M/s. Babcock Borsig Limited vs Commissioner Of Service Tax

P. Dinesha, Member (J)

This appeal is filed by the assessee against Order-in-Appeal No. 323/2013 (M-ST) dated 31.10.2013 passed by the Commissioner of Customs, Central Excise and Service Tax (Appeals), Chennai-I and the period of dispute is from April 2003 to April 2005.

1.2 A Show Cause Notice dated 23.10.2008 was issued apparently based on an internal audit by the Revenue in the appellant's premises. In the Show Cause Notice, the Revenue has alleged that on verification of records of the appellant, it was noticed that the appellant was rendering consultancy engineering services to parties in India and abroad, they were not paying Service Tax in respect of services rendered to foreign parties for the period 2003-04, 2004-05 and April 2005 though the amounts towards the said services were realized in convertible foreign currency, as detailed in the Annexure to the said Show Cause Notice. It is also alleged that the appellant had not satisfied the conditions in Board Circular No. 254/1/2003-CX.4 dated 25.04.2003, they did not maintain any record to prove that the services rendered by them to the Indian companies were ultimately consumed/merged with the services that were exported and that when the service gets consumed in part or in toto for providing services in India, Service Tax would be leviable on the secondary service provider. It was thus proposed in the Show Cause Notice to demand Rs.14,60,984/- by invoking the extended period of limitation within the meaning of proviso to Section 73(1) of the Finance Act, 1994 towards Service Tax and Education Cess covering the above period, apart from appropriate interest under Section 75 ibid. and penalties under Sections 76 and 78 ibid.

It appears that the appellant filed a detailed reply denying their liability, primarily contending that they had only provided ‘manpower supply’ services to M/s. Babcock Borsig Softech Ltd. (hereinafter referred to as ‘BBSL’); for such supply, Rs.200/- was fixed as the man-hour rate for their employees who were deputed to attend the project work of M/s. BBSL, who were directly reporting to M/s. BBSL, but however, their salary was paid by the appellant itself. It appears that they also filed letter / work order (paragraph 13.2 of the Order-in-Original) in this regard to support that what was sought by M/s. BBSL was only manpower supply for their overseas projects. Further, at paragraph 13.3 of the Order-in-Original, the adjudicating authority acknowledges the fact that the appellant had only supplied their qualified workforce to assist M/s. BBSL and that the same could not have been held to be a consultancy service.

In the adjudication order i.e., Order-in-Original No. 29/2010 dated 11.03.2010, insofar as consultancy services to various other clients like M/s. Caterpillar Commercial Private Ltd., M/s. Technical India Ltd., M/s. Saipem India Projects Services Ltd., M/s. FTZ Engineering Private Ltd., M/s. International Development Process and Engineering Ltd. and M/s. Alphine Inspection Services are concerned, the adjudicating authority observes that the appellant did not question the demand on these services and thus confirms the demand to the extent of Rs.12,99,711/- as against Rs.14,60,984/- proposed in the Show Cause Notice, but however, holds that the appellant was not liable to Service Tax on the charges realized by them for the supply of manpower to M/s. BBSL.

The appellant appears to have filed an appeal before the Commissioner (Appeals) against the demands confirmed in the Order-in-Original. The first appellate authority has, however, vide impugned Order-in-Appeal No. 323/2013 (M-ST) dated 31.10.2013 dismissed the appeal for non-compliance of the condition of stay granted vide OISP No. 24/2013(M-IV) dated 07.02.2013.

It is against this order that the present appeal has been filed.

6.1 Heard Shri T.R. Ramesh, Ld. Advocate for the assessee-appellant. The Ld. Advocate would contend at the outset that the first appellate authority did not pass any order on the stay petition filed by the appellant and thus, there was nothing for the appellant to comply with and hence, the order is unsustainable

6.2 He would further submit that the first appellate authority had granted personal hearing on 08.10.2013, as is visible from the record of personal hearing placed at page no. 16 of the appeal memorandum, whereby the authority has only recorded the proceedings and other than this, there was no other order issued by the first appellate authority. He would thus emphatically contend that the first appellate authority has grossly mis-directed himself by referring to an order dated 07.02.2013, which was non-existent and non-applicable to the appellant since admittedly, the date of personal hearing itself was 08.10.2013 at 02:45 p.m.

Per contra, Shri N. Satyanarayanan, Ld. Assistant Commissioner, supported the findings of the first appellate authority and reiterated that the appellant having not satisfied the conditional stay order dated 07.02.2013, the order of the appellate authority is correct.

8.1 After hearing both sides, we tend to agree with the contentions of the Ld. Advocate since the said order referred to by the lower appellate authority in OISP No. 24/2013(M-IV) dated 07.02.2013 is non-existent; even if it is in existence, the same cannot be made applicable to the appellant since the very first date of hearing itself is in October i.e., 08.10.2013.

8.2 In view of this, the impugned dismissal order by the first appellate authority can never sustain, for which reason we set aside the same.

Admittedly, we find that there is no discussion on merits and hence, we deem it proper to restore the case back to the file of the first appellate authority for passing a de novo order on merit alone. It goes without saying that the first appellate authority shall adhere to the principles of natural justice thereby affording reasonable and time-bound opportunities to the appellant before passing the de novo order. The appellant is also directed to co-operate with the lower appellate authority in getting an early disposal of the first appeal without seeking unnecessary adjournments. The matter pertains to the year 2003-05 and hence, we direct the first appellate authority to pass the de novo order within a period of ninety days from the date of receipt of this Order by the jurisdictional Commissionerate. All the contentions are left open.

The appeal is disposed of by way of remand.