2018 (12) TMI 80 - AT - Service Tax

Validity of SCN - Principles of res-judicata - Renting Immovable of Property Service or franchise service - scope of SCN - Held that - Admittedly, in the impugned order, the adjudicating authority has held that service rendered by the appellant does not fall under the category of Franchise Service . Therefore, as the demand of service tax under initial show cause notice has indirectly been dropped by the adjudicating authority, the same demand of service tax issued in another show cause notice to the appellant which is against the principles of res-judicata under section 11 of Code of Civil Procedure, 1908 as on the same amount do not sustain. The show cause notice dt.12.10.2012 is not maintainable and the principle of res judicata is applicable - there is no merit to demand service tax from the appellant under Renting Immovable of Property Service . Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of service tax under the category of "Renting Immovable of Property Service."
2. Applicability of the principle of res judicata in the issuance of show cause notices for service tax under different categories.

Analysis:

Issue 1:
The appellant appealed against an order confirming the demand of service tax under the category of "Renting Immovable of Property Service." The appellant had entered into an agreement with a company, receiving a lump-sum upfront fee and an annual fee. The appellant paid service tax on the annual fee but not on the apportioned upfront fee. A show cause notice was issued, and the demand was confirmed with interest and penalty. The appellant argued that a previous show cause notice for franchise service was issued and the impugned notice for property service was barred by limitation. The adjudicating authority held the service did not fall under franchise service. The Tribunal found the demand under the new notice was not sustainable due to the principles of res judicata, as the demand under the previous notice had been indirectly dropped.

Issue 2:
The Tribunal noted that a show cause notice for franchise service was initially issued, followed by a notice for property service. As the demand under the first notice was dropped, issuing a new notice for the same amount was held against the principles of res judicata. The Tribunal applied the principle of res judicata under section 11 of the Code of Civil Procedure, 1908, stating that the new show cause notice was not maintainable. Consequently, the impugned order demanding service tax under "Renting Immovable of Property Service" was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for service tax under the category of "Renting Immovable of Property Service" based on the principle of res judicata, as the demand under a previous notice had been indirectly dropped.