2014 (9) TMI 459 - HC - Service Tax

Challenge to the issue of Show Cause Notice - renting of equipment with or without without transferring right - Business of leasing out equipments of Air Separation Plant to customers which produce the industrial gases - sub-section (zzzzj) of Section 65(105) of the Finance Act, 1994 - petitioner submitted that the petitioner is paying Value Added Tax and service tax is payable on this activity - Held that - when the present petition is against the show cause notice and the petitioner has yet to respond to the same, present petition is not entertained and the same is dismissed. However, it is observed that all the defences which may be available to the petitioner under the law are kept open which the authority is bound to consider the same in accordance with law and on merits at the time of adjudication. - Petition dismissed - Decided against the assessee.

Summary

Issues:
Challenge to show cause notice for Service Tax demand.

Analysis:
The petitioner, engaged in manufacturing industrial gases and leasing equipment, challenged a show cause notice demanding Service Tax of Rs. 2,32,87,465 on taxable value of Rs. 21,69,03,887 received from 16-5-2008 to 31-3-2012. The notice alleged the petitioner provided services categorized as "Supply of Tangible Goods Services" to customers without transferring possession rights, making them liable for Service Tax. The petitioner contended they pay Value Added Tax under Gujarat Value Added Tax Act, hence not liable for Service Tax. The petitioner argued against the jurisdiction of the notice and sought its quashing.

The court noted the challenge was against the show cause notice itself and emphasized exhausting alternative remedies before approaching the writ Court. Citing precedents, the court highlighted the need for replying to show cause notices before seeking judicial intervention. The court also dismissed the petitioner's reliance on certain Supreme Court decisions, finding them inapplicable to the present case.

Regarding the petitioner's argument on jurisdiction, the court held that the authority issuing the notice had the jurisdiction to do so, pending a final determination on the liability for Service Tax. The court emphasized that the question of liability for both Value Added Tax and Service Tax on the same transaction needed adjudication by the appropriate authority.

Ultimately, the court dismissed the petition, stating the petitioner must respond to the show cause notice, leaving all defenses open for consideration during adjudication. The court clarified it did not express any opinion on the merits of the case, leaving it to the adjudicating authority to decide the liability for Service Tax after due process.

In conclusion, the Special Civil Application challenging the show cause notice for Service Tax demand was dismissed, with the court emphasizing the need for due process and adjudication by the appropriate authority to determine the liability for the taxes in question.