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2022 (4) TMI 202 - HC - Service TaxValidity of SCN - Time Limitation - allegation is that the impugned SCN are beyond the statutory period of limitation prescribed under Section 73 of the Finance Act, 1994 - services rendered by Government Contractors, by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation and alteration of works specified - applicability of Mega Exemption Notification No.25/2012-ST, dated 20.06.2012 - HELD THAT - A reading of the chart indicates that only a part of the demand would be statutorily time barred, as it is beyond five years period from the last date for filing of the returns. Bearing the above, the entire demand proposed in the show cause notice cannot be said to be time barred. To that extent, the Writ Petitions filed challenging the impugned proceedings cannot be sustained. It is open for the petitioners to establish the same before the respondents by explaining the provisions of Section 73 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994. The other challenge on the ground that the show cause notices are time barred is concerned, it is noticed that the petitioners have neither obtained registration nor filed returns. Therefore, it cannot be said that the petitioners were not guilty of suppression of facts - HELD THAT - The show cause notices issued by the respondents based on the information gathered from the counterpart from the Income Tax Department, cannot be said to be time barred. Had the petitioners obtained registration and filed returns stating that they were not liable to pay tax, even if they wrongly claimed that they were not liable to pay tax, it would have been open to the petitioners to show their bona fide that they are not liable to pay the tax and therefore, no case was made out for no suppression of facts. Exemption was withdrawn and re-introduced with certain conditions. The exemption is confined to a specific category of contracts entered before 01.03.2015. Therefore, it is open for the petitioners to reply to the show cause notices and meet out the allegations contained in the show cause notices, taking advantage of the benefit given by the Parliament, vide Section 102 of the Finance Act, 2016 read with Notification 9/2016-ST, dated 01.03.2016. Similarly, it is open for the petitioners to establish that part of the demand was time barred in terms of Section 73 of the Finance Act read with Rule 7 of Service Tax Rules, 1994. The petitioners are also not without any remedy. It is open for the petitioners to make representations to the respective Departments of the Government to reimburse the tax by applying the principle contained in Section 64-A of the Sale of Goods Act, 1930. The respective petitioners are therefore directed to give detailed replies to the respective show cause notices and participate in the adjudicatory mechanism provided under the Finance Act, 1994. The petitioners shall file replies within a period of 45 days from the date of receipt of a copy of this order - Petition disposed off.
Issues Involved:
1. Validity of the show cause notices being time-barred under Section 73 of the Finance Act, 1994. 2. Applicability of tax exemptions under various notifications. 3. Allegations of suppression of facts by the petitioners. 4. Requirement of pre-show cause notice consultation for demands above ?50 Lakhs. 5. The petitioners' failure to register and file returns. 6. The petitioners' entitlement to seek reimbursement from the Government departments. Detailed Analysis: 1. Validity of the Show Cause Notices Being Time-Barred: The petitioners challenged the impugned show cause notices on the grounds that they were issued beyond the statutory period of limitation prescribed under Section 73 of the Finance Act, 1994. They cited multiple precedents to support their claim that the notices were time-barred. However, the court noted that only a part of the demand would be statutorily time-barred, as it is beyond five years from the last date for filing returns. The entire demand proposed in the show cause notices cannot be said to be time-barred, and the petitioners can establish this before the respondents. 2. Applicability of Tax Exemptions: The petitioners argued that they were exempted from tax under various notifications, including Notification No.25/2012-ST and Notification No.9/2016-ST, which provided exemptions for services rendered to the Government and governmental authorities. The court acknowledged that the exemption was withdrawn by Notification No.6/2015-ST but was reintroduced with conditions by Notification No.9/2016-ST. The exemption is specific to contracts entered before 01.03.2015. The petitioners should reply to the show cause notices and meet the allegations, taking advantage of the benefit given by Section 102 of the Finance Act, 2016, read with Notification 9/2016-ST. 3. Allegations of Suppression of Facts: The respondents argued that the petitioners had neither registered with the Service Tax Department nor filed returns, which constituted suppression of facts. The court held that since the petitioners did not obtain registration and file returns after the exemption was withdrawn, it could not be said that they were not guilty of suppression of facts. The show cause notices issued based on information from the Income Tax Department cannot be said to be time-barred. 4. Requirement of Pre-Show Cause Notice Consultation: For W.P.(MD)No.7137 of 2021, the petitioners argued that there was no pre-show cause notice consultation, as the demand proposed was above ?50 Lakhs, violating the Circular dated 19.11.2020 of the Central Board of Indirect Taxes. The court did not provide a specific ruling on this issue but directed the petitioners to reply to the show cause notices. 5. The Petitioners' Failure to Register and File Returns: The court noted that the petitioners had not obtained registration or filed returns after the exemption was withdrawn, which indicated suppression of facts. The respondents' reliance on information from the Income Tax Department to issue the show cause notices was deemed valid. 6. The Petitioners' Entitlement to Seek Reimbursement: The petitioners argued that the Public Works Department should be directed to pay the tax as indirect tax is to be borne by the consumer. The court stated that the petitioners are not without remedy and can make representations to the respective Government departments for reimbursement of the tax, applying the principle contained in Section 64-A of the Sale of Goods Act, 1930. Conclusion: The court directed the petitioners to give detailed replies to the respective show cause notices and participate in the adjudicatory mechanism under the Finance Act, 1994. The respondents are to pass appropriate orders within 45 days after giving the petitioners an opportunity for a hearing. The views expressed in the judgment are prima facie, and the respondents should pass orders independently, uninfluenced by the court's views on limitation or merits. The writ petitions were disposed of accordingly, with no costs, and connected miscellaneous petitions were closed.
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