2017 (8) TMI 839 - HC - Service Tax

Maintainability of petition - Alternative remedy - Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - Works Contract Service - composite contract - Held that - the matter was remanded to the Adjudicating Authority on the sole ground that the authority referred to a judgment of the Supreme Court, Dy. Commissioner of Sales Tax (Law) vs. Advani Coorlikon (P) Ltd. 1979 (10) TMI 90 - SUPREME COURT OF INDIA , which was overruled by the Larger Bench of the Supreme Court. The Court made it clear that setting aside the impugned order will not be taken as a reflection on the merits of the matter. In paragraph 12 of the order, dated 05.12.2016, the Court has summarised the submissions and while doing so, it has made an observation that the question whether the impugned transaction is composite in nature as alleged by the respondent is a mixed question of fact and law. The Court rendered a finding that the impugned transaction whether it is a composite in nature or not, is a mixed question of fact and law. This finding had been accepted by the petitioner, as the petitioner appears to have not canvassed the matter on merits, though the Court observed that an overruled judgment of the Supreme Court has been relied on. Apart from that, the Court also held that it cannot be known as to what extent, the first respondent was influenced by referring to an overruled judgment and as to how the overruled judgment has had a bearing on the manner in which the subject contracts have been viewed. Thus, the petitioner did not canvass the merits of the case and appears to have been satisfied with the order passed by the Court remanding the matter for denova consideration to consider as to what extent the Adjudicating Authority was influenced by the ratio of the overruled judgment in the case of Kone Elevators India Pvt., Ltd., 2005 (2) TMI 519 - SUPREME COURT OF INDIA , did it have a bearing on the manner in which the subject contracts have been viewed. When the Court at the very threshold held that question as to whether the transaction is composite in nature or not, is a mixed question of fact and law, and it would be the answer to the petitioner s present challenge of the impugned order raising factual questions. The Tribunal being the last fact finding authority in the hierarchy of authorities is entitled to appreciate and re-appreciate the scope of the contract, whether it is composite in nature or otherwise and this exercise cannot be done in a Writ Petition - the petitioner cannot now canvass the merits of the case in a Writ Petition, call upon this Court to examine as to whether the transaction is composite in nature or otherwise, whether the valuation made was correct or incorrect; what is the yardstick to be applied to the sale value, etc. Therefore, the petitioner has to necessarily avail the appellate remedy and the contentions raised by the petitioner being mixed questions of fact and law cannot be adjudicated in a Writ Petition under Article 226 of the Constitution of India. Petition dismissed being not maintainable.

Summary

Issues Involved:
Challenge to order passed by first respondent classifying services under Works Contract Service, maintainability of Writ Petition without exhausting alternate remedy, nature of contract as composite or separate in terms of service tax liability.

Analysis:
1. The petitioner challenged an order classifying services under Works Contract Service by the first respondent. The Court noted that the petitioner has an alternate remedy through an appeal to the Customs Excise and Service Tax Appellate Tribunal, Chennai. The Court questioned the maintainability of the Writ Petition without exhausting the alternate remedy. The Court had earlier set aside an order due to reliance on an overruled judgment, emphasizing that the nature of the transaction being composite or separate is a mixed question of fact and law.

2. The petitioner argued that the contracts were separate and independent, not composite in nature, and that the first respondent misapplied the Supreme Court decision. The petitioner cited various judgments to support the contention that the contracts were separate and should not be artificially vivisected. The respondent contended that the contracts were lumpsum composite contracts involving supply of goods and services, with inflated values of goods supplied. The Court noted the conflicting stands of the parties regarding the nature of the transactions.

3. The Court reiterated that the question of whether the transaction is composite in nature is a mixed question of fact and law. The Court held that the Tribunal is the appropriate authority to determine the nature of the contract and that such factual questions cannot be decided in a Writ Petition. The Court dismissed the Writ Petition as not maintainable, directing the petitioner to avail the appellate remedy. The Court emphasized that the petitioner cannot seek a review of the merits in a Writ Petition, as it involves mixed questions of fact and law that fall under the jurisdiction of the Tribunal.