2023 (5) TMI 721 - AT - Service Tax

Validity of SCN - SCN failed to identify the alleged taxable service and the category of service - difference between the receipts in the profit loss account of the appellant and the taxable value declared in the ST-3 returns without even identifying the service and the taxable category - extended period of limitation - HELD THAT - SCN mentions that the ST-3 returns and the balance sheet of the appellant had been perused and since the balance sheet shows Rs. 15,03,87,703/- and ST-3 returns show a taxable value as Rs. 10,34,19,681/-, the appellant would have to pay service tax of Rs. 54,49,215/- on the taxable value of Rs. 4,69,68,022/-. It is, therefore, clear that the show cause notice which was issued for the period April 01, 2007 to March 31, 2012 does not give any reason as to why the amount would be taxable and, if so, then under which category. What transpires from the show cause notice is that the difference between the amount shown in the balance sheet and the ST-3 returns has been construed to be a taxable amount. This issue regarding vagueness of the show cause notice in similar circumstances was examined by a Division Bench of the Tribunal in M/S HINDUSTAN ZINC LTD. VERSUS COMMISSIONER, CENTRAL EXCISE, UDAIPUR 2021 (9) TMI 859 - CESTAT NEW DELHI where it was held that Neither is there any allegation in the two show cause notices nor any finding has been recorded in the impugned order to demonstrate how the provisions of 66 read with 66A of the Finance Act and the Import Rules are attracted. In fact, neither the show cause notices nor the impugned order specify the category of service under which the demand has been confirmed against the Appellant. The demand has been proposed and confirmed merely because of difference between the figures in the balance sheet of the Appellant and the ST-3 Returns. In the present appeal also, the demand has been proposed in the show cause notice only because of the difference between the figures shown in the balance sheet of the appellant and the ST-3 returns. The show cause notice, therefore, is vague. The order passed by the Commissioner confirming the demand on this show cause notice, therefore, deserves to be set aside. Appeal allowed.

Summary

Issues:
The issues involved in this case are the confirmation of demand of service tax with interest and penalty based on a show cause notice issued to the appellant for the period from April 01, 2007 to March 31, 2012.

Details of Judgment:

1. Confirmation of Demand:
The appellant challenged the order confirming the demand of service tax, contending that the demand was not justified and the extended period of limitation could not have been invoked. The Commissioner confirmed the demand citing various reasons, including receipt for material handling work, supply of tangible goods service, lack of evidence for executed works contracts, and invoking the extended period of limitation. The appellant argued that the show cause notice was vague and did not specify the alleged taxable service and category. The Tribunal found the show cause notice to be vague and set aside the order confirming the demand.

2. Vagueness of Show Cause Notice:
The Tribunal highlighted the vagueness of the show cause notice, which merely pointed out a difference between the figures in the balance sheet and the ST-3 returns without specifying the taxable service or category. Citing precedents, the Tribunal emphasized that a show cause notice should specify the taxable service clearly. The Tribunal noted that the demand was proposed solely based on the discrepancy in financial figures without proper identification of the taxable service, rendering the show cause notice vague and the confirmation of demand unsustainable.

3. Legal Precedents and Decision:
The Tribunal referred to previous decisions emphasizing the importance of specifying the taxable service in show cause notices. It cited cases where demands based on vague notices were not sustained. Relying on these precedents, the Tribunal concluded that the confirmation of demand based on the vague show cause notice in the present case was not valid. Consequently, the order confirming the demand was set aside, and the appeal was allowed.

In conclusion, the Tribunal found the show cause notice to be vague as it did not clearly identify the taxable service, leading to the setting aside of the order confirming the demand of service tax. The judgment serves as a reminder of the necessity to specify the taxable service clearly in show cause notices to ensure a valid basis for demands.