2019 (6) TMI 1665 - HC - Central Excise

Validity of SCN - non-satisfaction of the license fee - main ground of the challenge is that the license fee is forming part of the revenue to be generated by the sale and hence it cannot be taxed - HELD THAT - It may have to be considered whether it is so or does it occupy a different pedestal. This is more so since even when a license is issued to a party subject to satisfaction of the license fee it may not be logically correct to say that there will always be a sale. In other words although license is issued and the shop is established there need not be any sale at all for various reasons like objection as to the location raised by the nearby inhabitants or because of the quality of liquour that is being supplied the price at which the commodity is sold and such other aspects by virtue of which no revenue may be generated despite the license issued. In such circumstance it may not be corrrect to say that license fee is part of the revenue generated by sale. However we do not express any opinion with regard to the said aspects. The writ petition is dismissed without prejudice to the rights and liberty to the petitioner to raise all the contentions both in facts as well as in law before the Assistant Commissioner Central Excise and Service Tax Bilaspur who has issued the show-cause notice to the petitioner.

Summary

Issues:
Challenge to the sustainability of the show cause notice regarding alleged non-satisfaction of license fee and other aspects.

Analysis:
The petitioner challenged the show cause notice citing various grounds, including constitutional mandates and definitions under the Finance Act, 1994. The petitioner argued that the license fee, being part of revenue generated from sales of liquor, should not be subject to service tax. The petitioner contended that the same transaction cannot involve both a sale and a service. Reference was made to the exclusive taxing powers of the Central Government under specific entries in the Seventh Schedule of the Constitution.

The State argued that the petitioner's understanding was misconceived, asserting that the license fee is unrelated to the tax on sales. The Court considered the petitioner's claim that the authorities lacked the power to issue such a notice. The Court acknowledged its wide jurisdiction under Article 226 of the Constitution but deliberated on whether to exercise discretion at that stage.

The main contention revolved around whether the license fee forms part of revenue from sales or occupies a distinct position. The Court noted that the issuance of a license does not guarantee sales, as various factors could hinder revenue generation. The Court refrained from expressing a definitive opinion on these matters, emphasizing that the competent authority should address these issues first. Consequently, the Court declined interference and dismissed the writ petition, allowing the petitioner to present all contentions before the Assistant Commissioner who issued the show cause notice.

In conclusion, the Court dismissed the writ petition without prejudice to the petitioner's rights to raise arguments before the competent authority. The petitioner was granted 15 days to comply with the judgment and proceed with further steps.