Contention that Assessee was service-recipient & not the provider cannot be termed as additional evidence

Contention that ‘Assessee was not service-provider but was service-recipient’ is not ‘a piece of evidence’, it is a ‘pleading, a ground of appeal’ and goes to root of jurisdiction – Hence, same can be raised for first time before Commissioner (Appeals)

In the instant case, the Department demanded Service tax for the periods 2005-06 to 2007-08 on Rs. 14,40,000/- paid by Astron Polymers (P.) Ltd. (the Appellant) towards factory rent to one of its director. The Appellant denied liability to Service tax citing that levy was unconstitutional. However, the Appellant failed to submit that it was not a service provider, but was merely recipient of services from one of its directors.

The Department confirmed the demand along with interest and penalty. Against the Adjudication Order, the Appellant preferred an appeal before the Commissioner (Appeals) specifically contending that rent was being charged by Directors of the Appellant individually and not by the Appellant. The Commissioner (Appeals), relying upon Rule 5 of Central Excise (Appeals) Rules, 2001 (the Excise Appeal Rules), rejected the Appellant’s contention on the ground that this was a new ground raised for the first time in the appeal and was not raised either in reply to the Show Cause Notice or during course of the Adjudication proceedings. Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Delhi.

The Hon’ble CESTAT, Delhi held that Rule 5 of the Excise Appeals Rules has no application in the instant case because a contention that the Appellant was not provider of service but was recipient of service is not ‘a piece of evidence’, it is a ‘pleading, a ground of appeal’ and goes to root of jurisdiction. Hence, such an additional ground is admissible and ought to be entertained and the Appellant must be called upon to substantiate this plea. Hence, the matter was remanded back for afresh adjudication.