Whether a totally new ground can be taken in the revisionary show cause notice?

PJ/Case Law/2013-14/1974

Case: AIA ENGINEERING LTD. V/S COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD

Citation: 2013 (32) S.T.R. 610 (Mad.)

Brief Facts: - The Appellant filed refund claims of Service Tax paid by them on terminal handling charges and repo charges. The refund was sanctioned by the original adjudicating authority. The Commissioner took up revision of the order passed by the original adjudicating authority and after issue of show cause notice, has passed the impugned order wherein refund sanctioned has been held to be wrong and the amount sanctioned has been demanded. Aggrieved by the order, the assessee filed the present appeal.

Appellant’s Contention: -The appellants contended that the refund has been denied on the ground that they had provided business auxiliary service and business support service and these services were not covered by the Notification No. 41/2007-S.T. He relied upon the Board’s Circular No. 112/6/2009-S.T., dated 12-3-2009 to submit that just because they had taken registration under a particular service category, the refund should not be denied on the ground that they had provided other services for which they were not registered. They also submitted that in this case the show cause notice issued by the Commissioner for revision under Section 84 of Finance Act, 1994 travelled beyond the show cause notice issued by the original adjudicating authority and the proceedings thereon. He submits that on these two grounds, they are eligible for refund and therefore the impugned order is liable to be set aside.

Respondent’s Contention: -The Respondents submitted that the services provided by the appellant were business auxiliary service and business support service which are not covered by Notification No. 41/2007-S.T. Further, the proceedings before them who has passed the order and in revision cannot be said to have travelled beyond the show cause notice in view of the fact that the original show cause notice was issued on the basis of documents submitted by the appellants and the original adjudicating authority had considered the eligibility or otherwise for refund based on documents. They while exercising their power also has gone through the very same documents and has come to the conclusion that the services in respect of which tax was paid were not covered by the said notification.

Reasoning of Judgment: - The Hon’ble Tribunal held that the appeals have to be allowed on the ground taken by the appellant that the Commissioner while exercising the powers of revision has gone beyond the show cause notice. In the case of Viacom Electronics (P) Ltd. v. CCE Vadodara reported in 2002 (145) E.L.T. 563 (Tri.-Mumbai), the Tribunal took a view that order under Section 35E of the Central Excise Act, 1944 beyond original show cause notice is not valid. Show cause notice in that case had alleged mutuality of interest between supplier and buyer, whereas Commissioner, while reviewing the order of Adjudicating Authority, held the buyer as real manufacturer. Since the review order was not passed on the basis of charges leveled in the show cause notice, the Tribunal held that the order was not sustainable. Further, in the case of Aero Products v. CST Bangalore reported in 2011 (22) S.T.R. 522 (Tri.-Bang.) also a similar view was taken after detailed consideration of the issue. In that case the revisionary show cause notice was issued for non-fulfillment of conditions in Export of Services Rules, 2005 which was not the ground on which original proceedings were initiated. In the case of Sands Hotel Pvt. Ltd. v. CST Mumbai reported in 2009 (16) S.T.R. 329 (Tri.-Mumbai) the original show cause notice did not have an allegation of suppression of facts with intention to evade Service Tax whereas the one issue in review made that allegation.
They held that all the decisions discussed above would show that a new ground cannot be taken in the revisionary show cause notice. In this case the original show cause notice had been issued only alleging that the documents did not contain the details of Service Tax paid and necessary declarations had not been filed by the appellants. While they have the fact that show cause notice was issued on 24-12-2008 and appellant replied to the show cause notice on 25-12-2008 and the Range Officer had submitted the verification report on 7-1-2009, whether the matter was referred to Range Officer for verification after the reply was received or not is not clear from the facts of the case in respect of appeal No. 311/2010. However, the discussion would reveal that the documents were not complete and information was not sufficient to sanction the refund. The revisionary show cause notice is on a totally new ground that the appellant is not at all eligible for the refund since the Service Tax was paid in respect of services not notified under Notification No. 41/2007-S.T.

Decision: - The appeal was allowed with consequential relief.

Comment: -The original show cause notice was issued only alleging that the documents did not contain the details of Service Tax paid and necessary declarations had not been filed by the appellants. However, in the revisionary show cause notice a totally new ground has been taken that the appellant is not at all eligible for the refund. It was decided that a totally new ground cannot be taken in the revisionary show cause notice.

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PJ/Case Law/2013-14/1974

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