2008 (4) TMI 25 - AT - Service Tax

Issue of SCN and raising demand of service tax - Department has conducted enquiry from the State Excise Department (for number of subscribers) and local enquiry (for rate charged by the cable operator from each subscriber /customer) without disclosing the nature and outcome of enquiry and arrived at amount of tax payable is clearly in violation of principles of natural justice. Therefore order-in-original set-aside and matter remanded.

Summary

Issues:
1. Upholding of order by Commissioner (Appeals) reducing penalty
2. Demand of duty on cable operator services
3. Reliability of evidence and procedural fairness in arriving at tax amount

Analysis:
1. The appeal was against the Commissioner (Appeals) order upholding the original authority's decision but reducing the penalty imposed. The appellant, a cable operator, failed to provide details to the Department regarding connections and subscription amounts. The Department obtained information from the State Excise Department and conducted local inquiries, leading to a demand of Rs. 1,11,600 along with interest and a penalty of Rs. 20,000. The Commissioner (Appeals) upheld the duty demand but reduced the penalty to Rs. 2000.

2. The appellant argued that the subscription rate of Rs. 200 per month per customer, as determined by the Department, was unsustainable. They contended that the service was provided in a village where residents could not afford such high charges. The appellant claimed that the rate was based on a local inquiry without documentary evidence. The Department argued that the appellant initially failed to provide details and later submitted unreliable records showing varying subscription rates.

3. The Tribunal found that the original authority's reliance on local inquiries without disclosing details violated principles of natural justice. The Tribunal set aside the orders and remitted the matter to the original authority for a fresh decision. The original authority was directed to provide details of the inquiry to the appellant and grant a reasonable opportunity for a hearing before deciding on the issue. The appeal was allowed by way of remand for further proceedings.