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TMI Blog2020 (8) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation 3 of clause (44) of Section 65B of the Act. It appears that the respondents have assumed the jurisdiction on mere misinterpretation of the provisions of explanation 3 (b) to Section 65B(44) of the Act,1994 read with Rule 6A of the Rules, 1994 as by no stress of imagination, it can be said that the rendering of services by the petitioner No.1 to its parent Company located outside India was service rendered to its other establishment so as to deem it as a distinct person as per Item (b), explanation 3 of clause (44) of Section 65B of the Act, 1994, the petitioner No.1 which is an establishment in India, which is a taxable territory and its 100% holding Company, which is the other company in non taxable territory cannot be considered as establishments so as to treat as distinct persons for the purpose of rendering service. Therefore, the services rendered by the petitioner No.1-Company outside the territory of India to its parent Company would have to be considered export of service as per Rule 6A of the Rules, 1994 and Clause (f) of Rule 6A of the Rules, 1994 would not be applicable in the facts of the case as the petitioner No.1, who is the provider of service and its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court may be pleased to stay further proceedings against the Petitioner No.1 pursuant to the Show Cause Notice (F. No. V ST(Adj)15/Linde/Commr-I/2017-18) dated 10.11.2017 issued by the Respondent No.3; c) Ex-parte ad-interim relief in terms of prayer (c) may kindly be granted; d) Such other and further reliefs as may be deemed appropriate by this Hon'ble Court. 4. The facts giving rise to this petition may be summarized as under: 4.1. The petitioner No.1 is a Private Limited Company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of providing taxable output services under the category of consulting engineer services, erection, commissioning and installation service, construction services other than residential complex, including commercial/industrial buildings or civil structures and works contract services etc. to various entities located in and outside India. Petitioner No.1 is subsidiary of Linde AG, Germany. The petitioner No.1- Company was filing its returns regularly and was paying appropriate service tax in accordance with law. 4.2. It is the case of the petitioners that the petitioners received a commun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no further inquiry or response from the respondent Nos.2 and 3. The petitioner No.1 was therefore, under a bona fide belief that the respondents were satisfied with the response submitted by the petitioner No.1. However, the petitioner No.1 again received communication dated 18.08.2017, which was replied by the petitioner No.1 vide its reply dated 28.08.2017. 4.6. It is the case of the petitioners that thereafter, the petitioner No.1 was served with the show cause Notice dated 10.11.2017 based upon the observations of the Audit Officer leveling following allegations against the petitioner No.1 : i. Linde AG, Germany which are legal entities, were mere establishments of the Petitioner No.1, as contemplated under Rule 6A of the STR read with Explanation 3 of the Section 65B (44) of the Act; ii. in view of (I) above, the services rendered by the Petitioner No.1 to Linde AG, Germany would not fall within the ambit of Export of Services and would therefore fall within the definition of the term 'exempted service' as defined in Rule 2(e) of the Cenvat Rules; ii. in view of (ii) above, according to the SCN, Rule 6(3) of the Cenvat Rules becomes applicable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. 5.3. It was submitted that the interpretation made on the part of the respondents is contrary to the purpose and object of the statute as well as the same is contrary to the language of the provisions, which requires strict interpretation. 5.4. Learned senior advocate submitted that the respondent No.3 has no jurisdiction to issue show cause notice under the provisions of the Act, 1994 and if the proceedings are permitted to continue, it would only lead to a multiplicity of the proceedings and would cause grave and irreparable loss, harm and injuries to the petitioners. 5.5. It was submitted that the plain reading of Rule 6A of the Rules, 1994 with Explanation 3 to Section 65B (44) of the Act, 1994, which clearly stipulates that in the event, the conditions prescribed there under stands fulfilled, the provision of service by a service provider in India to a service recipient outside India shall be considered as an export of service amenable to the benefits available under the law. It was submitted that the conditions prescribed under Rule 6A of the Rules, 1994 and as to how the conditions stand fulfilled in the facts of the present case are tabulated as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1. It was, further submitted that the show cause notice is ultra vires the provisions of the applicable law and is completely contrary to the provisions of the Act and the Rules framed there under and is therefore, fully without jurisdiction in as much as fundamental underlying principle for the exclusion of services provided by a service provider to its establishment in a non-taxable territory is that one cannot render service to one's own self . 5.9 It was further contended that in the facts of the case, the petitioner No.1 and Linde AG Germany are distinct legal entities and therefore, the provisions of Rule 6A of the Rules, 1994 cannot be applied in the facts of the case. 5.10 Learned senior advocate submitted that the basis of issuance of show cause notice, considering the holding Company of the petitioner i.e. Linde AG Germany as its other establishment is contrary to the object and purpose of encouraging the export of services from India to locations outside India. 5.11 It was submitted that if the interpretation as sought to be adopted by the respondent No.3 is approved, the same would effectively tantamount to brining within the tax ambit every provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia as it is challenging issuance of the show cause notice which is yet to be adjudicated by the competent authority. 6.1) It was submitted that the petitioners should be relegated to the competent authority to file its reply to the show cause notice so as to enable the adjudication of the show cause notice in accordance with law. It was submitted that the respondent No.3 has jurisdiction to issue show cause notice. 