Lancet Pharma Pvt. Ltd. (Appellant) rendered ‘Manpower Recruitment or Supply Agency’s Services’ (services) to Cipla Ltd. During the course of the audit of the records of the Appellant, it was observed that there was a difference between the value of taxable services declared by the Appellant in their ST-3 returns and the value reflected in the books of accounts maintained by the Appellant. It was also noticed that the Appellant had not discharged Service tax liability on the TDS amount deducted by the recipient of the services. Therefore, Service tax was demanded on the difference between the value shown in the books of accounts and the values declared in the ST-3 returns as per which there was a difference in value of Rs. 23,83,83,231/- and Service tax liability thereon worked out to Rs. 2,49,80,120/- which was confirmed along with interest and penalties in the order passed by the Commissioner of Service Tax, Mumbai.
The Appellant, being aggrieved, preferred an appeal before the Hon’ble CESTAT, Mumbai contending the following:
It was held by the Hon’ble CESTAT, Mumbai that while the Department had opportunity to verify whatever information/ statements furnished by the Appellant, a copy of the verification report should have been provided to the Appellant to make their submissions/rebuttal. Inasmuch as a copy of the verification report has not been given to the Appellant for their comments/rebuttal, there is a violation of principles of natural justice.
It was further held that the adjudication manual of the Central Board of Excise and Customs also lays down guidelines to the effect that if a new fact is emerging from the verification/ investigation caused by the Department, the assessee should be given an opportunity to make a submissions/rebuttal on those facts, failing which there would be a procedural irregularity leading to denial of natural justice.
Accordingly, the adjudicating authority was ordered to give a copy of the verification report (along with copies of the documents verified) to the Appellants for their comments/rebuttal and thereafter pass afresh speaking order taking into the account the submissions made by the Appellant.
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: firstname.lastname@example.org)