2017 (2) TMI 773 - HC - Service Tax

Autonomous body incorporated by the statutory provision and functioning within the State of Madhya Pradesh - recovery of 10% service tax for the service rendered - whether the extraordinary jurisdiction under Article 226 and 227 of the Constitution should be invoked or the petitioner should be relegated to take recourse to the remedy of appeal before the Tribunal? - Held that - the Board was notified by issuance of notification under Section 3(1) of the Adhiniyam, 2007 only on 14.03.2016 and, therefore, prior to that date the Board continue to be a Department of the State Government, this aspect of the matter required consideration by the enquiry officer - in treating the petitioner organization to be an autonomous corporation created under the Adhiniyam, 2007 and rejecting the objection that it is not a department of the State, the respondent No.2 has committed an error and this has been done without taking note of the legal aspect of the matter. Matter remanded for re-consideration.

Summary

Issues:
Challenge to order of assessment imposing 10% service tax on petitioner establishment and challenging Tribunal's order directing deposit of tax amount.

Analysis:
1. The petitioner challenged the imposition of liability for service tax, arguing that it is an autonomous body incorporated by statutory provision and functions within the State of Madhya Pradesh. The petitioner relied on previous judgments to support their claim that they are not constituted under the relevant Adhiniyam and continue to function as a department of the State. The central question was whether the Revenue correctly imposed the liability, necessitating a decision on whether extraordinary jurisdiction under Article 226 and 227 should be invoked or the petitioner should pursue the remedy of appeal before the Tribunal, which was pending but required a 10% deposit for hearing due to a significant tax demand.

2. The petitioner contended that the legal issue was not adequately considered, suggesting that the matter should be remanded back to the Assessing Officer rather than requiring the petitioner to deposit 10% for appeal. In contrast, the Revenue argued that the Tribunal's involvement precluded interference by the Court at this stage. The Court, considering the unique circumstances of the case, decided to address the matter in the writ petition itself due to the need for a proper evaluation of legal and statutory provisions that were overlooked in the assessment process.

3. The Court reviewed a show cause notice issued to the petitioner in 2011, highlighting discrepancies in treating the petitioner as an autonomous body under the relevant Adhiniyam. Previous judgments clarified that the petitioner was not an autonomous corporation but a department of the State, as the necessary notification under the Adhiniyam had not been issued until a later date. The Court emphasized the importance of correctly interpreting the legal status of the petitioner organization and concluded that the assessment order should be quashed, remanding the matter for reconsideration in light of the legal aspects discussed.

4. It was revealed that the Board was officially notified under the Adhiniyam only in 2016, indicating that prior to this date, it remained a State Government department. This crucial aspect required thorough consideration by the Assessing Officer. Consequently, the Court allowed the petition, quashed the 2013 assessment order, and instructed the respondent to proceed in accordance with the law, emphasizing the need for a proper legal evaluation in the re-examination process.

5. As a result of remanding the matter, the Tribunal's 2015 order became irrelevant, and no further action was deemed necessary concerning that order. The Court allowed and disposed of the petition based on the detailed analysis and decision outlined in the judgment.