2024 (4) TMI 301 - AT - Service Tax

Evasion of service tax - SCN issued only on the basis of Audit report - violation of principles of natural justice - difference between the value declared in ST-3 return and Income Tax Audit Report - HDLD THAT - It is found that though the independent inquiry was conducted but ultimately the demand is based on Income Tax Documents. It is also found that no specific category of service was referred which is the primary aspects for confirmation the Service Tax demand. The appellant have submitted various documents but the Adjudicating authority despite that observed that no documents have been submitted. It is the appellant s submission that they have given the proper reconciliation and explanation regarding difference between ST-3 return and Income tax Audit report. The same has also not been considered properly by the Adjudicating Authority - there is a clear violation of principles of Natural justice on the part of the Adjudicating Authority. Therefore the order cannot be sustained. The appeal is allowed by way of remand to the Adjudicating authority for passing a fresh order after considering all the submission documents and explanation given by the appellant.

Summary

Issues involved:
The appeal challenges the Service Tax demand, penalty under Section 78, penalty under Section 77, and interest imposed in the Order-In-Original by the Principle Commissioner Customs, Excise, and Service Tax-RAJKOT. The primary issue is the Service Tax liability based on the Income Tax Audit Report of the applicant.

Service Tax liability based on Income Tax Audit Report:
The appellant, represented by a Chartered Accountant and an Advocate, contested the best judgment assessment under Section 72 of the Finance Act, 1994. They argued that the show cause notice lacked specificity and was based on a vague Audit report. The appellant explained the variance between the values in the ST-3 return and the Income Tax Audit Report, citing works contract obligations under Notification No. 30/2012-ST. They highlighted that the Adjudicating Authority failed to consider that relevant documents were in the possession of the department and that the notice was issued solely on the Audit report without concrete evidence of clandestine removal.

Limitation and legal precedents:
The appellant raised concerns about the demand being time-barred, emphasizing that no incriminating documents were recovered. They cited legal precedents to support their argument, including cases like Forward Resources Pvt. Ltd. v/s Commissioner of C.Ex & ST and Aries Chemicals Pvt. Ltd. v/s Commissioner of Central Excise. The appellant contended that the Adjudicating authority did not address this issue adequately.

Adjudication and violation of natural justice:
Upon reviewing submissions, the Tribunal noted that the demand was primarily based on the Income Tax Audit, which was deemed impermissible. Despite the appellant providing various documents and explanations, the Adjudicating authority failed to acknowledge them properly. The Tribunal found shortcomings in the Adjudication order, highlighting a violation of principles of natural justice. Consequently, the impugned order was set aside, and the appeal was allowed for remand to the Adjudicating authority for a fresh decision, emphasizing the need for a proper opportunity for personal hearing.

Conclusion:
The Tribunal ruled in favor of the appellant, directing a fresh order within three months, considering all submissions and documents. The decision was pronounced on 05.04.2024 by the Appellate Tribunal CESTAT AHMEDABAD, comprising Mr. Ramesh Nair, Member (Judicial), and Mr. Raju, Member (Technical).