2023 (12) TMI 439 - HC - Service Tax

Refund ordered for service tax paid under protest; 11.05.2011 instruction inapplicable; Section 73(1) 18-month bar excludes Aug 2008-Apr 2012

Writ petition allowed. HC held Instruction dated 11.05.2011 inapplicable to petitioner's facts, set aside the show-cause notice dated 18/21.10.2013 and ... Maintainability of the writ petition on the ground that an alternate remedy is available - Correctness of Instruction dated 11.05.2011 issued by the Director, Service Tax under the Ministry of Finance through its Department of Revenue - declaration that Course Certificate being issued by Flying Training Institutes cannot be held as “recognized in law” for the purposes of exemption from paying service tax - time limitation - HELD THAT:- On perusing the judgment of the Delhi High Court in Indian Institute Aircraft Engineering [2013 (5) TMI 592 - DELHI HIGH COURT] it is found that Instruction dated 11.05.2011 that is impugned in the present writ petition was also the subject matter of consideration therein. The Division Bench after considering various provisions of the Act of 1994 including Section 65(27) alongwith Rule 133-B of the Rules of 1937 has held in clear terms that the certificate/training qualification offered by the Institute approved by the DGCA have been conferred some value in the eyes of law. A distinction has been made under the relevant Statutes and the Rules framed thereunder between an approved institute and an un-approved one. Since a successful candidate from an approved institute is entitled to enforce the right conferred on him by Statute, the inference drawn was that the Course Completion Certificate offered by such Institute was recognized by law. The learned counsel for the respondents is justified in contending that in view of low tax effect, the guidance under Instruction dated 22.08.2019 issued by the Department of Revenue was followed. He submits that since Instruction dated 11.05.2011 had not been held to be illegal or ultra vires, the withdrawal of the proceedings on the basis of earlier Instruction dated 17.08.2011 was justified. Maintainability of the writ petition on the ground that an alternate remedy is available - HELD THAT:- It is found that the present writ petition was filed on 10.09.2014 raising a challenge to Instruction dated 11.05.2011 and the show cause notice dated 18/21.10.2013. Since Instruction dated 11.05.2011 was also the subject matter of consideration by the Delhi High Court vide its decision in Indian Institute of Aircraft Engineering [2013 (5) TMI 592 - DELHI HIGH COURT] that was decided on 21.05.2013, the writ petition was entertained. It was informed however that the judgment of the Delhi High Court was subjected to challenge before the Hon’ble Supreme Court. The hearing of the writ petition was therefore deferred till the time the proceedings were decided by the Hon’ble Supreme Court. In the interregnum, the show cause notice issued to the petitioner was adjudicated. Time Limitation - limitation of period of eighteen months as prescribed by Section 73(1) - HELD THAT:- It is seen from the show cause notice dated 18/21.10.2013 that it does not refer to any fraud, collusion, wilful mis-statement or suppression of facts at the behest of the petitioner to invoke the larger period of limitation of five years. For this reason the provisions of Section 73(1) would be attracted and the period beyond eighteen months would not be liable to be taken into consideration. Thus the period of demand from August-2008 to April-2012 being beyond eighteen months from issuance of the show cause notice dated 18/21.10.2013 is liable to be excluded. The petitioner has made out a case for grant of relief. Accordingly it is held that Instruction dated 11.05.2011 cannot be made applicable to the facts of the present case. Hence the show cause notice dated 18/21.10.2013 and the order dated 24.12.2014 passed on that basis are set aside - petitioner would be entitled to refund of the amounts of service tax as paid under protest pursuant to the show cause notice dated 18/21.10.2013 in accordance with law. Petition allowed. Issues Involved:1. Validity of Instruction dated 11.05.2011 regarding exemption from service tax for Flying Training Institutes.2. Validity of the show cause notice dated 18/21.10.2013.3. Applicability of Section 73(1) of the Finance Act, 1994 concerning the limitation period for issuing the show cause notice.4. Maintainability of the writ petition in the presence of an alternate remedy.Summary:1. Validity of Instruction dated 11.05.2011:The petitioner challenged the Instruction dated 11.05.2011 issued by the Director, Service Tax, which held that the Course Certificate issued by Flying Training Institutes is not 'recognized in law' for the purpose of service tax exemption. The petitioner argued that their institute, approved by the DGCA, provides training recognized by law, as established in the Delhi High Court's judgment in Indian Institute of Aircraft Engineering v. Union of India & Others. The court agreed with the Delhi High Court's interpretation that the Course Completion Certificate from an approved institute has legal value, even if it does not directly result in a license.2. Validity of the show cause notice dated 18/21.10.2013:The petitioner contested the show cause notice demanding service tax for the period from September 2008 to June 2012, asserting it was issued without legal basis. The court found that the Instruction dated 11.05.2011, which formed the basis for the show cause notice, was not applicable to the petitioner's case, thereby invalidating the notice and the subsequent order dated 24.12.2014.3. Applicability of Section 73(1) of the Finance Act, 1994:The petitioner argued that the show cause notice was barred by the limitation period prescribed in Section 73(1) of the Finance Act, 1994, which is eighteen months unless fraud, collusion, wilful mis-statement, or suppression of facts is involved. The court noted that the notice did not allege any such factors, thus the extended limitation period of five years was inapplicable. Consequently, the demand for the period from August 2008 to April 2012 was excluded.4. Maintainability of the writ petition:The respondents contended that the writ petition should not be entertained due to the availability of an alternate remedy. However, the court held that since the Instruction dated 11.05.2011 had already been adjudicated by the Delhi High Court and the show cause notice was issued without jurisdiction, the writ petition was maintainable. The court referenced the decision in Ghanshyam Mishra & Sons v. Edelweiss Asset Reconstruction Company Limited, which allows for jurisdictional challenges under Article 226 of the Constitution of India.Conclusion:The court ruled in favor of the petitioner, setting aside the Instruction dated 11.05.2011, the show cause notice dated 18/21.10.2013, and the order dated 24.12.2014. The petitioner was entitled to a refund of the service tax paid under protest. Rule was made absolute with no order as to costs.