2014 (7) TMI 940 - HC - Service Tax

Challenge to the Show Cause notice - writ petition - Commission to overseas agencies - reverse charge - Business Auxillary Services - Held that - By the impugned notice, the petitioner was only called upon to submit their objections, if any. The show cause notice has been issued in compliance with the principles of natural justice and it cannot be said to be arbitrary or illegal. Therefore, the writ petition is disposed of with a direction to the petitioner to submit their explanation to the notice which is impugned in this writ petition along with necessary documents in support of their claim. - On receipt of such notice, the respondents shall afford an opportunity of hearing to the petitioner and then pass orders on merits and in accordance with law.

Summary

Issues:
Challenge to show cause notice under Section 11A of Central Excise Act for recovery of sanctioned amount.

Analysis:
The petitioner, a yarn manufacturer, was issued a show cause notice by the first respondent demanding the recovery of Rs. 18,32,782 under Section 11A of the Central Excise Act with applicable interest. The dispute arose from the non-payment of service tax on commission paid to overseas agencies, leading to an assessment order against the petitioner. Despite appeals and interim stay applications, the arrears were appropriated from rebate claims, prompting the petitioner to challenge the order. The High Court set aside the appropriation order, leading to the payment of the disputed amount to the petitioner. Subsequently, a notice of demand dated 16.12.2013 was issued to avoid future time-bar demands, which the petitioner challenged in the writ petition.

The petitioner argued that the amount in question was not due as it was subject to a final order by the CESTAT, Chennai, making the show cause notice legally unsustainable. Conversely, the standing counsel for the respondents contended that the notice was merely a call for submission of objections and not a final adjudication. The Court noted that the petitioner rushed to file the writ petition without submitting objections, emphasizing that the show cause notice was issued in compliance with natural justice principles and was not arbitrary or illegal. The Court directed the petitioner to submit their explanation and necessary documents in response to the notice, ensuring an opportunity for a hearing before the respondents make a decision based on merit and law. The petitioner was also allowed to engage an auditor of their choice if desired. The writ petition was disposed of without costs, and connected miscellaneous petitions were closed.