The New Delhi ,Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that Commissioner (Appeals) has no Jurisdiction to issue SCN under section 73 of the Finance Act, 1994 and the order passed by the Commissioner of Appeal, which confirmed the demand of interest and Penalty is not valid.
KEI Industries Limited, the appellant is engaged in the manufacture of winding wire, plastic cable and SS wire. In addition to the manufacturing activity, the appellant is also engaged in providing turnkey project services and erection and commissioning services, mainly to electricity distribution companies.
A show cause notice dated 07.09.2017 was issued to the appellant proposing a demand of Rs. 1,70,89,498/- under rule 6(3A) of the CENVAT Credit Rules, 2004 on the ground that apart from manufacturing excisable goodsand provision of output services, the appellant was also engaged in trading of goods in such turnkey projects, which would qualify as ‘exempted service’
Further viewed that the CENVAT credit was liable to be reversed under rule 6(3A) of the 2004 Credit Rules. The proposed demand of Rs. 1,70,89,498/- was confirmed by the Additional Commissioner by the order dated 19.03.2018 with interest and penalty.
The Commissioner (Appeals) purported to exercise powers conferred under the second proviso to section 35A(3) of the Excise Act read with section 73 of the Finance Act and issued a fresh notice dated 29.12.2020 to the appellant proposing a demand of service tax of Rs. 37,05,65,014/- for short payment of service tax for the period from October 2014 to June 2017 with interest and penalty. The Commissioner (Appeals) also invoked the extended period of limitation contemplated under the second proviso to section 73(1) of the Finance Act.
It was contended that the Commissioner (Appeals) have no power to issue a fresh notice demanding service tax short paid by the appellant in an appeal filed by the appellant to assail the order passed by the adjudicating authority confirming the demand of service tax based on an earlier show cause notice.
In Commissioner of Service Tax versus Associated Hotels Ltd, the Madras High Court observed that sub-section (3) of the 35A of the Excise Act cannot be superimposed into sub-section (5) of 85 of the Finance Act, as sub-section (4) of 85 Finance Act provides for how the Commissioner (Appeals) shall hear and determine the appeal.
A Coram comprising Justice Dilip Gupta, President and Mr P V Subba Rao, Member (Technical) held that the Commissioner (Appeals) did not have the power to issue the notice under section 73(1) of the Finance Act. The notice dated 29.12.2020, therefore, that was issued by the Commissioner (Appeals) under section 73(1) of the Finance Act was without jurisdiction.
While allowing the appeal of the assessee, the order dated 31.03.2021 passed by the Commissioner (Appeals) was set aside and the matter is remitted to the Commissioner (Appeals) to pass a fresh order by restricting his decision to the order dated 19.03.2018 passed by the Additional Commissioner confirming the demand proposed in the show cause notice dated 07.09.2017.
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