2018 (12) TMI 1364 - AT - Service Tax

Validity of SCN - Sub-contract - Demand based on third party documents - Held that - M/s Utility Powertech Ltd. did not submitted any invoices raised by appellant service-provider to support the information submitted by them in the form of Bill value from the period from 01.04.2006 to 31.03.2011 which was treated by Revenue as assessable value. Also, Revenue did not confront the appellant service provider with the figures obtained from M/s Utility Powertech Ltd. - therefore, the entire show cause notice is based on third party information, and is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appeal arising out of common impugned Order-In-Appeal
2. Service provider's failure to file ST-3 returns
3. Non-cooperation of the service provider during audit
4. Allegations based on third party information
5. Sustainability of the show cause notice

Analysis:
The judgment pertains to two appeals arising from a common impugned Order-In-Appeal, one filed by the service provider and the other by the Revenue. The service provider, registered with the Service Tax Department, failed to file ST-3 returns and was contacted by Revenue for information and audit, which was hindered by the service provider's non-cooperation. During the investigation, a statement from M/s Utility Powertech Ltd. implicated the service provider as a sub-contractor for certain services. The Revenue issued a show cause notice based on this information, demanding around &8377; 37 lakhs in service tax. The Original Authority confirmed the demand with penalties under Section 76 & 78 of the Finance Act, 1994. The Commissioner (Appeals) set aside the penalty under Section 76 but upheld the remaining Order-In-Original, leading both parties to appeal before the Tribunal.

Upon hearing both sides, the Tribunal noted that the show cause notice was solely based on data provided by M/s Utility Powertech Ltd. without invoices from the service provider to support the claimed bill values. The Tribunal observed that the Revenue did not confront the service provider with the figures obtained from the third party. Citing a similar precedent, the Tribunal found the show cause notice unsustainable due to reliance on third-party information. Consequently, the Tribunal set aside the impugned order, allowed the service provider's appeal, and dismissed the Revenue's appeal. The service provider was entitled to consequential relief as per law.

The judgment highlights the importance of evidence and due process in tax matters, emphasizing the need for direct proof and proper confrontation of allegations. The decision serves as a reminder for Revenue authorities to ensure the validity and reliability of information before initiating enforcement actions based on third-party claims.