Grounds not taken before adjudication authority cannot be raised first time before appellate authority.

PJ/Case Laws/2012-13/1170

Case:M/S. Cargo Motors (Guj.) Pvt. Ltd. V/s. Commissioner of Customs Excise , Vadodara

Citation:2012-TIOL-270-CESTAT-AHM

Issue: Grounds not taken before adjudication authority cannot be raised first time before appellate authority.

Brief Facts:The assessee is providing various services like- providing finance from various banks, insurance of the vehicles, coating/colour, incentive/labour etc. to his clients as under the category of ‘Business Auxiliary Service’. The assessee has not contested the merit of service tax liability before the first adjudicating authority and only pleaded against imposition of penalties under section 76, 77 and 78 of the Finance Act, 1994 and therefore, taking up the issue on merits of service tax liability before the subsequent appellate authority will be incorrect position of law. Thus, demand of service tax and interest thereon is confirmed. As regards the imposition of penalties, there are various decisions of the Tribunal which clearly states that services provided by the appellant such as loan from banks, amount received from banks and insurance companies for services rendered cannot be brought within the definition of ‘Business Auxiliary Service’ and thus, this is a fit case to invoke the provisions of section 80 of the Finance Act, 1944 and penalties under section 76, 77 and 78 are set aside.

Appellant’s Contention: The appellant submitted that he is providing various services like- providing finance from various banks, insurance of the vehicles, coating/colour, incentive/labour etc. to his clients as under the category of ‘Business Auxiliary Service’. He submitted that the issue is squarely covered by the decision of the Tribunal in the case of Kamal Auto Ind. Vs. CCE, Jaipur, CCE, Belgaum vs. Chadha Auto Agencies -2008-TIOL-1388- CESTAT-MAD and Silicon Honda vs. CCE, Banglore- 2007 (7)-STR 475 (Tri-Bang)= (2007-TIOL-1159-CESTAT-BANG.). Thus, the appellant submitted that this appeal should be allowed in the light of above cited judgments.

Respondent’s Contention:The respondent reiterates the findings of the first appellate authority.

Reasoning of Judgment: The appellant has not disputed service tax liability before the first appellate authority. They have pleaded against the imposition of penalties under section 76, 77 and 78 of Finance Act, 1944 only and have conceded the issue on merits. On specific query from the counsel submits that the assessee is unable to justify the stand taken by the assessee before the first appellate authority or today before us as regards contest of issue of merits. The appellant has not disputed the issue on merits of service tax liability before the first adjudicating authority and later on taking up the issue on merits of service tax liability before the subsequent appellate authority will be incorrect position of law.
As regards the imposition of penalties, there are various decisions of the Tribunal which clearly states that services provided by the appellant such as loan from banks, amount received from banks and insurance companies for services rendered cannot be brought within the definition of ‘Business Auxiliary Service’ and thus, this is a fit case to invoke the provisions of section 80 of the Finance Act, 1944 and penalties imposed on the appellant under section 76, 77 and 78 are set aside on the basis of the various decisions of the Tribunal holding that the activities provided by the appellant could not have been taxed under the category ‘Business Auxiliary Service’.

Decision: The appeal is disposed of by way of allowing the appeals as regards the imposition of penalties are involved and confirming the demand of service tax and interest thereon.

Comment:- This is settled principle as well as ratio of this decision that the grounds raised before adjudication officer can be raised before the appellate authority. No new ground can be raised at that stage. Hence the drafting of show cause notice is very important and the consultants as well as assessee should be very particular in doing the same.

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PJ/Case Laws/2012-13/1170

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