2017 (4) TMI 1083 - AT - Service Tax

Overseas Commission - case against appellant is that the appellant had not paid the Service Tax on Overseas Commission credited to the Overseas Commission Agent (OCA) ledger account and that the transaction between them and OCA was between the associated enterprises - Held that - the SCN dt. 21.04.2009 could not invoke the allegation of associated enterprises when the law at the time did not provide for the same and the relevant provision was introduced on 10.05.2008, without it being made expressly retrospective. Extended period of limitation - Held that - the facts about payment of commission to OCA were well known to the Department prior to the SCN dt. 21.04.2009, the extended period therefore, could not have been invoked in the third SCN. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Invocation of extended period in the show cause notice.
2. Allegation of transaction between associated enterprises.
3. Compliance with notification pertaining to associated enterprises.
4. Bar on time for invoking extended period.

Analysis:
1. The appellant contested the invocation of the extended period in the show cause notice, citing overlap with previous notices. The Tribunal found substance in this claim, noting that the Department failed to establish the basis for considering the appellant and Overseas Commission Agent (OCA) as associated enterprises. The show cause notice dated 21.04.2009 introduced the concept of associated enterprises without legal support, as the relevant provision was effective from 10.05.2008, rendering the notice invalid in this regard.

2. The Tribunal examined the Department's failure to provide a basis for alleging the appellant and OCA as associated enterprises. The Commissioner's findings lacked clarity on this aspect, highlighting the lack of evidence supporting the Department's claim. The Tribunal emphasized that the Department could not invoke the extended period for a known issue, as per the Supreme Court ruling in Nizam Sugar Factory Vs. CCE, 2006, establishing a time bar for such actions.

3. The Tribunal considered the notification related to associated enterprises issued on 10.05.2008 and the timeline of the show cause notice dated 21.04.2009, which predated the notification. As the law did not support invoking associated enterprises before the notification, the Tribunal concluded that the Department lacked legal grounds for raising this allegation in the notice. The absence of retrospective application further weakened the Department's position.

4. Ultimately, the Tribunal held that the Order-in-Original passed by the Commissioner was unsustainable due to the issues with invoking the extended period and alleging associated enterprises without legal backing. Consequently, the Tribunal allowed the appeal, setting aside the Commissioner's order. The judgment underscored the importance of legal compliance and proper basis for invoking extended periods and allegations in show cause notices, ensuring adherence to established legal principles and timelines.