2018 (4) TMI 1408 - HC - Service Tax

Doctrine of Merger - case of Revenue is that the petitioner cannot maintain the second round of litigation by challenging the impugned order-in-original - Held that - the Commissioner (Appeals) as well as the CESTAT did not decide on the merits of the issue - considering the nature of activity done by the petitioner and the quantum of service tax demanded, this Court is of the considered view that the respondent should take a decision as regards the applicability of the exemption notification to the case of the petitioner. This Court is inclined to issue appropriate directions so as to enable the petitioner to go before the respondent and place the exemption notification for their consideration so that the respondent can pass reverse orders - petition disposed off.

Summary

Issues:
Challenge to order-in-original, Doctrine of Merger, Applicability of exemption notification

Challenge to order-in-original:
The petitioner challenged an order confirming service tax demand, interest, and penalty. The appeal before the Commissioner (Appeals) was dismissed as time-barred. The CESTAT also dismissed the appeal for the same reason. The petitioner then appealed before the Division Bench seeking to withdraw the appeal and challenge the correctness of the show cause notice. The Division Bench allowed the withdrawal with liberty to challenge the notice. The petitioner filed a writ petition challenging the order-in-original.

Doctrine of Merger:
The revenue contended that the Doctrine of Merger prevents the petitioner from challenging the order-in-original in a second round of litigation. However, the court disagreed as the Commissioner (Appeals) and CESTAT did not decide on the merits. The Division Bench granted liberty to challenge the show cause notice, indicating satisfaction with the petitioner's submission regarding the exemption notification.

Applicability of exemption notification:
The petitioner argued that they are entitled to exemption under notification No. 6/2005-S.T. as amended by No. 8/2008-S.T. The Division Bench allowed withdrawal of the appeal to challenge the show cause notice based on this submission. The court noted that if the turnover did not exceed &8377;10 lakhs during 2008-09, the demand for service tax would not apply. The court directed the petitioner to treat the order-in-original as a show cause notice, submit a reply within fifteen days, and afford a personal hearing to consider the exemption notification's applicability.

In conclusion, the court directed the respondent to reconsider the applicability of the exemption notification based on the peculiar facts of the case. The petitioner was instructed to submit a reply within fifteen days, after which the respondent would pass fresh orders in accordance with the law. The court emphasized the need for the respondent to consider the exemption notification and the petitioner's compliance with its conditions.