2013 (11) TMI 1007 - HC - Service Tax

Challenged Service Tax Demand Dismissed as Premature. Upheld due process under Finance Act.

M/S Tirupati Construction Company Versus Joint Commissioner (Audit) And Another

The High Court dismissed the writ petition challenging a demand for service tax as premature since no show cause notice was issued as required by Section ... Challenge to the letter issued by the Superintendent, Service Tax requesting the petitioner to deposit the amount of service tax short paid/not paid as detected by the Audit along with interest, and to furnish report to the office immediately treating it as most urgent, keeping in view the limitation of time - Held that:- the reliefs claimed in the writ petition are premature. - The show cause notice as required under sub-section (1) of Section 73 has not been issued so far. The petitioner has been requested to submit its comment on the audit objections. In the circumstances, we do not propose to go into the detailed arguments of the petitioner and the cases cited by him on the jurisdiction of the Central Excise and Service Tax authorities and the grounds on which the show cause notice may be given. - Decided against the assessee. Issues:1. Jurisdiction of Central Excise & Service Tax Department in issuing notice.2. Validity of the demand raised on the petitioner.3. Compliance with Section 73 of the Finance Act, 1994 regarding show cause notice.Analysis:1. The petitioner challenged a letter dated 25.9.2012 issued by the Superintendent, Service Tax Range-II, Central Excise Division-V, Ghaziabad, requesting the petitioner to deposit the amount of service tax short paid/not paid as detected by the Audit. The petitioner contended that the audit was conducted illegally without proper authority. The petitioner argued that the notice lacked jurisdiction as the issuing authority did not have the power to impose the demand without following the due process under Section 73(1) of the Finance Act, 1994. The petitioner emphasized that no show cause notice had been issued, which is a prerequisite for imposing service tax liabilities.2. The petitioner, a partnership firm engaged in supplying goods and undertaking works contracts, highlighted that the demand raised on the gross amount received was unjust as it included both the value of goods and services provided. The petitioner maintained that they were regularly filing returns and paying service tax. The petitioner also mentioned being registered under various tax acts and taking abatement on the gross value of contracts for payment of commercial tax. The Court observed that the demand was premature as no show cause notice had been issued, and the petitioner was only asked to respond to audit objections without formal proceedings.3. The Court referred to Section 73(4-A) of the Finance Act, 1994, which allows for the recovery of service tax after issuing a show cause notice to the person concerned. The Central Excise Officer is empowered to determine the amount of service tax due and proceed with recovery. In this case, the audit revealed issues with the petitioner's CENVAT credit utilization and maintenance of separate accounts for input services. The Court noted that the impugned order was not a show cause notice but a request for the petitioner to address audit objections. The Court dismissed the writ petition as premature, emphasizing that no show cause notice had been issued, and no detailed arguments on jurisdiction or merits were considered.In conclusion, the High Court dismissed the writ petition as premature, as the show cause notice required under Section 73(1) of the Finance Act, 1994 had not been issued. The Court highlighted the importance of following due process before imposing service tax liabilities and emphasized that no decision on the merits of the case was made.