Space Associates Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The appeal challenged the Order-in-Appeal dated 27.08.2015, which upheld the demand of differential service tax, interest and penalty under Section 78 of the Finance Act, 1994 in respect of completion and finishing services provided during April 2006 to June 2007. The demand originated from a show cause notice alleging that an erstwhile partnership firm had wrongly claimed abatement under Notification No. 01/2006-ST and had short-paid service tax. The adjudicating authority confirmed a total service tax demand of Rs.29,41,214 along with interest and penalty. The Commissioner (Appeals) dropped the demand relating to works contract services but sustained the demand on completion and finishing services.
The appellant contended that the demand related to activities undertaken by an erstwhile partnership firm having a separate service tax registration and PAN, whereas the appellant was a proprietary concern registered only from 24.10.2008. It argued that no undertaking had been given accepting liability for the partnership firm’s tax dues and that the services constituted works contract involving transfer of property in goods on which VAT had been paid. It also raised limitation and penalty-related contentions.
The Tribunal found merit in the preliminary objection. It noted that the show cause notice itself acknowledged separate registrations and PANs for the partnership firm and the proprietary concern. Although the partnership firm’s liability did not automatically cease after surrender of registration, the Department had failed to establish that the proprietary concern had acquired the partnership business so as to incur successor liability. The show cause notice was addressed to the proprietary concern with a fresh registration and not to the erstwhile partner. In the absence of evidence of a formal transfer or amalgamation of the business, the Tribunal held that transferee liability remained unestablished, the show cause notice was ab initio void, and the demand was liable to be set aside on that ground alone.
