2010 (9) TMI 75 - AT - Service Tax

Opportunity of hearing- The revenue imposed service tax and penalty on the assessee. The assessee wanted a personal hearing and filed written submissions. A personal hearing was fixed but advocate for the assessee could not appear and revenue confirmed the demand. The tribunal set aside the order on the basis that natural justice was not provided and remanded the case back to the adjudicating authority.

Summary

Issues:
1. Service tax liability on income from software activation.
2. Violation of principles of natural justice in the adjudication process.

Analysis:
1. Service tax liability on income from software activation:
The appellant, registered as a service provider, faced proceedings for the collection of service tax on income from software activation. The department treated the service provided as falling under business auxiliary service. After the issuance of a show cause notice and the adjudication process, a service tax of Rs.2,08,89,202/- was demanded for a specific period. The penalties were imposed under various sections of the Finance Act, 1994. The appellant's advocate argued during the personal hearing that there were issues regarding the levy of service tax on activation charges. However, the Tribunal found a violation of the principles of natural justice in the proceedings. The appellant had requested an adjournment due to the absence of their advocate, but this request was not properly addressed in the order. The Tribunal concluded that the appellants did not receive a sufficient opportunity to present their case, leading to the decision to remand the matter to the original adjudicating authority for a fresh decision after providing a reasonable opportunity to the appellants.

2. Violation of principles of natural justice in the adjudication process:
The Tribunal highlighted the importance of adhering to the principles of natural justice in the adjudication process. It noted that the appellant's request for an adjournment during the personal hearing was not adequately considered or reflected in the order. The absence of clarity on the number of occasions personal hearings were offered raised concerns about the fairness of the process. Due to these shortcomings, the Tribunal concluded that the appellants were not given a sufficient opportunity to present their case. As a result, the impugned order was set aside, and the matter was remanded to the original adjudicating authority to ensure a fresh decision with a reasonable opportunity for the appellants to present their case effectively.