A Model Show Cause Notice and Adjudication Order? Government loses 3 Crores Demand
06 07 2015
Monday
IN a case before the CESTAT recently, the Show Cause Notice stated,
Whereas from the documents submitted by the party it appears that they have rendered the taxable services which may either be classified under "Management, Maintenance or Repair service' or 'Erection, Installation and Commissioning services' and other construction linked services as defined under the Finance Act, 1994".
Thus the Show Cause Notice alleged that the assessee must have rendered the taxable service which may be classified under:
1. "Management, Maintenance or Repair service' or
2. 'Erection, Installation and Commissioning services' and
3. Other construction linked services.
The Department was not sure as to what taxable service they rendered, but sure they were that some service was rendered, only they were not sure where to classify it.
In the entirety of the show cause notice, there was not a single assertion proposing to levy and collect service tax on the basis of any specified taxable services allegedly rendered by the appellant except the several alternative taxable services speculated to have been proved and set out as above.
If this was the model Show Cause Notice, the adjudication was no better.
The Adjudication Order :
The Tribunal observed, “The impugned adjudication order is drafted in 32 paras spread over 22 printed pages.
1. Paragraphs 1 to 17 reiterate almost verbatim, the contents of the show cause notice.
2. Para 18 elaborates the response of the appellant and its several defences to the vague and incoherent allegations in the show cause notice.
3. Para 19 sets out particulars of the personal hearing provided.
4. Paras 20 to 31 purport to be part of discussion and findings of the Commissioner.
5. Para 20 is formal in nature and states to have considered the facts of the case, the records and as to providing personal hearing.
6. Para 21 identifies the issues involved in the case. The third sentence in para 21 onwards is a reproduction of para 7 of the show cause notice.
7. Paras 22 to 28 are reproduction of paras 8, 9, 11, 12, 14, 15, 16 and 17 of the show cause notice.
8. Paras 29 to 31 could alone be considered, if at all, the analysis by the learned Commissioner. Para 29 asserts that none of the contentions of the appellant are tenable since it failed to provide the required information to the Department during investigation. It is also observed that the appellant obtained service tax registration for Works Contract on 10/12/07 and was therefore aware of the applicable law. From this observation, the Commissioner infers that the appellant willfully suppressed the fact of earning/receiving taxable income and withheld information which led to evasion of service tax. In para 31, the impugned order records that though the appellant intentional and willfully suppressed the taxable value and failed to remit service tax, the facts came to light only during the process of audit. Para 31 abruptly jumps to the conclusion, without any preceding analysis nor a finding as to the specific taxable services provided by the appellant, that service tax of Rs. 1,53,14,782/- is recoverable under the proviso to Section 73 (1) of the Act alongwith interest, excluding penalty under Section 76. Para 32 records the operative portion of the order declaring the specified liability to service tax, interest and penalties.
This is how many of the Show Cause Notices and adjudication orders are issued by the learned Revenue officers!
Government loses 3 crores demand:
The Tribunal observed,
| 1. The show cause notice and the impugned adjudication order are vitiated by incoherence and vagueness. |
| 2. There cannot be a best judgment assessment regarding the specific taxable service provided. There can be no best judgment, for instance as to whether the tax liability is for income tax, sales tax, excise duty, customs duty, service tax or professional tax. |
| 3. A conclusion as to the taxable event and the liability to tax under the appropriate fiscal legislation authorizing the levy and collection of such tax is a matter for determination with precision and clarity and not by a process of guess-work or speculation . |
| 4. Neither the show cause notice dated 21/10/11 nor the impugned adjudication order dated 18/1/13 record any assertion/ conclusion whatsoever as to which particular or specific taxable service the appellant had provided. |
| 5. In the absence of an allegation of having provided a specific taxable service in the show cause notice and in view of the failure in the adjudication order as well, neither the show cause notice nor the consequent adjudication order could be sustained. |
| 6. The Act provides ample powers including of search under Section 82 of the Act to obtain information necessary to pass a proper, disciplined and legally sustainable adjudication order. |
| 7. The disinclination to employ the ample investigatory powers conferred by the Act is illustrative of gross Departmental failure and cannot afford justification for passing an incoherent and vague adjudication order. |
| 8. The failure to gather relevant facts for issuing a proper show cause notice cannot provide justification for a vague and incoherent show cause notice, which has resulted in a serious transgression of the due process of law. |
The Tribunal held that the show cause notice dated 21/10/11 and the consequent impugned adjudication order dated 18/1/13 are unsustainable and quashed the same.
Please see Breaking News and 2015-TIOL-1339-CESTAT-DEL
Show Cause Notice - NACEN Lesson
A Study Material issued by NACEN states,
The Show Cause Notice is more than a notice. It gives an opportunity to the Department of leading evidence in support of its allegations and equally it gives an opportunity to the person/firm/company charged with, to make representation and adduce evidence against the allegations or charges made out against them.
