TaxTMI 
TaxTMI 
2026 (4) TMI 1436
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....e payment of service tax to the tune of Rs. 61,86,425/- for the period from financial year 2014-15 (October 2014 to March 2015) to 2017-18 (Upto June 2017 and thereby violated the provision of section 66B, 68, 69 and 70 of chapter V of the Finance Act, 1994 read with Rule 4,6 and 7 of the service Tax Rules. It was alleged in the show cause Notice dated 29.09.2020 that from the information received from the Income Tax Department that the petitioner rendered taxable services amounting to Rs. 4,36,80,582/- and on such value of services, service tax amounting to Rs. 61,86,425/- ought to have been paid by the petitioner which the petitioner failed to do and as such the same was required to be recovered under proviso to Section 73 of the Finance Act, 1994 by invoking extended period of limitation along with interest at appropriate rate under Section 75 of the Finance Act 1994. Therefore the Petitioner was called upon to show cause as to why service amounting to Rs. 61,86,425/- on the services rendered during the Financial year 2014-15 (October 2014 to March 2015) to 2017-18 (Upto June 2017) should not be demanded and recovered from the Petitioner under proviso to Section 73(1) of the Fin....
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....said Order-in-Original dated 01.03.2022, the Additional Commissioner, Central Goods and Services Tax has also imposed interest under section 75 of the Finance Act, 1994 with an equal amount of penalty of Rs. 61,86,425/- under section 78 of the Act. 5. Being aggrieved by the aforesaid Order-In-Original dated 01.03.2022 passed by the Additional Commissioner, Central Goods and Services Tax, the petitioner preferred an appeal before the Commissioner(Appeals), Central Goods and Services Tax, Central Excise and Customs, GST Bhavan, Kedar Road, Guwahati on 24.05.2022 along with an application for condonation of delay in filing the said appeal. In the said appeal the petitioner submitted that the petitioner had received a total consideration of Rs. 4,63,80,582/- during the years 2014-15, 2016-17 and 2017-18 on account of work executed in the year 1991 and 2009 respectively on account of construction of Legislative Assembly of Nagaland and Construction of School Building in Nagaland and also produced the relevant work orders and payment receipts in connection thereto. The petitioner also furnished certificates issued by the respective Government authorities providing details of the works....
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....ent clearly shows the details of Agencies which made payments to the Petitioner with the amount of tax deducted at source. The work executed by the petitioner is exempted under the Mega Notification No. 25/2012 (Service Tax) dated 20.06.2012. In support of the said claim of exemption, the Petitioner submitted the relevant work orders and payment certificate from the concerned Departments. However, without considering such clear evidence of exemption from payment of service tax, the Commissioner(Appeals), Central Goods and Services Tax, Central Excise and Customs proceeded erroneously and vide order-in-appeal dated 11.10.2023 upheld the order-in-original dated 01.03.2022 passed by Additional Commissioner, Central Goods and Services Tax and levied service tax on entire receipts including the exempted and non-taxable transaction under the said notification no. 25/2012(Service Tax) dated 20.06.2012 issued by the CBIC. Such action of the Respondent Authorities in levying service tax upon entire receipts of the Petitioner without deducting receipts under exemption are absolutely illegal, without jurisdiction and not tenable in law. 8. The learned Senior counsel for the petitioner subm....
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....fication. The said action of the Respondent authorities in treating the entire receipts of the Petitioner as 'taxable service' is therefore absolutely illegal, without jurisdiction, not tenable in law and therefore the impugned Order In Original dated 01.03.2022 as well as the subsequent order-in-appeal dated 11.10.2023 passed by the Additional Commissioner, Central Goods and Services Tax and the Commissioner(Appeals), Central Goods and Services Tax, Central Excise and Customs respectively are liable to be set aside and quashed. 9. The learned senior counsel for the petitioner further submits that the impugned order-in-original dated 01.03.2022 passed by the Additional Commissioner, Central Goods and Services Tax is based on third party data and information received from the Central Board of Direct Taxes. He submits that the Income Tax and Service Tax are two different, separate and independent Acts and their provisions operating in two different fields. Therefore by relying the 26AS/TDS Statement under the Service Tax Act, demand of service tax cannot be made. Therefore the impugned order-in-original dated 01.03.2022 passed by the Additional Commissioner, Central Goods and Serv....
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....y followed in Commissioner of Income Tax Vs. Provident Investment Company Ltd. reported in (1957) 32 ITR 190. The learned Senior counsel also presses into service Judgments in support of his contention by referring to Venkateswara Stainless Steel and Wire Industries Vs. Union of India, reported in (1987) 27 ELT 648 and M/S N.E Logistics &Anr. Vs. Union of India & 2 Ors. [W.P(C) No. 1870/2020]. It is submitted that in N.E Logistics (Supra), similar show cause notice was issued based on information collected from the Income Tax Department through Form 26AS. It is submitted that the High Court remanded the matter back to the authorities on the ground that the department had proceeded on a presumption that the assessee therein was liable to pay tax. It was held that the liability to pay tax of a service tax is not based on presumption nor can it be based upon the State of indeterminateness on the part of the authorities. Liability to pay the tax has to be conclusively determined for a given transaction for which the tax is imposed and for which the noticee has been held to be liable to pay tax as the same determination has not been made, the matter was remanded back to the Principal Co....
