2016 (7) TMI 874 - HC - Service Tax

Levy of VAT and Service tax both on Supply of tangible goods service - Section 65(105)(zzzzj) of the Finance Act, 1994 - demand of service tax on lease charges received by the assessee - Held that - Merely because the petitioner argues that not service tax but value added tax would be leviable since the title in the property does not pass on to the lesee would not be a ground to hold that the tax authorities cannot examine and entertain such a contention thus rendering them wholly without jurisdiction. We may record that the competent authority, in the impugned order, has observed that the petitioner has voluntarily paid value added tax which would not automatically mean that service tax, if otherwise payable, cannot be recovered. Whether the petitioner has paid such tax voluntarily or upon coercion of the department are the issues which can be gone into in statutory appeals, if so filed. - In the result, petition is not entertained leaving it open for the petitioner to pursue statutory remedy.

Summary

Issues:
1. Challenge to order-in-original regarding service tax demand.
2. Petitioner's approach to High Court without availing statutory appellate remedy.
3. Jurisdiction of Commercial Tax authorities to levy service tax.
4. Justification for bypassing statutory appellate remedy.
5. Applicability of Supreme Court decisions on entertaining writ petitions.
6. Reliance on Supreme Court decision in a similar case.
7. Interpretation of legal principles in the context of the case.
8. Observations on payment of value added tax and service tax recovery.

Issue 1:
The petitioner challenged an order-in-original confirming a service tax demand of ?13.7 crores on lease charges received. The order classified the service under "Supply of tangible goods service" as per the Finance Act, 1994.

Issue 2:
Despite the availability of statutory appeal before CESTAT, the petitioner directly approached the High Court through a writ petition. The court questioned the petitioner's decision to bypass the appellate remedy and sought justification for doing so.

Issue 3:
The petitioner argued that since value added tax was paid on the lease amount, the application of service tax should be excluded. It was contended that the Commercial Tax authorities lacked jurisdiction to levy service tax, warranting direct approach to the High Court.

Issue 4:
The court emphasized the importance of following the statutory appellate mechanism unless exceptions, as recognized by previous judgments, justify bypassing the same. Mere arguability of the case does not suffice to ignore the statutory remedy.

Issue 5:
Citing a Supreme Court decision, the court highlighted that the High Court should not entertain a writ petition if an effective alternative remedy exists, unless exceptional circumstances warrant interference. The judgment emphasized the discretionary nature of the rule on alternative remedies.

Issue 6:
The petitioner relied on a Supreme Court decision involving telecom services to support the direct approach to the High Court. However, the court found the circumstances in the present case did not align with the issues raised in the referenced case.

Issue 7:
Legal principles regarding the enforcement of fundamental rights and the availability of statutory remedies were discussed in detail, emphasizing the need to exhaust statutory remedies before approaching the High Court.

Issue 8:
The competent authority noted that the petitioner's payment of value added tax did not preclude the recovery of service tax. The court directed the petitioner to pursue the statutory remedy by filing an appeal within a specified timeline for consideration on merits.

In conclusion, the High Court dismissed the petition, advising the petitioner to pursue the statutory remedy by filing an appeal within the stipulated timeframe for further consideration.