2021 (2) TMI 8 - HC - Service Tax

Requirement of showing the trading turnover and non-taxable services in the periodical ST-3 returns - Existence of column in ST- 3 form dealing with non-taxable turnovers under the Finance Act, 1994 - HELD THAT - When there is no such column in ST-3 returns dealing with non-taxable turnovers , petitioner cannot be blamed by the respondents for not indicating the non-taxable turnovers in the ST-3 return and it cannot be penalized for the same ignoring all the other material evidence which has already been submitted by the petitioner to the respondents on various occasions as mentioned in para 13 of the affidavit filed in support of the Writ Petition and also the letters dt.10.04.2017 and dt.17.10.2017 including the audit reports relating to the audit of their accounts, work sheets, etc. The 4th respondent ought to have examined the said material which was already available with the 1st respondent-department to test the petitioner s defence i.e., that for the financial year 2011-12, petitioner had executed only irrigation and canal projects, which were exempt vide Notification No.41/2009/ST dt.23.10.2009, and that from 2012-13 onwards, petitioner was executing electrical works also and was discharging service tax liability on the taxable turnover, and the difference between the Balance Sheet and the ST-3 returns is because of this reason - the 4th respondent could also have asked the petitioner to furnish such material, if he could not find it in the file during the course of the personal hearing, and he could not have penalized the petitioner on the said ground. Such action of the 4th respondent vitiates the impugned order. In M.P. Special Police Establishment v. State of M.P. 2004 (11) TMI 524 - SUPREME COURT the Supreme Court held that non-consideration of material on record by an authority would vitiate the exercise of power by the said authority. The impugned Order passed by the 4th respondent cannot be sustained and that the matter must be remitted to the 4th respondent to consider afresh - Petition allowed by way of remand.

Issues Involved:

1. Validity of the demand for service tax on exempted and non-taxable services.
2. Jurisdictional challenge and maintainability of the Writ Petition.
3. Non-consideration of material evidence by the adjudicating authority.
4. Availability of an alternative remedy and its impact on the maintainability of the Writ Petition.

Issue-wise Detailed Analysis:

1. Validity of the demand for service tax on exempted and non-taxable services:

The petitioner, a company engaged in various business activities including Commercial or Industrial Construction and Erection, challenged the demand for service tax amounting to ?37,16,16,555/- on exempted non-taxable services for the period 2011-12 to 2014-15. The petitioner contended that it was paying service tax on taxable services and filing periodical returns, but canal construction works, construction of roads in Jammu & Kashmir, and trading of electrical equipment were outside the purview of service tax. These activities were either exempted or non-taxable, and hence were not reflected in the ST-3 returns. The petitioner argued that the ST-3 returns did not contain any column for non-taxable services, and the details of these activities were known to the respondents through various submissions and audits.

2. Jurisdictional challenge and maintainability of the Writ Petition:

The petitioner argued that the 4th respondent acted arbitrarily and without jurisdiction in demanding the service tax, making the Writ Petition maintainable despite the availability of an alternative remedy. The petitioner cited the case of Sanghi Polyesters Limited v. Supdt. of Central Excise, where it was held that a Writ Petition is maintainable if the authority acts without jurisdiction or in an arbitrary manner.

3. Non-consideration of material evidence by the adjudicating authority:

The petitioner contended that the 4th respondent failed to consider the material evidence submitted, including work orders, agreements, and audit reports, which demonstrated that the services were exempted. The 4th respondent's order was based on the failure to produce documents substantiating the exemption claims, but the petitioner had submitted these documents multiple times. The court noted that the 4th respondent should have examined the available material or requested additional documents during the personal hearing, and penalizing the petitioner without considering this evidence vitiated the impugned order.

4. Availability of an alternative remedy and its impact on the maintainability of the Writ Petition:

The court held that the existence of an alternative remedy does not bar the exercise of judicial review under Article 226 of the Constitution if the statutory authority acts without jurisdiction, violates fundamental rights, or acts arbitrarily. The court cited the Supreme Court's decision in Whirlpool Corpn. v. Registrar of Trade Marks, which established that a Writ Petition is maintainable in cases of violation of natural justice, lack of jurisdiction, or enforcement of fundamental rights.

Conclusion:

The court concluded that the impugned order could not be sustained due to the non-consideration of material evidence and the arbitrary exercise of power by the 4th respondent. The matter was remitted to the 4th respondent for fresh consideration, with instructions to afford the petitioner a personal hearing and pass a reasoned order in accordance with law. The Writ Petition was allowed, and the impugned order was set aside. The petitioner was granted four weeks to file written submissions with supporting material, and the 4th respondent was directed to communicate the reasoned order to the petitioner. No costs were imposed, and any pending miscellaneous petitions were closed.

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