2009 (5) TMI 519 - HC - Service Tax

High Court directs company & director to respond to show cause notice on service tax liability by specified date.

The High Court directed the petitioners, a private limited company and its director, to respond to the show cause notice regarding service tax liability ... Service tax liability - show cause notice under Section 73 of the Finance Act, 1994 - question of fact not amenable to writ jurisdiction - fresh adjudication with opportunity of hearing and reasoned order - verification of documents to guard against double taxationService tax liability - question of fact not amenable to writ jurisdiction - fresh adjudication with opportunity of hearing and reasoned order - verification of documents to guard against double taxation - Whether the service tax claimed to be payable by the petitioner or paid on its behalf is a matter which can be adjudicated in writ jurisdiction or requires fresh factfinding by the Commissioner - HELD THAT: - The Court held that the core controversy - whether service tax has been paid by the petitioner or paid on its behalf by other parties - is essentially a question of fact unsuitable for determination in writ proceedings and therefore cannot be gone into on the present petition. The petition was not decided on merits; instead the Court directed that the petitioner be permitted to file a written reply to the show cause notice by 30th June, 2009, and that the Commissioner of Service Tax, Kolkata, shall dispose of the matter afresh by passing a reasoned order after giving the petitioner an opportunity of hearing within six weeks from the date of submission of the reply. The Commissioner is required to verify the documents produced (in view of the petitioner's contention of possible double taxation) and to deal with the points raised in the petition and in the affidavits on record. All substantive points were left open for consideration by the adjudicating authority, which was also directed to proceed without giving unnecessary adjournments. [Paras 9, 10, 11, 12, 13]The factual issue of payment of service tax is remanded for fresh adjudication by the Commissioner; the petitioner may file a written reply by 30th June, 2009 and the Commissioner shall decide afresh by a reasoned order after hearing and document verification within six weeks of receipt of the reply.Final Conclusion: Writ petition does not decide merits; the Court remanded the factual dispute on payment of service tax for fresh adjudication by the Commissioner of Service Tax with directions for filing a written reply, verification of documents to address alleged double taxation, an opportunity of hearing, and disposal by a reasoned order within a stipulated time. Issues: Challenge to show cause notice on service tax liability.Analysis:The petitioners, a private limited company and one of its directors, challenged a show cause notice issued by the Commissioner of Service Tax on various grounds. The petitioners, engaged in cargo handling service, transportation, and hiring, got registered under the Finance Act in 2004. Despite reflecting income in their accounts, a demand for service tax was raised in 2007, leading to a series of events including a search and seizure, summons under the Central Excise Act, and subsequent denial of liability through a letter. The matter was brought before the High Court, where the petitioners argued that they had replied to queries, provided necessary documents, and denied the service tax liability. The respondent authorities contended that since the petitioners were registered under the Service Tax Act, they were obligated to file returns and pay the tax, making the show cause notice valid.The central issue revolved around whether the service tax had been paid by the petitioners or on their behalf by other entities. The Court deemed this a factual question unsuitable for writ jurisdiction. Consequently, the petitioners were granted the opportunity to respond to the show cause notice by a specified date. The Commissioner of Service Tax was directed to review the reply, pass a reasoned order after hearing both parties, and consider all points raised in the writ petition and related affidavits. The Court emphasized the need to avoid double taxation and made it clear that it had not delved into the case's merits, leaving all points open for the Commissioner's consideration. It was further instructed that proceedings should not be unduly delayed, and both parties were directed to communicate the order to the revenue authorities for action.In conclusion, the High Court did not award costs, provided for the issuance of a certified copy of the order to the parties upon request, and emphasized the need for prompt action by the revenue authorities based on the order's communication.