CESTAT | An arbitrary show cause notice which is held to be correct in principle cannot become a ground to re-open a case under guise of rectification of mistake

Custom, Excise and Service Tax Appellant Tribunal (CESTAT): A Division Bench of Rachna Gupta (Judicial Member) and C.L. Mahar (Technical Member) dismissed a rectification appeal filed by the applicant.

The applicant had submitted that the Tribunal in the impugned order had committed an error by not dealing with the following contentions of the appellant as were made against impugned order-in-original dated 31-03-2014:

  • No specific categorization of demand was made in the impugned show-cause notice which should render the entire proceedings as vague and bad in law.
  • In Skylarks Cazers International v. CST 2018 (5) TMI 877, a similar demand was set aside for want of bifurcation of demand under various services.
  • The order omitted to consider the other grounds mentioned in the appeal and therefore must be an error apparent on the face of the record.

On the other hand, the department contended that the impugned appeal has been allowed by way of remand. The demand for Service Tax was confirmed on principle, however, quantification of the same was given to the adjudicating authority for de novo adjudication. Thus, all the grounds as raised by the appellant were not the subject matter of rectification of mistake.

The Tribunal explained that the show-cause notice proposing the impugned demand of Rs 64,04,301 was served upon the appellant observing that the appellant had a number of companies under its aegis and was availing payment of Service Tax by suppressing the full taxable amount collected from various clients who were receiving the services as that the security agency and manpower supply services from the appellant. The contention about show-cause notice being barred was also considered. Finally, the contention that the demand for gross turnover of all the services provided by the appellant without bifurcation had also been dealt with as the matter had been remanded back for the quantification of the demand on the basis of financial year-wise receipt service tax value.

The Tribunal finally dismissed the appeal stating that the decision cannot be re-opened under the guise of rectification of mistake. As far as the arbitrary/vagueness of a show-cause notice was concerned, the same was held to be correct in principle by the Tribunal. A decision on a debatable point of law or fact cannot be corrected by way of rectification. Otherwise also the impugned final order was remanded to the adjudicating authority for quantification of the demand. [Skylark Hi-Tech Solution (P) Ltd. v. Commissioner, 2019 SCC OnLine CESTAT 303, decided on 11-11-2019]

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