In the previous cases, we have already discussed regarding the vagueness of the show cause notice or adjudication order. If the charge is not clear in the show cause notice, disabling the assessee to respond to it, the said show cause notice would not sustain in the eyes of law. If the show cause notice is proposing the demand against the assessee under two categories for the same activity and the word 'or' and 'may' has been used, it very clearly shows that the allegations of the show cause notice are not clear and the department itself is not clear that under which category the activity of the appellant would fall. Issuance of show cause notice in such circumstances without proper inquiry about the business of the assessee, would certainly lead to a vague show cause notice. The allegations have to be very clear in the show cause notice otherwise, it would be considered as a vague or incoherent show cause notice. In most of the case, the reason behind the issuance of a vague show cause notice, is that the show cause notice is issue without proper inquiry, for which the powers are available with the department officers under the act. Further, it has also been discussed in the previous cases that any order passed beyond the scope of show cause notice is not maintainable in the eyes of law. The order has to be passed within the scope or ambit of the allegations levelled in the show cause notice and it cannot go beyond that. Any show cause notice issued beyond the scope of show cause notice or passed on the basis of some new allegations which were not there in the show cause notice would make the order not maintainable in the eyes of law. Similarly, if the Service Tax has been demanded on the transaction which is leviable to VAT or excisable good, the demand proposed in the show cause notice would not be maintainable. If any machinery has been supplied to the customer with complete control and possession, it would be considered as 'Right to use' and leviable to VAT. The supply of machinery would not be covered under any of the services in the Finance Act or under services such as 'Supply of Tangible Goods'. In case of 'Supply of Tangible Goods, the effective control and possession of the machinery is not transferred to the customer. Moreover, service tax cannot be demanded on the transaction, on which the assessee is already paying VAT, both the taxes are mutually exclusive.
Our team handled a case before the Hon'ble CESAT Delhi, wherein the Appellant was engaged in the supply of transit mixers and sale of RMC. On audit being conducted of M/s Larsen & Toubro, it was noticed by the department that the appellant/assessee is providing the taxable services in the capacity of 'sub-contractor' which may be classified under the category of 'Commercial or Industrial construction' and 'Works Contracts Services'. A show cause notice was issued proposing demand under the aforesaid categories however, the adjudication order confirmed the demand against the appellant under the category of 'Supply of Tangible Goods.' On the behalf of the appellant/assessee, it was submitted by our team that the impugned show cause notice is vague and the impugned order is beyond the scope of show cause notice. The invocation of Section 72(a) is not tenable. On merits, it was submitted that supply of transit mixers in the present case is covered under 'Right to use' not 'Supply of tangible goods.' Further, sale of RMC is not leviable to Service Tax as it is a simple sale transaction and there is no element of Service. With respect to demand under 'Goods Transport Agency', it was submitted that in terms of rule 2 (1) (d) (v), the tax would be payable on the basis of reverse charge and the person paying the freight was required to pay the tax. It was submitted that the payment of Service Tax and VAT, both are mutually exclusive. Extended period of limitation would not be invocable as the appellant was under a bonafide belief. On behalf of revenue, it was submitted that the appellant is working under a self-assessment system and therefore was duty bound to correctly assess the service tax liability and file the return accordingly, but the facts were never disclosed to the department. Section 72 was rightly invoked by the department as requisite reply along with documents was not submitted by the appellant. The appellant is providing several activities which involves both transfer of material as well as the service activities, hence, VAT and Service Tax, both would be applicable/payable.
The Hon'ble Bench after considering the submissions made and the facts of the case, found that the show cause notice is the present case is vague as it is completely silent on the nature of the respective activities so as to fall under any specific 'service' as defined under the Finance Act. The Hon'ble Bench referring to the decisions of Shubham Electricals Vs. Commissioner of C. Ex. And ST, Rohtak – 2015 (40) S.T.R. 1034 & on Indo Nippon Chemicals Co. Ltd. Vs. Commissioner of C. Ex. Vadodara – 2009 (16) S.T.R. 639,, held that the Hon'ble Tribunal time and again has observed that the Officers have ample powers under the statute to make effective enquiry and investigation. And, the issuance of show cause notice without proper enquiry & investigation would lead to a vague show cause notice, when the department wrongly classified the services provided by the appellant despite the fact, the information was provided by the appellant to the department about its activities. Further, referring to the decisions relied upon by the Appellant in Futura Interiors Vs. Commissioner of GST & C.Ex., Chennai – 2019 (24) GSTL 261; JSEL Securities Ltd. Vs. Commissioner of C. Ex. & ST, Jaipur – I – 2017 (4) GSTL 8 & Inox Leisure Ltd. Vs. Commissioner of Service Tax, Hyderabad – 2022 (61) GSTL 326, held that repeatedly the Apex Court as well as the Tribunal has reiterated that the confirmation of service tax beyond the scope of show cause notice, is not sustainable and on this infirmity, the proceedings will fail. Therefore, the impugned show cause notice is not tenable and liable to be quashed. On merits, the Hon'ble Bench agreed with the submissions made on the behalf of the appellant that the sub-contractor would not be automatically covered under construction services, if the main contractor is providing 'Works Contract Service' in view of Circular No. 147/16/2011 dated 21.10.2011. While discussing the issue of 'Supply of Transit Mixers', it was found that the case is squarely covered by the decision of Andhra Pradesh High in G.S. Lamba & Sons Vs. State of Andhra Pradesh – 2015 (324) ELT 316 (AP). Further, the Hon'ble Bench taking note of decisions in Express Engineers & Spairs Pvt. Ltd. Vs. Commissioner of CGST, Ghaziabad – 2022 (64) GSTL 112 and the decision of Bharat Sanchar Nigam Ltd. Vs. Union of India – 2006 (2) S.T.R. 161, and perusal of the various clauses of the agreement found that full control of the transit mixers, i.e., on the method, manner, and time of using them is absolutely vested in M/s L& T. Therefore, the appellant had not rendered any service to L& T providing the transit mixers on hire rather have transferred the right to use goods to L & T chargeable to VAT only. Deciding on the issue of taxability of RMC, it was found that the Hon'ble Tribunal in GMK Concrete Mixing Pvt. Ltd. Vs. Commissioner Service Tax, Delhi – 2012 (25) S.T.R. 357 that preparation and supply of RMC is not a service which can be taxed under Finance Act. And, this case was later affirmed by Hon'ble Supreme Court, thus the issue already stands decided and thus, the appellant is not liable to pay any Service Tax on the supply of RMC to M/s L& T. With respect to demand confirmed under the head 'Goods Transport Agency', for transportation of concrete from L&T to Delhi Airport project, it was found that the appellant does not issue any consignment note and thus, in view of the settled law in this regard, it was held that the services provided by the appellant is not covered under 'GTA'.
The Hon'ble Bench with the above observations and findings, allowed the appeal by setting aside the impugned order.
Case details — R.V. Infrastructure Pvt. Ltd. v. Commissioner of Central Tax
Forum — CESTAT
Case No. — Final Order No. 51608/2023 dated 07.12.2023 in ST/50616/2018
Represented by — CA Atul Kumar Gupta & CA Anmol Gupta