Rejection of Appeal on Technical Grounds without allowing Rectification of Curable Defects Not Sustainable: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench, held that an appeal cannot be dismissed on technical or procedural defects which are curable in nature without granting an opportunity to rectify and without examining the matter on merits.

The appellant, AIMS Industries Limited, is engaged in supply of gas in cylinders and collected retention charges from customers for delay in returning empty cylinders.

A Show Cause Notice (SCN) was issued to the appellant demanding service tax of ₹4,88,712 under Proviso to section 73(1) of the Finance Act, 1994 along with interest under section 75 of the Finance Act.

Aggrieved by the order of the assistant commissioner, the appellant filed an appeal before the Commissioner (Appeals) who rejected the appeal and confirmed the order of the Assistant Commissioner.

Hasit Dave, counsel for the appellant contended that the appeal was erroneously rejected on technical grounds without examining the case on merits, even though the defects pointed out were merely procedural and curable in nature.

The appellant counsel also submitted that retention charges collected for delayed return of gas cylinders could not be subjected to service tax under “supply of tangible goods service” as during the period of retention, effective control and possession of the cylinders remained with the customers.

M P Solanki, Assistant Commissioner for the respondent contended that the nature of the transaction is determined by its substance and not by the nomenclature used by the appellant. It was also contended that by allowing customers to retain gas cylinders beyond the permissible free period in return for consideration, the appellant was effectively providing a taxable service under “supply of tangible goods service.”

The respondent counsel further submitted that although the cylinders were physically with the customers, the ownership and effective control continued to vest with the appellant thereby satisfying the essential conditions of the said taxable service.

Somesh Arora, Judicial Member and Satendra Vikram Singh, Technical Member observed that the defects pointed out by the Commission respondent were procedural and curable in nature. The tribunal held that rejection of appeal without granting opportunity to cure defects is contrary to principles of natural justice.

In light of facts and circumstances, the Tribunal set aside the impugned order and remanded the matter back to the Commissioner (Appeals) to allow the appellant to rectify the defects and decide the case on merits.

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