6.2) Learned advocate for the respondents further relied upon the averments made in the affidavit-in-reply filed on behalf of the respondents to contend that the issuance of show cause notice does not give rise to a cause of action to the writ petitioners under Article 226 of the Constitution of India and it does not amount to an adverse order, which affects the right of any party unless the show cause notice has been issued by a person having no jurisdiction to do so, which is not fact in the present case. Reliance was placed on the following averments made in para 8 of the Affidavit-in-reply wherein various judgments are cited and it reads thus : 8. It is respectfully submitted that the Hon'ble Supreme Court of India has deprecated practice of entertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Union of India and another versus Kunisetty Satyanarayana {Appeal (civil) 5145 of 2006} decided on 22.11.2006 wherein the Hon'ble Supreme Court held that It is well settled by a series of decisions of this Court that ordinarily no writ lies against a charge sheet or show-cause notice vide Executive Engineer, Bihar State Housing Board vs. Ramdesh Kumar Singh and others JT 1995 (8) SC 331, Special Director and another vs. Mohd. Ghulam Ghouse and another AIR 2004 SC 1467, Ulagappa and others vs. Divisional Commissioner, Mysore and others 2001(10) SCC 639, State of U.P. vs. Brahm Datt Sharma and another AIR 1987 SC 943 etc. The reason why ordinarily a writ petition should not be entertained against a mere show-cause notice or charge-sheet is that at that stage the writ petition may be held to be premature. A mere charge-sheet or show-cause notice does not give rise to any cause of action, because it does not amount to an adverse order which affects the rights of any party unless the same has been issued by a person having no jurisdiction to do so. It is quite possible that after considering the reply to the show-cause notice or after holding an enquiry the authority concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,050/- along with permissible interest and penalty should not be recovered from the petitioners under Rule 14 of the Cenvat Credit Rules read with proviso to Sub-section (1) of Section 73 of the Finance Act, 1994. It is submitted that paragraph 3 of the show cause notice along with paragraphs 4 and 5 vis-a-vis Cenvat Credit Rules 2004, Rule 6A of the Service Tax Rules, 1994 so referred to in paragraph 3 of the show cause notice, is to be interpreted in the backdrop of following substantial question of law:- i. Whether in terms of Explanation 3 to Section 65B(44) of the Act, a holding company of the Petition No.1 being Linde AG, incorporated in Germany, or any other subsidiary of Linde AG, can be construed as 'establishments of the Petition No.1'? ii. Whether in the facts and circumstances of the present case and on a reading of the provisions of Rule 6A of the Service Tax Rules, 1994 (hereinafter referred to as STR ) read with the provisions of Section 65B(44) of the Act, the consulting engineering services rendered outside India by the Petition No.1 to any other subsidiary of Linde AG or holding company would qualify as 'Export of Services' as contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1 . - For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,- (A) the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or (B) the duties performed by any person who holds anypost in pursuance of the provisions of the Constitution in that capacity; or (C) the duties performed by any person as a-Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or agreed to be provided or deemed to have been agreed to be provided. (2) Any rule made under sub-section (1) shall not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory. (iv) Section 73 of the Act, 1994 reads thus : Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded.- 73. (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any service tax has not been levied or paid or has been shortlevied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 994; or (b) by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India];] xxxx [Obligation of a manufacturer or producer of final products and a provider of [output] service.] 6. (1) The CENVAT credit shall not be allowed on such quantity of input as is used in or in relation to the manufacture of exempted goods or for provision of exempted services or input service as is used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services and the credit not allowed shall be calculated and paid by the manufacturer or the provider of output service, in terms of the provisions of sub-rule (2) or sub-rule (3), as the case may be: 11. On perusal of the above provisions of the Act, 1994 and the Rule, 1994 read with Rules, 2004, it emerges that Rule 6A of the Rules, 1994 provides that services rendered would be treated as Export of services when clause (a) to clause (d) refers to provider of service is located in the taxable territory and recipient of service is located outside India and the service is not a service specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany located outside India was service rendered to its other establishment so as to deem it as a distinct person as per Item (b), explanation 3 of clause (44) of Section 65B of the Act, 1994, the petitioner No.1 which is an establishment in India, which is a taxable territory and its 100% holding Company, which is the other company in non taxable territory cannot be considered as establishments so as to treat as distinct persons for the purpose of rendering service. Therefore, the services rendered by the petitioner No.1-Company outside the territory of India to its parent Company would have to be considered export of service as per Rule 6A of the Rules, 1994 and Clause (f) of Rule 6A of the Rules, 1994 would not be applicable in the facts of the case as the petitioner No.1, who is the provider of service and its parent Company, who is the recipient of services cannot be said to be merely establishment so as to be distinct persons in accordance with Item (b) explanation 3 of Clause (44) of Section 65B of the Act, 1994. 13. In such circumstances, the respondents would not have any jurisdiction to invoke the provisions of the Act, 1994 read with Rules, 1994 to bring the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field. 16. Rashid Ahmed v. Municipal Board, Kairana 1 laid down that existence of an adequate legal remedy was a factor to be taken into consideration in the matter of granting writs. This was followed by another Rashid case, namely, K.S. Rashid Son v. Income Tax Investigation Commission 2 which reiterated the above proposition and held that where alternative remedy existed, it would be a sound exercise of discretion to refuse to interfere in a petition under Article 226. This proposition was, however, qualified by the significant words, unless there are good grounds therefor , which indicated that alternative remedy would not operate as an absolute bar and that writ petition under Article 226 could still be entertained in exceptional circumstances. 17. A specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation. 16. In view of the above legal position, the reliance placed on behalf of the respondents on the various decisions of the Apex Court, which are based on the facts of each case, would not be applicable as the impugned show cause notice is held to be issued without jurisdiction as the respondents could not have issued the same invoking the provisions of Section 73 of the Act, 1994 read with Section 65B(44) and Rule 6A of the Rules, 1994. 17. For the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned show cause notice dated 10.11.2017 is hereby quashed and set aside. Rule is made absolute to the aforesaid extent with not order as to costs. - - TaxTMI - TM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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