The Madras High Court held that Show Cause Notice must not only be specific but also give full details regarding the proposal to demand.
The petitioner, R.Ramadas is a contractor for carrying out certain contracts for the Nevyeli Lignite Corporation Ltd., and registered as a service provider for Management, Maintenance and Repair Services, Manpower Supply Service, Civil and Industrial Construction Service, and Works Contract Service, filed his returns under the Service Tax Law for the period 2009-2010 to 2012-2013.
The Department issued the show cause notice proposing the demand service tax on Manpower Recruitment or Supply Agency; Management, Maintenance or Repair services; Works Contract and Commercial or Industrial Construction.
The petitioner had given a reply stating that the proposed demand does not indicate the exact amount under each type of service and there is no mention under which category the service tax has been demanded.
The first respondent authority had passed the impugned order stating that the petitioner is liable to pay service tax for Site formation and clearance, excavation, earth moving and demolition services; Works contract service and Maintenance and Repair service for the work done by the petitioner for the road works from Melpathy to Virudhachalam Cuddalore Main Road.
The main grounds raised by the petitioner is that the demand of service tax on the grounds relied upon in the impugned order is not in conformity with the proposals made in the show cause notice and that the notice is vague and without any details.
The single-judge bench of Justice M.S. Ramesh clarified that it is a settled proposition of law that a show-cause notice, is the foundation on which the demand is passed and therefore, it should not only be specific and must give full details regarding the proposal to demand, but the demand itself must be in conformity with the proposals made in the show cause notice and should not traverse beyond such proposals.
The court noted that the very purpose of the show cause notice issued is to enable the recipient to raise objections, if any, to the proposals made and the concerned Authority are required to address such objections raised.
“In cases where the consequential demand traverses beyond the scope of the show cause notice, it would be deemed that no show-cause notice has been given, for that particular demand for which a proposal has not been made,” the court said.
Therefore, the court directed the respondent authority to grant liberty to issue a fresh show-cause notice giving details of the proposed demand for the respective services, at least within a period of 30 days.Subscribe Taxscan AdFree to view the Judgment