2022 (10) TMI 734 - AT - Service Tax

Recovery of Service Tax - premium received towards marine policy - period from 2006-07 to 2013-14 - HELD THAT - The adjudicating authority has examined the breakup of the premium on marine policy received by the respondent herein for 2011-12 and has conclusively arrived at the finding that, barring the policies that are exempt from taxation, tax has been duly discharged. The grounds of appeal contain no cogent evidence of any misstatement or error in the said finding. The demand for 2006-11 has been dropped solely on the premise that CERA appeared to have accepted the stand of the service tax authorities that appropriate taxes had been discharged. CERA is the field arm of the Comptroller and Auditor General (CAG) entrusted with responsibilities in accordance with the Constitution. The correspondence between the revenue administration and the audit arm constitutes inter-departmental interface on objections raised by the latter with a hierarchy of consequences upon non-acceptance - Most often, the issue of show cause notice in furtherance of objections is sufficient satisfaction as far as the audit arm is concerned. A show cause notice is issued under the appropriate statutory empowerment and is taken to its logical conclusion, independent of the source leading to the issue of the notice, in adjudication proceedings. Such proceedings are governed by standard procedures that conform to the principles of natural justice with a specific adjudicating outcome upon evaluation of the responses to the show cause notice - the obligation devolving upon the adjudicating authority has evidently not been discharged insofar as the demand the first notice is concerned. It is seen for that, for the remaining notices, there has been no evaluation save for the period 2011-12. The applicability of the finding for this period to the subsequent periods has not been explained in the impugned order. Furthermore, the discussion pertaining to 2011-12 has placed on record the submission made by the noticee without either detail, or examination, of the facts relating to the several exemptions claimed by the assessee. Thus, the adjudicatory process has been incomplete and has thereby impacted the acceptability of the impugned order - it would be appropriate to have the notices adjudicated afresh for which the impugned order is set aside and matter remanded back to the original authority for appropriate remedial action - appeal allowed by way of remand.

Summary

Issues:
1. Appeal against dropping the recovery proposal for premium received towards marine policy.
2. Failure to address the crux of the audit objection regarding non-levy of service tax on marine insurance.
3. Lack of consideration for interest and penal liabilities.
4. Discrepancies in the show cause notice and response.
5. Inadequate evaluation of tax liabilities and exemptions.
6. Acceptance of certificates without proper scrutiny.
7. Incomplete adjudicatory process impacting the order's acceptability.

Analysis:
1. The appeal by Revenue challenges the dropping of the recovery proposal for premium received towards marine policy. The issue revolves around the failure of the Adjudicating Authority to address the crux of the audit objection, which was the non-levy of service tax on marine insurance up to the port of export. The Adjudicating Authority erred in not appreciating this key issue, leading to the appeal against the order-in-original.

2. The Adjudicating Authority's failure to consider the substantive issue raised in the show cause notice is highlighted. Despite the audit objection regarding non-levy of service tax on marine insurance, the responses provided by the noticees did not directly address this issue. The Authority's decision to drop the demand without proper evaluation of the core allegation renders the order neither speaking nor legally sustainable.

3. The appeal also raises concerns about the lack of consideration for interest and penal liabilities due to the cavalier manner in which the demand was dropped. The failure to address these aspects while determining the liability as per the show cause notice indicates a lapse in the adjudicatory process.

4. The discrepancies in the show cause notice and responses are brought to light, emphasizing the need for a thorough examination of the issues raised. The vagueness and conjectures in the show cause notice, as pointed out by the Senior Counsel for the respondent, further complicate the adjudication process.

5. The evaluation of tax liabilities and exemptions, especially regarding marine insurance policies, is crucial. The Adjudicating Authority's examination of the premium breakup for marine policies in 2011-12 and subsequent periods is questioned. The acceptance of explanations without detailed scrutiny raises doubts about the accuracy of the findings.

6. The acceptance of certificates from Chartered Accountants without proper verification, solely based on the entity being a public sector unit, is deemed inadequate. Special treatment to public sector units in tax matters is considered discriminatory and inconsistent with the principles of equal treatment under tax laws.

7. The incomplete adjudicatory process has a significant impact on the acceptability of the impugned order. The need for a fresh adjudication of the notices is emphasized, leading to the decision to set aside the order and remand the matter back to the original authority for appropriate remedial action.