2017 (4) TMI 1460 - HC - Service Tax

Challenging Show Cause Notice on Service Tax Liability: High Court Emphasizes Exhausting Remedies First

The High Court dismissed the petition challenging a Show Cause Notice on service tax liability, emphasizing that writ petitions against such notices ... Show cause notice - premature writ petition - maintainability of writ against initiation of adjudicatory proceedings - jurisdictional issue - opportunity of hearing - extended period of limitation - renting of immovable property serviceShow cause notice - premature writ petition - maintainability of writ against initiation of adjudicatory proceedings - jurisdictional issue - opportunity of hearing - Whether the writ petition challenging the Show Cause Notice dated 11/10/2013 is maintainable at the threshold or is premature such that the authority issuing the notice should be allowed to adjudicate after hearing the petitioner - HELD THAT: - The Court applied the settled principle that ordinarily writ jurisdiction should not be exercised to quash or interfere with a mere show cause notice or charge-sheet which does not amount to a final adverse order, unless the notice is wholly without jurisdiction or wholly illegal. Reliance was placed on the ratio that the authority issuing the show cause notice must be permitted to consider the recipient's reply and conduct the adjudication, and that questions of jurisdictional validity may be raised before and decided by the authority initially. In the circumstances of the present case the petitioner challenged a Show Cause Notice invoking liability for service tax (including invocation of extended limitation) for the period stated in the notice; the Court observed that the Department has a complete mechanism to consider the reply, grant opportunity of hearing and decide the matter. No contention of total lack of jurisdiction on the part of the issuing authority was shown to justify extraordinary interlocutory relief. Applying these principles, the Court held that the writ petition was premature and declined to entertain it at this stage, while directing that the petitioner be granted 30 days to file its reply and that the authority shall proceed in accordance with law and afford an opportunity of hearing.Writ petition dismissed as premature; petitioner directed to file reply within 30 days and the authority to proceed with adjudication after granting opportunity of hearingFinal Conclusion: The challenge to the Show Cause Notice is premature; the petitioner is granted 30 days to file its reply and the issuing authority is directed to proceed in accordance with law and afford the petitioner an opportunity of hearing. Issues:Challenge to Show Cause Notice regarding service tax liability for the period from 01/04/2008 to 31/01/2013.Analysis:The petitioner, a limited company with a manufacturing unit, challenged a Show Cause Notice issued by the Addl. Director General of Central Excise Intelligence regarding service tax liability for services rendered from 01/04/2008 to 31/01/2013. The petitioner had entered into agreements with another company for the transfer of Brewery License and leasing of manufacturing plant. The respondent Union of India filed a detailed reply, addressing the grounds raised by the petitioner. The petitioner's counsel did not challenge the constitutional validity of the statutory provisions but focused on contesting the Show Cause Notice. The High Court cited previous judgments emphasizing that writ petitions challenging show cause notices should not be entertained prematurely unless there is a clear lack of jurisdiction. The Court highlighted that the petitioner should respond to the notice and raise all arguments during the proceedings before the authority issuing the notice.In various cases, including Special Director Vs. Mohd. Ghulam and Union of India Vs. Jain Shudh Vanaspati, the Supreme Court held that a mere show cause notice does not infringe any rights and should not be a basis for a writ petition unless it lacks jurisdiction or is wholly illegal. The Court stressed that writ jurisdiction is discretionary and should not be used to quash show cause notices routinely. The High Court declined to interfere, stating that the petitioner had the opportunity to respond to the Show Cause Notice and present all grounds before the Addl. Director General. The Court considered the petition premature and directed the petitioner to file a reply within 30 days, allowing the authority to proceed according to the law. The Writ Petition was disposed of, emphasizing the importance of following due process and exhausting remedies available before challenging such notices in court.