2010 (1) TMI 294 - HC - Service Tax

Show cause notice stage- the petitioner is challenging the show cause notice on the ground that the petitioner is liable for service tax only on the labour charges and show cause notice issued with the view to levy service charges on the composite price. Held that-authority to decide whether contract is composite contract and Service tax leviable on labour charges only or on entire amount. Jurisdictional error not shown. Matter not adjudicated finally and prima facie view alone taken. Reply already filed and petitioner can file comprehensive reply if required. High Court declines to interfere.

Summary

Issues:
Challenge to show cause notice regarding service tax on a composite contract for repair and maintenance.

Analysis:
The petitioner challenged a show cause notice issued by respondent No. 3 regarding service tax on a contract for repairing and testing distribution transformers. The petitioner argued that service tax should only apply to labor charges, not the entire composite price. The respondent contended that the nature of the contract, whether composite or divisible, should be determined based on its terms. The court noted that the authority must decide if service tax is applicable to the entire contract or just labor charges based on the contract's terms. The court found no jurisdictional error in the show cause notice and directed the authority to decide the matter promptly.

The petitioner relied on a Supreme Court decision to support the maintainability of the writ petition against the show cause notice. However, the respondent argued that the writ petition was not maintainable as the authority had the jurisdiction to issue the notice. The court emphasized that the authority must examine the terms of the contract to determine the nature of the contract and the applicable service tax. The court found that the show cause notice did not represent a final adjudication and directed the authority to consider the petitioner's reply in accordance with the law.

The court declined to interfere in the matter but directed the authority to expedite the decision based on the petitioner's comprehensive reply. The writ petition was disposed of with this observation, emphasizing the need for a prompt resolution by the concerned authority in accordance with the law.