2024 (5) TMI 379 - HC - Service Tax

Territorial Jurisdiction - impugned proceeding has been initiated by the Officer located at Tirunelveli in respect of the dispute that had arisen in Chennai in respect of the rental income received by the petitioner from renting of the property - HELD THAT - Considering the fact that the petitioner has already paid the disputed tax and considering the fact that the petitioner is raising fundamental issue, which goes to the root of the issue, a reprieve is given to the petitioner by quashing the impugned order and by remitting the case back to the respondent to pass fresh orders on merits and in accordance with law within a period of 90 days from the date of receipt of a copy of this order, subject to the petitioner filing a detailed reply to the show cause notice. Considering the fact that the petitioner has already paid the tax, the order attaching the bank account of the petitioner with the concerned bank shall stand vacated. The petitioner is directed to co-operate with the respondent. The writ petition is allowed.

Summary

Issues involved:
The issues involved in this case are challenging an impugned Order in Original, jurisdictional error in initiating proceedings, statutory period of limitation for filing an appeal, taxation of rental income, and failure to reply to a show cause notice.

Challenging Impugned Order in Original:
The petitioner challenged the impugned Order in Original dated 13.07.2021 confirming the demand proposed in the show cause notice dated 15.10.2020. The petitioner, an individual proprietor of a hotel, was unaware of the impugned order as it was received by the Manager but not informed to the petitioner. The petitioner filed an appeal which was rejected on the ground of being beyond the statutory period of limitation.

Jurisdictional Error and Taxation of Rental Income:
The petitioner argued a jurisdictional error as the proceeding was initiated by an Officer in Tirunelveli for a dispute arising in Chennai regarding rental income. The petitioner contended that taxing rental income of a residential house contradicts the Finance Act, 1994 and relevant notifications. The petitioner highlighted paying the disputed tax prior to the show cause notice and provided Challans as evidence.

Failure to Reply to Show Cause Notice and Court's Decision:
The Court noted that the petitioner failed to reply to the show cause notice, indicating a lapse in exercising rights. However, considering the payment of disputed tax and the fundamental issue raised, the Court quashed the impugned order. The case was remitted back to the respondent for fresh orders within 90 days, subject to the petitioner filing a detailed reply to the show cause notice. The impugned order was treated as a corrigendum, and the order attaching the petitioner's bank account was vacated.

Legal Arguments and Court's Ruling:
The first respondent argued that the writ petition lacked merit due to the petitioner neglecting statutory rights and cited relevant legal precedents. The Court considered arguments from all parties and acknowledged the petitioner's delay in responding to the show cause notice. Despite this, the Court granted relief to the petitioner by quashing the impugned order, directing fresh orders to be passed within 90 days, and vacating the bank account attachment order. The writ petition was allowed with no costs incurred.