1. The Show Cause Notice should be issued only after proper inquiry/investigation i.e. when the facts used are ascertained and allegations are justified.
2. The Show Cause Notice should be in writing (not oral). The date of issue of Show Cause Notice should be clearly written.
3. The Show Cause Notice should not be an exercise in deliberate ambiguity. It should be specific and unambiguous.
4. It should be clear on facts and legal provisions. Violation of the provisions of law should be clearly brought out in the Show Cause Notice.
5. The charges should be specific. They should not be vague/or contradictory.
6. The provisions for imposing penalty and reasons and conclusion for the same be clearly mentioned.
7. Copies of the relied upon documents should be listed in seriatim as per the references made in the Show Cause Notice and given as Annexures to the Notice.
8. The duty amount needs to be quantified and explained in a chart as to how the same was arrived at. The duty demanded should be manifestly specified in the notice itself.
9. When mis-statement or suppression of facts is alleged in the Show Cause Notice, these expressions must be preceded by the word ‘willful'. Likewise, when the allegation is that of contravention of the provisions of the Act or the rules, the same must be followed by the expression ‘with intent to evade payment of duty'.
10. If the time limit to reply is provided in Law, it should be adhered to, otherwise, adequate time should be given for filing a written reply.
11. The Show Cause Notice should clearly mention whether the noticee(s) wishes to be heard in person, apart from filing a written representation, in the matter.
12. The authority to which the Show Cause Notice is answerable should be specifically stated along with the postal address.
Obviously these things are not taken seriously.
CESTAT Single Member Cases - Information Sought from Lawyers
THE CESTAT Registrar notes that,
Consequent to Finance Act, 2013, the monetary limit of Single Member case was raised from Rs.10 lakh to Rs. 50 lakh, where the issue does not involve classification/valuation or interpretation of a notification. Steps have already been taken to transfer such matter to the Single Member Bench Registry for listing such matters before the Hon'ble Single Member Bench for disposal. In spite of best efforts by the Registry some of the matters are still left with respective division Benches.
So, he requests Advocates, Consultants and AR's Office to provide detailed list of cases where the issue does not involve classification/valuation or interpretation of a Notification and the amount of duty/penalty involved is less than Rs. 50 lakhs, so as to list such cases before the Single Member Bench.
CESTAT F.No.01/04/Circular/CESTAT/2014., Dated: June 29, 2015
CESTAT - Posting Problems?
THIS is not about posting of cases; this is about posting of Members. It seems there is deep dissatisfaction among some Members of the CESTAT about their place of posting. It is heard that a Member has even resigned. It seems for one Bench in Ahmedabad, there are three Members, while there are not enough Members in Delhi. Of Course the Cause List states that a new Member is joining today. It is heard that a retired officer selected for the post of Member is not joining as he is posted to a place he doesn't want. Members of the CESTAT are almost equal to High Court judges and most of the technical members join at the age of 58 plus. Can't they be adjusted in their places of choice in the last few years of their service? Should they be also subject to the rigours of transfer as any other employee? Does the Revenue Department want to show their authority?
In the meanwhile a Circuit Bench will function in Allahabad from today. The High Court had directed that a Bench should start function from Allahabad.
From IRS to IAS
THE IAS topper this year is IRS probationer Ira Singhal. The Revenue Secretary Shaktikanta Das tweeted,
Congratulations to IAS topper Ira Sehgal. Her performance in Customs and Excise training academy was impressive. Great determination.
It's Ira Singhal. Makes every Indian feel proud. Feel very happy for the Customs and Excise IRS officer. Congratulations to her parents.
Third rank holder in UPSC exams Nidhi Gupta. Also from Excise and Customs. Congratulations to her.
The 5th rank holder Suharsha Bhagat, the first among men, is currently serving as an IRS (Income-Tax) officer.
Preeti Mishra, daughter of retired Superintendent of Central Excise PN Mishra of Uttarakhand has secured 526th rank. She will get a Central Service.
Congrats to the winners.
GST will accelerate investment - FM
FINANCE Minister Arun Jaitley in a Facebook post said,
There is an ambitious program to increase public investment in roads, railways, rural infrastructure and connectivity (the SECC shows, for example, that mobile penetration is only about a quarter in rural Chattisgarh).
At the same time, the government is creating the conditions for greater private investment: implementing the GST and creating a common market, reforming the land law, easing the costs of doing business, and unblocking stalled projects are all measures that will improve the conditions for investment.
The latest data suggest that the investment cycle is slowly turning around and stalled projects are being unblocked at a faster pace. Passing the GST and reforming the land law will accelerate this investment turnaround.
Until Tomorrow with more DDT
Have a nice day.
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