2018 (12) TMI 784 - AT - Service Tax

Scope of SCN - the determination of the constitution of the firm was not alleged in the SCN - Held that - In the Show Cause Notice, there is no allegation against Smt. Priyatama Mohanty either as Partner or as Proprietor or the other partner Shri Santosh Kumar Sarangi, in as much as, demand had been issued to the Partnership firm, i.e. M/s Universal Travels. By observing Smt. Priyatama Mohanty is not the partner of M/s Universal Travels but she is sole Proprietor, the Ld. Addl. Commissioner has travelled beyond the Show Cause Notice. In the present case, the Ld. Adjudicating Authority has not given any notice to the Appellant to record her submissions on the point and therefore the order cannot be sustained. The matter remitted to the ld. Adjudicating Authority to decide afresh - appeal allowed by way of remand.

Summary

Issues:
1. Service tax demand on a partnership firm.
2. Alleged liability of partners in a partnership firm.
3. Compliance with stay orders.
4. Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.

Analysis:
1. The case involved a service tax demand on a partnership firm, M/s Universal Travels, for providing services during a specific period. The Adjudicating Authority confirmed the demand along with interest and penalties. The appellant contested this demand through appeals and stay petitions, leading to a series of legal proceedings.

2. The appellant argued that the liability of the erstwhile partnership firm cannot be shifted to any one partner holding them as the sole proprietor. The appellant highlighted the registration of the partnership firm under Section 69 of the Finance Act, 1994, and presented financial statements to support their case. The issue of the organizational structure of the firm and the roles of partners were central to the legal arguments presented.

3. The appellant failed to comply with the stay order, leading to further legal actions, including filing a writ petition before the High Court. The non-compliance with the order and subsequent legal steps taken by the appellant were crucial factors in the overall proceedings and decisions made by the authorities.

4. The Tribunal, upon review, found discrepancies in the observations and decisions of the Adjudicating Authority. The Tribunal noted that the Adjudicating Authority had not given proper notice or opportunity to the appellant to present their case effectively. Citing a relevant decision of the Hon’ble High Court of Jharkhand, the Tribunal set aside the impugned orders and remanded the matter for fresh consideration, emphasizing the importance of natural justice and fair hearings.

In conclusion, the Tribunal allowed the appeal by way of remand, directing the Adjudicating Authority to reevaluate the case in line with the principles of natural justice and legal procedures. The detailed analysis of the partnership firm's structure, liability of partners, compliance issues, and imposition of penalties formed the basis for the Tribunal's decision to set aside the previous orders and provide the appellant with a fair opportunity to present their case.