2018 (7) TMI 26 - AT - Service Tax

Scope of SCN - case of appellant is that adjudicating authority has proceeded beyond the scope of Show Cause Notice. The Notice was issued under Tour Operator Service . However, the impugned orders have confirmed the demand under Rent-a-Cab services - Held that - The demand made in respect of tour operator services, provided to SEZ but confirmed by the adjudicating authority under Rent-a-Cab services, will not sustain and is, therefore, set aside. Demand in respect of cancellation charges in respect of Tour Operator Service - Held that - Punjab and Haryana High Court in the case of Janata Travels (P) Ltd. 2008 (8) TMI 187 - PUNJAB AND HARYANA HIGH COURT has set aside the demand in respect of charges received on cancellation of tickets - demand set aside. Appeal allowed in part.

Issues:
1. Demand of service tax for transportation of employees.
2. Allegation of services performed outside the SEZ.
3. Demands for cancellation charges.
4. Scope of Show Cause Notice.
5. Interpretation of provisions of statute and exemption notification.
6. Penalties imposed under Section 76 and 78 of the Finance Act, 1994.

Issue 1: Demand of service tax for transportation of employees
The appellants were facing demands for service tax in relation to the transportation of employees of their clients to and from their residence to the workplace. The service tax liability was proposed under "Tour Operator Service" as per Section 65(115) of the Finance Act, 1994. The impugned orders confirmed the service tax liability along with interest and imposed penalties under Section 76 and 78 of the Finance Act, 1994.

Issue 2: Allegation of services performed outside the SEZ
It was alleged that the services provided by the appellants were performed outside the Special Economic Zone (SEZ), leading to the contention that these services cannot be considered as rendered for consumption within the SEZ. This allegation was a crucial aspect of the case and formed part of the demands made against the appellants.

Issue 3: Demands for cancellation charges
Apart from the service tax demands related to transportation services, demands were also made in respect of cancellation charges collected by the appellants. The appellants argued that these charges should not be treated as provision of taxable services as they were administrative costs akin to penalties and not amounts received for providing services.

Issue 4: Scope of Show Cause Notice
The appellants contended that the adjudicating authority had exceeded the scope of the Show Cause Notice by confirming demands under Rent-a-Cab services instead of Tour Operator Service as mentioned in the Notice. They relied on various case laws to support their argument that confirming demands beyond the scope of the Notice is legally impermissible.

Issue 5: Interpretation of provisions of statute and exemption notification
The dispute primarily revolved around the interpretation of statutory provisions and exemption notifications. The appellants argued that the entire dispute arose due to differing interpretations of the law and exemption notifications, which, according to them, should preclude the imposition of penalties as held in previous decisions.

Issue 6: Penalties imposed under Section 76 and 78 of the Finance Act, 1994
Penalties were imposed under Section 76 and 78 of the Finance Act, 1994. The appellants argued against the imposition of penalties, citing the interpretation of statutory provisions and exemption notifications as the basis for their contention.

In the judgment, the Tribunal noted that the adjudicating authority had departed from the scope of the Show Cause Notice by confirming demands under Rent-a-Cab services instead of Tour Operator Service as mentioned in the Notice. Citing legal precedents, including a decision by the Apex Court, the Tribunal held that orders exceeding the scope of the Notice are legally flawed. Consequently, the demand made for services provided to SEZ but confirmed under Rent-a-Cab services was set aside.

Regarding the demand for cancellation charges, the Tribunal referred to previous decisions and held that such charges should not be subject to service tax. Following legal precedents, the Tribunal set aside the demand for service tax under Tour Operator Service concerning cancellation charges. As a result, the appeal was allowed partly on technical grounds and partly on merits, with any consequential benefits to be provided as per law.

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