The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside a service tax demand of Rs. 29.72 lakh in relation to Rent-a-Cab services received under the Reverse Charge Mechanism (RCM), holding that once the assessee had voluntarily paid the tax along with interest before issuance of the show cause notice, the Department could not legally proceed with adjudication proceedings.
The bench of Dr. Suvendu Kumar Pati (Judicial Member) has observed that the Department was fully aware of the payment since the same was acknowledged in the show cause notice itself. Therefore, issuance of the notice was contrary to the statutory mandate under Section 73(3).
The dispute arose from a CERA audit conducted for the period 2013-14 to 2016-17. During the audit, the Department observed that the company had availed Rent-a-Cab services from a transport service provider but had allegedly failed to discharge service tax liability to the extent of 40% of the taxable value under Notification No. 30/2012-ST dated June 20, 2012.
Following the audit objection, the company paid service tax amounting to ₹29,72,287 along with interest of ₹13,34,012 and informed the Department through a letter dated April 26, 2018, which was prior to issuance of the show cause notice. Despite this, the Department issued a show cause notice on August 7, 2018 proposing recovery of tax, interest, and imposition of equal penalty under Section 78 of the Finance Act, 1994.
The assessee argued before the Tribunal that it was entitled to protection under Section 73(3) of the Finance Act, 1994, which bars issuance of a show cause notice where service tax and interest are paid before issuance of notice and the payment is intimated to the Department in writing. The company further contended that the entire information was already available in its records and had merely been detected during audit, which could not be treated as suppression of facts with intent to evade tax.
The appellant also relied upon several Tribunal rulings and the Supreme Court judgment in Uniworth Textiles Ltd. v. Commissioner of Central Excise, contending that mere non-payment of tax does not automatically amount to wilful suppression or fraud. It was argued that audit mechanisms are intended to identify irregularities and facilitate compliance rather than automatically trigger penal proceedings.
The Department argued that the appellant had not disclosed the Rent-a-Cab transactions in its ST-3 returns and had failed to bring the transactions to the Department’s knowledge, thereby justifying invocation of the extended limitation period and imposition of penalties.
After examining Section 73(3) of the Finance Act, the Tribunal observed that where service tax dues are paid either on self-ascertainment or upon being pointed out by the Department before issuance of notice, and such payment is communicated in writing, no show cause notice under Section 73(1) can be issued.
The Bench further observed that invocation of the extended period was also not justified in the facts of the case, particularly when the issue was detected during audit and the assessee had promptly discharged the liability with interest.
The Tribunal set aside the Order-in-Appeal passed by the Commissioner (Appeals) and allowed the appeal with consequential reliefs.
Case Details
Case Title: M/S. Owens Corning (India) Pvt Ltd Versus Commissioner Of Cgst & Central Excise
Citation: JURISHOUR-1144-CES-2026(MUM)
Case No.: SERVICE TAX APPEAL NO. 86439 OF 2021
Date: 05.05.2026
Counsel For Appellant: Aditya Jain, C.A.
Counsel For Respondent: Arun Bhaskar, Superintendent
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