IN a Communication to the TARC, President of the CESTAT Justice Raghuram observed that show cause notices often record conclusions, instead of allegations.
Show Cause Notices are usually issued with ultimate apathy, usually at the last moment when time has run out. Usually the department gets a favourable remand order from higher appellate authorities to rectify their lapses. But for once they faced a different situation in the Madras High Court.
More than 50 Show Cause Notices were issued to several contractors who were engaged in providing certain services to Neyveli Lignite Corporation (NLC). It was alleged by the noticees that in none of the Show Cause Notices, the Department, brought out any allegation against any one of the Assessee with reference to his/her specific/individual activity undertaken for NLC, as per the contract or the scope of work, to hold that such activity was a taxable service under Finance Act, 1994. None of the show cause notices specified the activity with reference to a particular classification of taxable Service. In certain cases, consideration received for certain activities which are clearly outside the purview of Service Tax levy, were also included in the demand of Service Tax, again without any proposal for classification of the service.
And the demands were confirmed.
The Commissioner (Appeals) allowed the appeals of the assessees observing,
I find that in the impugned SCNs issued by the department there were no allegation as regards to the category under which the appellants are liable to service tax and the SCNs simply state that the appellants are providing taxable service and have received payments for such services and therefore entire amount received is liable to service tax as could be seen from the impugned SCNs.
SCN is foundation on which the Department has to build up its case. In the absence of specific allegations, the appellants would not be in a position to defend their case effectively. Hence I hold that the impugned orders emanated from such insufficientSCNs are not sustainable.
He also held the Show Cause Notices to be time barred:-
I also find that all the SCNs are time barred inasmuch as the department had been aware that the appellants had been rendering services to M/s.NLC from the year 2002 onwards. This being so the appellants cannot be fastened with duty liability invoking proviso to Sec.73 as there was no intention on the part of the appellant to evade payment of service tax. There were also series of correspondences withNLCon the rendering of various services by the appellants.
This is the kind of temerity up with which the department will not put.
So they appealed to the Tribunal and got a remand order from the tribunal. The Tribunal observed, there is no dispute that the Assessees rendered various taxable services at the premises of NLC. It is a fact that the Assessees had obtained service tax registration for the services rendered by them to NLC. The demand of tax is for the period prior to registration. Hence, it is the duty of the Assessees to explain the activities in respect of the amounts in question received by them from NLC as they had entered into contract with the NLC for rendering services of various nature.[2015-TIOL-05-CESTAT-MAD]
The assessees now appealed to the High Court. The High Court observed,
A careful perusal of the orders of the adjudicating authority, the Commissioner (Appeals) as also the Tribunal would reveal that the Commissioner (Appeals) has decided the issues on two aspects, viz., one on the vagueness of the show cause notices stating that it is bereft of details and being without clarity and the other on the plea of limitation. The Tribunal, however, in its order, while extracting the portion of the order of the Commissioner (Appeals) was of the view that the Revenue had discharged its burden by producing the statements given byNLCand that the assessees did not dispute it at any point of time and that the entire demand was raised on the basis of the statements provided byNLC. However, this finding of the Tribunal runs counter to the plea raised by the appellants/assessees before the Commissioner (Appeals) as the show cause notices were challenged on the very foundation that they are vague and without particulars as to classification of works that attracts service tax.
The High Court held that the issues raised by the appellants/assessees and answered by the Commissioner (Appeals) in their favour has to be considered by the Tribunal on its own merits and there being no finding on the issues in the manner in which the plea has been taken by the present appellants, who were successful before the Commissioner (Appeals), the order of the Tribunal cannot be sustained on an issue of open remand.
The arguments of the standing counsel for the Department that all the issues can be thrashed out before the adjudicating authority did not find favour with the Court as the Department cannot be allowed to fill up the lacunae in the show cause notices on the basis of an open remand as alleged by appellants.
So, the High Court remanded the matter to the Tribunal to decide the appeal in relation to the findings of the Commissioner (Appeals) which was under challenge before the Tribunal in the appeals.
The Department cannot always get away with its pitiably low quality Show Cause Notices.
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