By TIOL News Service

HYDERABAD, OCT 28, 2015: When the respondent assessee approached the Service Tax authorities for registration under the category "Technical Testing and Analysis" service, (taxable with effect from 01.07.2003), department felt that the service is classifiable under "Consulting Engineer" service (taxable with effect from 07.07.1997) and issued a letter to that effect. The respondent tried to justify their claim of classification. After personal hearing, an adjudication order was passed confirming the classification as "Consulting Engineer". The Commissioner (Appeals) also confirmed the demand. On appeal, the Tribunal vide 2007-TIOL-1315-CESTAT-BANG allowed the appeal on the ground that no Show Cause Notice had been issued to the assessee. Aggrieved, revenue is in appeal before the High Court.

After hearing both sides, the High Court held:

+ It is an undisputed fact that the Tribunal had categorically recorded that no show cause notice was issued at any point of time and the order of the Commissioner was set aside on that ground. A perusal of Section 73 of the Finance Act leaves no manner of doubt that there is a requirement of issuance of notice by an authority who is not below the rank of Assistant Commissioner / Deputy Commissioner. The notice is required to state whether the noticee falls within the category of Section 73(1)(a) or 1(b) of the Act and further specify the amount of service tax that is payable. In the present case, admittedly, no notice was issued to the respondent. Reliance is placed on the letter dated 17.08.2001 which was issued by the Superintendent who is not authorized to issue such notice and he is only a subordinate officer to the Deputy / Assistant Commissioner. Further, the letter dated 17.08.2001 does not satisfy the requirements of the notice as there is no allegation that a specified amount is required to be paid as service tax and even no period is mentioned therein. By no stretch of imagination, the letter dated 17.08.2001 could be treated as a show cause notice satisfying the requirement of Section 73 of the Act. As a matter of fact, this letter was issued only as a clarification to the query raised by the appellant to the respondent seeking that they are required to be registered as technocrats for the services of scientific or technical consultancy. The said letter is more in the nature of providing advice to the appellant. The procedural requirement of issuance of notice and calling for explanation cannot be dispensed with as otherwise the demand of money in the name of tax is in violation of the very procedure prescribed under the Act, thus violating the safeguard provided under Article 265 of the Constitution of India.

Thus, the High Court upheld the order of the Tribunal and dismissed the appeal filed by revenue.

(See 2015-TIOL-2488-HC-AP-ST)