CESTAT Quashes Order as SCN Deemed Time-Barred, Issued Beyond Period of Limitation [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad bench has quashed an order related to a service tax appeal on the grounds that the Show Cause Notice (SCN) was deemed time-barred and issued beyond the period of limitation.

The case pertained to an order-in-original passed by the Commissioner of Central Excise against Kandla Port Trust confirming a demand of interest amounting to Rs. 3,04,00,376/- under Section 75 read with Section 71(1) of the Finance Act, 1994. Additionally, a penalty of Rs. 10,000/- under Section 77 and a penalty of Rs. 3,04,00,376/- under Section 78 of the Finance Act, 1994 were also imposed.

The appellant assessee, Kandla Port Trust, now known as Ms. Deendayal Port Trust, represented by Shri Jigar Shah, contended that service tax was not payable on the leasing of the land as the lease contract had expired, rendering the occupation by the oil companies unauthorized.

The assessee argued that without a valid contract, no service tax could be charged.

The assessee further stated that the bills raised were for compensation against the unauthorized occupation and not for lease rent, making the service tax levy unjustified.

The assessee also emphasized that the SCN was not issued under Section 73(1) of the Finance Act, 1994 and, therefore, neither interest nor penalties were recoverable.

The assessee submitted that the SNC is time-barred since the same is issued after the normal period of 1 year and the assessee being a Trust of Government of India, invocation of the extended period is not legal and proper as there is no malafide intention on the part of the assessee.

Shri Prabhat K Rameshwaram, the Additional Commissioner representing the Revenue, reiterated the findings of the order.

The two-member bench comprising Mr. Ramesh Nair (Judicial Member) and Mr. C.L. Mahar (Technical Member) found merit in the assessee's contentions.

The bench observed that the issue of taxability on the service of renting immovable property was raised for the first time before them and was not part of the SCN or the order.

The tribunal noted that the notice only demanded interest and penalties, with no demand for service tax.

Additionally, it was revealed that the SCN was issued after the normal period of limitation, rendering it time-barred.

Citing the precedent set by the judgment in Pushpam Pharmaceuticals Company vs. CCE, Bombay – 1995 (78) ELT 401 (SC), the bench emphasized that the SCN being time-barred rendered the order unsustainable.

The CESTAT further highlighted that since no demand of service tax was raised under Section 73(1) of the Finance Act, 1994, the penalty under Section 78 was not sustainable.

The bench kept the issue of taxability open, considering that the SCN did not raise a demand for service tax despite the appellant having paid it.

In result, the bench quashed the order and allowed the appeal.

To Read the full text of the Order CLICK HERE

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