Appeal - rectification of mistakes - section 74, Service Tax

[Jignesh Shah]

One of our clients had received SCN from the Service Tax Department. He had submitted his reply to the same and the Addl Commissioner passed the OIO against the client. The client appealed against the same to the Commissioner Appeals. The Commissioner Appeals confirmed the demand. Then the client realised that some of the important points were missed out and he filed an appeal for Rectification of Mistakes u/s. 74 of the  Finance Act, 1994 to the Commissioner Appeals. The Commissioner Appeals after 2 months of filing the appeal returned the appeal stating - "...that the application for Rectification of Mistake under Section 74 of the  Finance Act, 1994, is to be submitted to the original adjucating authority as no such provision is prescribed under Section 74 to approach the appellate authority for the same...." My question is - - Is it as good as remand back? - Should our client approach the Addl. Commissioner with the Rectification of Mistake and then start from there? - Should he approach CESTAT only? / Simultaneously while submitting Rectification of Mistakes to the Addl Commissioner? - Anything else? I want your views of the forum on the same....

Posts / Replies

[Surender Gupta]

There is limitation for question submission of additional grounds of facts. But there is no limitation for submission of additional grounds on question of law. Moreover, it depend upon the circumstances in which you omitted to mention the facts before the original authority or commissioner (appeal). The circumstances and original of evidences are important factors. Where the additional grounds of question of facts are substantial one can change the basis nature of demand or SCN you can argue the same before the CESTAT where the department representative raise an objection. In my view commissioner (appeal) has not power to rectify the order since it was not a mistake in passing an order. Therefore, you need to file an appeal before the CESTAT only with full facts and details. Perhaps you may be successful in convincing the CESTAT to consider new facts and grounds which were not raised before original authority.

[Jignesh Shah]

Further in the above case, the client has submitted his application for rectification of mistake u/s. 74 of the Finance Act 1994 to the original adjudicating authority ( Jt. Commissioner )on the basis of the directions given by the Commr. ( Appeals). My questions are - 1. Has he done the right thing to approach the original adjudicating authority on the basis of the letter received from the Commissioner Appeals? 2. Should the client approach CESTAT within 3 months of the day he received his RoM back from the Commissioner Appeals or should he wait for the Jt. Commr. to call him for a personal hearing. What in the view of the law is right? What is more just and beneficial for the client - to wait or to approach CESTAT? Your views would help.

[Surender Gupta]

Your whole issue is in clouds. Did u appeal before commissioner (appeal) on limited grounds of rectification of mistake? In my view despite filing an application before the Jt. Commissioner for ROM, you should also file an appeal before CESTAT so that you can keep your options open in case ROM is rejected by the adjudicating authority (which is most likely).

[Jignesh Shah]

Dear Mr. Gupta, Let me discuss the issue in detail. The client is my cousine and this case pertains to June2003 - December2004. -He was engaged in routing expenses like stamping charges, RTO charges, Sales Executive and back office executive salaries ( they were not on his rolls ) etc. for a private bank. - He was the proprietor of the business. - He was getting reimbursement of the expenses plus commission as % of reimbursement. - He had not obtained ST registration as he had taken an expert opinion at that point in time and he was told that his services do not fall in the ST payable category. - He was summoned by the ST department where he appeared 4 -5 times over 6 months and then ST department asked him to pay ST on the commission amount under Business Auxiliary Services which he accepted and deposited the same willingly. - After 1year and 3 months ( extended period ), he received SCN. - He submitted his reply, he appeared before the JC who gave the judgement against him. - He appealed and appeared before the Comm. ( Appeals ) for personal hearing. Comm. confired the OIO. - He took his case to a renounced ST practitioner, who pointed out the following - - Before April2006, under Business Auxiliary only commercial concerns were falling under ST net, INVIDIVIDUALS WERE NOT INCLUDED and were not supposed to pay the ST. - The service provided by the client did not fall under Business Auxiliary. - The extended period can not be availed by the dept as there was no willful suppression. - On the basis of the above Rectification of Mistake u/s 74 was filed with the Comm. (A). -Comm(A) directed the client to file the same with the original adjudicating authority. -The client filed the same with the Jt Commr. Can you read into the matter suggest the way forward?

[Surender Gupta]

I reiterate my view that despite filing an application with the Jt. commissioner, you must file an appeal before CESTAT because if the order of the commissioner (appeals) is an order of remand back than Jt commissioner can review or revise the order but if it is merely a view or response to your letter and not an order against your appeal, Jt. commissioner or addl commissioner has limited powers. Only one option remains - appeal to CESTAT.

[rakesh chitkara]

Educated people often are easier to confuse. ROM for interpretation of law or of a fact ? Your case is clearly of arguments on points of law.Not on the basis of fact. These arguments can be raised at any stage, even if not taken earlier. CESTAT too has power to remand, which the Commissioner (Appeals)does not have. You have taken wrong decision by going back to the original adjudicating authority. Plea of no suppression and not being a commercial concern, frankly is an extremely weak argument. All CESTAT decisions are against you on the point of taxability but totally in your favour on penalty. BAS on Direct Sales Agents (DSA) who were engaged by Banks to promote loans for vehicle financing was mired in confusion at initial stages. Most of DSAs never received a paisa of ST from Banks. There are strong mitigating circumstances for complete waiver of penalty. My advise : Follow Mr. Gupta's advise. Retrace your error by promptly approaching CESTAT before your case becomes time-barred for appeal which even High Court may find difficult to condone.

[Jignesh Shah]

Dear Sir, Our client filed an appeal in CESTAT following your advice with delay condonation and stay applications. As his service was unique as he was actually making payment ( of whatever nature - be it stamping charges, RTO charges, salary to the CPAs / Sales Staff etc. ) on behalf of and as per the instructions of the bank - is he covered under BAS? The whole taxability of the services provided by him is in question - will CESTAT consider this point? Need your advice on the same. What should be the next step? Please guide...

[Surender Gupta]

CESTAT would definitely hear your arguments and submission if your appeal and applications are otherwise in order.