2018 (5) TMI 788 - HC - Service Tax

Validity of Show Cause Notice demanding service tax - Maintainability of petition - Jurisdiction - Mega Exemption Notification dated 20.06.2012 - renting of immovable property service - Held that - what is being sought to be taxed is the renting of immovable property and not for excavation work. Therefore, if any remittance being made by the Contractor who has excavated the earth for the purpose of renting of immovable property, will not absolve the petitioner from the proposal made in the SCN. The jurisdictional issue, which is pointed out by the learned Additional Advocate General is not purely a jurisdictional issue as it primarily involves adjudication of facts. The writ petition is not maintainable and it is premature, for the reason that the impugned order in the writ petition is only a SCN and not an order for the petitioner to be aggrieved - petition dismissed being not maintainable.

Summary

Issues:
Challenge to show cause notice regarding classification of services and demand for service tax, interest, and penalty. Preliminary objection on maintainability of writ petition. Jurisdictional issue regarding service tax levied on public duty. Applicability of Mega Exemption Notification.

Analysis:
The petitioner, a Superintending Engineer, challenged a show cause notice proposing classification of services as "Renting of immovable property" and demanding a substantial amount towards service tax, interest, and penalty. The petitioner argued that as a public service provider, no service tax should be levied, especially when Telecom Companies paying GST inclusive of all taxes. The petitioner contended that the excavation work is already taxed by the contractor and falls under the Mega Exemption Notification exempting certain services from service tax. The respondents raised a preliminary objection on the maintainability of the writ petition, emphasizing the need for the petitioner to reply to the show cause notice and participate in the adjudication process.

The court considered the nature of the proposed taxation, focusing on renting of immovable property rather than excavation work. It noted that remittance by the contractor for excavation work does not absolve the petitioner from the tax proposed in the notice. The applicability of the Mega Exemption Notification was deemed a factual issue, requiring the petitioner to establish that the services fall under the exemption clause strictly. The court emphasized that disputed factual questions, such as the nature of services to be taxed, must be adjudicated by the authority, making it necessary for the petitioner to respond to the show cause notice and engage in the adjudication process.

Ultimately, the court dismissed the writ petition as premature, stating that the observations made in the order were provisional and would not influence the adjudication process. The court directed the petitioner to submit a reply to the show cause notice within thirty days, emphasizing that the Adjudicating Authority should independently decide the matter. The judgment highlighted the importance of active participation in the adjudication process and refrained from quashing the show cause notice based on the grounds raised by the petitioner.