Show cause notice is the foundation of the case made against the assessee. If the department is of the view that the assessee has not paid tax required to be paid or if there is any contravention of the provisions of the act on the behalf of the assessee, the department can issue a show cause notice upon the assessee under Section 73 of the Finance Act, proposing recovery of demand of Service Tax along with imposition of penalties and interest, if applicable. The show cause notice is issued based on the allegations levelled against the assessee and the allegations made have to be very specific and clear without any confusion. The show cause notice demonstrates the charge against the assessee, on the basis of which the case has been made against the assessee. However, if the allegations or charges are not clear, the assessee would not be in a position to respondent to the same and explain its stand before the authorities. A show cause notice with the allegations or charge which is not clear, specific and confusing, would disable the assessee to file any reply to the same, and consequently would be considered as 'Vague or Incoherent' show cause notice. A vague show cause notice would defeat the principles of natural justice and hence, not sustainable in the eyes of law. Any case made out against the assessee with the issuance of show cause notice, which is vague in nature, would vitiate the whole proceedings. Moreover, any order passed on the basis of a show cause notice which is vague in nature, would also be non-sustainable.
A case was argued by our team before the Hon'ble CESTAT Delhi, wherein the demand was proposed and confirmed against the assessee/appellant under the three different categories i.e., Erection, commissioning or installation service, works contract service & Commercial or Industrial construction service, without confining to one particular service. On the behalf of the Appellant, our team strongly argued the matter on merits, however, apart from the submissions on merit, it was submitted that the order of the Commissioner is liable to be set aside solely on the ground that the show cause notice issued to the appellant alleges alternative services have been provided by the appellant. Reliance was placed on the decision of M/s Shubham Electricals Vs CST & ST, Rohtak – 2015 (40) S.T.R. 1034 (Tri. – Del.). On the behalf of the revenue, the findings of the impugned order were supported and it was submitted that the impugned SCN and the adjudication order do not suffer from any illegality.
The Hon'ble Bench after considering the submissions made from both the sides, found that the show cause notices alleges that the service provided by the appellant can fall either under the category of 'erection, commissioning or installation service' or 'works contract service.' The impugned order passed by the Commissioner also proceeds to classify the service provided by the appellant and in this connection has referred all the services i.e. 'erection, commissioning or installation, works contract service & commercial or industrial construction service.' The show cause notice alleges that the services provided by the appellant could have fallen under any of the aforesaid three categories and the Commissioner has also not confined the order to one particular service and has considered all the three categories, while confirming the demand against the assessee/appellant. The Hon'ble bench taking note of the decision of Shubham Electricals relied upon by the Appellant, found that a similar controversy was dealt in this matter since the show cause notice also alleged that the services provided could either be classified under 'management, maintenance or repair service or erection, commissioning or installation service' and the impugned order was set aside for the reason that the show cause notice was vague and incoherent. Further, the aforesaid order of the Tribunal was affirmed by the Hon'ble High Court of Delhi reported as 2016 (42) S.T.R. J 312 (Del.).
The Hon'ble Bench with the above observations and findings, held the show cause notice issued in the present appeal is also vague and incoherent as it alleges that the appellant could have provided any of the three alternative services. Therefore, in view of the findings in the decision of Shubham Electricals and the decision of Delhi High Court, the impugned order in the present appeal was set aside and the appeal was accordingly allowed.
Case details — Jai Shree Shyam Borewell Co. v. Commissioner of Central Tax, Jaipur
Forum — CESTAT, New Delhi
Case No. — Final Order No. 50036/2023
Represented by — CA Atul Kumar Gupta & CA Anmol Gupta