2024 (6) TMI 251 - HC - Service Tax

Validity of Show Cause Notice - Calculation of service tax - service tax required to be paid on gross amount collected by LCOs or on the amount which the petitioner gets from the LCOs after deduction of the share by the LCOs from the gross amount - Extended period of limitation - HELD THAT - The judgment in the case of Canon India Pvt. Ltd 2021 (3) TMI 384 - SUPREME COURT is in respect of the Customs Act and Rules made thereunder. It is not the judgment in the context of Section 73 (1) of the Finance Act 1994. The Notification No. 22/2014-ST dated 16.09.2014 has specifically appointed the Officers of the Directorate General of Central Excise Intelligence Now Directorate General of GST Intelligence as Central Excise Officers, vesting them with the powers under Chapter V of the Finance Act, 1994 and the Rules made thereunder. The Supreme Court, while interpreting the provisions of Section 28 (4) held that when the Statute confers the power to perform an act on different officers, especially when they belong to different Departments, a different officer cannot exercise their powers in the same case. Where one officer has exercised his powers of assessment, the power to order re-assessment must also be exercised by the same officer - Thus, the Supreme Court held that the Additional Director General of DRI who issued the recovery notice under Section 28 (4) was not a Proper Officer for re-opening the assessment completed by the Deputy Commissioner of Customs. There is no irregularity or illegal infirmity in the show cause notice issued by the Additional Director General of the Directorate of GST Intelligence. Its final adjudication will be carried out by the jurisdictional Central GST and the Central Excise Commissioner - this Court does not find that the 2nd respondent does not have authority or power under the Finance Act 1994 read with the Notifications and Circulars mentioned above to issue the impugned show cause notices. The impugned show cause notices do not suffer from jurisdictional error as contended by the learned Counsel for the petitioner. Extended period of limitation - HELD THAT - The question of whether the extended period of limitation would be available to the Department or not and whether one or more jurisdictional facts for invoking the extended period of limitation is/are available or not, is a mixed question of fact and law, which can be decided after considering the response of the petitioner to the show cause notices issued. However, this Court would not like to embark upon the detailed enquiry on factual aspects inasmuch as the challenge before this Court is the impugned show cause notices. It is well settled that the High Court in the exercise of its jurisdiction under Article 226 of the Constitution of India, should not interdict the initial stage of enquiry in the show cause notice unless the show cause notice is without jurisdiction or in violation of the law or vires of an Act is challenged. If there is the existence of the disputed question of fact, the High Court should not interfere with the show cause notice in the exercise of its jurisdiction under Article 226 of the Constitution of India. Tthis Court is of the considered view that the petitioner has been issued only two show cause notices impugned in these two writ petitions, which involve separate factual and legal aspects. The enquiry is at the threshold. Therefore, this Court is not inclined to interfere with the ongoing proceedings in pursuance of the impugned show cause notices. The petitioner should file a reply to the show cause notices if already not filed and would be free to make all the submissions available to them under the law. If the petitioner has not filed the reply to the show cause notices, the petitioner should file the reply to the show cause notices within a period of four weeks from today and pursue the case before the competent authority - Petition dismissed.

Issues Involved:
1. Jurisdiction of the officer issuing the show cause notices.
2. Applicability of the extended period of limitation.
3. Liability of the petitioner to pay service tax on gross amounts collected by LCOs.
4. Maintainability of the writ petition against show cause notices.

Summary:

1. Jurisdiction of the Officer Issuing the Show Cause Notices:
The petitioner challenged the jurisdiction of the Additional Director General of the Directorate of GST Intelligence (DGGI) to issue show cause notices u/s 73 of the Finance Act 1994. The petitioner argued that only the Commissioner, Central Tax and Central Excise, Thiruvananthapuram, had jurisdiction. However, the court noted that officers of the DGGI have been appointed as Central Excise Officers with powers under Chapter V of the Finance Act 1994 throughout India. The court found no irregularity or legal infirmity in the show cause notices issued by the Additional Director General of DGGI.

2. Applicability of the Extended Period of Limitation:
The petitioner contended that the show cause notices were barred by limitation, as they were issued after 58 months from the relevant date, invoking the extended period of limitation without jurisdictional facts. The court held that the question of whether the extended period of limitation is available is a mixed question of fact and law, which can be decided after considering the petitioner's response to the show cause notices.

3. Liability of the Petitioner to Pay Service Tax on Gross Amounts Collected by LCOs:
The petitioner argued that they were liable to pay service tax only on the amount received from LCOs, not on the gross amount collected by LCOs from subscribers. The court noted that with the implementation of the Digital Addressable System (DAS) from 01.02.2017, the control of access to channels by subscribers was with the petitioner. The court found that the issue of whether the petitioner is liable to pay service tax on the entire subscription collected by LCOs or only on the amount received from LCOs requires detailed factual examination.

4. Maintainability of the Writ Petition Against Show Cause Notices:
The GST Department argued that the writ petition against the show cause notices was premature and not maintainable. The court held that the High Court should not interdict the initial stage of enquiry in the show cause notice unless it is without jurisdiction or in violation of law. The court found that the petitioner had not demonstrated any such grounds and that the enquiry was at the threshold stage.

Conclusion:
The court dismissed both writ petitions, directing the petitioner to file replies to the show cause notices within four weeks and pursue the case before the competent authority. The court emphasized that Chapter V of the Finance Act 1994 is a complete code for Service Tax matters, and the petitioner should avail the remedies provided therein if aggrieved by the adjudication of the show cause notices. All interlocutory applications regarding interim matters were closed.

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