2017 (9) TMI 1193 - AT - Service Tax

Validity of second SCN issued invoking Extended period of limitation - first notice is still pending adjudication with the original authority - Held that - the appellants are making a claim that they have provided the details and cooperated with the Department in the proceedings. Regarding application of Section 72, we note that the basis of arriving at the taxable value should be clearly recorded. In the present case the claim of the appellant is that they ceased operation in February, 2009 itself. This aspect also requires verification. Considering the serious infirmities in the present impugned order and also considering that the first notice on the same issue is still pending adjudication, we find fit and proper to remand the matter to the original authority to decide the case together - appeal allowed by way of remand.

Issues:
1. Validity of the second notice issued to the appellant.
2. Application of Section 72 without proper basis.
3. Tax liability and penalties imposed on the appellant.
4. Cooperation of the appellant with the Department.
5. Verification of the claim of ceasing operations in February 2009.
6. Basis for computing taxable value under the Finance Act, 1994.
7. Pending adjudication of the first show cause notice.

Analysis:
1. The appellant challenged the second notice issued on 23.03.2011, claiming it as the second notice after an earlier notice dated 16.02.2009. The second notice invoked an extended period due to alleged non-cooperation. The Tribunal noted that both notices covered 5 years each, and the second notice might not stand legal scrutiny. The appellant contended they cooperated and provided details. The Tribunal emphasized the need for clear findings on the cooperation issue.

2. The Tribunal addressed the application of Section 72 by stating that the taxable value determination basis must be clearly recorded. The appellant claimed to have ceased operations in February 2009, questioning the validity of using Form 26 AS details for tax computation. The Tribunal highlighted the necessity of evidence for taxable service provision during the relevant period and emphasized the pending adjudication of the first notice.

3. The original authority had imposed a service tax liability of ?10,27,464 on the appellant under 'business auxiliary service,' along with penalties under Sections 78 and 77 of the Finance Act, 1994. On appeal, the Commissioner (Appeals) reduced the tax liability to ?99,915 and adjusted the penalties accordingly. The Tribunal found serious infirmities in the impugned order and remanded the matter to the original authority for a comprehensive decision.

4. The appellant's cooperation with the Department was a crucial aspect of the case. The Tribunal acknowledged the appellant's claims of cooperation and the alleged non-receipt of earlier correspondence. It stressed the importance of providing due opportunity for the appellant to present their case fully and receive a fair hearing.

5. The claim of the appellant regarding ceasing operations in February 2009 raised questions about the period for which tax liability could be imposed. The Tribunal highlighted the need for verification of this claim and emphasized the importance of examining all submissions made by the appellant for clear findings.

6. The Tribunal emphasized that the basis for computing the taxable value under the Finance Act, 1994 should be robust and supported by evidence of taxable service provision during the relevant period. It cautioned against relying solely on income tax records like Form 26 AS for this purpose and stressed the need for a thorough examination of all relevant factors.

7. The Tribunal noted the pending adjudication of the first show cause notice issued to the appellant on 16.02.2009. Despite the appellant's claim of clearing the tax liability for that period, no adjudication order had been issued. The Tribunal deemed it appropriate to remand the matter to the original authority to consolidate both cases and ensure a comprehensive and fair decision-making process.

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