SCN Cannot Introduce New Service Classification During Adjudication: CESTAT Chennai

ABK-AOT-DOSOKAI Vs Commissioner of GST & Central Excise (CESTAT Chennai)

Summary: CESTAT Chennai allowed the appeal of ABK-AOT-DOSOKAI and set aside service tax demands arising from Japanese language training, 5S management training, hall hire/rental, translation and interpretation services and several other receipts. The Tribunal held that a Show Cause Notice must disclose the material facts and legal foundation of the proposed demand and that an adjudicating authority cannot introduce a new taxable category or factual basis at the adjudication stage. Accordingly, the 5S management-training demand could not be sustained where the SCN proposed “Management or Business Consultancy Service” but the adjudicating authority classified the activity under “Business Auxiliary Service”.

Hall hire/rental demands were also held unsustainable because the transactions were disclosed, the dispute was essentially one of classification, suppression with intent to evade tax was not established and the SCN lacked the necessary factual and legal foundation. Regarding Japanese language training, the Tribunal held that the amendment to Notification No. 24/2004-S.T. introduced by Notification No. 03/2010-S.T. could not operate from 27.02.2010 in view of its decision in L.V. Prasad Film & TV Academy. It further held that the independent exemption for a “recreational training institute” remained available and that NCVT affiliation was not a condition under that limb. Circular No. 59/8/2003-S.T. dated 20.06.2003 was noted as recognising foreign-language institutes and hobby classes within the exempted category, while the Tribunal’s decisions concerning foreign-language training also supported the appellant’s case.