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Best judgment order not sustainable if it is non-speaking, does not disclose reasons and is arbitrary.
Facts
The
adjudicating authorities confirmed demand of service tax on certain
foreign expenditure under reverse charge mechanism (RCM) and also on
certain incomes to be in the form of services liable to service tax.
A
‘Best Judgment Order’ was passed on the basis of documents submitted
vide section 72 of the Finance Act, 1994. Also certain expenses like
renting of immovable property and supply of movable property for use in
India were wrongly construed as income. Further share in the expenses
relating to marketing support were treated as income. On perusal of the
records and correspondence, it appeared that adjudicating authority had
just reproduced the facts and the definitions as given under law and no
speaking order was passed citing reasons for such best judgement
assessment without providing explanations.
Held
Adjudicating
authority merely reproduced assessee’s submissions and there were
hardly any reasons to justify demand. After analysing various paragraphs
of the impugned order which were either a reproduction or irrelevant,
the Tribunal observed that the analysis therein was cryptic and
inadequate to arrive at the findings. The order was completely
non-speaking about the methodology/reasons/grounds adopted for arriving
at ‘Best Judgment’ figures.
In fact, the authority was not even
sure whether it was justified to invoke best judgment assessment in the
present case which was evident from the phrase used in impugned order as
‘In order to safeguard the revenue, I find that section 73 appears to
be inviolable…”This was an arbitrary best judgment assessment and
therefore, was not sustainable quasi-judicially. Appreciating the
observations made by the Hon’ble Supreme Court in case of M. L. Capoor
(AIR 1974 SC 87), it was held that the adjudicating authority was
conspicuously non-speaking, non-reasoned, arbitrary and cavalier while
passing the impugned order. Accordingly, along with setting aside the
impugned order, costs were imposed on adjudicating authority to be
deposited in Prime Minister’s National Relief Fund.
