The Madras High Court in its recent ruling in the case of R. Ramadas has held that Show Cause Notice must not only be specific but also give full details regarding the proposal to demand. It was accordingly adjudged that adjudication order without a proposal and made in pursuant of a vague show cause notice cannot be sustained.
Facts of the case:
- 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 Joint Commissioner of Central Excise 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.
Contention of the Petitioner:
The main ground 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.
Order of Madras High Court: Deliberations and Ruling
- 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 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 impugned adjudication order cannot be sustained, since it traverses beyond the scope of the show cause notice and is also vague and without any details. Accordingly, such an adjudication order without a proposal and made in pursuant of a vague show cause notice cannot be sustained.
In view of above deliberations the single-judge bench of Justice M.S. Ramesh allowed the petition by quashing the order in original. However the Court granted liberty to the respondent authority 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.
READ / DOWNLOAD ORDER:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
