2017 (3) TMI 307 - HC - Service Tax

Challenge to the issuance Show Cause Notice (SCN) - Levy of tax - Societies registered under the Co-operative Societies Act - petitioner claim that they do not come under the purview of Service Tax Rules and is classified as Primary Agricultural Credit Society registered as per Section 2(oaa) of the Kerala Co-operative Societies Act, 1969, and they do not belong to any of the organization mentioned in Section 65 (105)(zm) of the Finance Act, 1994 so as to attract service tax - Held that - if the issue that the activity carried on by the society attracts provisions of Finance Act, 1994 to fasten the liability of service tax is decided against the Society, objection will be considered, is clearly complied with, while issuing the SCN - Even otherwise, when the respondents have in the SCN clearly indicated that they are proceeding after hearing the petitioner or their representative and after coming to a finding that the service rendered is taxable under the Service Tax Act, there is no reason for this Court to interfere in the matter at this stage of the proceedings - petition dismissed - decided against petitioner.

Summary

Issues:
Challenge to show cause notice for imposition of service tax on Cooperative Societies under the Co-operative Societies Act.

Analysis:
The judgment addresses the challenge posed by Cooperative Societies against the show cause notice issued by the Commissioner of Central Excise and Customs for imposing service tax along with penalty and interest. The petitioners, registered under the Co-operative Societies Act, argue that they do not fall under the purview of the Service Tax Rules and are not obligated to pay service tax. They claim to be exempt as a "Primary Agricultural Credit Society" and not falling under the organizations mentioned in the Finance Act, 1994. The petitioners had previously paid service tax but later realized their exemption status and sought a refund. The show cause notice was issued after a previous judgment allowed for the Society to produce documents to quantify the liability. The main contention raised by the petitioners is that the taxability issue was not decided before issuing the show cause notice, rendering it illegal and arbitrary.

The counter affidavit filed by respondents 2 and 3 asserts that the petitioners are engaged in activities falling under various definitions of the Finance Act, 1994, both before and after a specific date. They claim that the Society's activities are taxable under banking and financial services, business auxiliary services, and renting of immovable properties. The petitioners argue that a decision on taxability should have been made before issuing the show cause notice, citing a previous judgment that directed an enquiry into the tax liability of a specific scheme. The show cause notice, however, indicates that the services provided by the Society are assessable to service tax, based on the legal aspects mentioned therein.

The judgment further discusses previous cases where similar issues were raised, emphasizing that the show cause notice in question includes a clear finding that the services rendered by the Society are taxable under the Service Tax Act. The Court rejects the petitioners' contentions, stating that the respondents were justified in issuing the show cause notice, as it addressed the jurisdiction and taxability concerns. The respondents argue that Cooperative Societies engaging in financial activities fall under the definition of a financial institution and are subject to service tax as per statutory provisions. The Court concludes that the petitioners can file objections to the show cause notice, which will be considered by the authorities in accordance with the law, ultimately dismissing the writ petitions.

In summary, the judgment upholds the validity of the show cause notice issued to Cooperative Societies for the imposition of service tax, rejecting the petitioners' claims of exemption and lack of decision on taxability. It emphasizes that the respondents followed the necessary procedures and legal provisions in issuing the notice, allowing the petitioners to raise objections through appropriate channels.