2023 (12) TMI 1096 - HC - Service Tax

Recovery of short paid service tax - post GST era - Refusal to entertain a challenge to the show cause notice issued by the 1st respondent - direction to respondent authorities to issue a fresh notice for personal hearing to the appellant/assessee in response to the impugned show cause-cum-demand notice - time limitation - HELD THAT - The averments in the notice give a different picture. Being alerted by the TDS deposited with the income-tax department, authority concerned initiated an independent investigation into the matter. In the course of the investigation it examined the records and documents of the firm including its audited balance-sheet etc. On the basis of these materials the authorities concerned was of the view that there was a short deposit of service tax for the financial years to the tune of 7,43,625/- for the financial years 2014-15, 2016-17 and 2017-18. Time Limitation - HELD THAT - There are substance in the submission of the learned counsel for the respondent authorities that the proceedings for recovery of service tax under the prior legislation (since repealed) is saved by operation by section 174 sub-clause (2) of the Act of 2017. Sub-section 2 of section 174 of the Act of 2017, inter alia, provides that the promulgation of the Act of 2017 shall not affect any right, privilege, obligation, liability accrued under the repealed law and/or any investigation, enquiry adjudication or recovery proceedings of duty, tax, penalty, interest under the repealed law may be instituted or continued as if the earlier law had not been repealed. The demand cum show cause notice for recovery of short deposit of service tax for the financial years 2014-2015, 2015-2016 and 2017-2018 shall be deemed to have been instituted and continued under the repealed law and cannot be pre-empted with reference to the time frame under section 74 (10) of the Act of 2017. Hence, the impugned show cause notice cannot be said to be ex facie without jurisdiction or time barred. Thus, no case of patent lack of jurisdiction or legal bar to the issuance of show cause notice cum demand notice has been made out. However the appellant/assessee is entitled to a personal hearing in the matter - appeal disposed off.

Summary

Issues involved:
The appeal challenges the order refusing to entertain a challenge to the show cause notice and directing issuance of a fresh notice for personal hearing to the appellant/assessee.

Issue 1 - Challenge to Show Cause Notice:
The show cause notice was issued for short payment of service taxes for multiple financial years. The appellant contended that the notice was time-barred and based on NSDL data, not independent enquiry. The Single Judge directed a fresh notice for personal hearing.

Issue 2 - Jurisdiction and Investigation:
The appellant argued that the notice was based solely on TDS data submitted to the income-tax department, making it illegal. However, the authorities conducted an independent investigation, examining firm records and documents to determine the short deposit of service tax.

Issue 3 - Time Frame and Legal Bar:
The appellant claimed that the proceedings were time-bound under Section 74(10) of the CGST Act, 2017. The respondent authorities argued that the proceedings were saved by Section 174(2) of the Act, allowing continuation of recovery proceedings under the repealed law.

Court's Decision:
The Court held that the show cause notice was not a knee-jerk reaction but a result of an independent investigation. It distinguished the case cited by the appellant and found the notice legally valid. The Court also upheld the continuation of proceedings under the repealed law, rejecting the argument of being time-barred. The combined show cause cum demand notice did not indicate a foreclosed mind and the appellant was granted a personal hearing.

Judgment:
The Court directed the respondent to issue a notice to the appellant within 30 days for a hearing, with a decision to be made within two months. The Court did not express any opinion on the case's merits, leaving it to be decided independently. The appeal and connected application were disposed of accordingly.