Adjudication Of Show Cause Notice Under Service Tax Provisions
June, 07th 2016
In the earlier articles it has been elaborately discussed about the issue of show cause notice under service tax provisions and also the necessity and requirement to reply to the show cause notice. The service tax provisions describe the procedure for the disposal of the show cause notices. In general in the show cause notice along with the demand of service tax and interest, penalty is also proposed to be imposed on the assessee. The penalty is also to be adjudicated by the Adjudicating authority.
Section 73(2) provides that the Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served under Section 73 (1) determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
Section 73(4B) provides that the Central Excise Officer shall determine the amount of service tax due under Section 73(2)-
within six months from the date of notice where it is possible to do so, in respect of casesfalling under Section 73(1);
within one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to Section 73(1) or the proviso to Section 73(4A) (omitted by Finance Act, 2015 with effect from 14.05.2015)
The proviso to Section 73(1) discuss the cases in which the service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of-
willful mis-statement; or
suppression of facts; or
contravention of any of the provisions of this Chapter or of the rules made there under with intent to evade payment of service tax.
If the assessee accepts the facts of the show cause notice then the demand made in the show cause notice for levy of service tax will be confirmed.
If the assessee does not accept the facts of the show cause notice and contests the same, he has to give reply giving all the facts on which he relied against the allegations shown in the show cause notice. In the reply the assessee is to indicate whether he wants to be heard in person before the authority. If he wishes to be heard in person, then the Central Excise Officer is to give a personal hearing to the assessee.
Section 33A of Central Excise Act is made applicable to the service tax provisions also under Section 83 of theFinance Act, 1994. Section 33A provides that-
The adjudicating authority shall, in any proceeding under this Chapter or any other provision of this Act, give an opportunity of being heard to a party in a proceeding, if the party so desires.
The Adjudicating authority may, if sufficient cause is shown, at any stage of proceeding referred above grant time, from time to time, to the parties or any of them and adjourn the hearing for reasons to be recorded in writing.
No such adjournment shall be granted more than three times to a party during the proceeding.
If the assessee requests for personal hearing in his reply to the show cause notice it is the bounden duty of the Adjudicating Authority to give personal hearing to the assessee by fixing a date. The notice in this regard to be sent to the assessee and the evidence for the service of notice shall be kept available in the records of the Adjudicating Authority.
In ‘Transcoastal Cargo & Shipping Limited V. Union of India’ – 2016 (1) TMI 346 - MADRAS HIGH COURT the notice of personal hearing though sent by the Adjudicating Authority was not received by the petitioner. No acknowledgement of receipt was produced by the Department. The service tax demanded was confirmed by the Adjudicating Authority, creating adverse civil consequences for petitioner. The High Court held that inflicting such consequences, without hearing petitioner, violates settled principles of Natural Justice. The High Court set aside the adjudication order with remand for de-novo adjudication after hearing the petitioner.
In ‘Commissioner of Central Excise, Raipur V. Chhattisgarh State Civil Supplies Corporation Limited’ – 2016 (2) TMI 870 - CESTAT NEW DELHI the Tribunal found that the Commissioner, in the impugned order dated 09.06.2009 has clearly recorded that the letter dated 29.03.2008 of the respondent was received in the office of the Adjudicating Authority but it is seen that order dated 30.04.2008 was passed without granting any opportunity for personal hearing. The Revenue has not been able to produce any evidence to show that in the letter dated 29.03.2008 the respondent had given up its right to be heard in person. Thus it is clear that the order dated 30.04.2008 was passed without personal hearing when there was a request made for the same and without rejecting that request. It is certainly an error which is apparent from the records of appeal and such an error renders the order to be a nullity.
The assessee can get an adjournment if requires. For this he is to submit a petition to the Adjudicating Authority indicating the reasons for not able him to attend the hearing. Not more than three adjournments will be given.
In the hearing the assessee himself or through his authorized representative may appear before the Adjudicating Authority in the time prescribed in the notice. If he is represented by representative, a letter authorizing such representative shall be submitted to the Adjudicating Authority. The representative may be the officer of the company or any professional such as Advocate, practicing Cost Accountant, Company Secretary or Chartered Accountant.
In the personal hearing mostly the Departmental Officer will not represent. The Adjudicating Authority would ask the assessee what he wants to tell further in this case. It is better to prepare a written submission containing the arguments, evidences and favorable judgments to the Adjudicating Authority at the time of hearing. He may put forth the arguments in oral also. The Adjudicating Authority is to record the arguments put forth by the assessee in the sheet maintained for that and the signature of the assessee is to be obtained by the Adjudicating Authority in that sheet.
