confirmed the demand and penalties.

The appellant argued that the impugned order violated principles of natural justice as they were unable to respond to the show-cause notice due to ongoing investigations and custody of key personnel by the CBI. They highlighted the prohibition on iron ore export and suspension of mining operations, leading to operational challenges and lack of management guidance. The appellant maintained that their accounting practices followed accrual system principles and that service tax was payable on realization basis as per Service Tax Rules, 1994.

In response, the AR contended that despite ample opportunities, the appellant failed to submit a reply, causing delays in the proceedings. The AR emphasized that the Commissioner had no choice but to base the decision on available records due to the appellant's non-compliance.

The Tribunal, after considering both parties' submissions and reviewing the impugned order, concluded that the matter should be remanded to the Commissioner to ensure compliance with natural justice principles. The Tribunal directed the Commissioner to provide the appellant with another opportunity to respond to the show-cause notice. If the appellant still failed to provide a reply, the Commissioner could proceed based on existing records. The Tribunal set aside the impugned order and remanded the case for a fresh decision, emphasizing the importance of granting the appellant a fair hearing and document submission opportunity before issuing the adjudication order.