2024 (10) TMI 1344 - AT - Service Tax

Payment of differential service tax - Cleaning Services - allegation in the SCN and the impugned order is general in nature and there is no specific allegation which warrants levy of Service Tax - HELD THAT - The case at hand shows that the SCN was issued on assumptions and presumptions and hence cannot be sustained. A similar matter was examined by a Division Bench of this Tribunal, in Balaji Insulations India Pvt. Ltd. 2024 (6) TMI 771 - CESTAT MUMBAI which covers the legal issues involved in this case, where it was held that ' while determining value of taxable service under Section 67 ibid, such aspect as to the activities which are covered by negative list and activities which are mentioned in the definition of service as those which are not covered by such definition becomes important'. It is a well-accepted norm of judicial discipline that a Bench of lesser quorum / strength should follow the view taken by Bench of larger quorum / strength, in a case whose ratio covers the legal issue involved in the impugned lis, more so when it is based on the precedence of earlier judgments on the matter. Having found the impugned order to be based on assumptions and presumptions without examining the books of accounts etc. and is liable to be set aside, the question of extended period, penalty etc. does not arise. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:

1. Whether the Show Cause Notice (SCN) issued for differential service tax was based on valid grounds.
2. Applicability of extended limitation period for issuing the SCN.
3. Justification for imposing penalties under sections 70, 77, and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Validity of the Show Cause Notice (SCN):

The primary issue in this case was whether the SCN demanding differential service tax was issued on valid grounds. The appellant argued that the SCN was based on assumptions and lacked specific allegations or evidence to support the demand for service tax. The Tribunal noted that the SCN relied on a mere extraction of sections from the Finance Act, 1994, without examining the nature of the appellant's activities or establishing that the conditions for taxability were met. The Tribunal emphasized that the onus was on the Revenue to prove that the appellant's activities fell within the taxable category, as outlined in the precedent case of K.P. Varghese vs The Income Tax Officer. The Tribunal found that the SCN was issued on presumptive grounds without a thorough examination of the appellant's records, similar to the findings in cases like Balaji Insulations India Pvt. Ltd. and Modern Road Makers Pvt. Ltd. Therefore, the SCN was deemed unsustainable.

2. Applicability of Extended Limitation Period:

The appellant contended that the invocation of the extended limitation period was not applicable, as the SCN was issued more than five years after the relevant service tax period. The Tribunal observed that for the extended period to apply, there must be evidence of fraud, collusion, or willful misstatement, which the Revenue failed to establish. The Tribunal referenced previous judgments, such as Sharma Fabricators & Erectors Pvt. Ltd., where it was held that the burden of proof lies with the Revenue to demonstrate such conditions before invoking the extended period. Since the Revenue did not discharge this burden, the extended limitation was not applicable.

3. Justification for Imposing Penalties:

The imposition of penalties under sections 70, 77, and 78 of the Finance Act, 1994, was also challenged by the appellant. The Tribunal highlighted that penalties could not be justified when the foundational demand for service tax itself was not maintainable. The Tribunal reiterated that the Revenue failed to establish any fraudulent intent or willful suppression of facts by the appellant, which are prerequisites for imposing penalties under the cited sections. The Tribunal referred to its earlier decisions, including those in the cases of Kush Constructions and Umesh Tilak Yadav, to support the view that without proving the appellant's liability for the differential service tax, penalties could not be sustained.

Conclusion:

The Tribunal concluded that the SCN was based on assumptions and lacked the necessary examination of the appellant's records to substantiate the service tax demand. Consequently, the extended limitation period was inapplicable, and the penalties imposed were unjustified. The Tribunal set aside the impugned order and allowed the appeal, granting the appellant consequential relief as per law.