2025 (9) TMI 679 - HC - Service Tax

Writ under Article 226 limited to review of decision-making process, won't disturb factual findings; statutory appeal permitted.

Md. Baharul Islam Versus The Union Of India, The Commissioner GST And Central Excise Guwahati, The Deputy Commissioner GST And Central Excise Guwahati.

The HC dismissed the writ petition, holding that a writ court under Article 226 is confined to examining the decision-making process and ordinarily will ... Jurisdiction to levy service tax for the period prior to the 101st Constitutional Amendment and/or after omission of Chapter V of the Finance Act, 1994 - Post GST era - Manpower Recruitment & Supply Services - it is a specific contention on part of the Revenue that the impugned order is an appealable order - HELD THAT:- It is a settled position of law that a Writ Court in exercise of jurisdiction under Article 226 of the Constitution of India would confine its powers to examine the decision making process only. Further, the present case pertains to a proceeding of an authority which has given its findings based on the facts. It is trite law that findings of facts are not liable to be interfered with by a Writ Court under its certiorari jurisdiction. The Hon’ble Supreme Court, after discussing the previous case laws on the jurisdiction of a Writ Court qua the writ of certiorari, in the recent decision of Central Council for Research in Ayurvedic Sciences and Anr. Vs. Bikartan Das & Ors [2023 (8) TMI 1425 - SUPREME COURT] has laid down that 'It is perfectly open for the writ court, exercising this flexible power to pass such orders as public interest dictates & equity projects. The legal formulations cannot be enforced divorced from the realities of the fact situation of the case. While administering law, it is to be tempered with equity and if the equitable situation demands after setting right the legal formulations, not to take it to the logical end, the High Court would be failing in its duty if it does not notice equitable consideration and mould the final order in exercise of its extraordinary jurisdiction. Any other approach would render the High Court a normal court of appeal which it is not.' This Court is of the opinion that no case for interference is made out and accordingly the writ petition is dismissed. It is however observed that in case the petitioner wishes, liberty is granted to the petitioner to file an appeal against the impugned Order-in-Original No. 02/DCG (ST LEGACY)/GHY/2017-18 dated 20.11.2017 issued by the Deputy Commissioner, CGST & CE, Commissionerate, Guwahati in which case the appellate authority would consider and dispose of the appeal, which however has to be done strictly in accordance with law. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the authority that issued the impugned order had jurisdiction to levy service tax for the period prior to the 101st Constitutional Amendment and/or after omission of Chapter V of the Finance Act, 1994. 2. Whether the impugned demand relates to taxable 'Manpower Recruitment & Supply Services' as distinct from exempted works contract services for construction of roads and irrigation works under Notification dated 20.06.2012 (clauses 13(a), 12(d) and clause 29(h) as applicable to sub-contractors). 3. Whether the impugned levy improperly treats the entire contract value as supply of manpower (including reliance upon Form 26AS/TDS entries) or whether the levy correctly isolates the manpower-supply component. 4. Whether the writ court should interfere with factual findings of the revenue authority under Article 226 (certiorari jurisdiction) where disputed questions of fact and an available appeal remedy exist. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Jurisdiction of the Authority after omission of Chapter V/constitutional amendment Legal framework: The contention raised was that Entry 92C of List I was omitted by the 101st Amendment (with effect from 16.09.2016) and Chapter V of the Finance Act, 1994 was omitted, thereby allegedly divesting the respondent authority of power to levy service tax. Precedent treatment: The Court relied upon and followed the reasoning in the Division Bench decision (Laxmi Narayan Sahu v. Union of India), which construed the effect of omission of Chapter V together with savings under the Finance Act to permit continuation of actions initiated under the earlier regime. The Court also referred to later Supreme Court exposition on limits of certiorari jurisdiction (Central Council for Research in Ayurvedic Sciences v. Bikartan Das) as to scope of interference. Interpretation and reasoning: The Court accepted that the constitutional/legislative change was not pressed further by learned counsel and observed that prior authorities hold that despite omission, savings provisions permit continuation of investigation/enquiry/verification initiated under the earlier provisions. The Court therefore treated the jurisdictional challenge on this ground as settled against the petitioner. Ratio vs. Obiter: The ruling that the constitutional/legislative omission does not invalidate the authority's actions (by virtue of savings clauses) is treated as ratio in so far as it disposes of the jurisdictional challenge in the present petition; reliance on earlier Division Bench authority is followed rather than distinguished. Conclusion: The jurisdictional ground challenging the authority to levy