Petitioner allowed to withdraw appeal, liberty to challenge show cause notice. Court invalidates Doctrine of Merger.

The Division Bench allowed the petitioner to withdraw the appeal challenging the order-in-original and granted liberty to challenge the show cause notice. The court disagreed with the Doctrine of Merger argument, emphasizing that the previous forums did not decide on the merits. The petitioner's argument for exemption under a specific notification was considered valid, leading to directions for the respondent to reassess the exemption's applicability based on the case's circumstances. The petitioner was instructed to respond within fifteen days, with the respondent required to issue fresh orders considering the exemption and compliance with its conditions.

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Issues:
Challenge to order-in-original, Doctrine of Merger, Applicability of exemption notification

Challenge to order-in-original:
The petitioner challenged an order confirming service tax demand, interest, and penalty. The appeal before the Commissioner (Appeals) was dismissed as time-barred. The CESTAT also dismissed the appeal for the same reason. The petitioner then appealed before the Division Bench seeking to withdraw the appeal and challenge the correctness of the show cause notice. The Division Bench allowed the withdrawal with liberty to challenge the notice. The petitioner filed a writ petition challenging the order-in-original.

Doctrine of Merger:
The revenue contended that the Doctrine of Merger prevents the petitioner from challenging the order-in-original in a second round of litigation. However, the court disagreed as the Commissioner (Appeals) and CESTAT did not decide on the merits. The Division Bench granted liberty to challenge the show cause notice, indicating satisfaction with the petitioner's submission regarding the exemption notification.

Applicability of exemption notification:
The petitioner argued that they are entitled to exemption under notification No. 6/2005-S.T. as amended by No. 8/2008-S.T. The Division Bench allowed withdrawal of the appeal to challenge the show cause notice based on this submission. The court noted that if the turnover did not exceed &8377;10 lakhs during 2008-09, the demand for service tax would not apply. The court directed the petitioner to treat the order-in-original as a show cause notice, submit a reply within fifteen days, and afford a personal hearing to consider the exemption notification's applicability.

In conclusion, the court directed the respondent to reconsider the applicability of the exemption notification based on the peculiar facts of the case. The petitioner was instructed to submit a reply within fifteen days, after which the respondent would pass fresh orders in accordance with the law. The court emphasized the need for the respondent to consider the exemption notification and the petitioner's compliance with its conditions.

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