Court quashes show cause notice, ruling for petitioner. Invalid notice due to legal errors. High-Speed Diesel exclusion upheld.

The court quashed the show cause notice, ruling in favor of the petitioner on all issues. It held that the notice was invalid due to reliance on an ultra vires provision, improper invocation of Rule 5(1) of the Service Tax Rules, and incorrect application of the extended limitation period. The court agreed that the value of High-Speed Diesel supplied free of cost should not be included in the taxable value. The writ petition was successful, and no costs were awarded.

---

---

Issues Involved:
1. Validity of the Show Cause Notice dated 21st March 2013.
2. Invocation of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006.
3. Applicability of the extended period of limitation under Section 73(1) of the Finance Act, 1994.
4. Inclusion of the value of High-Speed Diesel (HSD) supplied free of cost in the taxable value.

Issue-wise Detailed Analysis:

1. Validity of the Show Cause Notice dated 21st March 2013:
The petitioner challenged the show cause notice issued by the Additional Commissioner, Service Tax Commissionerate, Kolkata, arguing that the invocation of Rule 5(1) was improper as it had been declared ultra vires by the Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. v. Union of India. The court noted that the facts of the case were not disputed and focused on the legal question. The court ultimately quashed the show cause notice, agreeing with the petitioner that the notice was invalid due to the reliance on the ultra vires provision.

2. Invocation of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006:
The petitioner argued that Rule 5(1) was declared ultra vires to Sections 66 and 67 of the Finance Act, 1994, by the Delhi High Court. The court acknowledged this declaration and noted that the foundation of the impugned show cause notice was based on a provision that had been declared ultra vires. Therefore, the court held that the reliance on Rule 5(1) rendered the show cause notice invalid.

3. Applicability of the extended period of limitation under Section 73(1) of the Finance Act, 1994:
The petitioner contended that the show cause notice was issued beyond the normal period of limitation and did not meet the criteria for the extended period under the proviso to Section 73(1). The court examined the provisions of Section 73(1) and the conditions under which the extended period could be invoked. The court found that the extended period could only be applied in cases of fraud, collusion, willful mis-statement, suppression of facts, or contravention of any provisions with intent to evade payment of service tax. The court concluded that the willful suppression could not be assumed merely on failure to declare certain facts unless it was preceded by deliberate non-disclosure to evade tax. As such, the court held that the extended period was improperly invoked in this case.

4. Inclusion of the value of High-Speed Diesel (HSD) supplied free of cost in the taxable value:
The petitioner argued that the value of HSD supplied free of cost by the service recipient should not be included in the taxable value. The court referred to the judgment in Intercontinental Consultants & Technocrats Pvt. Ltd. and other relevant cases, which held that only the consideration paid for the service could be brought to charge and that including the value of HSD would go beyond the charging provisions. The court agreed with this view, stating that the value of HSD supplied free of cost could not be included in the taxable value and that the authorities could not take a contrary stand based on the provision declared ultra vires.

Conclusion:
The court quashed and set aside the impugned show cause notice, agreeing with the petitioner on all counts. The court held that the extended period of limitation was improperly invoked, the inclusion of the value of HSD supplied free of cost was invalid, and the reliance on Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, was improper as it had been declared ultra vires. The writ petition succeeded, and no order as to costs was made.

---