The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), New Delhi invalidated Show Cause Notice ( SCN ) as classification of service under Works Contract by the Commissioner (Appeals) was beyond the scope.
Acting upon information received from Income Tax Department, the appellant, M/s Babulal Gurjar had a gross turnover of Rupees ninety-eight lakhs, accordingly, revenue called for information from the appellant, with regard to his service tax liability during the said period. As no information was submitted by the appellant, it appeared to revenue that it is not possible to ascertain the nature of services provided by the appellant.
Accordingly, show cause notice dated was issued invoking the extended period of limitation based on the information received from Income Tax Department demanding services including cess. It was further alleged that appellant have wilfully suppressed the facts from the department with intent to evade payment of tax. Further interest and penalty were also proposed.
The Assistant Commissioner confirmed the proposed demand and also imposed equal amount of penalty under Section 78 of the Finance Act, 1994.
The Commissioner (Appeals) recorded findings that the appellant is rendering Works Contract Service. Although, no such proposal was there in the show cause notice, nor the Commissioner (Appeals) served any notice upon the appellant for classification of service and the appeal was dismissed. Being aggrieved the appellant is before the Tribunal.
Counsel for the appellant O.P. Agrawal, Chartered Accountant urges that the demand is not sustainable for failure to classify the service rendered in the SCN. Further Commissioner (Appeals) have also erred in classifying the service without giving any opportunity of hearing as required under law. In absence of proposal to classify the service under a particular head, the order travelled beyond the scope of show cause notice and was not sustainable.
The Counsel further submitted that the appellant had provided JCB-machinery on monthly charges basis for ‘packing plant maintenance job’ inside the factory premises. Thus, such service being used for manufacturing activity, is outside the scope of service tax as per Section 66D of the Finance Act.
A Bench of Anil Choudhary, Judicial Member observed that “I find that Clause (f) of Section 66D provides that services by way of carrying out any process amounting to manufacture or production of goods, falls under the negative list and is exempted from the levy of service tax.I further find that the classification of service under Works Contract Service by the Commissioner (Appeals) is beyond the scope of show cause notice, and is held to be bad.”
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