2023 (1) TMI 941 - HC - Service Tax

Exemption from service tax - works contract service - applicability of Clause-14 (a) of Mega Exemption Notification No.25/2012 dated 20.06.2012 issued by the Government of India - HELD THAT - As per Clause-14.3 of the Circular under No.1053/02/2017-CX dated 10.03.2017, at least three opportunities of personal hearing should be granted by the authorities before the final adjudication of a matter. In the present case, only two opportunities were given o n 16.09.2022 and 29.09.2022. Even after communication of the order dated 21.09.2022 via email on 18.10.2022, the respondent No.3 did not provide the third opportunity to the petitioner in an illegal, arbitrary and high handed manner - the impugned order dated 16.11.2022 passed by the respondent No.3, apart from being illegal, arbitrary and without jurisdiction, is apparently perverse and fraught with patent illegality since it was conclusively decided by the respondent No.2 after consulting the relevant laws that the services rendered by the petitioner during the financial year 2016-17 are exempted from the purview of Service Tax, particularly in view of the Clause-14(a) of the Central Government s Mega Exemption Notification No.25/2012 dated 20.06.2012. Hence, the impugned order dated 16.11.2022 as well as the order dated 25.03.2022 are liable to be set aside and quashed. The respondent No.3 while passing the impugned order dated 16.11.2022 has acted without any jurisdiction in view of the admitted position of fact that whatever contractual job was executed by the petitioner during the financial year 2016-17 was under the N.F. Railways within the State of Assam and under the territorial jurisdiction of the respondent No.2 and there was nothing on record to even remotely suggest that any work was executed by the petitioner within the State of Tripura i.e. within the territorial jurisdiction of the respondent No.3. The impugned demand stands set aside since, a non-speaking order has been passed without dealing with regard to the exemption clauses and the notification issued thereunder - the respondents shall consider the explanation in the light of the exemption notification No.25/2012 and then pass a speaking order after giving an opportunity of personal hearing. It is further made clear that till a decision is taken, no adverse action shall be initiated against the petitioner. Petition allowed by way of remand.

Issues:
1. Legality and validity of orders dated 25.03.2022 and 16.11.2022
2. Violation of provisions of Finance Act, 1994 and relevant circular
3. Non-consideration of provisions in Mega Exemption Notification No.25/2012
4. Jurisdiction of respondent No.5 in issuing summons
5. Impugned order dated 25.03.2022 for deposit against service tax
6. Response to impugned order and submission of written explanation
7. Issuance of demand cum show cause notices by respondent No.2
8. Exemption under Mega Exemption Notification No.25/2012
9. Compliance with Circular No.1053/02/2017-CX
10. Jurisdiction of respondent No.3 in passing impugned order
11. Territorial jurisdiction and factual position of contractual works
12. Setting aside the impugned demand and issuance of speaking order
13. Opportunity for personal hearing and consideration of exemption clauses
14. Representation regarding withdrawal of demand by Guwahati Range Commissioner

Analysis:
1. The petition challenges the legality and validity of orders dated 25.03.2022 and 16.11.2022, alleging violations of the Finance Act, 1994, and relevant circulars. The petitioner contends that respondent No.3 acted beyond jurisdiction by not considering the exemption provisions in Mega Exemption Notification No.25/2012, causing injustice.

2. Concerns arise regarding the jurisdiction of respondent No.5 in issuing summons and the subsequent impugned order dated 25.03.2022 demanding a substantial amount against service tax. The petitioner responded with a detailed submission, citing exemptions under the Finance Act, 1994.

3. Respondent No.2 issued demand cum show cause notices, prompting the petitioner to seek reconsideration based on the exemptions granted by the Mega Exemption Notification No.25/2012. The petitioner emphasized that the works executed fell under exempted services as per the notification.

4. Compliance with Circular No.1053/02/2017-CX is questioned as the petitioner was not provided with the requisite three opportunities of personal hearing before final adjudication. The respondent No.3's actions are deemed illegal and arbitrary.

5. The impugned order dated 16.11.2022 is challenged for being without jurisdiction, as the contractual works were executed under the territorial jurisdiction of respondent No.2. The order is considered perverse and lacking legal basis.

6. The judgment sets aside the impugned demand and directs the respondents to reconsider the case in light of the exemption notification, emphasizing the need for a speaking order after affording an opportunity for personal hearing. No adverse action is to be taken against the petitioner until a decision is made.

7. Notably, the petitioner is permitted to present materials supporting contentions, especially in cases where similar demands have been withdrawn by other authorities. This representation highlights the importance of consistency and fairness in tax assessments.

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