By TIOL News Service

NEW DELHI, AUG 03, 2016: THE facts are that the appellant is registered with department for air travel agent service, tour operators service and business auxiliary service. Initially, a SCN was issued for the period 2004-2005 to 2008-2009 on 8.4.2010.

Later, the appellant was asked to provide details/documents/information for the period April, 2009 to March 2010 through various letters dated 3.6.2010, 4.7.2010, 28.7.2010, 3.9.2010 and lastly on 1.10.2010. But the appellant did not provide any details to the department.

Therefore, a SCN was issued by invoking the provisions of section 72 of the FA, 1994 mentioning that best judgment assessment is attracted as no returns were furnished by assessee. Incidentally, the service tax liability was computed by enhancing the previous year turnover by 25%.

The section reads -

72. Best Judgment Assessment - If any person liable to pay service tax, -

a. fails to furnish the return under Section 70;

b. having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made thereunder,

the Central Excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment...."

This SCN was challenged and the Delhi High Court directed the adjudicating authority to decide the matter with regard to jurisdiction.

The adjudicating authority held that SCN is maintainable and the same was confirmed by the Commissioner (Appeals).

The CESTAT while setting aside the order and allowing the appeal observed –

+ in this case, the allegation against the appellant is that they have not filed their ST 3 return under section 70 of the Act. If that is so, then the provision of section 72(a) are attracted. But it is a fact on record that the appellant has filed their return regularly under section 70 of the Act. Therefore, the foundation of the show cause notice that the appellant has not filed their return is incorrect. If the case of the Revenue is that appellant has not filed the return, the provision of section 72 are attracted. The said allegation against the appellant stand disapproved as the appellant has filed their return regularly.

+ there is no allegation against the appellant that they have filed the return and failed to assess the tax in accordance with the provisions of law. Therefore, we hold that provision of section 72(b) are not attracted in the show cause notice and the show cause notice has been issued without appreciating the facts that the appellant have been filing the return regularly.

+ in the paragraph 4 of the show cause notice, it is mentioned that appellant were asked to provide details /documents/ information for issuance of the show cause notice, through various letters. On examination of those letters, we find that in para 2 of the same, it is alleged that the appellant has not filed proper reply inspite of letters issued to them. Hence, he was requested to furnish following information/ details/ documents for the period April, 2009 to March, 2009. But, what are the documents /information and details as required is not been mentioned in these letters. For that, appellant has specifically asked the department to tell what information they require, but despite the appellants request, it was not informed what information /details /documents were required for by the department to issue the show cause notice. In the absence of any document, nature of details which was sought to be asked from the appellant specifically, in that case the show cause notice is only on the basis of assumption and presumption.

We reported this order as - 2015-TIOL-2270-CESTAT-DEL.

Revenue is unhappy with this order and so is before the Delhi High Court.

After narrating the facts involved and considering the submissions made, the High Court observed -

…counsel for the Department was unable to point out how Section 72 (a) could possibly be invoked when admittedly the return for the period April to September, 2009 had been filed on 22nd October 2009 and for the period October 2009 to March 2010 on 22nd April 2010 with the jurisdictional service tax office. Therefore, the factual basis on which the SCN was issued invoking Section 72(a) of the Act was non-existent. Secondly, the SCN does not make out a case for invoking Section 72 (b) of the Act. Consequently, the question of adopting best judgment assessment did not arise. Thirdly, there could be no failure by the Respondent to provide information when the letters of the Department failed to specify the specific information that was to be provided.

Adverting to the decision in Mega Cabs Pvt. Ltd. v. Union of India - 2016-TIOL-1061-HC-DEL-ST, in the context of the applicability of Section 72, the High Court observed that the CESTAT was right in concluding that the second SCN dated 20th October 2010 was not maintainable.

Holding that no substantial question of law arises for consideration from the impugned order of the CESTAT, the appeal was dismissed.

(See 2016-TIOL-1617-HC-DEL-ST)