2019 (6) TMI 1318 - HC - Service Tax

Import of services - reverse charge - Reversal of cenvat credit - manufacturing and trading activity - Principles of natural justice - principles of estoppel - Non speaking order passed by the tribunal - time limitation - HELD THAT - It is clear that the manner in which the impugned order of the Tribunal has dealt with the appellant's appeal leaves much to be desired. The Tribunal is an authority under the Act to decide the disputes between the State and the assessee. Therefore, it is expected to deal with the contentions raised before it by the parties and give reasons in coming to the conclusion whether the contention raised by the parties before it are to be accepted or not. It is not expected of the Tribunal to ignore the submissions of the parties as raised in the written statement which are taken on record as evident from the order and proceed to decide the issue as if no submissions and / or case law in support of the appellant's case was made before it. The impugned order of the Tribunal is a nonspeaking order in as much as it does not consider the contentions of the appellant as supported by case law. It is of cardinal importance that the Tribunal passes orders with reasons - Appeal restored to the Tribunal for fresh disposal in accordance with law - appeal disposed off.

Summary

Issues involved:
- Challenge to the order passed by the Customs, Excise and Service Tax Appellate Tribunal
- Questions of law related to the Tribunal's decision, nature of imported service, retrospective effect of legal fiction, limitation period, and penalty under Section 78 of the Customs Act, 1962

Analysis:
1. The appellant challenged the Tribunal's order, raising questions on the Tribunal's failure to consider submissions on merits and limitation. The Tribunal's decision was questioned for ignoring the appellant's contentions and for deeming the issue of service tax payment as an academic exercise due to prior payment. The appellant also disputed the retrospective effect of an amendment and the invocation of the extended limitation period. The Tribunal's decision to confirm a penalty equal to the service tax demanded was also contested.

2. The High Court admitted the appeal based on the substantial question of law regarding the Tribunal's breach of natural justice principles. The Court noted that the controversy was narrow, focusing on the Tribunal's failure to consider the appellant's submissions on merits and limitation. Consequently, the appeal was taken up for final disposal due to the limited scope of the issue.

3. The facts leading to the appeal involved the appellant's manufacturing and trading activities, where service tax issues arose concerning services received from foreign entities. The Revenue issued a show-cause notice despite the appellant's prior payment of service tax. The Commissioner confirmed the service tax amount and imposed penalties, leading to the appellant's appeal to the Tribunal.

4. The appellant's arguments before the Tribunal focused on the payment of service tax before the show-cause notice and the absence of a need to reverse credit for input services used in trading activities. The Tribunal's order, however, failed to consider the appellant's submissions and relied on unfavorable case laws without addressing the appellant's favorable references.

5. The High Court criticized the Tribunal's order for being nonspeaking and failing to provide reasons for its decision, contrary to the principles of natural justice. The Court emphasized the importance of reasoned orders to prevent arbitrariness and enable parties to understand the basis of decisions. Citing legal precedent, the Court set aside the Tribunal's order and remanded the appeal for fresh disposal.

6. In conclusion, the High Court ruled in favor of the appellant, highlighting the need for tribunals to consider parties' submissions and provide reasoned decisions. The Court's decision aimed to uphold natural justice principles and ensure fair adjudication of disputes.