2022 (8) TMI 993 - HC - Service Tax

Validity of show cause notice - availability of a statutory remedy - Challenge to SCN on the ground of lack of Jurisdiction - invocation of extended period of limitation - HELD THAT - The learned Writ Court was fully justified in examining such of those facts which were required to decide as to whether the authority lacked jurisdiction in issuing the show-cause notice. Therefore, there is no error in the finding of the learned Writ Court that the writ petition was maintainable. In any event, the said issue has now become academic as the writ petition which was filed in the year 2011 was allowed by order dated 10.08.2011 against which the present appeal was filed in the year 2011 and the appeal is heard now and at this stage even assuming we were to hold that the writ petition was not maintainable, it will be too harsh on the assessee to be relegated back to the authority to respond to the show-cause notice. Therefore, the first issue is decided in favour of the respondent writ petitioner. Invocation of extended period of limitation - Section 73(1) of the Finance Act,1994 - HELD THAT - On a careful reading of the show-cause notice, it is evidently clear that there is absolutely no whisper of any allegation of wilful mis-statement or suppression of facts or fraud or collusion as committed by the respondent assessee with an intention to evade payment of service tax. In the absence of such factual finding, the extended period could not have been invoked - the respondent was registered with the service tax department in the year 2004; during 2006 the Director General of Central Excise and Intelligence conducted search and seizure in the premises of the respondent and seized various records. It is thereafter in August 2006, the Officer from Dhanbad alleged that conversion charges for conversion of coal into coke attracted service tax under the category Business Auxiliary Service . The respondent immediately sent their reply informing the Officer that the conversion of coal into coke amounts to manufacture, thus exempt from service tax in view of the proviso to Section 65(19) of the Finance Act. It appears that none of the proceedings were taken to the logical end i.e. by issuance of show-cause notice, adjudication and passing of final orders. It is only in the year 2010, the impugned show-cause notice was issued invoking the extended period of limitation, with an iota of any allegation of mis-statement or fraud or collusion committed by a respondent with the intention to evade payment of service tax - the learned Single Bench was fully justified in holding that the show-cause notice impugned before it was barred by limitation. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Condonation of delay in filing the application.
2. Maintainability of the writ petition against a show cause notice.
3. Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994.
4. Validity of the show cause notice issued by the Commissioner of Service Tax.

Detailed Analysis:

Condonation of Delay:
The court addressed the delay of 546 days in filing the application. Upon reviewing the affidavit supporting the application, the court found that sufficient cause was shown for the delay. Consequently, the application for condonation of delay was allowed, and the delay was condoned.

Maintainability of the Writ Petition:
The appellant revenue raised a preliminary objection regarding the maintainability of the writ petition, arguing that determining whether the proviso to Section 73(1) of the Act was rightly invoked involves factual determination and thus should not be entertained by the writ court. The court referred to the Supreme Court decisions in Whirlpool Corporation Versus Registrar of Trade Marks and State of Punjab Versus Bhatinda District Cooperative Milk P. Union Limited, which established that a writ petition challenging the validity of a notice on the ground of being barred by limitation is maintainable despite the availability of an alternate statutory remedy. The court concluded that the writ petition was maintainable as it involved a jurisdictional question.

Invocation of the Extended Period of Limitation:
The show cause notice demanded service tax under three heads and invoked the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994. The respondent contended that the notice was barred by time and that the extended period could not be invoked as the necessary ingredients were absent. The court noted that the show cause notice did not indicate how the extended period was justified and emphasized that the burden of proof lies with the authority issuing the notice. The court held that the extended period could not be invoked without clear evidence of fraud, collusion, wilful mis-statement, or suppression of facts with intent to evade tax. The court found no such allegations in the show cause notice, rendering the invocation of the extended period invalid.

Validity of the Show Cause Notice:
The court examined the factual background, including the respondent's registration with the Service Tax Department, search and seizure operations, and subsequent correspondence. The court found that the show cause notice lacked specific allegations necessary to invoke the extended period of limitation. The court also addressed the appellant's argument regarding a previous judgment (APO No. 332 of 2009) and clarified that it had no impact on the present case as it involved a different entity. The court concluded that the show cause notice was barred by limitation and quashed it without addressing the merits of the service tax claims.

Conclusion:
The appeal filed by the revenue was dismissed, and the court upheld the decision of the learned Writ Court quashing the show cause notice on the ground of limitation. The court found no error in the finding that the writ petition was maintainable and that the extended period of limitation could not be invoked without clear evidence of intent to evade tax.