2024 (3) TMI 500 - AT - Service Tax

Scope of SCN - vague SCN - absence of specific demand of service tax under a particular service - Service tax on the Insurance commission received from Bajaj Alliance - service tax on reimbursements received by the appellant - service tax on TDS refund - interest - penalty. Vague SCN - HELD THAT - The service tax of Rs.2,69,401/- has been demanded from the Appellant on the Appellant on the taxable value of Rs.22,77,358 received by them for the years 2006-07 to 2009-10. It is observed that neither the SCN dated 14.10.2011 nor the Order-in-Original dated 29.06.2012 has mentioned the specified category service under which the service tax has been demanded. In the absence of specific demand of service tax under a particular category of service, that the demand of service tax is not sustainable. This view has been held by Tribunal Hyderabad in the case of SYNIVERSE MOBILE SOLUTIONS PVT LTD., (EARLIER TRANSCIBERNET INDIA PVT LTD.) VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, HYDERABAD IV 2023 (6) TMI 463 - CESTAT HYDERABAD , wherein it has been held Tribunals have been consistently holding that it is essential for the Show Cause Notice issuing authority to clearly indicate the sub-clause under which the service tax in question would fall. It is a settled law that the defect in the notice cannot be cured by the observations of the adjudicating authority or appellate authority. Accordingly, the demand of service tax along with interest and penalty confirmed in the impugned order is not sustainable as the SCN fails to specify the category of service under which the demand has been raised. Demand of service tax on the Insurance commission received from Bajaj Alliance - demand confirmed on the ground that the Appellant failed to substantiate that Bajaj Alliance for whom the Appellant has worked has paid the Service Tax - HELD THAT - Board has issued Circular F. No. B11/1/2002-TRU, dated 1-8-2002, which provides that the Service tax would be paid by the Insurance Company and not the insurance agent. Relying on the Circular cited above, it is held that no service tax is payable by the Appellant on the amount received as Insurance commission. Demand of service tax on the reimbursements received by the appellant - HELD THAT - The Appellant submits that they have acted as pure agent, as such, the invoices have been raised in the name of the principal and the exact amount has been reimbursed. The ledger would envisage that the exact amount spent on behalf of the principal has been reimbursed. Accordingly, it is held that the demand of service tax confirmed on the reimbursed expenses, where the Appellant acted as a pure agent is not sustainable. Demand of service tax on the TDS refund - HELD THAT - There is no provision under the service tax act to demand service tax on TDS refund. Accordingly, it is held that the demand confirmed in the impugned order on this count is not sustainable. Interest and penalty - HELD THAT - Since the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. Accordingly, it is held that the demand of service tax along with interest and penalty confirmed in the impugned order is not sustainable. The impugned order set aside - appeal allowed.

Summary

Issues:
The appeal against the Order-in-Appeal upholding service tax demands, except penalty under Section 76 of the Finance Act, 1994.

Issue 1: Specific demand of service tax under a particular category

The Appellant argued that the demand of service tax was not sustainable as the specific category of service was not mentioned in the Show Cause Notice or Order-in-Original. Citing a Tribunal case, it was noted that the failure to specify the sub-clause under which the service tax falls renders the demand unsustainable. The Tribunal held that the defect in the notice cannot be cured by observations of the adjudicating authority. Consequently, the demand of service tax, interest, and penalty was deemed unsustainable.

Issue 2: Demand of service tax on Insurance Commission

The Commissioner (Appeals) confirmed the demand on Insurance Commission received from Bajaj Alliance. However, the Appellant relied on a Board Circular stating that the service tax is to be paid by the Insurance Company, not the agent. The Tribunal found that based on the Circular, no service tax was payable by the Appellant on the Insurance Commission amount received.

Issue 3: Demand of service tax on Reimbursement of expenses

The demand on reimbursements received by the Appellant was questioned, as they acted as a pure agent and raised invoices in the name of the principal. The Tribunal observed that the exact amount spent on behalf of the principal was reimbursed, leading to the conclusion that the demand of service tax on reimbursed expenses was not sustainable.

Issue 4: Demand of service tax on TDS refund

Service tax was demanded on the TDS refund, which was contested as there is no provision under the service tax act to demand service tax on TDS refund. The Tribunal held that the demand on this count was not sustainable. As the overall demand was deemed unsustainable, the question of demanding interest and imposing a penalty did not arise. Consequently, the impugned order was set aside, and the appeal filed by the Appellant was allowed.