2013 (10) TMI 1164 - HC - Service Tax

Demand of service tax - Service provider or Service receiver - Held that - order passed by the Additional Commissioner, Central Excise, Ranchi, has travelled beyond show-cause notice given to the service provider i.e. respondent no. 3. The present petitioner is service receiver. Thus, the directions and observations made by the Additional Commissioner, Central Excise, Ranchi, are hereby quashed and set aside because the same are observed in the impugned order without giving any notice and without giving any opportunity of being heard and the said directions are travelling beyond the show-cause notice. All these writ petitions (Tax) are hereby allowed and the aforesaid paragraphs insofar as these affect the petitioner, are hereby quashed and set aside - Decided in favour of assessee.

Summary

Issues:
Challenge to order passed by Additional Commissioner, Central Excise; Service tax liability on service provider vs. service receiver; Violation of natural justice and Article 14 of the Constitution of India.

Analysis:
The judgment by the High Court of Jharkhand revolves around the challenge to an order passed by the Additional Commissioner, Central Excise, Ranchi. The main issue raised is the imposition of service tax on the service provider instead of the service receiver as per the Finance Act, 1994. The petitioner, represented by Ms. Amrita Sinha, argues that the order in question should be quashed as it goes beyond the show-cause notice and contains observations that affect the petitioner without providing an opportunity to be heard. The petitioner contends that the order violates the principles of natural justice and Article 14 of the Constitution of India.

The counsel for the respondents argues that while the petitioner was not given notice or an opportunity to be heard, the observations in the order do not directly impact the petitioner as the notice was served on the service provider. The respondents claim that nothing adverse has been decided against the petitioner, making the petitions legally untenable. The service provider, represented by Mr. Ratnesh Kumar, asserts that the order against them is incorrect and that they are not liable to pay any service tax under the Finance Act, 1994.

After hearing arguments from both sides, the High Court quashes and sets aside specific paragraphs from the order of the Additional Commissioner, Central Excise, Ranchi. The court finds that the observations and directions in the order, which impose financial liability, were made without notice or an opportunity to be heard for the petitioner, violating the principles of natural justice. The court emphasizes that when financial liability is imposed, notice and an opportunity to be heard must be provided. Additionally, the court notes that the order exceeded the scope of the show-cause notice given to the service provider, as the petitioner is the service receiver. Consequently, the directions and observations affecting the petitioner are deemed invalid and are set aside, leading to the allowance of all the writ petitions (Tax) filed by the petitioner.