2019 (1) TMI 1437 - AT - Service Tax

Demand of service tax by way of statement in lieu of Show cause notice (SCN)- demand-cum-penalty - mobile telephone services rendered by the appellant to their employees - period after 2012 - post negative list regime - invocation of section 73 (1A) of Finance Act, 1994 - non-invocation of section 73(1) of Finance Act, 1994 - Held that - It is trite that a taxing statute, before proceeding to recover any tax that were short-paid, mandates notice supported by evidence, opportunity to respond in writing and in person before an adjudication. The present proceedings appears bereft of such and is, thus, tantamount to a notice for payment of the said taxes relying entirely on preceding adjudication for an earlier period. Obviously, the provision is to be invoked in restrictive circumstances and cannot, by any stretch, be a substitute for resorting to section 73(1) in each and every subsequent period. The jurisdictional Commissioner has traversed beyond referring to the demand for the preceding period to record the changes effected in consequence of taxation in the negative list and has drawn upon the authority of Article 265 of the Constitution. This is clearly in excess of the circumstances contemplated in the newly incorporated artifice and sufficing to vitiate the impugned order. The tax regime had altered since period covered by the order relied upon in the present demand-cum-penalty notice and the impugned order goes beyond mere reference to the earlier order to adjudicate, without notice and opportunity, the applicability in the transformed tax regime. The facts and circumstances of the transactions themselves are found to be vastly dissimilar - section 73 (1A) of Finance Act, 1994 is not invokable and the deficiency in invoking section 73(1) of Finance Act, 1994 is irreparable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Legality of proceedings post-2012 tax regime change.
2. Levy of tax on mobile telephone services to employees.
3. Validity of demand-cum-penalty notice.
4. Applicability of section 73(1A) of Finance Act, 1994.
5. Jurisdictional overreach by the Commissioner.
6. Interpretation of service definition under section 65B(44) of Finance Act, 1994.

Analysis:
1. The appeal challenges a demand-cum-penalty notice issued post the 2012 tax regime change, questioning the legality of proceedings due to the altered circumstances. The Chartered Accountant argues that the change in service tax levy regime raises doubts on the validity of the current proceedings.

2. The dispute revolves around the tax imposition on mobile services provided to employees by the appellant. The Commissioner had earlier determined tax liability, interest, and penalty for a specific period, which was contested. The current order combines a final tax determination with an opportunity to challenge the penalty under section 76 of the Finance Act, 1994.

3. The Tribunal scrutinizes the validity of the demand-cum-penalty notice, emphasizing the necessity of proper notice, evidence, and opportunity for adjudication before tax recovery. It highlights the restrictive nature of invoking section 73(1A) for subsequent periods and the need for adherence to due process.

4. Section 73(1A) of the Finance Act, 1994 is analyzed concerning its application post the 2012 amendment. The Tribunal delves into the purpose of the provision to avoid redundant proceedings and notes the conditions for its invocation, emphasizing the importance of consistency in grounds for subsequent notices.

5. The Commissioner's overreach beyond the scope of the newly incorporated provision and reliance on constitutional authority are criticized. The Tribunal finds the Commissioner's actions exceeding the intended circumstances of the amendment, leading to the impugned order's invalidation.

6. The interpretation of the service definition under section 65B(44) of the Finance Act, 1994 is pivotal in determining tax liability. The Tribunal distinguishes between transactions involving separate entities and those where services are billed to oneself, concluding that no service and taxability exist in the latter scenario.

In conclusion, the Tribunal sets aside the impugned order, allowing the appeal due to the irreparable deficiency in invoking the appropriate sections of the Finance Act, 1994 post the tax regime alteration. The judgment emphasizes the necessity of adherence to due process and consistency in tax proceedings under the amended law.