2014 (12) TMI 38 - HC - Service Tax

Challenge to the service tax inquiry - Levy of service tax on restaurants - Restaurants already subjected to sales tax - Held that - If we read the language employed in Section 14 of the Act, then we can have a presumption without any doubt that the authorities have only issued summons intending to enquire into alleged evasion. Therefore, the petitioner will appear before the authority concerned to know what is the real intention of the issuing authority (sic) vis-a-vis its nexus and if the real intention of the issuing authority is to proceed against the petitioner as a proposed assessee or payee of evaded tax, obviously at that stage, the aforesaid judgment of the Kerala High Court 2013 (7) TMI 431 - KERALA HIGH COURT would be absolutely relevant. Therefore, we think that at this stage, the petitioner shall go to the Officer concerned, who has issued the summons. The aforesaid judgment of the Kerala High Court shall also be placed by the petitioner before the Officer concerned, who must see the said judgment and take note of it and follow the same without any demur. This exercise shall be completed within a period of four weeks from the date of communication of the order. Till such date, no coercive measures shall be taken by the respondent-authorities. - Decided against the assessee.

Summary

Issues:
- Imposition of service tax on transactions of supply by a restaurant already subjected to sales tax.
- Validity of summons dated 10-1-2013 under Section 14 of the Central Excise Act, 1944.

Analysis:
1. The petitioner sought relief through a writ petition, challenging the imposition of service tax by Respondents 3 to 5 on transactions of supply by a restaurant already paying sales tax. The petitioner argued that such action was illegal, arbitrary, and without jurisdiction, violating Article 265 of the Constitution of India.

2. The material presented to demonstrate the imposition of service tax was a summons dated 10-1-2013 under Section 14 of the Central Excise Act, 1944. The petitioner's counsel referenced a judgment by the Kerala High Court, indicating that the provision enabling the imposition of service tax had been struck down.

3. Upon examining the summons dated 10-1-2013, the court noted that it did not explicitly state the intention to impose service tax on the petitioner. The summons was issued for an inquiry into non-payment or evasion of service tax by M/s. Sri Devi Restaurant & Bar, without specifying the evader or the party against whom proceedings were to be initiated.

4. The court emphasized that a summons can be issued to any person, including a prospective assessee or a third party, for an inquiry into alleged evasion. The petitioner's assumption that the proceedings were intended for tax imposition was not accepted, and it was advised to appear before the authority to understand the real intention behind the summons.

5. The court directed the petitioner to approach the issuing authority to clarify the purpose of the summons and present the judgment of the Kerala High Court for consideration. No coercive measures were to be taken by the respondent-authorities until the clarification was obtained within four weeks from the date of communication.

6. Both writ petitions were disposed of based on the judgment in the first petition, as the issues on fact and law were identical. The miscellaneous applications, if any, were also deemed disposed of accordingly.