2018 (11) TMI 530 - HC - Service Tax

Jurisdiction - exigibility to Service Tax - Retention amount - Held that - This Court is of the clear and considered opinion that a Government Undertaking was clearly ill-advised to invoke the writ jurisdiction of this Court at the premature stage of show cause notice issued by the Service Tax Department and such premature writ petition deserves to be dismissed with costs for unnecessarily wasting the time of the Court - petition dismissed with cost.

Summary

Issues:
Challenge to show cause notice regarding imposition of service tax on forfeited retention amount and earnest money deposits.

Analysis:
1. The petitioner, a government undertaking, challenged a show cause notice issued by the Service Tax Department regarding the imposition of service tax on certain amounts retained from contracts with vendors. The notice claimed that the retention amount and earnest money deposits forfeited by the petitioner should be subject to service tax under the Finance Act, 1994.

2. The main contention raised by the petitioner was the lack of territorial jurisdiction of the authority issuing the show cause notice, which was based in Delhi. However, the court found that the notice merely pointed out an audit objection and required the petitioner to respond before the concerned authority in Bangalore. The objection on territorial jurisdiction was dismissed by the court.

3. Another contention raised by the petitioner was regarding the validity of the provisions of Section 66(E)(e) of the Finance Act, 1994. The petitioner argued that the definition of "Declared Services" was unconstitutional. The court deemed this argument as frivolous and upheld the legislative competence of the Union of India in defining taxable services.

4. The court criticized the petitioner for prematurely challenging the show cause notice and invoking the writ jurisdiction of the court. It was emphasized that the petitioner should have followed the hierarchy of remedial measures and forums provided by tax laws before approaching the court. The court dismissed the plea and imposed costs on the petitioner for wasting the court's time.

5. Ultimately, the court dismissed the writ petition and ordered the petitioner to pay costs of ?50,000 to be deposited with the Registrar General of the court, with the amount to be remitted to the Prime Minister's Relief Fund upon deposit within two months.