2024 (4) TMI 532 - AT - Service Tax

Scope of SCN - SCN does not mention the category of service under which the demand is raised - Violation of principles of natural justice - HELD THAT - On perusal of the SCN as well as the order-in-original, it is noted that the category of service has not been mentioned at all. It is merely stated that from the statements recorded from persons of M/s Neyveli Lignite Corporation, various services in the nature of Management, Maintenance or Repair Services, Manpower supply Agency Services and Commercial or Industrial Construction Services have been provided by the appellant. On perusal of the annexure to the show cause notice, it is seen that there is nothing mentioned as to the category of service. The annexure merely states the description of work done in the invoices. The adjudicating authority, while confirming the demand, has not made any discussion as to what is the amount that would fall under each category of service or whether the entire amount falls within one category of service. The Hon ble Supreme Court in the case of Commissioner of Central Excise, Vs. M/S Brindavan Beverages (P) Ltd. 2007 (6) TMI 4 - SUPREME COURT has observed that the show cause notice, being the foundation of litigation, has to contain the necessary details so as inform the assessee to defend the allegations. In the case of CCE ST Pondicherry Vs. A.M. Manickam 2017 (6) TMI 57 - CESTAT CHENNAI , the Tribunal had occasion to consider the demand of service tax on show cause notices issued to various persons who had provided services to M/s Neyveli Lignite Corporation. The Tribunal observed that these show cause notices did not contain any mention of the category of service and therefore the demand was set aside. Since the department has not mentioned the category of service in the show cause notice as well as the order-in-original much prejudice has been caused to the appellant. The proceedings are therefore vitiated and the demand cannot sustain. The impugned order is set aside - Appeal allowed.

Summary

Issues:
The issues involved in this case are the demand of service tax on various construction services provided by the appellant to M/s Neyveli Lignite Corporation Ltd., the lack of specification of the category of service in the show cause notice, and the imposition of penalties under Section 76 & 77(2) of the Finance Act 1994.

Demand of Service Tax:
The appellant, engaged in construction services, was found to have received payments for taxable services from M/s Neyveli Lignite Corporation but had not paid the corresponding service tax. The show cause notice did not specify the category of service for which the tax was demanded, leading to a lack of clarity for the appellant to defend against the allegations. The appellant argued that without proper details in the notice, the demand is vitiated, citing the decision in Commissioner of Central Excise vs. M/S Brindavan Beverages. The Tribunal's precedent in CCE & ST Pondicherry vs. A.M. Manickam supported the view that a demand without specifying the service category cannot be sustained.

Legal Consideration:
The Tribunal observed that both the show cause notice and the order-in-original failed to mention the category of service for which the demand was raised. Without this crucial information, the appellant was deprived of the opportunity to present a proper defense. Citing the importance of the show cause notice as the foundation of litigation, the Tribunal referred to the Supreme Court's decision in Commissioner of Central Excise vs. M/S Brindavan Beverages and the Tribunal's ruling in CCE & ST Pondicherry vs. A.M. Manickam. As the category of service was not specified, the proceedings were deemed vitiated, leading to the setting aside of the impugned order and allowing the appeal.

Penalties Imposed:
The original authority had confirmed the demand of service tax along with interest and imposed penalties under Section 76 & 77(2) of the Finance Act 1994. However, the penalty under Section 77(2) was set aside by the Commissioner (Appeals). The appellant contested the penalties, emphasizing the lack of clarity in the show cause notice regarding the category of service. The Tribunal's decision to set aside the demand of service tax also impacted the penalties, ultimately leading to the allowance of the appeal with consequential relief.