Whether Show Cause Notice (SCN) issued under 73(1)(a) of erstwhile provision for a reason of failure to disclose all material facts was valid when SCN was issued on the basis of details gathered from earlier two notices on same issue for the same period?

Naresh   Kumar & Co. Pvt.  Ltd.  vs. CCEx.  &   ST [2014  (35) STR  257 (Allahabad)]

 

  FACTS:

The appellants   were  engaged   in  handling  operations (cutting/bending  iron&   steel products and transportation) for TISCO  from  1998 onwards  and were  under a belief that  service  tax was  not applicable  on the said  activity. However, due to persuasion of the authority, they obtained service  tax registration  under  C & F agent, filed  returns and  paid  service  tax  on  remuneration   under  protest. Further two notices were received for the period 1999 onwards which were duly complied with.  Subsequently, a third  Notice  was  issued  u/s. 73(1 )(a) of the  Finance Act,  1994 demanding  service  tax  and penalties  for the same period. Apart from submitting the details, validity of Show Cause Notice was challenged.  The Commissioner confirmed the demand and penalties.  On appeal, the Tribunal, also upheld tax and also the penalty.

 

HELD:

For invoking section 73(1 )(a) of the Act, there must exist material to form the belief as to failure to disclose true and full  material facts.  On perusal of Show Cause Notice, it was observed that material available on record was used to infer the escaped assessment.  No case was made for non-disclosure   of primary facts relating to transactions and hence invocation of section 73(1)(a) of the Finance Act, 1994 was held illegal.