2025 (6) TMI 1268 - AT - Service Tax

Availability of two registration numbers against the name of the Appellant - determination of appellant s liability for service tax - partial payment and voluntary disclosure under the Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS) - HELD THAT - It is worth-mentioning here that concerned Commissioner had not accepted the pre-deposit amount of Rs. 2, 18, 870/- that was paid by challan dated 08.01.2024 under the active Service Tax registration number of the Appellant but as because show-cause notice was issued with the newly temporarily generated registration number which concerned Assistant Commissioner through his letter dated 16.04.2025 claims to be also of Appellant in respect of Central Excise registration to the denial of appellant that it was never a manufacturer nor registered for Excise and a wrong registration number which might be due to a glitch in the system of the Department has come up apart from the fact that in the event Ld. Commissioner (Appeals) was of the opinion that proper pre-deposit was not made he should not have entertained the appeal as contemplated u/s. 35F of the Central Excise Act equally applicable to Service Tax matters u/s. 85(5) of the Finance Act 1994 but once appeal is admitted for hearing he was supposed to follow section 35A(4) of the Central Excise Act also applicable to Service Tax matters in stating in his order the point for determination the decision thereon and the reason for the said decision while disposing of the appeal which is not done in the present case. Admittedly appellant had registered as a service provider and had never filed any return in respect of manufacturing of any excisable articles for which mere entering of a single alphabet L in places of S should not have brought the issue upto the Tribunal level. 5. As we have noticed required pre-deposit of the full amount is made at this end and as we have noticed Appellant is only a service provider and not a manufacture Respondent Department could have accepted the entire amount paid by the Appellant towards discharge of service tax liability. Conclusion - The entire demand was not consistent with the appellant s partial payments and voluntary disclosure under SVLDRS especially given the procedural confusion caused by the generation of a new registration number. It is appropriate to set aside the order passed by the Commissioner (Appeals) which is not in conformity to section 35A(4) of the Central Excise Act and to remand the matter for hearing afresh by the Commissioner (Appeals) - appeal allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the appellant's liability for service tax was correctly determined and demanded in full despite partial payment and voluntary disclosure under the Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS);
• Whether the issuance of a show-cause notice under a newly generated temporary registration number, distinct from the appellant's original active service tax registration number, was valid and justified;
• Whether the pre-deposit made by the appellant under its original registration number was properly accepted or rejected by the Department, particularly in light of the issuance of the show-cause notice under a different registration number;
• Whether the Commissioner (Appeals) erred in entertaining the appeal despite the Department's contention that proper pre-deposit was not made, and whether the appeal order complied with the statutory requirements under section 35A(4) of the Central Excise Act (applicable to service tax matters by virtue of section 85(5) of the Finance Act, 1994);
• Whether the appellant's status as a service provider (and not a manufacturer) was correctly recognized, and whether the inadvertent generation of a Central Excise registration number (with an "L" instead of "S") was a procedural or systemic error that should have been rectified without penal consequences;
• Whether the entire amount demanded, along with penalties and interest, was justified given the facts and payments made by the appellant.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the demand for entire service tax liability despite partial payment and voluntary disclosure under SVLDRS

The appellant, a private limited company providing online information and data retrieval services, had filed service tax returns for the disputed period April 2014 to June 2017. Although the total duty liability was Rs. 29,18,276/-, the appellant had paid Rs. 23,44,311/- by the end of FY 2018-19 and sought to settle the balance Rs. 5,73,965/- under the Sabka Vishwas Legacy Dispute Resolution Scheme introduced in 2019.

The appellant filed a declaration under SVLDRS on 30.12.2019; however, due to an inadvertent system-generated fresh temporary registration number, the entire duty amount was shown as voluntarily disclosed, rather than only the unpaid balance. The appellant sought revision to reflect only the unpaid amount, but this was not accepted. Subsequently, a show-cause notice was issued demanding the entire amount along with penalties and interest.

