2021 (5) TMI 31 - HC - Service Tax

Court overturns penalties on lab for tax non-remittance, citing delay in notice issuance and time bar limitations.

The Regional Testing Laboratory Versus The Customs, Excise and Service Tax, The Commissioner of Central Excise (Appeals), The Assistant Commissioner of Central Excise

The court set aside the penalties imposed on a regional testing laboratory by the third respondent for non-remittance of service tax, after finding ... Demand of Differential Service Tax - laboratory testing of chemicals and materials for MSME and Government departments - no service tax was remitted for the period from 01.07.2003 to 13.10.2004, (after which petitioner duly registered themselves with the respondent on 14.10.2004 and thereafter, the petitioner has been remitting the service tax and also filing the necessary returns) - HELD THAT:- The learned counsel for the petitioner in KASHMIRI LAL VERSUS GOVT. OF NCT OF DELHI AND ORS. [2011 (3) TMI 1811 - DELHI HIGH COURT] passed by the appellate authority in Appeal No.170 of 2010. In the said appeal, the regional testing laboratory, K.Pudur, Madurai, was the appellant. The petitioner is identically placed. The petitioner is also a regional testing laboratory. Therefore, whatever applied to the appellant therein would apply to the petitioner also - The department obviously knew that the petitioner had not paid any tax for the period preceding October, 2004. Therefore, nothing stopped the department from issuing a show cause notice immediately thereafter - Petition allowed - decided in favor of petitioner. Issues:1. Liability to pay service tax for a regional testing laboratory.2. Issuance of show cause notice for non-remittance of service tax.3. Validity of penalties imposed in the Order-in-Original.4. Applicability of time bar on the demand for service tax.Analysis:1. The petitioner, a regional testing laboratory under the Industries and Commerce Department of the Government of Tamil Nadu, conducts tests on chemicals and materials for MSME and Government departments. The petitioner collects statutory charges for testing as per Government norms and registered for service tax after clarification. The issue arose when the third respondent issued a show cause notice for non-remittance of service tax for a specific period, which the petitioner contested.2. After an enquiry, the third respondent confirmed the demand of service tax and imposed penalties. The petitioner appealed to the appellate authority, which provided partial relief by setting aside the penalty portion. The petitioner, dissatisfied with the decision, filed a writ petition challenging the order.3. The respondents contended that any aggrieved party could approach the Tribunal after an order by the Commissioner (Appeals). The standing counsel argued that the appellate order granting relief on penalties did not warrant interference. However, the petitioner's counsel pointed out a similar case where the appellate authority allowed an appeal due to genuine doubts and time limitations.4. The judge examined the materials and noted a previous case where doubts were settled by the Chief Commissioner, leading to the allowance of the appeal based on time limitations and genuine doubts. Drawing parallels, the judge found the petitioner in a similar position and criticized the delay in issuing the show cause notice. Consequently, the judge set aside the impugned order, citing time bar limitations and similarities with the previous case, and allowed the writ petition without costs.