Assessee cannot plead violation of natural justice when he defaulted in availing opportunity of personal hearing.

PJ/Case law/2013-14/1930

Case:-D.A. ENTERPRISES Vs COMMISSIONER OF CENTRAL EXCISE, PUNE-III

Citation:-2013 (32) S.T.R. 83 (Tri. – Mumbai)

Brief facts:- The appellant, M/s. D.A. Enterprises, Dighi, Pune, was registered with the department under the category of “Manpower Recruitment or Supply Agency Service” and “Security Agency Services”, vide registration No. P-III/STC/MRA/648/05, dated 18-8-2005 & P-III/STC/SEA/314/2006, dated 13-10-2008. They had been regularly filing the statutory returns and discharging service tax liability from 1-4-2007 onwards. An investigation was conducted regarding the appellant’s service tax liability for the period 1-4-2007 onwards and the investigation revealed that the appellant was liable to pay service tax under “Manpower Supply Agency” service amounting to Rs. 49,61,166/- for the period 2007-08 to 2009-10 and Rs. 3,49,224/- under “Security Agency” service during the period 2007-08 to 2009-10. Thus, the total liability pending to be discharged by the appellant amounted to Rs. 53,10,390/- as per the books of account and records maintained by the appellant. A statement of the appellant was recorded on 3-8-2010 where the appellant admitted non-discharge of service tax liability. The same was attributed to non-receipt of service tax from some of the customers. The appellant also stated that they had given a cash of Rs. 20 lakhs to Mr. Joshi (M/s. Joshi Associate) the Tax Consultant for payment of service tax. However, the said Shri Deepak Joshi denied having received any payment of Rs. 20 lakhs from the appellant.
On completion of investigation, a show cause notice dated 28-6-2011 was issued to the appellant demanding service tax of Rs. 53,10,390/- along with interest thereon and also proposing to impose penalties. The appellant filed written submissions vide reply dated 14-7-2011. Personal hearing was granted to the appellant on 23-4-2012, 11-6-2012, 24-7-2012 and on 24-8-2012 which the appellant failed to avail. On 11-9-2012 a fax was sent to the department from M/s. Bhide Consultants as reply to the show cause notice wherein it was contended that the appellant was not providing “Manpower Supply Services” but was engaged in job work such as removing, shifting, stacking of raw material and housekeeping activities, etc. and therefore, in terms of Notification No. 8/2005-S.T. they were exempted from payment of service tax. The appellant was given one more opportunity to appear for personal hearing on any date between 9th to 11th October, 2012 but again the appellant failed to appear. Thereafter, the impugned order was passed confirming the service tax demand of Rs. 53,10,390/- along with interest thereon and also imposing penalties.

Appellant’s contentions:-The appellant had filed a letter vide fax dated 8-7-2013 through their Counsel and in the said fax it had been requested that the case be decided on merits, after considering the submissions made in the appeal memorandum. However, nobody represented the appellant in person. The appellant said that they had perused the appeal memorandum. In the appeal memorandum, it had been contended that the adjudicating authority had violated the principles of natural justice inasmuch as their contentions raised in the reply to the show cause notice vide fax dated 11-9-2012 had not been considered. It was also claimed that the appellant was exempted from service tax vide Notification No. 8/2005-S.T. It was further alleged that opportunity to cross-examine Mr. Joshi had not been provided. In view of the above, it was contended that the impugned order was not sustainable in law and accordingly stay be granted.

Respondent’s contentions:- The ld. AR appearing for the Revenue on the other hand contended that the appellant had been given enough opportunities to defend their case. However, they did not avail any of these opportunities and therefore, it could not be held that principles of natural justice had been violated. The ld. AR also submitted that in the statement recorded by the investigating agency, had been clearly admitted that the appellant did not discharge the service tax liability during the impugned period. In view of the above, he pleaded for putting the appellant to terms.

Reasoning of judgment:-The Hon’ble judge said that the appellant had been given sufficient opportunities to defend their case. Five opportunities of personal hearing were granted and the appellant did not avail any one of them. Even after the submissions over fax on 11-9-2012 an opportunity for personal hearing was granted between 9th to 11th October, 2012 which also the appellant did not avail. Therefore, the contention of the appellant that they were not given sufficient opportunities to defend their case had no merits. Even before this Tribunal though in the appeal memorandum, the appellant sought personal hearing while considering the appeal and stay petition, but the appellant had not availed the said opportunity and the Counsel, on behalf of the appellant, had requested the Tribunal to decide the case on merits. In the appeal memorandum, the only ground urged was denial of natural justice. In the statement given before the investigating agency, the appellant had clearly admitted that they had not discharged the service tax liability during the impugned period and they sought to blame the lapse on the consultant to whom they have alleged to have given a sum of Rs. 20 lakhs to discharge the service tax liability. The said consultant had denied receipt of Rs. 20 lakhs. The service tax demand had been made on the basis of the figures given in the books of account maintained by the appellant and invoices issued by them to their clients and therefore, there was sound basis for computation of such demand. As regards the claim of the appellant that they were eligible for the benefit of Notification No. 8/2005-S.T., as per appellant’s own version the activity undertaken by them involved shifting of raw materials and housekeeping activities. Notification No. 8/2005-S.T. grants exemption on job work carried out by service provider on the materials supplied by the clients. Such job work envisages processing of materials supplied by the clients. Shifting of raw material or cleaning factory premises, by no stretch of imagination, could be considered as job work, so as to be eligible for the benefit of Notification No. 8/2005-S.T. Therefore, the appellant’s submission in this regard lacked merit. The appellant had also not pleaded any financial hardship in the appeal memorandum.
In view of the above, the Bench was of the considered view that the appellant had not made out any case for grant of any stay. Accordingly, it was directed that the appellant make a pre-deposit of entire amount of service tax confirmed of Rs. 53,10,390/- within a period of eight weeks and report compliance on 11-9-2013. On such compliance, pre-deposit of balance of dues adjudged against the appellant shall stand waived and recovery thereof stayed during the pendency of the appeal.

Decision:-Pre-deposit ordered.

Comment:- The crux of this case is that when the assessee himself forego the opportunity of personal hearings on several occasions, then he cannot plead that there was violation of principles of natural justice and that his submissions have not been considered while deciding the case. Accordingly, entire duty demand was ordered as pre-deposit.

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PJ/Case law/2013-14/1930

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