Service Tax Issuance of Show Cause Notice on the basis of third party enquiry without disclosing the nature and outcome of the enquiry

Facts of the case:

The appellant is rendering services of cable operator and the Department sought for details from the appellant about the number of connections and the amounts recovered from their subscribers. As  the appellant was not furnishing  the details, they made enquiries from the State Excise Department who are administering entertainment tax in relation to cable operators and appears to have got details of number of customers who are availing cable connection from the appellant.  It appears that the Department also conducted local enquiry and came to a conclusion that the appellant is collecting subscription  at the rate of Rs.200/- per month from each customer.  Accordingly, show cause notice was issued and original authority confirmed the demand of Rs. 1,11,600/-  along with interest and imposed a penalty of Rs. 20,000/- under Section 76.

Held:

We find that the original authority has relied on certain local enquiries without disclosing the nature and outcome of enquiry and arrived at amount of tax payable.  This procedure adopted is clearly in violation of principles of natural justice.  Therefore, we set-aside the orders of the authorities below and remit the matter to the original authority to decide the matter afresh  after furnishing details of enquiry made to the appellant.  He shall also grant to the appellant a reasonable opportunity of hearing before deciding the issue. 

(For full text of judgment - visit 2008 -TMI - 3755 - CESTAT, NEW DELHI)