Case Law Details
Ahmedabad Network Systems Pvt Limited Vs Commissioner of Central Excise & ST (CESTAT Ahmedabad)
In the case of Ahmedabad Network Systems Pvt Limited vs Commissioner of Central Excise & ST (CESTAT Ahmedabad), several crucial legal issues were brought to light. This article delves into the details of the case, analyzing the key arguments presented by both parties, the rectification process, and the final decision rendered by the appellate authority.
Detailed Analysis:
The appellant in this case was involved in providing cable television services, which became subject to taxation under the provisions of Chapter-V of the Finance Act, 1994, effective from September 10, 2004. However, the appellant failed to pay the service tax on time. Subsequently, a search was conducted at their premises, leading to the issuance of a show cause notice that determined a total service tax liability of Rs. 28,48,560.
Due to internal disputes within the appellant’s management, they did not attend the hearings, resulting in an ex-parte order-in-original by the Adjudicating Authority. Upon receiving the order-in-original, the appellant identified certain mistakes and applied for rectification under Section 74 of the Act. The Adjudicating Authority, after considering the rectification application, passed a rectified order-in-original.
This led to appeals from both sides. The appellant appealed against the imposition of penalties on the confirmed service tax demand, while the Revenue also appealed against the rectified order-in-original, seeking to reinstate the original order.
In the appellant’s appeal, their representative argued that the Adjudicating Authority had correctly rectified the order, as per the provisions of Section 74. They contended that the penalty should not have been imposed, citing a bona fide belief due to the new levy on cable TV services. Various legal precedents were referenced to support their case.
On the other hand, the Revenue’s representative reiterated the findings of the impugned order.
Conclusion:
After carefully considering the arguments presented by both parties and reviewing the relevant legal provisions, the appellate authority was tasked with determining whether the Adjudicating Authority had the right to pass a rectified order under Section 74 of the Act. Section 74 allows for rectification of mistakes apparent from the record within two years of the original order’s issuance.
In this case, the rectification went beyond apparent errors and delved into mixed questions of law and fact, such as the date of service tax levy and the Cenvat credit issue. Consequently, the rectification process was deemed inappropriate, as these issues required detailed analysis and should have been addressed through an appeal rather than rectification. Additionally, since the appellant did not attend the initial hearing, the rectification was based on data that was not available at the time of the original order, further highlighting its procedural flaws.
As a result, the appellate authority upheld the order of the learned Commissioner (Appeals) regarding the Revenue’s appeal but decided to remand the appellant’s appeal related to penalty and service tax demand back to the Adjudicating Authority. The Adjudicating Authority was directed to pass a denovo adjudication order after considering the appellant’s submissions, providing them an opportunity for a personal hearing.
In conclusion, the Ahmedabad Network Systems Pvt Limited vs Commissioner of Central Excise & ST case underscores the importance of a fair and thorough adjudication process in matters of taxation, ensuring that all parties have the opportunity to present their case and rectifications are made in accordance with the law.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that appellant was engaged in the business of providing cable television services which were brought to the taxability under the provisions of Chapter-V of the Finance Act, 1994 with effect from 10.09.2004. The appellant could not pay service tax in timely manner. The search was conducted at the premises of the appellant and pursuant to which the show cause notice was issued determining the total service tax of Rs. 28,48,560/-. Due to internal disputes of the appellant’s management, the hearing were not attended by the appellant and the order-in-original was passed ex-parte by the Adjudicating Authority. On receipt of order-in-original by the appellant, they noticed that there exists certain mistakes in the order-in-original and accordingly they preferred application for rectification of mistake under Section 74 of the Act. The Adjudicating Authority considering the application for ROM passed the rectified order-in-original. Thereafter the appellant preferred appeal against the rectified order-in-original before the learned Commissioner (Appeals) as regards the imposition of penalty on the confirmed demand of service tax. On the other side Revenue also preferred appeal against the rectified order-in-original before the same appellate authority. Learned Commissioner (Appeals) dismissing the appeal preferred by the appellant and allowing the appeal preferred by Revenue by setting aside the rectified order-in-original and restored the order-in-original. It is this order-in-appeal which is under challenge before us by the appellant.
2. Shri Rahul Patel, learned Chartered Accountant appearing on behalf of the appellant submits that the Adjudicating Authority considering the application of the appellant exercising the power under Section 74 rightly rectified the order by reducing the demand therefore, as per the provisions of Section 74, the Adjudicating Authority has correctly rectified the order-in-original. Hence, learned Commissioner (Appeals) order is not sustainable to that extent. He further submits that the penalty imposed on the appellant is also not sustainable on the ground that being a new levy, the service tax on the cable TV services there was a bonafide belief and accordingly penalty should not have been imposed. He placed reliance on the following judgments:-
(a) Airports Authority of India vs. Union of India – 2018 (8) G.S.T.L. 250 (Del.)