Lapse on the part of assessee
It is also expected that the assessee is also to co-operate in the adjudication proceedings. Some assessees will drag on the case, which is not correct. In ‘Midas Events V. Commissioner of Service Tax, Mumbai’ – 2015 (6) TMI 546 - CESTAT MUMBAI the appellant in spite of enough opportunity was given during the proceedings failed to produce documents evidencing amount received by them being cum-tax. The appellant contended that the documents were washed away in floods which is not acceptable as the documents could have been procured from clients, which are reputed companies. The Tribunal held that the cum-tax benefit was rightly denied in adjudication in absence of evidence.
As per Para No. 3 of Board’s Circular dated 20 September 2010, in all cases, where the personal hearing has already been completed, orders should normally be issued within a month of the date of completion of the personal hearing.
If show cause notice is based on one ground, demand cannot be confirmed on the other ground;
The order should not travel beyond the show cause notice.
In ‘Vamona Developers Private Limited V. Commissioner of Customs, Central Excise & Service Tax, Pune – III’ – 2015 (12) TMI 1111 - CESTAT MUMBAI the Tribunal held that the mismatch between the allegations in the show cause notice and the findings in the adjudication order is not permissible. When show cause notice had neither questioned availment of CENVAT credit nor alleged that documents were not provided, finding in Adjudicating Authority that assessee had avoid submission of required documents, was not sustainable.
Delay in adjudication
In ‘Britt Worldwide India Private Limited V. Union of India’ – 2016 (1) TMI 737 - BOMBAY HIGH COURT the petitioner challenged the order that the impugned order has been passed 17 months after the personal hearing was over. This unreasonable and unexplained delay itself vitiates the conclusion reached in the impugned order. It is not disputed by the Department that there is indeed a long delay in passing the impugned order after the conclusion of personal hearing. The Department pointed out the administrative and other difficulties. The High Court set aside the impugned order and directed to adjudicate the show cause notice afresh and pass a fresh order.
Scope of the order
In ‘Himalaya Constructions Private Limited V. Union of India’ – 2015 (12) TMI 1055 - PUNJAB AND HARYANA HIGH COURT the High Court held that order cannot be passed without considering overall material on record, including reply to show cause notice. It has to give detailed reasons on issues raised in reply. In absence thereof there is a violation of principles of Natural Justice.
In ‘Union of India V. Spectrum Coal & Power Limited’ – 2015 (2) TMI 1130 - CHHATTISGARH HIGH COURTthe High Court held that any order prejudiced to assessee is required to be reasoned and considered. It is the duty of the Adjudicating Authority to deal with all issues raised before him specially precedent order of the Supreme Court. The action of the Commissioner is unfair and arbitrary. The High Court set aside the order.
In ‘Commissioner of Central Excise & Service Tax, Trichy V. Grasim Industries Limited’ – 2015 (12) TMI 272 - CESTAT CHENNAI the respondent in the reply to show cause notice specifically brought to the notice of the authorities below that Pollution Control Board required trees to be planted to prevent pollution. That required service of contractor suffered the service tax. But the Adjudicating Authority did not pay any regard to such material act to record the same for consideration of claim of the respondent. The High Court held that the authorities are expected to record the material fact properly and that the same with evidence on record so that the decisions flow in accordance with the law. Failure to do so results in mockery or miscarriage of justice.
Service of order
Service of the order passed by the Adjudicating Authority is a must for compliance of the order by the assessee or for filing appeal before the next appellate authority within the limitation period. The Authority should ensure the delivery of the order by the assessee.
In ‘Rajshree Enterprises V. Commissioner of Central Excise, Jaipur’- 2016 (5) TMI 677 - CESTAT NEW DELHIthe Commissioner (Appeals) dismissed the appeal as time barred. The appellant has filed an affidavit to the fact that they have not received the adjudication order and the affidavit has not controverted by Commissioner (Appeals) with cogent evidence. In those circumstances, the Tribunal held that the affidavit filed by the appellant is having evidentiary value. Therefore, it is held that the appellant has not received the order in the year 2010 and received the order only on 09.1.2013 and filed appeal on 08.03.2013 which is well within the time.
In ‘Jyoti Enterprises V. Commissioner of Central Excise & Service Tax’ – 2015 (12) TMI 804 - ALLAHABAD HIGH COURT it was held that if the order is served on a member of the family, it is duly served on.