2019 (3) TMI 449 - AT - Service Tax

Withdrawal of SCN and issuance of fresh SCN for the same period - time limitation - Held that - We do not understand how the department could withdraw the show cause notice and issue a fresh SCN case for the very same period. The Larger Bench in the case of Agauta Sugar Chemicals 2010 (9) TMI 16 - CESTAT, NEW DELHI has considered the validity of show cause notice issued and adjudicated after the amendment in 2003 / 2004. It did not discuss a situation in which a fresh show cause notice is issued, where already show cause notice is pending. On perusal of the adjudication order, we do take note of the fact that the adjudicating authority has started the order by stating that the proceedings arise out of show cause notice dated 30.8.2001. However, in the operative portion, it is stated by him that this show cause notice stands abated and treated as withdrawn due to issuance of the show cause notice dated 27.10.2004. Show cause notice dated 27.10.2004 is also on the similar set of facts as alleged in the earlier show cause notice. The only allegation of suppression made in the show cause notice is that the appellant did not file returns and did not pay tax. When there is no liability on the service recipient the appellant could not have been expected to file returns or pay tax. There is no positive act of suppression brought out from the facts or evidence placed - there are no ingredients for invocation of extended period and therefore the demand cannot sustain. Appeal allowed - decided in favor of appellant.

Issues:
1. Liability of service recipient to pay service tax.
2. Validity of show cause notices issued in 2001 and 2004.
3. Applicability of retrospective amendments validating recovery of service tax.
4. Invocation of extended period of limitation for demand of service tax.

Analysis:

Issue 1: Liability of service recipient to pay service tax
The case involved a dispute regarding the liability of the service recipient to pay service tax under the Goods Transport Operators Service. The appellant argued that the initial show cause notice issued in 2001 was against the law as there was no provision at that time for the service recipient to pay the tax. The Hon'ble Supreme Court had held such provisions as ultra vires. The appellant contended that the second show cause notice in 2004, for the same period, could not be sustained as it was based on a retrospective amendment validating the recovery of service tax from the recipient. The department argued that subsequent amendments empowered the recovery of service tax from the recipient, and the second notice was valid under the amended law.

Issue 2: Validity of show cause notices
The appellant challenged the validity of the show cause notices issued in 2001 and 2004. The appellant argued that the first notice was issued invoking the extended period of limitation, which was not applicable as there was no provision for the recipient to pay service tax during that period. The second notice, issued after retrospective amendments, was also contested on the grounds that it was based on an earlier notice that was invalid due to the absence of legal provisions at that time. The department, however, relied on the retrospective amendments to validate the recovery of service tax from the recipient.

Issue 3: Applicability of retrospective amendments
The case involved an examination of the Finance Act amendments in 2000 and 2003, which introduced retrospective changes to validate the recovery of service tax from the recipient. The department argued that these amendments empowered the recovery of service tax from the service recipient, even for past periods. The appellant contended that the retrospective amendments could not justify the issuance of a fresh show cause notice based on an earlier notice that was invalid due to the absence of legal provisions at that time.

Issue 4: Invocation of extended period of limitation
The appellant raised the issue of the extended period of limitation invoked by the department for demanding service tax. The appellant argued that as there was no liability on the service recipient during the relevant period, the invocation of the extended period was unjustified. The appellant emphasized that there was no evidence of suppression of facts by the appellant regarding the payment of service tax, as there was no legal obligation for the recipient to pay during that period.

The Tribunal set aside the impugned order on the ground of limitation, holding that there were no grounds for invoking the extended period. The appeal was allowed in favor of the appellant.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the Tribunal's decision in the case.

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