The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) quashed a second show cause notice ( SCN ) issued demanding service tax on operation of heavy water plant.
The appellant is engaged in the manufacture of fertilizers falling under Chapter 31 of the Central Excise Tariff Act, 1985. The appellant is registered with service tax department for various purposes. The appellant manufactures Urea out of two basic raw materials namely Ammonia ( NH3 ) and Carbon Dioxide ( CO2 ) and Nitrogen from air.
The demand under the show cause notice has been made under three categories namely; Business Auxiliary Service as defined and provided under Section 65(19) of the Finance Act, 1994 and under Manpower Recruitment or Supply Agency Service as defined under Section 65 (64) of the Finance Act, 1994 as well as under Maintenance or Repair Service. The interest and penal provisions have also been invoked in the show cause notice.
The counsel appearing for the appellant contended that the entire demand for the period 01.04.2004 to 30.11.2006 is barred by limitation as there was no suppression of facts by the appellant. It has been submitted that department had started enquiry against the appellant in the year 2003 and sought various details during the CERA audit. It is matter of record that on the basis of information provided by the appellant, the first show cause notice was issued on 16.06.2005 demanding service tax for the period July 2003 to March 2004. It is therefore submitted that at the time of issuance of second show cause notice the department was well aware about the activity of the appellant.
It was also contended that the extended period of limitation cannot be invoked with regard to second show cause notice dated 01.05.2009 covering the period April 2004 to November 2006 as the second show cause notice has been issued on the same set of facts which were already in the show cause notice dated 16.06.2005 and therefore, second show cause notice dated 01.05.2009 is clearly time-barred.
A Two-Member Bench comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “It is clear from the facts of the matter that first show cause notice was issued on 16.06.2005 demanding service tax on the same set of activities for the period 01.07.2003 to 31.03.2004 and the second show cause notice was issued by the department on 01.05.2009 covering the period 2004 to November 2006 invoking extended time proviso under Section 73 of the Finance Act, 1994 on the same set of activities of the operation of Heavy Water plant by the appellant.”
“Since the department was already aware about the activities undertaken by the appellant and the show cause notice has already been issued on 16.06.2005 still they proceeded to issue second show cause notice without providing any reason. We are of the opinion that on this very count also second show cause notice is clearly time-barred and therefore need to be set-aside on the ground of limitation” the Tribunal noted.
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