By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether Show Cause Notice (SCN) issued under 73(1)(a) of erstwhile provision for a reason of failure to disclose all material facts was valid when SCN was issued on the basis of details gathered from earlier two notices on same issue for the same period? Held, No
Facts:
The appellants were engaged in handling operations (cutting/bending iron & steel products and transportation) for TISCO from 1998 onwards and were under a belief that service tax was not applicable on the said activity. However, due to persuasion of the authority, they obtained service tax registration under C & F agent, filed returns and paid service tax on remuneration under protest. Further two notices were received for the period 1999 onwards which were duly complied with. Subsequently, a third Notice was issued u/s. 73(1)(a) of the Finance Act, 1994 demanding service tax and penalties for the same period. Apart from submitting the details, validity of Show Cause Notice was challenged. The Commissioner confirmed the demand and penalties. On appeal, the Tribunal, also upheld tax and also the penalty.
Held:
For invoking section 73(1)(a) of the Act, there must exist material to form the belief as to failure to disclose true and full material facts. On perusal of Show Cause Notice, it was observed that material available on record was used to infer the escaped assessment. No case was made for non-disclosure of primary facts relating to transactions and hence invocation of section 73(1)(a) of the Finance Act, 1994 was held illegal.
