2024 (11) TMI 829 - AT - Service Tax

Order travelled far beyond the show cause notice - Service tax demand along with interest and equal amount as penalty u/s 78 of the Finance Act - there was no proposal to demand service tax under works contract service in the SCN and Demand was proposed under commercial and industrial construction service HELD THAT - The undisputed facts are that the appellant had entered into contracts for providing services along with the materials, and therefore all their contracts were in the nature of works contracts. This fact was also noted in the Tribunal's order in the first round of litigation. The impugned order also does not dispute this fact. It is for this reason, that in the impugned order the Commissioner set aside the demand for the period prior to 1st June, 2007 following the judgement of the Supreme Court in Larsen Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT Commissioner confirmed the demand for the period after 1st June, 2007 under the head works contract service . There was no proposal to demand tax in the SCN under this head, nor has the appellant been given an opportunity to defend itself against tax liability under this head. Therefore, as the impugned order clearly travelled beyond the SCN it needs to be set aside on this ground alone. It is a well-settled legal position that any order which travels beyond the scope of the show cause notice cannot be sustained. Appeal allowed.

Summary

Issues:
1. Scope of the show cause notice in tax liability determination for works contract services.

Detailed Analysis:

The appellant, engaged in construction services, challenged an order demanding service tax based on an audit report. The Commissioner's original order confirmed a demand but also granted exemptions. The appellant appealed this order, leading to a remand by the Tribunal for reevaluation. The Tribunal directed consideration of abatements and material valuation, which the Commissioner addressed in a subsequent order. The appellant did not appear during the proceedings but submitted written arguments. The appellant contested the order on various grounds, including exceeding the scope of the show cause notice, failure to exclude property value in works contracts, and time-barring the demand. The Revenue representative supported the order, stating it was justified.

The Tribunal found that the order exceeded the show cause notice's scope by demanding tax under "works contract service" post-June 2007, not mentioned in the notice. As all contracts were works contracts, the demand was set aside for the period after June 2007. This breach of notice scope rendered the order unsustainable. Consequently, the Tribunal did not delve into the other grounds raised by the appellant. The impugned order was set aside, and the appeal was allowed in favor of the appellant with consequential relief.

In conclusion, the Tribunal's decision focused on the crucial issue of the order exceeding the show cause notice's scope in determining tax liability for works contract services. By finding this breach, the Tribunal set aside the order, emphasizing the legal principle that orders must align with the notice's parameters to be valid. The decision provided relief to the appellant based on this fundamental procedural flaw, without delving into the other contested grounds.