2022 (3) TMI 1157 - HC - Service Tax

Levy of service tax - works contract - demand based on TDS form 26AS - petitioner takes a stand that in respect of the contract works they had undertaken for which the service tax had been imposed, they are exempted under the law from payment of service tax in respect of some of such contractual works - HELD THAT - The liability to pay a service tax is not upon a presumption nor can it be based upon a state of indeterminateness on the part of the authorities. The liability to pay a tax has to be conclusively determined that for the given transaction for which the tax is imposed the noticee is liable to pay such tax and such taxes are not being paid. After making a conclusive determination, any reasoned order or any further demand notice as may be called for may be issued by the authorities. On the other hand, if the conclusion arrived at that the petitioner is not liable to pay service tax, appropriate reasoned order be also passed. In order to substantiate the claim of the petitioners assessee that they are not liable to pay the service tax, any other ground or reason as may be desirable be also allowed to be raised by the petitioners. Petition disposed off.

Summary

Issues:
1. Imposition of service tax on a proprietorship firm engaged in civil construction activities.
2. Exemption from payment of service tax for certain contractual works.
3. Lack of conclusive determination by the authorities regarding tax liability.
4. Remand of the matter for a fresh determination by the Principal Commissioner, CGST, Guwahati.
5. Opportunity provided to the petitioners to produce relevant material to establish non-liability for service tax.
6. Instructions for the authorities to issue reasoned orders based on the fresh determination.

Analysis:
The judgment addresses the imposition of service tax on a proprietorship firm engaged in civil construction activities. The firm was served a demand notice for a substantial service tax amount along with penalties and interest. The petitioner claimed exemption from service tax for certain contractual works, citing Mega Exemption Notification No. 25/2012-ST. However, the authorities, in the impugned demand notice, expressed difficulty in correlating the amounts received with specific contracts listed in Form 26AS, leading to the presumption of tax liability.

The court noted that the authorities had not conclusively determined the petitioner's tax liability and emphasized that tax liability cannot be based on presumption or indeterminateness. Consequently, the matter was remanded back to the Principal Commissioner, CGST, Guwahati for a fresh determination. The petitioners were granted an opportunity to present relevant material supporting their non-liability for service tax. Cooperation between the petitioners and authorities was encouraged to facilitate a conclusive determination.

The court directed the authorities to issue reasoned orders based on the fresh determination. If it was concluded that the petitioner was not liable to pay service tax, an appropriate order to that effect was to be passed. Additionally, the petitioners were permitted to raise any other grounds or reasons supporting their claim of non-liability. Until a final determination was made, coercive action against the petitioners was prohibited to safeguard their interests.

In conclusion, the writ petition was disposed of with the outlined terms, emphasizing the need for a conclusive determination of tax liability, provision of opportunities for evidence presentation, and issuance of reasoned orders by the authorities.