Averments without Providing Nature of Service and Classification of Taxpayer in SCN is Vague: CESTAT upholds Rs. 9 Cr Service Tax Demand Drop [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) Hyderabad held that averments in a Show Cause Notice ( SCN ) without providing the nature of service and classification of the taxpayer are vague, resulting in the upholding of the Rs. 9 crore service tax demand drop.

The appellant, Vijay Mining & Infra Corp Pvt Ltd., is registered under the service tax department for various services, including 'Mining of mineral, oil or gas service,' 'Goods Transport Agency service' ( GTA ), and 'Supply of Tangible Goods service' ( SOTG ).

Following audits for the period 2009-10 to 2011-12, the department alleged that the appellant had not paid service tax correctly. Consequently, an SCN was issued, demanding service tax under various heads for the period April 2009 to March 2011, invoking the extended period of limitation.

Another SCN was issued later, alleging that the appellant had not availed the benefit of the Voluntary Compliance Encouragement Scheme (VCES) due to non-payment of at least 50% of the tax dues. The department demanded tax dues of Rs.6,11,70,185/- under Section 110 read with Section 111 of the Finance Act, 2013.

The department further demanded tax dues of Rs.9,68,42,681/- jointly under the head 'Mining service' (waste handling charges from mine head to dump yard) and 'Cargo Handling service' for the period April 10, 2008 to August 11, 2010, invoking the extended period of limitation.

The key issue in the case was the compliance of the appellant with the Voluntary Compliance Encouragement Scheme (VCES) under the Finance Act, 2013. The appellant had declared service tax dues of Rs. 28,55,26,115/- up to 31.12.2012. The Revenue's demand was based on alleged discrepancies in tax payments and the use of Cenvat credit, which they claimed were not appropriately accounted for by the appellant.

S. Sunil, representing the appellant, argued that they had accurately declared their dues and paid substantial amounts through both Cenvat credit and direct payments. They maintained that the Revenue's calculations were erroneous and did not consider all payments made.

It was also emphasised that their tax liabilities had been settled under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS) of 2019, which provided for the settlement of legacy disputes with substantial relief on penalties and interest.

The bench of Anil Choudhary (Judicial Member) and A.K. Jyotishi (Technical Member) held that the demand of Rs.6,11,70,185/- raised under VCES was not justified as the department had not considered the amount paid through Cenvat credit.

However, the bench agreed with the department that the appellant was not eligible for the VCES scheme due to their failure to deposit 50% of the tax dues by the due date.

The Tribunal observed that the department was already aware of activities of the appellant due to previous audits and the issuance of an SCN in October 2014. This prior knowledge, according to the CESTAT, precluded the department from invoking the extended period of limitation for the SCN dated December 2014.

Accordingly, the bench set aside the disputed demand of Rs. 6,11,70,185/- and upheld the dropping of the Rs. 9,68,42,681/- demand.

To Read the full text of the Order CLICK HERE

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