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of <h1>Court directs Respondent to justify show cause notice, warns of contempt, stays proceedings, disposes petition. Uphold legal precedents.</h1> <h3>M/s. Skill Tech Engineers & Contractors Pvt. Ltd., Versus Commissioner of Central Taxes</h3> The Court directed the Respondent to justify the show cause notice and warned of contempt action for disregarding legal precedents. The proceedings were ... Valuation - petitioner pointed out that Rule 5 of the Service Tax (Determination of Value) Rules, 2006 has been struck down - Supreme Court decision in the case of Kusum Ingots & Alloys Ltd., v. Union of India and Another [2004 (4) TMI 342 - SUPREME COURT OF INDIA], referred by which, it has been held that once the particular provision is declared as ultra vires by one High Court, the said Rule cannot be invoked by any Authority of the Respondent-Department anywhere in the Country. Held that:- Despite the lapse of one year, though the learned counsels at the bar have made a statement that the judgment of the Delhi High Court has been upheld by the Hon’ble Supreme Court in the light of the judgment rendered earlier in the case of Kusum Ingots & Alloys Ltd., v. Union of India and Another, neither the date of the said judgment is available with the learned counsels nor the copy thereof, is produced for perusal. The writ petition is disposed of with a liberty and direction to the petitioner to appear before the concerned authority and show cause before him in pursuance of the show cause notice dated 12.07.2017 vide Annexure-E and cite the relevant judgments before the said authority. Issues:Challenge to show cause notice invoking Rule 5 of Service Tax (Determination of Value) Rules, 2006; Ignoring Delhi High Court decision striking down Rule 5; Contempt action against Commissioner of Central Taxes; Stay on proceedings; Upholding Supreme Court judgment in Kusum Ingots & Alloys Ltd. case.Analysis:The writ petition challenges a show cause notice issued by the Commissioner of Central Taxes invoking Rule 5 of the Service Tax (Determination of Value) Rules, 2006. The petitioner contends that Rule 5 has been struck down by the Delhi High Court in a previous case, citing the Intercontinental Consultants and Technorats Pvt. Ltd. judgment. The petitioner had also obtained an interim order from the High Court for previous periods, yet the Commissioner issued the impugned notice for a subsequent period, leading to unnecessary multiple proceedings and litigation.The Delhi High Court had invalidated Rule 5 on the grounds that it exceeded the permissible scope by prescribing a taxable value exceeding the gross value of services provided. The petitioner also referred to the Supreme Court decision in Kusum Ingots & Alloys Ltd. case, emphasizing that once a provision is declared ultra vires by one High Court, it cannot be invoked by any authority nationwide. Despite these legal precedents, the Commissioner proceeded with the notice, prompting the Court to issue notice to the Respondent to explain the contemptuous actions and potential costs and damages.The Court directed the Respondent to file an affidavit justifying the show cause notice and warned of contempt action for disregarding legal precedents and creating unnecessary litigation. The proceedings related to the impugned notice were stayed pending the writ petition, with the option for the Respondent to withdraw the notice. The matter was scheduled for further hearing to address the issues raised.Despite the lapse of time and assertions by counsels regarding the Supreme Court's affirmation of the Delhi High Court judgment, the Court disposed of the petition with a directive for the petitioner to appear before the concerned authority. The petitioner was instructed to present the relevant judgments, including the Delhi High Court decision and the Supreme Court ruling in the Kusum Ingots & Alloys Ltd. case, to the authority. The authority was tasked with considering the cited judgments and issuing a reasoned order within six months from the disposal date.In conclusion, the Court's decision focused on upholding legal precedents, ensuring compliance with judicial rulings, and providing a mechanism for the petitioner to present relevant judgments before the authority responsible for adjudicating the show cause notice.
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