2019 (1) TMI 1385 - HC - Service Tax

Maintainability of petition - requirement with the pre-deposit - availability of appellate remedy - section 35F of the Central Excise Act, 1944 read with the provisions of section 86 of the Act - percentage of completion (POC) sales - validity of SCN - Held that - Issue Notice returnable on 23.01.2019 - By way of adinterim relief, the respondents are restrained from making any coercive recovery pursuant to the impugned order-in-original dated 31.10.2018.

Summary

Issues:
1. Interpretation of provisions under section 35F of the Central Excise Act, 1944 regarding predeposit for appellate remedy.
2. Recognition of revenue under Accounting Standards7 for percentage of completion (POC) sales and its relevance to liability for service tax.
3. Challenge to the findings of the adjudicating authority regarding the correctness of the revenue calculation.
4. Granting ad-interim relief and restraining coercive recovery by the respondents.

Analysis:

1. The petitioner argued that the appellate remedy under section 35F of the Central Excise Act, 1944 requires a predeposit of 7.50% of the service tax demand, subject to a maximum of ?10 Crores. With a service tax demand exceeding ?100 Crores, the petitioner contended that mandating any predeposit would result in injustice. It was asserted that the petition raised a pure question of law, rendering the alternative remedy ineffective.

2. Regarding the merits of the case, the petitioner emphasized that the recognition of revenue for percentage of completion (POC) sales under Accounting Standards7 does not necessarily indicate consideration for services provided. The method of accounting chosen by the service provider was argued to be irrelevant to determining the liability for service tax.

3. The petitioner challenged the findings of the adjudicating authority, highlighting discrepancies in the calculation of revenue. It was contended that adding billed revenue to POC sales was deemed incorrect and against accounting standards. The basis of the show cause notice was disputed on these grounds.

4. In response to the submissions made, the Court issued a Notice returnable on 23.01.2019. Additionally, as ad-interim relief, the respondents were restrained from enforcing coercive recovery following the order-in-original dated 31.10.2018. Direct service was permitted in this matter.

This judgment from the Gujarat High Court addressed various legal issues, including the interpretation of statutory provisions, accounting standards, and challenges to administrative findings, ultimately leading to the grant of ad-interim relief to the petitioner.