service tax post-omission was not sustained; the Court declined to entertain that ground further. Issue 2 - Characterisation: Manpower Supply (taxable) v. Works Contract for roads/irrigation (exempt) Legal framework: Notification dated 20.06.2012 exempts service tax for construction of roads (Clause 13(a)) and for irrigation works (Clause 12(d)); Clause 29(h) extends exemption benefit to sub-contractors. Manpower Recruitment & Supply Services is a distinct taxable category under Section 65B(44) of the Finance Act, 1994. Precedent treatment: The Court applied the established principle that classification of the nature of service - whether works contract or manpower supply - depends on the substance of contractual obligations and factual matrix. The Division Bench authority referred to earlier supported continuation of proceedings but the present Court independently examined the material to see whether the authority had considered the exemption. Interpretation and reasoning: The Court found from the record and impugned order that two discrete components existed in the work entrusted to the sub-contractor: (a) construction/irrigation works (exempt) and (b) supply of workforce (taxable). The impugned order expressly considered Notification 20.06.2012, granted exemption to the construction/irrigation component, and imposed levy only on the manpower-supply component. The authority relied on specific work orders (including a work order dated 15.10.2009 for supply of labour) to classify certain contracts as supply of manpower. Ratio vs. Obiter: The finding that the impugned order distinguishes between exempt construction work and taxable manpower supply and that levy is confined to the manpower component is treated as ratio relevant to correctness of the impugned order in the present facts; observations about the discrete components are factual conclusions by the authority upheld by the Court. Conclusion: The Court held that the impugned order legitimately characterises and taxes the manpower-supply component while exempting construction/irrigation components under the notification; no interference was called for on this ground. Issue 3 - Alleged reliance on Form 26AS/TDS and alleged inclusion of entire contract value Legal framework: Taxable value must be correctly ascertained and the basis of levy must be demonstrated; reliance on documentary entries (including TDS/Form 26AS) may not, by itself, be determinative if not the basis of levy. Precedent treatment: The Court noted the revenue's explanation and contemporaneous record indicating the competent authority did not base the levy solely on Form 26AS/TDS entries and that the levy did not encompass the entire contract value indiscriminately. Interpretation and reasoning: The learned Standing Counsel demonstrated that the impugned order was a confirmatory order isolating manpower supply and that the revenue considered the notification and excluded exempt components. The Court accepted that the impugned order does not rest merely on TDS entries and does not take the entire contract value as taxable; rather, only the manpower-supply component was taxed. Ratio vs. Obiter: The acceptance that the impugned levy was not founded on Form 26AS alone and did not treat the whole contract as manpower supply is a factual conclusion of the authority sustained by the Court (ratio for present petition). Conclusion: The challenge that Form 26AS/TDS was impermissibly used as the basis of levy and that the whole contract value was taxed was rejected. Issue 4 - Scope of writ court interference where disputes of fact and alternative remedy exist Legal framework: Under Article 226, the High Court exercising certiorari jurisdiction is confined to review of decision-making process and errors of law apparent on the face of the record; it does not function as an appellate body to re-evaluate factual findings. The Court may, in discretion, refuse to upset orders even if illegal, to do substantial justice, guided by principles expounded by higher courts regarding limits of certiorari. Precedent treatment: The Court relied on the Supreme Court's recent articulation that a writ court should not reweigh evidence or substitute its view for that of the inferior tribunal and that certiorari requires error of law apparent on the face of the record; equitable considerations may guide discretionary relief. Interpretation and reasoning: The Court observed that the main controversies between parties were factual (classification of contract components) and that the impugned order contains findings on those facts. An appeal lay against the impugned order and had not been availed. The writ court therefore confined itself to examining the decision-making process and found no jurisdictional error or patent illegality warranting interference. Ratio vs. Obiter: The instructive statement on the scope and limits of certiorari exercised by the writ court is applied as ratio in refusing interference; reflections on discretionary refusal as an exercise of Article 226 are aligned with binding principles and treated as authoritative guiding ratio for disposal. Conclusion: The writ petition was dismissed for lack of jurisdictional error or patent illegality; factual disputes should be ventilated in the appellate forum and the petitioner was granted liberty to prefer an appeal to the appellate authority which must be decided strictly in accordance with law.