2024 (9) TMI 64 - HC - Service Tax

Challenge to action of the respondent Department in issuing show-cause notice or having passed the orders-in-original relating to demand sought to be raised under the provisions of the Finance Act, 1994 relating to service tax liability - HELD THAT - Upon suggestion of the court, learned Additional Solicitor General has responded positively and has stated that a team of Officers who are competent to pass orders without reference to the territorial jurisdiction would be constituted and from amongst such team of officers designation would be made and cases allotted in order to pass necessary orders from the stage of post show-cause notice which would be done within a period of three months. The officers while disposing off the petitions to keep in mind the following 1) Whether petitioners do not qualify under Section 65B (44) of the Finance Act, 1994 ? 2) Whether services are covered under negative list ? 3) Whether services are covered under the exemption list under the Notification No.25/2012-ST dated 28.06.2012 or under any other applicable Notifications ? 4) Whether the person is liable to remit service tax in terms of Rule 2 (1) (d) read with applicable notification? 5) Whether claims are barred by limitation in terms of the law laid down by the Apex Court ? he writ petitions relating to challenge to show-cause notice, such matters will stand relegated to the officers - Petition disposed off.

Issues Involved:
1. Issuance of show-cause notices under the Finance Act, 1994 for service tax liability.
2. Validity of Orders-in-Original based on show-cause notices.
3. Reliance on data provided by the Central Board of Direct Taxes (CBDT).
4. Allegations of non-application of mind by the department.
5. Compliance with statutory provisions and principles of natural justice.
6. Jurisdiction and procedural propriety.

Detailed Analysis:

1. Issuance of Show-Cause Notices:
The petitions challenge the issuance of show-cause notices by the respondent Department under the Finance Act, 1994, relating to service tax liability. The notices were based on inputs from the Central Board of Direct Taxes (CBDT) derived from Form 26AS/Income Tax returns. The petitioners argued that the notices were issued without proper verification of the books of account, alleging non-application of mind by the department.

2. Validity of Orders-in-Original:
The petitions also challenge the Orders-in-Original passed by the department, confirming the service tax demands. The department contended that the orders were passed after providing reasonable opportunities for hearing and following the principles of natural justice. However, the petitioners claimed that the orders were based on presumptions and lacked proper examination of the facts.

3. Reliance on Data Provided by CBDT:
The department defended its reliance on data from CBDT, stating that a Memorandum of Understanding was signed between CBDT and the Central Board of Indirect Taxes & Customs (CBIC) for regular data exchange to track tax evasion. The department argued that there is no prohibition under the Finance Act, 1994, or Service Tax Rules against using third-party information for issuing show-cause notices.

4. Allegations of Non-Application of Mind:
The petitioners alleged that the show-cause notices were issued without the application of mind and were based solely on CBDT data. The department refuted this claim, stating that it had taken utmost care in examining the data and issuing notices only after preliminary verification. The affidavit filed by the Principal Commissioner of Central Tax detailed the process followed, including the issuance of notices and adjudication based on available information.

5. Compliance with Statutory Provisions and Principles of Natural Justice:
The department asserted that it followed the due process of law and principles of natural justice in issuing show-cause notices and passing Orders-in-Original. The affidavit highlighted that out of 49,665 cases received from CBDT, 21,549 cases were dropped after verification, and show-cause notices were issued in 28,116 cases. Of these, 8,816 cases were dropped during adjudication, and orders were confirmed in 19,300 cases.

6. Jurisdiction and Procedural Propriety:
The court suggested that a team of competent officers, without reference to territorial jurisdiction, be constituted to pass orders from the stage of post show-cause notice within three months. The court emphasized that various contentions raised by the petitioners should be considered by the appropriate authorities during adjudication.

Court's Order:
1. The writ petitions challenging show-cause notices are relegated to designated officers for reconsideration from the stage of post show-cause notice.
2. The Orders-in-Original are set aside, and the matters are referred back to designated officers for reconsideration from the stage of show-cause notice.
3. Petitioners are allowed to file their pleadings within a reasonable time as fixed by the concerned officers.
4. Pending appeals should be withdrawn, and the Orders-in-Original in question will receive the same treatment.
5. Demands made pursuant to the impugned orders are set aside.

The court clarified that the disposal of the petitions does not adjudicate any contentions, including jurisdiction, and all contentions on merits are kept open. Legal remedies remain available to aggrieved petitioners upon conclusion of proceedings.

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