2025 (4) TMI 452 - HC - Service Tax

Entitlement to specific deductions under Rule 2A of the Service Tax (Determination of Values) Rules 2006 - applicability of Ext.P4 N/N. 30/2012 regarding the percentage of service tax payable - condonation of delay in filing the appeal against the assessment order - HELD THAT - The specific contention raised by the petitioner is that the deduction available to the petitioner as per 2A (i) of the Rules 2006 has not been extended to the petitioner. Though in the counter affidavit the stand of the department is that whatever abatement applicable to the services provided by the assessee has given due credit to as per the provisions of the Act and therefore the contention of the petitioner is without any basis the learned counsel for the petitioner pointed out that even in Ext.R1(b) inspection report of CERA it is specifically found that the VCES request made by the petitioner was rejected on the ground of nonpayment of dues within the stipulated time and on the basis of the same it is contended that the stand in the counter affidavit that whatever benefits of abatement applicable to the service provided by the assessee as per the Act has been extended to the petitioner is without any basis. Yet another aspect to be noted is that the petitioner was detected with cancer and he was undergoing treatment and due to strong dosage and potency of the medicines taken for cancer and consequent dizziness he had a fall from the terrace of his residence which resulted in multiple fractures. The health issues of the petitioner was stated as reasons for the delay in filing the appeal. It is also to be noted that though a specific contention was taken by the petitioner that he is entitled for the benefit of Ext. P4 notification no answer has been given in the counter affidavit filed by the respondents regarding the same. The matter requires reconsideration by the 1st respondent assessing authority. To facilitate reconsideration Exts.P3 and P9 are set aside - Petition disposed off by way of remand.

ISSUES PRESENTED and CONSIDERED

The judgment primarily addresses two core legal questions:

1. Whether the petitioner was entitled to specific deductions under Rule 2A of the Service Tax (Determination of Values) Rules, 2006, and the applicability of Ext.P4 notification No. 30/2012 regarding the percentage of service tax payable.

2. Whether the delay in filing the appeal against the assessment order could be condoned, considering the petitioner's health issues and the statutory limitation period.

ISSUE-WISE DETAILED ANALYSIS

1. Deductions under Rule 2A and Applicability of Ext.P4 Notification

Relevant legal framework and precedents: The petitioner argued that according to Rule 2A of the Service Tax (Determination of Values) Rules, 2006, deductions should be allowed for the value of goods transferred during the execution of a works contract. Additionally, Ext.P4 notification No. 30/2012 stipulated that only 50% of the service tax was payable by the service provider.

Court's interpretation and reasoning: The Court noted the petitioner's claim that the assessment order (Ext.P3) did not allow for permissible deductions, which were required by Rule 2A. The petitioner contended that the entire amount received was treated as assessable to service tax, ignoring the portion representing the purchase of materials subjected to VAT.

Key evidence and findings: The petitioner provided evidence of his health issues and the resulting delay in filing the appeal. The Court observed that the respondents had not addressed the petitioner's entitlement to the deductions under Rule 2A or the applicability of Ext.P4 in their counter affidavit.

Application of law to facts: The Court found that the petitioner's claim regarding the deductions and applicability of Ext.P4 had not been adequately considered by the assessing authority. The Court deemed it necessary to reassess these claims.

Treatment of competing arguments: The respondents argued that the assessment was legal and that all applicable abatements had been granted. However, the Court found the petitioner's claims merited reconsideration, particularly since the respondents did not address the Ext.P4 notification in their response.

Conclusions: The Court concluded that the assessment order required reconsideration to address the petitioner's claims regarding permissible deductions and the applicability of Ext.P4.

2. Condonation of Delay in Filing Appeal

Relevant legal framework and precedents: The statutory period for filing an appeal was 90 days, beyond which the delay could not be condoned.

Court's interpretation and reasoning: The Court acknowledged the petitioner's severe health issues, which contributed to the delay in filing the appeal. Despite the statutory limitation, the Court considered the circumstances as a jurisdictional issue, warranting examination under Article 226 of the Constitution of India.

Key evidence and findings: The petitioner presented medical evidence of his cancer diagnosis and the resulting immobility due to treatment side effects and a fall.

Application of law to facts: The Court weighed the petitioner's health condition against the statutory limitation, ultimately determining that the circumstances justified a reconsideration of the assessment order.

Treatment of competing arguments: The respondents maintained that the appeal was rightfully rejected due to the delay. However, the Court found that the petitioner's health issues provided a reasonable basis for reconsideration.

Conclusions: The Court set aside the assessment order and directed the assessing authority to issue a fresh order after considering the petitioner's claims and health-related delay.

SIGNIFICANT HOLDINGS

The Court held that the assessment order (Ext.P3) and the order dismissing the delay condonation application (Ext.P9) were to be set aside. It directed the assessing authority to reconsider the assessment, taking into account the permissible deductions under Rule 2A and the applicability of Ext.P4 notification. The Court emphasized the need for a fresh assessment order within three months, providing the petitioner an opportunity to be heard.

Core principles established: The judgment underscores the importance of considering jurisdictional issues and the necessity of reassessment when statutory provisions and notifications are potentially misapplied. The Court also highlighted the need to account for exceptional circumstances, such as severe health issues, when considering procedural delays.

Final determinations on each issue: The Court determined that the assessment order required reconsideration to ensure compliance with Rule 2A and Ext.P4. It also recognized the petitioner's health condition as a valid reason for the delay in filing the appeal, necessitating a fresh assessment process.

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