2016 (8) TMI 403 - HC - Service Tax

Seeking quash of impugned order - invalid and contrary to settled legal principles - Service Tax Commissionerate on the same transaction proposed to demand service tax, whereas, the first respondent treated the same transaction as trading and an exempted service and has demanded an amount under Rule 6(3) of CENVAT Credit Rules - both Commissionerate are taking contrary stands - Held that - the petitioner cannot maintain this Writ Petition to quash the impugned order, which is only a Show-Cause Notice. Furthermore, the effect of the earlier proceedings which were initiated pursuant to the audit paras and reply given by the petitioner, the reversal of appropriate input tax done by them and the claim for revision effected by them and the impact of those proceedings on the impugned Show-Cause Notice is also a factual issue. That apart, the action initiated by the petitioner based on audit paras has not attained finality pursuant to the petitioner s claim for refund. A Show-Cause Notice has been issued to the petitioner on 23.09.2014, by the Assistant Commissioner of Central Excise, A B Division, Chennai I Commissionerate. Therefore, such issue cannot be taken to have attained finality and more particularly, when the petitioner has given a reply to the Show-Cause Notice. In such circumstances, this Court would not be justified in interdicting the proceedings at the stage of Show-Cause Notice. Period of limitation - Section 11A(7) of the Central Excise Act - Held that - in any event if the petitioner submits his reply raising all objections, both, factual and legal, the first respondent shall consider the issue as to whether the impugned proceedings is barred by limitation, as first among the several other issues and thereafter take up the other issues for adjudication and pass an order on all issues. - Decided against the petitioner

Summary

Issues: Challenge to Show-Cause Notice regarding CENVAT Credit reversal for trading services for specific years, Validity of Show-Cause Notice, Bar on limitation under Section 11A(7) of Central Excise Act, Impact of earlier proceedings on the current Show-Cause Notice, Justification for not interfering with the Show-Cause Notice.

In this case, the petitioner challenged a Show-Cause Notice dated 24.02.2016, demanding the reversal of CENVAT Credit availed on exempted trading services for the years 2011-12 and 2012-13. The petitioner argued that the notice was invalid and contrary to legal principles as it conflicted with the Service Tax Commissionerate's treatment of the same transaction. The petitioner had previously reversed the appropriate input tax credit and filed a revision claim, but the Show-Cause Notice was still issued.

The petitioner contended that the proceedings initiated after a year were without jurisdiction, citing a Supreme Court decision. The Court noted that the issue of limitation and the impact of earlier proceedings were factual matters. The Court declined to quash the Show-Cause Notice at this stage, emphasizing that the petitioner had to respond to the notice and allow the authorities to consider all objections raised before making a final decision.

The Court highlighted that the petitioner should submit their reply to the Show-Cause Notice, and the authorities would then address the limitation issue along with other matters for adjudication. Ultimately, the Court refused to interfere with the Show-Cause Notice, stating that the petitioner must participate in the ongoing proceedings. The Writ Petition was dismissed, granting the petitioner three weeks to respond to the notice. No costs were awarded, and the case was closed.