The Mumbai bench of Customs Excise & Service Tax Appellate Tribunal (CESTAT) has held that adjudication of a Show Cause Notice (SCN) demanding service tax issued on the same set of facts without adjudicating first one is not tenable.
M/S Shairu Gems Diamonds Pvt. Ltd., the appellants are engaged in manufacturing and selling cut and polished diamonds. During the disputed period 2012 – 13, the Service Tax Commissionerate-l, Mumbai, had initiated show cause notice proceedings on the ground that the appellants have remitted foreign currency to companies based outside India, and certain services have been rendered to the appellant by such foreign companies during the purchase of rough diamonds.
The department alleged that the appellants had received Business Auxiliary Service from M/S. Bonas & Co. Ltd., London and had paid them a commission in foreign currency for services received from outside India.
It was also alleged that the appellant had also paid in foreign exchange against receipt of the taxable service namely Business Support Service from M/S Diamond Trading Company, United Kingdom (DTC Ltd.) for the purchase of diamonds. Since those overseas service providers have no offices in India, the appellants were liable to pay service tax under the reverse charge mechanism in terms of Section 66A of the Finance Act, 1994 read with Rule 3(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.
Since the appellant did not discharge the service tax liability as a recipient of such services in India, the department issued the show cause notice on 01.11.2013, seeking confirmation of the service tax demands along with interest and for the imposition of penalties.
The matter arising out of the show cause notice dated 01.11.2013 was adjudicated by the Commissioner of Service Tax-IV, Mumbai vides impugned order dated 29.01.2016, wherein service tax demand of Rs.40,07,544/- was confirmed along with interest.
It was submitted that on an identical set of facts for the earlier period i.e., April 2008-March 2012, the department had issued the show cause notice on 21.08.2012, seeking confirmation of the service tax demand along with interest and penalty, He submitted that the same notice issued by the department had so far has not been adjudicated upon by the competent authority.
It was argued that both the show cause notices were issued concerning the same set of facts, the original authority should adjudicate upon the first show cause notice, instead of the subsequent follow-up show cause notice issued subsequently for the later period.
It was observed that the Commissioner referred to the show cause notice dated 21.08.2012 having been issued to the appellant, seeking confirmation of service tax demand for the period 2008 to 2012 but not taken up for adjudication in his impugned order.
A Coram comprising of Mr S K Mohanty, Member (Judicial) and Mr M M Parthiban, Member (Technical) observed that since the first show cause notice dated 21.08.2012 has considered the aspects of liability for payment of service tax by the recipient of service consequent upon analysis of the statutory provisions, it was required to be adjudicated at the first instance and the subsequent follow-up show cause notices issued thereafter to be adjudicated at a later stage.
The Tribunal set aside the impugned order and remanded the matter back to the original authority with a direction to adjudicate both the show cause notices referred (supra) and pass a speaking order as per provisions of law.
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