2023 (10) TMI 736 - AT - Central Excise

Violation of principles of natural justice - mandatory pre-show cause notice consultation was not held - invocation of extended period of limitation - Demand raised on the basis of Form-26AS supplied by the Income Tax department - HELD THAT - Although summons were issued to the appellant and the appellant did not join the proceedings, therefore, the demand has been raised on the basis of Form-26AS. Admittedly, no investigation has been conducted in this case at the end of the appellant by the adjudicating authority. Being the appellant a registered service provider and filing their Service Tax returns, in that circumstances, the demand cannot be raised on the basis of Form-26AS obtained from the Income Tax Department. Further, the adjudication order has been passed ex parte. Moreover, the show cause notice has been issued to the appellant by invoking extended period of limitation and some of the demand pertains to beyond five years and in this case, the demand has to be calculated in terms of Valuation Rules, 2006. The issue in this case is whether the appellant is eligible for the benefit of Notification No.30/2012-ST dated 20.06.2012 or not? The extended period of limitation is not invocable. Moreover, on the basis of Form-26AS, no demand is sustainable against the appellant. Appeal allowed.

Summary

Issues involved:
The judgment involves the following Issues:
1. Demand of service tax for the period 2012-13 to 2016-17 based on show cause notice.
2. Applicability of Valuation Rules, 2006 and Notification No.30/2012-ST dated 20.06.2012.
3. Bar of limitation for the demand raised.
4. Validity of the demand calculated on the basis of Form-26AS.

Issue 1: Demand of service tax for the period 2012-13 to 2016-17 based on show cause notice:
The appellant contested the show cause notice demanding service tax for the mentioned period, which was confirmed against the appellant. The appellant argued that the demand cannot be raised solely based on Form-26AS figures, as they received contractual payments for executing 'Works Contract Services' and had submitted relevant documents. The demand was calculated using the Best Judgement Method for the period April 2017 to June 2017, which the appellant disputed. The appellant also raised concerns about the violation of natural justice principles and the arbitrary nature of the demand.

Issue 2: Applicability of Valuation Rules, 2006 and Notification No.30/2012-ST dated 20.06.2012:
The appellant claimed eligibility for the benefit of Notification No.30/2012-ST dated 20.06.2012, as a Proprietorship Firm, and argued that the valuation should have been done in accordance with Rule 2A(ii) of the Valuation Rules, 2006 after allowing abatement. The appellant contended that the tax liability was not calculated based on relevant Rules and Notifications, and a mandatory preshow cause notice consultation was not conducted. The appellant presented a detailed computation to show a vast difference in the calculated liability compared to the hypothetical amount demanded.

Issue 3: Bar of limitation for the demand raised:
The appellant raised the issue of the demand being barred by limitation, as the show cause notice for the period 2012-13 to 2016-17 was issued beyond the normal period of limitation. The appellant argued that they had been submitting returns and paying service tax, making the differential demand hypothetically demanded and contrary to statutory provisions.

Issue 4: Validity of the demand calculated on the basis of Form-26AS:
The appellant challenged the validity of the demand calculated based on Form-26AS figures obtained from the Income Tax Department. The appellant highlighted that being a registered service provider and regularly filing Service Tax returns, the demand solely based on Form-26AS without conducting any investigation or providing an opportunity for the appellant to participate in the proceedings was unjustified. The judgment held that no sustainable demand could be raised against the appellant solely on the basis of Form-26AS.

Therefore, the judgment set aside the impugned order and allowed the appeal in favor of the appellant, emphasizing that the extended period of limitation was not applicable, and the demand based on Form-26AS was unsustainable.