The Tribunal noted that the appellant had voluntarily paid the balance amount on 13.12.2020 using its original active registration number, indicating willingness to discharge the outstanding liability. The demand for the entire amount, including penalties and interest, was therefore contested as unjustified.

Relevant legal framework includes the provisions of the Sabka Vishwas Legacy Dispute Resolution Scheme, which allows for settlement of legacy disputes by voluntary disclosure and payment of outstanding dues. The scheme aims to encourage compliance and reduce litigation.

The Tribunal found that the entire demand was not consistent with the appellant's partial payments and voluntary disclosure under SVLDRS, especially given the procedural confusion caused by the generation of a new registration number.

Issue 2: Validity of show-cause notice issued under a newly generated temporary registration number

The show-cause notice dated 31.12.2020 was issued under a newly generated temporary registration number (AADC12658LD0001), distinct from the appellant's original active service tax registration number (AADC12658ASD0001). The appellant contended that it was never a manufacturer nor registered under Central Excise, and that the new registration number was erroneously generated, possibly due to a system glitch, replacing the letter "S" with "L".

The Department's letter dated 16.04.2025 confirmed the existence of two registration numbers against the appellant's name, including the temporary one. The Assistant Commissioner claimed the temporary registration number was valid in respect of Central Excise registration, which the appellant denied.

The Tribunal emphasized that the appellant had consistently registered and filed returns only as a service provider and had never engaged in manufacturing or excise-registered activities. The mere substitution of a single alphabet in the registration number should not have escalated the dispute to the Tribunal level.

Legal principles governing registration and identification numbers under service tax and central excise regimes were considered. The Tribunal held that the issuance of a show-cause notice under an incorrect or unintended registration number was procedurally improper and prejudicial to the appellant.

Issue 3: Acceptance or rejection of pre-deposit and its impact on appeal proceedings

The appellant made a pre-deposit of Rs. 2,18,870/- by challan dated 08.01.2024 under its original service tax registration number. However, the Department did not accept this pre-deposit, arguing that since the show-cause notice was issued under the temporary registration number, the pre-deposit was not properly made.

The Commissioner (Appeals) entertained the appellant's appeal despite the Department's contention that the pre-deposit was insufficient or invalid. The Tribunal found this to be an error, noting that under section 35F of the Central Excise Act (applicable to service tax matters via section 85(5) of the Finance Act, 1994), the Commissioner (Appeals) should not have admitted the appeal if the pre-deposit was not properly made.

Nevertheless, once the appeal was admitted, the Commissioner (Appeals) was statutorily required under section 35A(4) of the Central Excise Act to state the points for determination, the decision thereon, and reasons for the decision in the appeal order. The Tribunal found that the appeal order failed to comply with these requirements, rendering it legally infirm.

The Tribunal observed that the pre-deposit was eventually made at the Tribunal level, and the appellant's compliance should have been recognized.

Issue 4: Recognition of appellant's status as service provider and rectification of registration number error

The appellant consistently operated as a service provider and was never involved in manufacturing or excise-registered activities. The inadvertent generation of a Central Excise registration number with the letter "L" instead of "S" was identified as a system glitch.

The Tribunal held that such a clerical or systemic error should not have resulted in adverse consequences or the escalation of the dispute. The Department ought to have accepted the appellant's original registration and payments made thereunder.

This issue is closely linked to the second issue regarding the validity of the show-cause notice and the acceptance of pre-deposit.

Issue 5: Justification of penalties and interest imposed

The original adjudication confirmed the demand of the entire service tax amount of Rs. 29,18,276/- along with an equal penalty and interest, and imposed an additional penalty of Rs. 10,000/- under section 77.

Given the Tribunal's findings that the demand itself was flawed due to procedural errors and the appellant's voluntary payment and disclosure, the imposition of penalties and interest on the full amount was not justified.

The Tribunal did not explicitly rule on the quantum of penalties