T.M.P. Manoharan & Co. Vs Commissioner of Central Excise (CESTAT Chennai)
CESTAT Chennai held that show cause notice not specifying specific service rather demanding service tax on consolidated tax liability makes the show cause notice indefensible. Accordingly, the demand raised thereon is liable to be set aside.
Facts-
The present appeal has been filed by the appellant against OIO passed by the Commissioner of Central Excise.
By the Show Cause Notice No. 22/2013 (C) dated 11.04.2013 issued to the assessee which culminated in the passing of the impugned order, it is the case of the Revenue that the assessee-appellant is a registered service provider under: (a) maintenance and repair service, (b) manpower recruitment service and (c) commercial or industrial construction service, they had also provided ‘erection, commissioning and maintenance’ services to M/s. Graphite India, Nasik and M/s. Siemens, Navi Mumbai which were found during one of the audits, from the balance-sheet copies, Income Tax statement copies and other documents obtained from the Income Tax Department, but however, the assessee-appellant refused to produce the documents required for statutory auditing. From the above, it was understood by the Revenue that the appellant had undertaken sub-contracting agreement for the provision of service under erection and commissioning services.
Notably, the Commissioner who issued SCN thus proceeded to propose a consolidated tax liability without specifying the service provided by the appellant, thereby alleging that the appellant had suppressed facts by not taking registration of all the services rendered during the period 2007-08 (October to March) to 2011-12.
Conclusion-
CESTAT in the case of Commissioner of Central Excise and Service Tax, Pondicherry v. A.M. Manickam & ors has held that the Show Cause Notice being bereft of clarity, not conveying exact nature of the alleged act or omission, any demand arising therefrom was not sustainable.
Held that a perusal of the Show Cause Notice makes it clear, and admittedly, that there is no specific service alleged against the appellant, as having been rendered by it; rather, a consolidated tax liability has been worked out, which makes it indefensible.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This appeal is filed by the assessee against the Order-in-Original No. 47/2014 (C) dated 30.06.2014 passed by the Commissioner of Central Excise, Puducherry and the period of dispute is from 2007-08 (October to March) to 2011-12.
2.1 By the Show Cause Notice No. 22/2013 (C) dated 11.04.2013 issued to the assessee which culminated in the passing of the impugned order, it is the case of the Revenue that the assessee-appellant is a registered service provider under: (a) maintenance and repair service, (b) manpower recruitment service and (c) commercial or industrial construction service, they had also provided ‘erection, commissioning and maintenance’ services to M/s. Graphite India, Nasik and M/s. Siemens, Navi Mumbai which were found during one of the audits, from the balance-sheet copies, Income Tax statement copies and other documents obtained from the Income Tax Department, but however, the assessee-appellant refused to produce the documents required for statutory auditing. From the above, it was understood by the Revenue that the appellant had undertaken sub-contracting agreement for the provision of service under erection and commissioning services.
2.2 The Show Cause Notice also refers to various communications as mentioned in paragraph 5 therein, with a further allegation that the assessee-appellant did not respond to any of those letters.
2.3 The Commissioner who issued the Show Cause Notice thus proceeded to propose a consolidated tax liability without specifying the service provided by the appellant, as per the table at paragraph 6 of the Show Cause Notice, thereby alleging that the appellant had suppressed facts by not taking registration of all the services rendered during the period 2007-08 (October to March) to 2011-12.
3. The assessee-appellant appears to have filed a suitable reply vide letter dated 21.10.2013, copy of which is placed on record even before us, wherein they have questioned the very basis of the Show Cause Notice. The salient features of the said reply are summarized below: –
(a) Internal audit was carried out in the year 2010 and in that connection, letter in C. No.III/10/22/2010-IA (Gr.III) dated 04.10.2010 was submitted.
(b) They had submitted all relevant documents in response to the above, but however, the same appears to have been accepted without pointing out any objection.
(c) Communication Ref. OC No. 18/2012 dated 09.01.2012 was issued enclosing audit objections, in which there is a reference to Show Cause Notice No. 172/2009 which was pending adjudication.
(d) From the above, the period 2008 to March 2009 stood covered in the earlier Show Cause Notice and therefore, covering the same period in the present Show Cause Notice by invoking the larger period is clearly without any basis.
(e) There was another internal audit in 2012 – communication Ref. C. No. III/10/5895/2012-I.A. (Gr.V), to which they responded enclosing the details/documents called for; there was no communication/objection till date.
(f) In the impugned Show Cause Notice dated 11.04.2013, there is absolutely no reference to the second audit carried out in 2012.
(g) The Show cause Notice dated 11.04.2013 is not referring to or relying on any specific document allegedly collected from the Income Tax department and nor did the Department share with them any of the so-called documents collected from the Income Tax department.