(b) Commr., Income Tax, Rajkot vs. Saurashtra Kutch Stock Exchange Limited – 2010 (18) STR 84 (SC).
(c) Koluthara Exports Limited vs. Union of India -2022 (57) G.S.T.L. 112 (Ker.)
(d) Commissioner of Central Excise, Mumbai vs. Bharat Bijlee Limited – 2006 (198) ELT 489 (S.C.)
(e) Raval Trading Company vs. CST -2016 (42) S.T.R. 210 (Guj.)
(f) Pearl Travels vs. Commissioner of C.Ex. & ST, Daman – 2020 (37) GSTL 242 (Tri. – Ahmd.)]
3. On the other hand Shri P. Ganesan, learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. On careful consideration of the submissions made by both the sides and perusal of record, we find that impugned issue is whether the Adjudicating Authority is right in passing rectified order in terms of Section 74 which reads as under :-
SECTION 74, Rectification of mistake.- (1) With a view to rectifying any mistake apparent from the record, the [Central Excise Officer] who passed any order under the provisions of this Chapter may, within two years of the date on which such order was passed, amend the order.
(2) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the [Central Excise Officer] passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.
(3) Subject to the other provisions of this section, the [Central Excise Officer] concerned –
(a) may make an amendment under sub-section (1) of his own motion; or
(b) shall make such amendment if any mistake is brought to his notice by the assessee or the [Principal Commissioner of Central Excise or Commissioner of Central Excise) or the [Commissioner] of Central Excise (Appeals).
(4) An amendment, which has the effect of enhancing [the liability of the assessee or reducing a refund], shall not be made under this section unless the (Central Excise Officer] concerned has given notice to the assessee of his intention so to do and has allowed the assessee a reasonable opportunity of being heard.
(5) Where an amendment is made under this section, an order shall be passed in writing by the [Central Excise Officer] concerned.
(6) Subject to the other provisions of this Chapter where any such amendment has the effect of reducing the [liability of an assessee or increasing the refund), the [Central Excise Officer] shall make any refund which may be due to such assessee.
(7) Where any such amendment has the effect of enhancing the [liability of the assessee] or reducing the refund already made, the [Central Excise Officer] shall make an order specifying the sum payable by the assessee and the provisions of this Chapter shall apply accordingly.
From the plain reading of above Section 74 it is clear that Adjudicating Authority can rectify own order only for the limited purpose i.e. if there is apparent error on the face of the order.
5. We find that in the present case, the Adjudicating Authority has rectified the order on the following grounds:-
(a) Tax was levied with effect from 10.09.2004 only, the amount realized cannot exceed the amount billed during the month of September, 2004 and thus the amount of Service Tax demanded for the month of September, 2004 ought to be Rs. 1,71,041 instead of Rs. 3,97,668.
(b) CENVAT Credit of Rs. 8,18,960 availed and utilized in ST-3 ought to be deducted from tax liability.
(c) Challan of Rs. 2,00,000 dated 04.11.2006 was to be appropriated against the liabilities determined in the order-in-original.
From the above grounds, it can be seen that the rectification of the order was not made only on apparent error but the issue in the rectification of order was mixed question of law and fact that on which date service tax is leviable even the Cenvat credit issue also involve a detailed scrutiny. Therefore, in our view the adjudication order does not suffer from apparent error whereas the issue under rectification was required a detailed analysis and therefore such issue could not have been decided by rectifying the order nor the issue which was rectified by the Adjudicating Authority was required to be agitated in an appeal and not by way of rectification. Moreover, the appellant have not attended the hearing and the order was passed ex-parte. The rectification was made on the date provided subsequently to the Adjudicating Authority therefore, at the time of passing the order the data was not available before the Adjudicating Authority. On this ground also the rectification of order was not correct and legal in terms of Section 74. The remaining issues raised before the Commissioner (Appeals) by the appellant through their appeal is related to penalty.
6. As per our above observations the order of the learned Commissioner (Appeals) in the Revenue’s appeal before him is correct and legal. As regards the appellant’s appeal which is related to penalty on the demand, the same needs to be decided along with the demand of service tax. Since the adjudication order was passed without any hearing and as per the order there was error in computing the demand, we are of the view that matter needs to be remanded to the Adjudicating Authority for passing denovo adjudication order after considering the appellants submission to be made. Needless to say that appellant shall be granted opportunity of personal hearing before passing denovo order.
(Pronounced in the open court on 12.09.2023)
