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2018 (7) TMI 183 - AT - Service TaxScope of SCN - whether the Commissioner (A) can take a completely different ground which was not an issue in the Order-in-Original? - Held that - The findings of commissioner as per whose order the appellants have paid the duty by way of cash and Cenvat credit were completely ignored. The letters of the appellants have not been replied. The claim of appellants that they have not taken credit of exempted services was not verified. Progressively the Order-in-Original and the Order-in-Appeal went tangentially to the issue raised in the SCN. Commissioner, vide order 05/2006 dated 23.01.2006, while confirming the demand against the appellants, did not give any finding against the availment of credit by the appellants. Show Cause Notice also did not seek to reject the claim on this count. Therefore, a strong case is made out by the appellants. In the instant case both, original and appeal authorities, have gone beyond the scope of the Show Cause Notice. Appeal allowed - decided in favor of appellant.
Issues:
Refund claim of service tax, Compliance with CBEC Circular, Eligibility for CENVAT credit, Non-maintenance of separate records, Scope of Show Cause Notice Refund Claim of Service Tax: The appellants, engaged in annual maintenance services, claimed a refund of service tax paid in excess. The department rejected the claim citing non-compliance with CBEC Circular and lack of evidence regarding the value of sale of components and labor in the invoices. The Assistant Commissioner and Commissioner (Appeals) upheld the rejection, stating the appellants failed to maintain separate records as per CENVAT Credit Rules. The appellants argued they paid service tax on only 40% of the total contract value and were eligible for the refund under Notification No. 12/03. Compliance with CBEC Circular: The department relied on CBEC Circular No. 59/8/2003 to reject the refund claim, emphasizing the need for evidence segregating the cost of goods and materials from the service value. The appellants contended that they collected service tax on only 40% of the value and submitted a certificate from a Chartered Accountant to support their claim. They argued that the Circular was not applicable as they had paid service tax on the full value as per separate proceedings initiated by the department. Eligibility for CENVAT Credit: The appellants asserted their eligibility for CENVAT credit under Rule 3 of the CENVAT Credit Rules, 2004, for inputs directly related to maintenance and repair services. They maintained records of credits taken on such inputs and services. The Commissioner (Appeals) raised concerns about the appellants' credit utilization, alleging they were not entitled to credit after filing returns. The appellants clarified that they availed credit only for taxable services and had not used credit for payment of service tax before the relevant period. Non-maintenance of Separate Records: The department argued that the appellants did not maintain separate accounts for taxable and exempted services, as required by Rule 6(2) of the CENVAT Credit Rules. The appellants refuted this claim, stating they only availed credit for inputs directly related to maintenance and repair services. They contended that the authorities went beyond the scope of the Show Cause Notice by introducing new grounds for rejection. Scope of Show Cause Notice: The appellants challenged the rejection of the refund claim on new grounds introduced by the Commissioner (Appeals) that were not part of the original Show Cause Notice. They argued that the authorities exceeded their jurisdiction by considering issues not raised in the notice. The Tribunal found in favor of the appellants, stating that both original and appeal authorities went beyond the scope of the Show Cause Notice, citing precedents where the Department was restricted from traveling beyond the notice's allegations. In conclusion, the Tribunal allowed the appeals, setting aside the impugned order and providing consequential relief to the appellants based on the jurisdictional limitations of the Show Cause Notice and the appellants' compliance with relevant rules and notifications.
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