2017 (10) TMI 84 - AT - Service Tax

SSI exemption - turnover within threshold limit - validity of SCN - case of appellant is that the SCN is vague and full of ambiguity - Held that - the allegations in the SCN are vague and do not contain the gist of accusation and/or the basis on which the appellant is required to respond. The amount have been taken from the balance-sheet, trading or profit and loss account of the appellant and tax have been calculated thereon. Further, in spite of categorical averments made by the appellant in their reply to the show cause notice, the same have not been considered nor any findings recorded as to why a particular services is taxable, although claimed exempt by the appellant - the SCN is vague and incomprehensible, leaving the appellant-assessee wondering as to what is the exact nature of allegations they are required to meet. Although the SCN discusses the various classifications of service but it fails to give the basis of categorization of the services under particular heads - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether payments received by the appellant under various heads of service are liable to be included in taxable value.
2. Whether services provided by the appellant to Railway, Military Engineering services, and other Government Departments are exempt as claimed.
3. Whether the contract amount received from BSNL is on account of sales/supply of materials not excisable to works contract for Service Tax.
4. Whether the appellant is liable to pay Service Tax on freight charges incurred on inward and outward transportation.
5. Whether the extended period of limitation is applicable.
6. Whether the proposed penalties are imposable.

Analysis:
1. The appellant, engaged in providing services like Works Contract, Erection Commissioning, and Installation, received a show cause notice alleging non-registration for Service Tax despite significant payments received under various categories. The notice invoked the extended period from October 2007 to March 2012, claiming tax liability under Works Contract, Management, Maintenance, Repair, and GTA services. The appellant's defense included objections on the vagueness of the notice, asserting exemptions for certain services provided to entities like Railways and Military Engineering Services. The appellant argued that Works Contracts not meant for commerce or industry were not taxable, highlighting specific contracts with BSNL for supply of goods subject to VAT, not Service Tax.

2. The Commissioner's order confirmed the Service Tax demand based on the nature of services performed by the appellant, categorizing them under taxable services like Works Contract, Maintenance, Repair, and Erection, Commissioning, and Installation. However, the appellant contested the order, claiming vagueness in the findings and lack of specific reasoning for taxability determinations. The Tribunal noted that the show cause notice lacked clarity in accusations and failed to provide a clear basis for the tax liabilities imposed. Despite the appellant's detailed submissions and documentations, the Commissioner's order did not adequately address the specific services claimed as exempt by the appellant, leading to a conclusion that the notice was vague and incomprehensible.

3. The Tribunal set aside the Order-in-Original, ruling in favor of the appellant due to the vague and unsustainable nature of the show cause notice. The decision emphasized the importance of clear and specific allegations in legal proceedings, highlighting the necessity for proper justification of tax liabilities to enable the appellant to respond effectively. The lack of detailed reasoning and consideration of the appellant's arguments led to the conclusion that the notice did not meet the required standards of clarity and comprehensibility, resulting in the appeal being allowed with consequential benefits for the appellant as per the law.