2025 (4) TMI 9 - AT - Service Tax

Time limitation for filing SCN - abnormal delay - disallowance of CENVAT credit - invocation of extended period of limitation. Whether the show cause notice dated 24.10.2011 had been properly served in 2011 or it was served for the first time on 01.07.2020 as claimed by the Appellant? - HELD THAT - Reference made to the Tribunal s order in the case of Collector of Custom Vs. Shani International 1992 (11) TMI 206 - CEGAT NEW DELHI . In the said case the service of SCN to clearing agent has been held to be not a proper service where it was held that service of Show Cause Notice demanding the duty on clearing agent is not a valid service after the goods have been released and that the importer to whom the demand notice was issued beyond the period of six months cannot be made to pay the duty under Customs Act merely because a copy of the notice was sent to the clearing agent in time. Besides for the reasons mentioned by the Collector (Appeals) (with which we agree) we are satisfied that the Department has failed to prove that the less charge demand was issued within six months from the date of the payment of the duty. The ratio of law laid down in the aforesaid case is squarely applicable to the facts of the present case. There is nothing on record to show that the SCN was served to the Appellant or its authorised agent any time during 2011. Conclusion - Notice was served to the Appellant for the first time on 01.07.2020 which is much beyond the extended period of 5 years. The demand of service tax and penalty imposed on the Appellant are set aside - Appeal allowed.

Summary

Issues Presented and Considered

The primary issues considered in this judgment are:

A. Whether the show cause notice (SCN) dated 24.10.2011 was properly served in 2011 or was served for the first time on 01.07.2020 as claimed by the Appellant.

B. Whether the orders passed by the Adjudicating Authority are liable to be set aside on the ground of abnormal delay.

C. Whether Cenvat credit of Rs.28,94,515/- is liable to be disallowed.

D. Whether the extended period of limitation is invokable.

Issue-wise Detailed Analysis

Issue A: Service of the Show Cause Notice

The central question was whether the SCN was served in 2011 or for the first time on 01.07.2020. The Appellant argued that the SCN was served only in 2020, while the Department claimed it was served in 2011 to the gate security. The Tribunal examined the relevant legal framework under Section 37C of the Central Excise Act, 1944, which mandates that notices must be served to the intended person or their authorized agent. The Tribunal found that service to a security guard does not satisfy this requirement. Citing precedents, such as the Tribunal's decision in Raja Sethi Financial Services, it was determined that the SCN was not validly served in 2011. Consequently, the Tribunal concluded that the SCN was served beyond the permissible period, rendering the notice invalid.

Issue B: Abnormal Delay in Adjudication

The Appellant contended that the adjudication process was unreasonably delayed, with the SCN adjudicated nearly a decade later. While the Tribunal acknowledged this argument, it did not delve into this issue further, as the appeal was decided on the service of notice issue.

Issue C: Disallowance of Cenvat Credit

The Appellant challenged the disallowance of Cenvat credit amounting to Rs.28,94,515/-, arguing that the services in question were integral to their business operations. They cited a previous Tribunal decision in their favor regarding the classification of services as input services. However, the Tribunal did not address this issue in detail, given the resolution of the appeal on the service of notice ground.

Issue D: Invocation of Extended Period of Limitation

The Appellant argued against the invocation of the extended period of limitation, asserting regular filing of returns and a bona fide belief in their eligibility for credit. The Tribunal, having determined the improper service of the SCN, found it unnecessary to address this issue further.

Significant Holdings

The Tribunal held that the SCN was not properly served within the required timeframe, as service to a security guard does not constitute valid service under Section 37C of the Central Excise Act, 1944. The Tribunal stated, "I hold that notice was served to the Appellant for the first time on 01.07.2020, which is much beyond the extended period of 5 years." As a result, the demand for service tax and the penalty imposed on the Appellant were set aside.

The core principle established is the strict adherence to procedural requirements for serving notices under the applicable legal framework. The Tribunal emphasized the necessity of serving notices to the intended recipient or their authorized agent to ensure due process.

In conclusion, the appeal filed by the Appellant was allowed, with the Tribunal setting aside the demand and penalty, granting consequential relief as per law.