2017 (10) TMI 140 - AT - Service Tax

Validity of SCN - merger of two SCN - Extended period of limitation - proviso to Sub-section (1) of Section 73 of the Finance Act, 1994 - Held that - the show cause notice for the extended period cannot be issued on the same facts if earlier show cause notice on the same facts has been issued - both the show cause notices dated 17.03.2010 and 17.05.2010 are not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Validity of show cause notices for service tax evasion.
2. Invocation of extended period under Section 73 of the Finance Act, 1994.
3. Merger of two show cause notices for adjudication.
4. Applicability of penalty under Section 78 of the Finance Act, 1994.

Analysis:

Issue 1: Validity of show cause notices for service tax evasion
The appellant was issued two show cause notices, one dated 17.03.2010 and the other dated 17.05.2010, alleging non-payment of service tax on construction services provided. The appellant argued that the first notice did not specify the reason for invoking the extended period under Section 73 of the Finance Act, 1994, rendering it unsustainable. Additionally, the appellant contended that the second notice, based on the same facts, was also not sustainable as per the legal precedent set by the Hon’ble Supreme Court in a relevant case. The Tribunal accepted the appellant's arguments, holding that both show cause notices were not sustainable on limitation grounds.

Issue 2: Invocation of extended period under Section 73 of the Finance Act, 1994
The appellant challenged the invocation of the extended period under Section 73 of the Finance Act, 1994 in the show cause notices. They argued that the lack of specific reasons for invoking the extended period in the first notice made it legally unsustainable. The Tribunal agreed with the appellant's contention, emphasizing that without assigning a valid reason for invoking the proviso to Sub-section (1) of Section 73, the period cannot be extended. Consequently, the Tribunal held that the show cause notices were not sustainable in law due to this procedural flaw.

Issue 3: Merger of two show cause notices for adjudication
The original authority merged the proceedings initiated through the two show cause notices for adjudication. However, the Tribunal, after considering the arguments presented by the appellant, found both show cause notices to be unsustainable on limitation grounds. Consequently, the Tribunal set aside the impugned Order-in-Original and allowed the appeal, granting the appellant consequential relief as per law.

Issue 4: Applicability of penalty under Section 78 of the Finance Act, 1994
The Tribunal did not delve into the merits of the case but focused on the sustainability of the show cause notices. The learned A.R. for Revenue supported the impugned Order-in-Original, which confirmed the demand and imposed penalties under Section 78 of the Finance Act, 1994. However, the Tribunal's decision to set aside the order based on the lack of sustainability of the show cause notices indicates that the penalties imposed were also overturned as a result of the appeal being allowed.

This comprehensive analysis highlights the key legal issues addressed in the judgment, focusing on the validity of show cause notices, the invocation of the extended period, the merger of proceedings, and the consequential relief granted to the appellant.