2017 (8) TMI 1009 - HC - Service Tax

Validity of SCN - interest - penalty - Extended period of limitation - Held that - Admittedly the petitioner has not submitted their objection to the show-cause notice but have filed this writ petition challenging the SCN itself. The challenge to the SCN is not on the ground of lack of jurisdiction of the second respondent to issue the notice. What is sought to be canvassed before this Court is that the Service Tax can be levied only with regard to the retreading aspect excluding the cost of materials/goods. However this aspect cannot be examined at this stage since the petitioner has not submitted themselves to the process of adjudication of the SCN - Therefore the petitioner has to necessarily submit their objection to the impugned SCN - The writ petitioner is directed to submit their reply to the show-cause notice within a period of 30 days - petition dismissed - decided against petitioner.

Summary

Issues: Challenge to show-cause notice for Service Tax demand, jurisdiction of the second respondent, applicability of Service Tax on retreading of tyres.

Analysis:
1. Challenge to Show-Cause Notice: The petitioner challenged the show-cause notice issued by the second respondent demanding Service Tax for a specific period. The petitioner argued that the Service Tax was being paid only on the labor component as the samples purchased were subject to the Tamil Nadu General Sales Tax Act. The petitioner contended that the show-cause notice was without jurisdiction.

2. Applicability of Service Tax: The Hon'ble Supreme Court's decision in Safety Retreading Co. Ltd. vs. Commissioner of Central Excise Salem was cited, where it was held that in a contract for retreading of tyres, Service Tax is not leviable on the total amount charged, including the value of materials/goods used and sold in the execution of the contract. The petitioner sought to quash the show-cause notice based on this decision.

3. Jurisdiction and Adjudication: The High Court noted that the petitioner had not submitted objections to the show-cause notice but directly challenged it through a writ petition. The court emphasized that the issue of whether Service Tax can be levied only on the retreading aspect excluding the cost of materials/goods could not be examined at this stage. The petitioner was directed to submit their reply to the notice, produce all relevant materials, and participate in the adjudication process.

4. Court Decision: The High Court dismissed the writ petition, directing the petitioner to respond to the show-cause notice within 30 days and participate in the adjudication process. The second respondent was instructed to consider the petitioner's submissions, review all relevant documents, including assessment orders under state tax laws, and pass a reasoned order in accordance with the law. The petitioner was allowed to raise all contentions, including challenging the extended period of the notice issuance. No costs were awarded, and the case was closed.

This detailed analysis of the judgment highlights the key legal issues involved, the court's considerations, and the directives given to the parties involved in the case.