2016 (10) TMI 486 - AT - Service Tax

Demand of service tax - jurisdiction of learned Commissioner to pass order - scope of SCN - manufacture of alcoholic beverages - Management Consultancy Service - Franchise Services - CBEC s Circular F.No. 249/1/2008-CX 4 dated 24th October 2008 - whether the learned Commissioner was justified in going beyond the scope of SCN and holding that the activity undertaken by the appellants falls under Franchise Service whereas the Ld. Commissioner in the adjudication categorically already held that the activity undertaken by the appellant does not fall under the category of Management Consultancy Service? - Held that - the learned Commissioner would have dropped the proceedings against the appellants, but instead of doing so, the learned Commissioner held that the activity undertaken by the appellants falls under Franchise Service which was also not the scope of re-adjudication awarded by this Tribunal in initial proceedings. Therefore, the impugned order lacks jurisdiction and beyond the scope of the show cause notice. As, in the show cause notice it has been alleged that the activity undertaken by the appellants falls under the category of Management Consultancy Service but the Ld. Commissioner in the adjudication categorically held that the activity undertaken by the appellant does not fall under the category of Management Consultancy Service ; therefore, no merit found in the impugned order to demand service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of the scope of 'Management Consultancy Service' and 'Franchise Services' for the purpose of Service Tax liability.
2. Jurisdiction of the adjudicating authority in interpreting the scope of the show cause notice.
3. Relevance and applicability of CBEC Circular dated 27.10.2008 in determining the tax liability.

Analysis:
1. The case involved a dispute regarding the classification of royalty received by the appellants for the use of their trademark as either 'Management Consultancy Service' or 'Franchise Services' for the purpose of Service Tax liability. The show cause notice alleged non-payment of Service Tax on royalty received during a specific period. The Tribunal remanded the matter back to the adjudicating authority for fresh consideration after considering the CBEC's Circular and appellants' submissions.

2. The appellants contended that the impugned order exceeded the scope of the remand order and the show cause notice. They argued that the Revenue cannot go beyond the show cause notice's scope, citing relevant legal precedents. The learned counsel emphasized that the CBEC Circular dated 27.10.2008 covered the dispute and asserted that the royalty based on agreements did not fall under franchise services. The impugned order was challenged on jurisdictional grounds.

3. The learned AR, on the other hand, supported the impugned order, stating that quoting the wrong provision did not invalidate the proceedings. It was acknowledged that the activity undertaken by the appellants did not fit under 'Management Consultancy Service' but under 'Franchise Services,' as determined by the adjudicating authority. The AR argued that the demand against the appellants was rightly confirmed based on the examination of agreements.

4. Upon hearing both sides and considering the submissions, the Tribunal noted that the earlier remand order limited the jurisdiction of the adjudicating authority to the CBEC Circular dated 27.10.2008. The Tribunal found that the impugned order exceeded the scope of the show cause notice by categorizing the activity under 'Franchise Services' instead of 'Management Consultancy Service' as alleged. Consequently, the impugned order lacked jurisdiction, and the demand for service tax was set aside, allowing the appeal with any consequential relief.

5. In conclusion, the Tribunal set aside the impugned order due to the jurisdictional error in interpreting the scope of the show cause notice and exceeding the remand order's limits. The case highlighted the importance of adhering to the specified scope in adjudicating tax liability issues and considering relevant circulars for decision-making.