2018 (12) TMI 1117 - HC - Service Tax

Composite works contract - liability of service tax - Jurisdiction - Held that - One of the four works contract entered into by the petitioner between the period September 10, 2004 to June 15, 2005 being exigible to Service Tax on the ground that, they are indivisible works contract, the assumption of jurisdiction by the authorities is without any basis. The impugned show-cause-cum-demand notice dated September 7, 2009 is quashed - appeal disposed off.

Issues:
Jurisdiction to issue show-cause-cum-demand notice for Service Tax on composite works contract; Disputed questions of facts in Writ Court intervention; Exigibility of Service Tax on indivisible works contract pre-June 1, 2007; Applicability of Larsen & Toubro Ltd. case on infrastructure projects; Invocation of Article 226 in absence of statutory alternative remedies; Correct application of Larsen & Toubro Ltd. ratio on jurisdiction assumption; Quashing of show-cause-cum-demand notice and consequential steps.

Jurisdiction to issue show-cause-cum-demand notice for Service Tax on composite works contract:
The petitioners challenged the jurisdiction of issuing the impugned show-cause-cum-demand notice, contending that Service Tax is not applicable to a composite works contract. They argued that such contracts cannot be dissected for imposing Service Tax. The Additional Advocate General relied on legal precedents to support this claim. The respondent's advocate argued that disputed factual questions should be resolved by the prescribed authority, citing relevant provisions of the Service Tax Act. The Court analyzed the contracts in question and concluded that they were indivisible works contracts related to infrastructure projects, thus not exigible to Service Tax prior to the 2007 amendment.

Disputed questions of facts in Writ Court intervention:
The respondent's advocate contended that a Writ Court should not intervene in cases involving disputed facts, citing various legal cases. However, the Court found no dispute regarding the classification of goods in the present case, emphasizing the correct application of legal precedents to determine jurisdiction based on the works contracts entered into by the petitioner.

Exigibility of Service Tax on indivisible works contract pre-June 1, 2007:
Referring to the Larsen & Toubro Ltd. case, the Court held that works contracts, especially related to infrastructure projects, were not subject to Service Tax before the 2007 amendment. The Court determined that the four works contracts entered into by the petitioner fell under this category and were not liable for Service Tax.

Applicability of Larsen & Toubro Ltd. case on infrastructure projects:
The Court applied the principles established in the Larsen & Toubro Ltd. case to infrastructure projects, affirming that such contracts were excluded from Service Tax before the 2007 amendment. This interpretation guided the decision regarding the exigibility of Service Tax on the petitioner's works contracts.

Invocation of Article 226 in absence of statutory alternative remedies:
While acknowledging the availability of statutory alternative remedies, the Court clarified that their existence does not bar the exercise of jurisdiction under Article 226 of the Constitution, especially when there are no classification disputes. In this case, the Court found no such disputes and emphasized the authorities' failure to correctly apply the Larsen & Toubro Ltd. ratio.

Correct application of Larsen & Toubro Ltd. ratio on jurisdiction assumption:
Highlighting the importance of understanding and applying legal precedents correctly, the Court concluded that none of the petitioner's works contracts were subject to Service Tax, rendering the assumption of jurisdiction by the authorities baseless. The impugned show-cause-cum-demand notice and all consequential steps were quashed.

Quashing of show-cause-cum-demand notice and consequential steps:
In the final decision, the Court quashed the impugned show-cause-cum-demand notice dated September 7, 2009, along with all subsequent actions taken based on it, including the order in original dated February 6, 2012. The related petitions were disposed of accordingly, with no costs imposed.

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