(h) With regard to the allegations of non-furnishing of information, non-responding to the Department’s several communications, the very fact of: (i) conduct of audit of accounts, (ii) existence of earlier Show Cause Notice for 2007-08 to 2008-09, (iii) declared values as per S.T.-3 return, and (iv) balance sheets, having been produced, clearly proves that the above allegations are baseless.
(i) With regard to the allegations of non-reconciliation, the statement showing year-wise breakup for the years 2009-10, 2010-11 and 2011-12 were already filed along with a chartered accountant’s certificate, which does not find any reference in the Show Cause Notice.
(j) With regard to the allegations of non-submission of S.T.-3 returns for 2009-10 to 2011-12, copy of each of the S.T.-3 returns filed by them were duly enclosed.
(k) In the statement as certified by the chartered accountant, the difference between the balance-sheet figures and the S.T.-3 figures were explained, but none of the above were considered by the officer issuing the Show Cause Notice.
(l) In the statement certified by the chartered accountant, they had categorized the differences between the balance-sheet figures and the S.T.-3 figures, as under: –
i. Amounts received in the year 2009-10, but relates to works already executed in the year 2008-09 and for which the main contractors had discharged Service Tax;
ii. Cost of materials reimbursed by Metro Water Board, which form part of only supply portion of the Operation and Maintenance Contract and not the service portion;
iii. Income earned for carrying out horticulture work, which is non-taxable;
iv. Income earned for service rendered to Railways in connection with infrastructure development, which is excluded from taxable service.
v. Income earned from renting of residential premises;
vi. Amount received for sub-contract work done to M/s. Siemens, M/s. Graphite, etc., with evidence of payment of Service Tax by these main contractors;
vii. Others (covering details of amounts shown to have been received by them in the notice, but actually not received, not even billed for and for which the notice has no evidence whatsoever)
(m) They had also relied on the following orders: –
i. Garden Makers v. Commissioner of C.Ex., Kochi [2009 (15) S.T.R. 37 (Tri. – )]
ii. Commissioner of C.Ex., Jaipur-I v. ANS Construction Ltd. [2010 (17) S.T.R. 549 (Tri. – Del.)
(n) References were made to the following Orders-in-Original/Order-in-Appeal: –
1) Order-in-Original No. 71/2009 (ST) dated 18.12.2009 for the period: 2003-04 to 2007-08
2) Order-in-Original No. 13/2010 (ST) dated 26.02.2010 for the period: up to 2006.
3) Orders-in-Appeal No. 33/2012 (PST) to 71/2012 (PST) all dated 02.05.2012 – no further appeal is filed by the Department.
to highlight that the Department was very much aware about the alleged transactions with the contractors from 2002 onwards and that they were in touch with M/s. NLC/contractors from 2006 in an organized manner.
(o) There were audits in 2010 and 2012 and hence, the allegation of suppression of facts through the Show Cause Notice in question is without any basis and therefore, there was no justification whatsoever to invoke the extended period of limitation. Consequently, the demand is also time-barred.
4. The assessee-appellant, having participated in the personal hearing, also appears to have filed a written submission dated 11.02.2014 reiterating its defence, with a prayer for dropping of further proceedings.
5. The adjudicating authority, however, having considered their explanation, vide impugned Order-in-Original dated 30.06.2014, confirmed the demand of Service Tax by observing that the assessee-appellant did not dispute the rendering of various taxable services, had received Rs.20,57,17,763/- as taxable value for providing taxable services which attracted Service Tax of Rs.2,30,30,794/- and the balance was recoverable under the proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 of the Act. Further, with regard to the allegation that the burden of classification of taxable services allegedly rendered by the appellant has not been rendered by the Revenue, the lower authority has held that when relevant information required for classification of service under respective categories were not furnished, the appellant cannot throw the burden on the Department; when the Notice had completely shifted the burden of proof on the assessee, the non-specification of classification could not be considered as being fatal to the validity of the Notice.
6. It is against this order that the present appeal has been filed before this forum.
7. Quite strangely, non-consideration by the Department as to its earlier audits, Show Cause Notices, etc., are conspicuously absent not only in the Show Cause Notice, but also in the Order-in-Original. In the interests of justice, there was no harm in bringing proper facts on record. In fact, we are reminded of reprimanding by higher judicial fora when a litigant goes before a court of law not with clean hands.
8. Heard Shri V. Ravindran, Ld. Advocate for the appellant, and Shri N. Satyanarayanan, Ld. Assistant Commissioner defending the order of the Commissioner.
9.1 The Ld. Advocate would submit at the outset that the following Show Cause Notices were issued to the assessee-appellant: –
