Sustainability of Show Cause Notice

PJ/Case Laws/2011-12/1483

Case: A.G. Engineers V/s Commissioner of C. Ex., Ghaziabad.

Citation: 2012 (25) S. T. R. 52 (Tri. – Del.)

Issue:- Show cause notice issued on the basis of assumptions and presumptions is not sustainable.

Brief Facts:- This matter came up for hearing of the stay application. But we looked into the magnitude of the demand that is very small being service tax demand of Rs. 48,886/-. Service tax demand is also followed by equal amount of penalty under Sections 76 and 78 of the Finance Act, 1994. So also there is a penalty of Rs. 1000/- under Section 77 thereof followed by interest under Section 75 of the said Act. Therefore, we took up both the stay application and appeal for common disposal by this order, also noticing that the matter is not that complicated to hear the evidence in detail. The appellants grievance is that show cause notice was issued on the conception that appellant was providing repair and maintenance service as an authorised service provider of a manufacturer. But Department has no evidence to come to that conclusion. Only taking account of some invoices of the appellant, show cause notice was issued.

Appellant’s Contention:- The appellant replied to the authority that no doubt that it is providing repair and maintenance service, but that is neither under any contract nor also in the capacity of authorized service provider by a manufacturer. While it was dealing with certain goods as an authorized dealer, it is not an authorised service provider. The appellant made it clear in terms of paras 2 to 7 of reply to show cause notice filed before authorities on 8-11-2008. When the appellant does not fall under the definition of maintenance and repair service under either of the clauses of Section 65(64) of Finance Act, 1994, this small tax payer should not be penalized. It is also small service provider to get relief because it has not exceeded the limit prescribed.

Respondent’s Contention:- On the other hand, Id. DR submits that when the appellant could not come out with clear evidence that it is not authorised service provider the department's case based on allegation made in show cause notice. So also when the appellant was service provider of some branded manufacturer the appellant will not get small scale benefit.

Reasoning of Judgement:- The thoroughly examined the show cause notice to find out whether there was any evidence with the department to show that the appellant had provided repair and maintenance under any agreement or contract entered into by it with any of the manufacturer. That is not available on 'record. The appellant pleaded its defence in the reply to show cause notice categorically making clear that it is not an authorized service provider. No doubt it is a dealer of certain branded goods. But merely becoming the dealer there cannot be any assumption or presumption or suspicion, however grave may be to impute the appellant to charges. Since the order is based on cogent evidence, there cannot be presumptive taxation. The appellant pleaded that appellant's submission was not been controverted by any evidence available on record of Revenue. Therefore, it appears that the adjudication is being made under presumption, which shall fail to meet justice under law. Considering that there is no evidence on record to show that the appellant acted under any contract or as an authorized service provider, the demand raised by adjudication order including penalty and interest are annulled.

Decision:- Appeal allowed.

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PJ/Case Laws/2011-12/1483

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