2017 (9) TMI 916 - AT - Service Tax

Manpower recruitment agency - Principles of Natural Justice - Held that - The adjudicating authority had no occasion to deal with the correct quantification for the reason that neither the appellant filed any reply nor attended any hearing before him. In such case at least the Commissioner (Appeals) should have either verified himself all the documents and the claim of the appellant regarding wrong quantification of the demand or should have called a report from the concerned division/range office. In the absence of carrying out such process there is a clear violation of principles of natural justice - appeal allowed by way of remand.

Summary

Issues:
Demand of service tax on services of manpower recruitment agency, imposition of penalties under Sections 76, 77 & 78 of the Finance Act, 1994, violation of principles of natural justice in the adjudication process, quantification of demand based on billing instead of payment receipts.

Analysis:
The Commissioner (Appeals) upheld the demand for service tax and penalties imposed on a manpower recruitment agency. The appellant contended that the adjudicating authority's ex parte order was unjust as they did not file a reply or attend the hearing. The appellant argued that the demand was incorrect as it was based on billing rather than payment receipts, which would substantially reduce the amount owed. Despite the appellant's submissions, the Commissioner (Appeals) did not address this issue or provide any findings. The appellant's request for remand was also denied. The Revenue supported the findings of the impugned order.

Upon careful consideration, the Tribunal found that the quantification of demand was inaccurate due to the billing-based approach. The appellant had presented documents showing that the demand should be substantially reduced based on payment receipts. The Tribunal noted that the adjudicating authority failed to address this discrepancy, leading to a violation of natural justice principles. To ensure the correct quantification, the matter needed to be remanded for proper verification and assessment. The appellant did not dispute the taxability of the service, only the quantification of the demand.

Therefore, the Tribunal allowed the appeal and remanded the case to the adjudicating authority for a fresh order following the principles of natural justice. The decision was pronounced in court on 31/07/2017.