2024 (8) TMI 97 - HC - Service Tax

Gross violation of principles of natural justice - impugned order were not served on the petitioner - liability of service tax - case of the petitioner is that the petitioner is a Civil Contractor, who is not liable to tax as the petitioner has not provided any services to the Government institutions and therefore, the withdrawal of exemption under Mega exemption N/N. 25/2012-ST, dated 20.06.2012 as amended by N/N. 6/2015-ST, dated 01.03.2015 would not apply to the petitioner. HELD THAT - Prima facie the petitioner has been in default in complying with the requirements of Chapter V of the Finance Act, 1994, in as much as the petitioner has failed to obtain service tax registration. The fact that the petitioner has been providing civil contract service indicate that the petitioner was indeed liable to pay service tax. The petitioner cannot blame the department as the petitioner had not given the correct particulars to the department for either issuance of the show cause notice or to the personal hearing notices thereafter or for communication of the impugned order. Prima facie the Court is of the view that the petitioner is indeed liable to pay service tax for the services provided to various private parties. Unless the petitioner is able to establish that the petitioner's turn-over was below the turn-over specified in the notifications exempting a service provided from payment of service tax, the demand cannot be questioned. The demand in the impugned order pertains to the period between 01.04.2016 to 30.06.2017. The interest will continue to mount on the petitioner on the demands as assessment under the provisions of the Finance Act, 1994 and the Service Tax Rules, 1994 are based on self-assessed returns that were required to be filed under the provisions of the aforesaid Act and Rules. The impugned order is quashed and the case is remitted back to the file of the 2nd respondent to pass fresh orders on merits and in accordance with law - petition disposed off by way of remand.

Summary

Issues:
Challenge to impugned Order in Original, Demand confirmation, Service tax liability, Violation of natural justice, Compliance with Finance Act, 1994, Liability to pay service tax, Balance of interests, Remittance of case for fresh orders, Deposit of disputed tax.

Impugned Order Challenge:
The writ petitioner challenged the impugned Order in Original No.MAD-ST-ASC-143-2022 confirming the demand proposed in show cause notice No.27/2021 ST. The petitioner contended being a Civil Contractor not liable to tax due to no services provided to Government institutions, thus withdrawal of exemption not applicable. The order was passed by comparing the profit and loss account filed for Income Tax Act, 1961, which the petitioner argued as a basis for quashing the demand sustained in the order.

Violation of Natural Justice:
The petitioner referred to a communication confirming non-service of preceding notices on the petitioner, alleging a gross violation of principles of natural justice. The petitioner sought the impugned order to be set aside based on this ground.

Service Tax Liability:
The Court found the petitioner in default for failing to comply with the requirements of the Finance Act, 1994, by not obtaining service tax registration. It was noted that the petitioner provided civil contract services, indicating liability to pay service tax. The Court held the petitioner accountable for providing services to private parties, emphasizing the need to establish turnover below specified limits to question the demand.

Balance of Interests and Remittance of Case:
Considering the balance of interests between the petitioner and respondent, the Court quashed the impugned order and remitted the case back for fresh orders. The petitioner was directed to file a consolidated reply to the show cause notice within thirty days and deposit 20% of disputed tax in two installments. Failure to comply would allow the respondents to proceed against the petitioner as per the order.

Compliance with Finance Act, 1994:
The Court noted the importance of complying with the Finance Act, 1994, and the Service Tax Rules, emphasizing the self-assessed returns required to be filed under these provisions. The order aimed to reduce further interest exposure by balancing the interests of both parties through remittance and payment directives.

Deposit of Disputed Tax:
The petitioner was instructed to deposit 20% of the disputed tax to the credit of the respondent department in installments, with the option to pay further amounts to reduce eventual tax liability and interest. Failure to comply would result in the revocation of concessions and dismissal of the writ petition.

Conclusion:
The High Court, after considering the arguments, balanced the interests of both parties by quashing the impugned order, remitting the case for fresh orders, and providing directives for compliance and deposit of disputed tax. The decision aimed to address the issues of service tax liability, violation of natural justice, and compliance with the Finance Act, 1994, while ensuring a fair balance between the petitioner and respondent's interests.