2024 (9) TMI 65 - HC - Service Tax

Challenge to Show-Cause Notices and Orders-in-Original - the proceedings by way of show cause notice under the Finance Act for Service Tax liability have been initiated on the basis of inputs received from the Central Board of Direct Taxes (CBDT) on the basis of Form 26AS/income tax returns filed - HELD THAT - The writ petitions relating to challenge to show-cause notice, such matters will stand relegated to the Officers to be designated in terms of the observations made in para-8 above, at the same stage. Accordingly, such of the writ petitions relating to challenge to show-cause notice are disposed off. Insofar as Writ Petitions relating to challenge to Orders-in-Original, in light of the discussion made hereinabove, the Orders-in-Original stand set aside and the matters are relegated to the Officers to be designated to be reconsidered from the stage of show-cause notice. The Writ Petitions relating to challenge to the Orders-in-Original are disposed off.

Issues Involved:
1. Challenge to Show-Cause Notices.
2. Challenge to Orders-in-Original.
3. Jurisdiction and procedural compliance.
4. Reliance on third-party information (CBDT data).
5. Application of mind in issuing Show-Cause Notices.
6. Compliance with statutory provisions and natural justice.
7. Limitation and exemption issues.
8. Relegation to designated officers for reconsideration.

Detailed Analysis:

1. Challenge to Show-Cause Notices:
The petitions challenge the issuance of Show-Cause Notices under the Finance Act, 1994, based on inputs from the Central Board of Direct Taxes (CBDT) derived from Form 26AS and income tax returns. The petitioners argue that these notices were issued without proper application of mind and verification of books of account, relying solely on presumptive data from the CBDT.

2. Challenge to Orders-in-Original:
The Orders-in-Original, which confirmed the service tax demands based on the Show-Cause Notices, are also challenged. The petitioners contend that these orders were passed without adequate consideration of their responses and without following due process.

3. Jurisdiction and Procedural Compliance:
The court notes that the legal contentions in the present batch of writ petitions are identical to those in W.P. No. 11154/2023 and connected petitions. The court emphasizes that the petitioners' contentions must be referred back for consideration by appropriate authorities, ensuring that officers take note of these contentions while disposing of the petitions at the post-show-cause notice stage.

4. Reliance on Third-Party Information (CBDT Data):
The Principal Commissioner of Central Tax, in an affidavit, justifies the reliance on CBDT data for issuing Show-Cause Notices. The affidavit explains that a Memorandum of Understanding between the CBDT and the Central Board of Indirect Taxes & Customs (CBIC) facilitates data exchange to track tax evasion. The affidavit asserts that the department verified the data and issued Show-Cause Notices only after preliminary verification.

5. Application of Mind in Issuing Show-Cause Notices:
The department denies the petitioners' claim that the Show-Cause Notices were issued without application of mind. The affidavit states that the department took utmost care by examining the data received from the CBDT and issued notices only after verifying the information.

6. Compliance with Statutory Provisions and Natural Justice:
The affidavit highlights that the Finance Act, 1994, and Service Tax Rules do not prohibit reliance on third-party information for issuing Show-Cause Notices. The department followed due process, providing hearing opportunities during adjudication and confirming demands only after considering the available information.

7. Limitation and Exemption Issues:
The court directs the officers to consider specific issues while disposing of the petitions, including whether the petitioners qualify under Section 65B(44) of the Finance Act, 1994, whether the services are covered under the negative list or exemption notifications, and whether claims are barred by limitation as per the law laid down by the Apex Court.

8. Relegation to Designated Officers for Reconsideration:
The court orders that the writ petitions challenging the Show-Cause Notices be relegated to designated officers for reconsideration from the same stage. Similarly, the Orders-in-Original are set aside, and the matters are referred back to designated officers for reconsideration from the stage of Show-Cause Notices. The petitioners are allowed to file their replies/additional replies within a reasonable time as fixed by the officers.

Conclusion:
The court disposes of the writ petitions, directing that the matters be reconsidered by designated officers. The petitioners are given the opportunity to file their responses, and any demands made pursuant to the impugned orders, including attachments, are set aside. The court clarifies that its orders are a one-time measure and do not set a precedent for other matters, leaving it to the Revenue to decide on extending similar relief in future cases.

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