2011 (3) TMI 1410 - HC - Service Tax

Writ petition against show cause notice - whether the petitioners are covered and liable to pay service tax under the head Business Auxiliary Services . The said services became taxable by the Finance Act, 2003, whereby sub-section (zzb) to Section 65(105) was enacted held that - In the present cases, as noticed above, there are factual disputes which have to be thrashed out in addition to interpretation of provisions. We do not see any reason why we should entertain Writ Petition against show cause notice. It may be noted that in these two writ petitions no circular or letter issued by the Ministry of Finance, Department of Revenue, has been challenged or questioned. - The appellants are given liberty to file appeal within a period of 30 days of receipt of copy of this order.

Issues Involved:
1. Liability of the petitioners to pay service tax under 'Business Auxiliary Services'.
2. Classification of ship brokerage activities and their taxability.
3. Whether services provided by the petitioners qualify as export of services.
4. Jurisdiction and appropriateness of High Court intervention in tax matters.

Issue-wise Detailed Analysis:

1. Liability of the petitioners to pay service tax under 'Business Auxiliary Services':
The primary dispute revolves around whether the petitioners' activities fall under 'Business Auxiliary Services' as defined in the Finance Act, 2003. The petitioners argue that they do not act as commission agents and their activities should not be categorized as such. The Finance Act, 2005, which defined 'commission agent', is particularly relevant here. The court noted that determining this liability requires a factual examination of the petitioners' activities and cannot be resolved in a writ petition. The petitioners should pursue the statutory appellate remedy for a thorough examination.

2. Classification of ship brokerage activities and their taxability:
The assessment order classified ship brokerage activities into three categories:
- Situation 1: Both ship owner and charterer are outside India, and payments in foreign currency are not taxable.
- Situation 2: Either ship owner or charterer is in India, and brokerage received in foreign currency is taxable.
- Situation 3: Both ship owner and charterer are in India, and brokerage received in foreign currency is taxable.
The court emphasized that the factual nature of these activities needs to be thoroughly examined before determining their taxability under 'Business Auxiliary Services'. This examination should be conducted by the appellate authority, not the writ court.

3. Whether services provided by the petitioners qualify as export of services:
The petitioners contend that their brokerage received in foreign exchange should be treated as export of services under the Export of Service Rules, 2005, and thus not subject to service tax. This issue also requires a detailed factual analysis, particularly regarding the location of the ship owner, charterer, and the voyage. The court held that such an analysis should be conducted by the Tribunal, not in a writ petition.

4. Jurisdiction and appropriateness of High Court intervention in tax matters:
The court reiterated that it is generally inappropriate for High Courts to intervene in tax matters at the stage of show-cause notices or initial assessments, especially when an adequate statutory appellate remedy is available. The court cited several precedents emphasizing that writ jurisdiction should not be exercised to bypass statutory remedies unless exceptional circumstances are present, such as violation of fundamental rights or lack of jurisdiction. The petitioners were directed to pursue their appeals before the Tribunal, which is competent to address both factual and legal issues.

Conclusion:
The writ petitions were disposed of with directions for the petitioners to file appeals before the Appellate Tribunal within 30 days. The interim orders preventing the enforcement of the assessment orders will continue until the Tribunal decides the appeals. The court clarified that it has not expressed any opinion on the merits of the case, and the Tribunal should independently evaluate the issues.

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