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2020 (1) TMI 166 - AT - Service TaxVague show cause notices (SCN) - Non-payment of services tax - reverse charge mechanism - Lease rent income - R D Income - Commission on sale - Know How fee - Professional Consultancy Expenses - Analytical testing Charges - Advertisement expenses - Bank Charges - Clinical trial Lab Consumables - Legal Expenses - Marketing Sales Promotion Expenses - Marketing and Research Overseas - Meeting Conference - Royalty expenses - Training Development Expenses - cases of appellant is that there is no classification of the taxable services given in the later 4 SCNs later 4 SCNs are entirely based on balance-sheet figures without any investigation being conducted there are case laws which suggests that show cause notices based only on balance sheet figures cannot stand in law Place of provision of service rules have not been quoted in the later 4 show cause notices and that Negative list provisions have not been quoted in the show-cause-notices. - case of Revenue is that Appellant failed to provide the relevant evidence despite demand from the department. HELD THAT - The burden was on the Revenue to prove the alleged shortcoming after the records of Appellant along with their C.A. certificate was already produced before the adjudicating authority. In the given circumstances neglecting those evidences and without referring to any other evidence proving short payment on part of Appellant confirmation of demand is not sustainable. The same is to be set aside. There is also a plea that a show cause notice dated 20.10.2008 cannot be referred to as the previous show cause notice for proposing the demand in impugned four show cause notices appellants had submitted that no elaborate basis of charge was given in any of the subsequent show cause notices except making a reference to the previous show cause notice of 20.10.2008 - HELD THAT - No scrutiny of record was done nor any document was examined. The demand is alleged to have been mechanically raised by simply ascertaining that the difference between the tax payable on balance sheet figures of income/expenditure and the tax paid as per ST-3 Returns is alleged to have been evaded that too by suppression of facts. Perusal of four of these show cause notices shows that nothing has precisely been discussed in the show cause notice for the impugned period. All these show cause notices are speaking about the records from 01.04.2009 to 31.03.2010 which apparently and admittedly is not the period of demand in any of these show cause notices. The show cause notices are opined to be vague. Though the department has laid emphasis upon the Finance Act 2012 Section 73 thereof but we are of the opinion that the said legal provisions for treating a subsequent show cause notice as continuation of the previous show cause notice where issue remains same came only in the year 2012. The same cannot be made applicable retrospectively. Thus each show cause notice had to be self contained including all the details and basis for arriving at the allegation of short/non-payment of service as already observed above. Thus two of the SCNs are out of the scope of this provision. SCN of 2014 could rely upon the contents of the SCN of the year 2012 but later also a no detail except reliance upon SCN of 2008 which is not permissible - Resultantly all four SCNs here are silent providing any basis to proceed against the appellant. The adjudicating authority below has concluded the erroneous findings. Not only this the judicial indiscipline on the part of the authority is very much apparent - the demand and penalties/interest is set aside not only on the merits thereof but also for the show cause notice being not maintainable - the appeal of the assessee stands allowed and the appeal of the department stands dismissed.
Issues Involved:
1. Classification of taxable services in show cause notices (SCNs). 2. Basis of SCNs relying solely on balance-sheet figures without investigation. 3. Non-quotation of Place of Provision of Service Rules and Negative List provisions in SCNs. 4. Consideration of Chartered Accountant certificate. 5. Quantum of penalty imposed under Section 76 of the Finance Act, 1962. Detailed Analysis: 1. Classification of Taxable Services in SCNs: The appellants argued that the later four SCNs lacked proper classification of taxable services. The Tribunal noted that the SCNs failed to specify the classification, which is a fundamental requirement for issuing a valid SCN. The absence of classification led to ambiguity and vagueness, rendering the SCNs deficient. 2. Basis of SCNs Relying Solely on Balance-Sheet Figures Without Investigation: The appellants contended that the SCNs were based solely on balance-sheet figures without any investigation. The Tribunal observed that the demands were raised based on balance-sheet details, which contradicted the returns filed. The Tribunal emphasized that balance sheets should not prevail over returns filed, especially when a Chartered Accountant certificate was provided. The Tribunal cited case laws, including the decision in Commissioner Central Excise, Patna vs. Universal Polythylene Industries, which held that SCNs based solely on balance-sheet figures are not sustainable in law. 3. Non-Quotation of Place of Provision of Service Rules and Negative List Provisions in SCNs: The appellants pointed out that the SCNs did not quote the Place of Provision of Service Rules and Negative List provisions. The Tribunal agreed that the legal provisions for charging service tax on export of services cited in the previous SCN of 20.10.2008 were not relevant for subsequent periods. The Tribunal noted that the Export of Service Rules, 2005, and the Place of Provision of Services Rules, 2012, determined when a service could be said to be imported or exported, and these rules were not mentioned in the SCNs. 4. Consideration of Chartered Accountant Certificate: The appellants submitted a Chartered Accountant certificate, which the adjudicating authority did not consider. The Tribunal observed that the certificate verified the expenses booked as accruals in foreign currency and clarified that these expenses did not include any to be paid in Indian currency. The Tribunal found that the adjudicating authority's decision to ignore the certificate without any evidence to falsify it was contrary to law. The Tribunal emphasized that the burden was on the Revenue to prove the alleged shortcoming after the appellant had produced their records and the Chartered Accountant certificate. 5. Quantum of Penalty Imposed Under Section 76 of the Finance Act, 1962: The department appealed against the quantum of penalty imposed under Section 76, arguing that it should be calculated from the first date after the due date till the actual payment date. The Tribunal found this contention unacceptable, especially since the order confirming the demand was set aside. Consequently, the order imposing any penalty could not sustain. Conclusion: The Tribunal concluded that the adjudicating authority's findings were erroneous and demonstrated judicial indiscipline. The Tribunal set aside the demands and penalties/interest on both merits and the non-maintainability of the SCNs. The appeal of the assessee was allowed, and the appeal of the department was dismissed.
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