2009 (10) TMI 98 - HC - Service Tax

Writ jurisdiction - the writ petition cannot be entertained at this stage because merely a show cause notice has been challenged. Firstly, the show cause notice cannot be considered to be without jurisdiction. Moreover, the petitioner has not even filed reply by pleading the Division Bench judgment in Indian Exporters Grievances case (supra) (sic) which has declared the provisions of Rule 2(1)(d)(iv) of the Rules as invalid - Therefore, we are not inclined to entertain the petition at this stage especially when the remedy of filing reply to the show cause notice before the authorities concerned has not yet been availed. It cannot be presumed that the authorities under the Act would not consider the issue raised before us. Therefore, the petitioner is relegated to the remedy of show cause notice by filing reply

Summary

Issues:
Challenge to show cause notice for non-payment of service tax to overseas agents, constitutional validity of Rule 2(1)(d)(iv) of Service Tax Rules, 1994, validity of Taxation of Service Rules, 2006.

Analysis:
The petitioner challenged a show cause notice for non-payment of service tax to overseas agents amounting to Rs. 3,81,33,750/- along with Rs. 41,73,003/- as education cess. Additionally, the constitutional validity of Rule 2(1)(d)(iv) of Service Tax Rules, 1994, Explanation to Section 65(105), and Section 66A of the Finance Act, 1994 were contested. The petitioner also questioned the validity of Taxation of Service Rules, 2006, citing a Division Bench judgment of the Bombay High Court declaring Rule 2(1)(d)(iv) as invalid.

The High Court, after hearing the arguments, found that challenging the show cause notice at that stage was premature as the petitioner had not even filed a reply or raised the Division Bench judgment declaring the rule invalid. The Court noted that the period in question was from 9-7-2004 to 31-12-2008, while the Division Bench judgment found the rule valid from 18-4-2006. The Court suggested that the petitioner should have raised the issue before the departmental authorities, especially for the period before 18-4-2006. The Court refused to entertain the petition, directing the petitioner to respond to the show cause notice and allowing the authorities to consider the raised issues. The Court left the question of the rule's validity open for the petitioner to raise if necessary.

In conclusion, the High Court disposed of the writ petition, emphasizing the importance of availing the remedy of responding to the show cause notice before the authorities and allowing them to consider the issues raised. The Court clarified that the petitioner could raise the validity issue if needed, indicating that the authorities should pass a speaking order considering the raised concerns.