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....ranted under the Finance Act of 1994, or because the liability for payment of service tax may have been fastened on the service recipient on reverse charge basis. As such the information contained in the 26AS statement cannot by any stretch of imagination be said to be indicative of the fact that the services in respect of which the amount was received and the income tax was deducted at source on the said receipt were also taxable under the Finance Act of 1994 and liable to Service Tax. The Adjudicating Authority simply on the basis of inferences and analogy levied Service Tax on the entire receipts as reflected in the 26AS statement without examining the fact as to whether those Services were liable to Service Tax under the Finance Act of 1994. Without undertaking such an exercise and examination, the Adjudicating Authority cannot levy the Service Tax on the said receipts as has been held by the Apex Court that Tax cannot be imposed on the basis of Inferences and analogy. Since in the present case the entire Service Tax liability has been imposed any on inferences and analogy without coming to a finding that the said services were liable to Service Tax under the Finance Act of 199....
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....r contravention of any of the provisions of the Act or the Rules made thereunder with the interest to evade payment of tax. 19. It is submitted by the learned Senior counsel that assuming though not admitting that there was a failure to furnish correct information, however, the same does not constitute suppression unless the failure/omission to furnish information or failure to pay taxes are made willfully in order to evade payment of tax. In support of his contentions, the learned Senior counsel has referred to the Judgment of the Apex Court rendered in Continental Foundation Joint Venture Holding Vs. CCE, reported in (2007) 10 SCC 334. It is submitted that the Apex Court in the said Judgment held that mere omission to give correct information did not constitute suppression unless that omission was made willfully in order to evade duty. Suppression would mean failure to disclose full and true information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party would not constitute suppression. An incorrect statement cannot be equated with a willful mis-statement. The latter implies making of an incorrect statement with the kn....
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....on 73(1) of the Act and thereby the impugned show cause notice is clearly barred by limitation and consequently the impugned order in original as well as the show cause notice are liable to be set aside and quashed. The learned Senior counsel therefore submits that the order-in-original has been passed by invoking extended period of limitation of five (5) years without providing any tangible evidence to show that any material fact or information was willfully suppressed from the Revenue with the intent to evade payment of any tax and thereby the issuance of the show cause notice itself is barred by the limitation and consequently the impugned show cause as well the order in original are liable to be set aside and/or quashed. 23. It is further submitted by the learned Senior counsel that if an authority while acting within its jurisdiction makes an error of law which is revealed on the face of its recorded determination, then the Court, in the exercise of its supervisory function, may correct the error unless there is some provision preventing a review by a Court of law. In support of his contentions, the learned Senior counsel refers to the Judgment rendered in Anisminic Ltd.....
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.... amount of penalty. It is submitted that the maximum amount of penalty cannot be imposed in all the cases inasmuch as the authority has to decide the relevant factors such as the period of delay conduct of dealer and such other considerations and the levy of maximum penalty without stating any reasons may not be sustainable. It is therefore submitted that the imposition of interest and penalty in the instant case is absolutely illegal without jurisdiction and thereby the same is liable to be set aside and quashed. Such a non-speaking order is not maintainable in law and same is liable to be set aside and quashed. 25. In so far as the question of maintainability of the writ petition is concerned in view of the statutory remedy of appeal being provided under the Act, the learned Senior counsel submits that the existence of other adequate legal remedy will not per se act a bar for issuance of a writ of certiorari and in an appropriate case it may issue prerogative writs. The duty of the superior Court to issue a writ of certiorari to correct the errors of an inferior court or tribunal called upon to exercise judicial or quasi-judicial functions and not to relegate the petitioner to....
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....of Tripura Vs. Monoranjan Chakraborty, reported in (2001) 10 SCC 740; Assistant Commissioner of State Taxes Vs. Commercial Steel Co. Ltd., reported in 2021 SCC Online SC 884 and Godrej Sara Lee Ltd. Vs. Com. Assessing Officer, reported in 2023 SCC Online SC 9695. 30. The learned Senior counsel therefore submits that the writ petition be allowed. The impugned order-in-original be interfered with and set aside interfering with the demand of service tax as well as the imposition of penalty imposed on the writ petitioner. 31. Mr. S.C Keyal, learned counsel appearing for the Respondents has strongly disputed the contentions made on behalf of the writ petitioner. On the question of maintainability of the writ petition, it is submitted that where there is elaborately prescribed statutory provisions providing for alternative remedy, the petitioner assessee should not be permitted to invoke the writ jurisdiction without first availing of the statutory prescribed remedies. The GST is a complete code in itself and elaborate provisions are prescribed for ventilating grievances of the assesses who are aggrieved by any orders passed by the GST authorities. Therefore the writ petition shoul....
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....writ petitioner assessee is that there were no dues of service tax payable by the petitioner in respect of the services rendered. 35. Upon a perusal of the pleadings available before the Court, it is seen that the service tax liability of services by the petitioner was stated that the contracts undertaken by the Petitioner were pertaining to works and the same was exempted from payment of service tax under the Mega Exemption Notification No. 25/2012 S.T. dated 20.06.2012 w.e.f. 01.07.2012 as amended. 36. In this context a reference to the Notification No. 25/2012-Service Tax dated 20.06.2012 as amended, in exercise of powers conferred on it by Sub-section (1) of Section 93 of the Finance Act, 1994 notified certain exemptions of the taxable services from the whole of the service tax leviable thereon under Section 66B of the said Act. 37. The first limb of argument by the learned Senior counsel for the petitioner before this Court is imposition of tax on solely on the basis of data available in Form 26AS which is obtained from the Income Tax Department. In Chatturam Holiram Ltd (Supra), the Apex Court held that there are three stages in the imposition of tax. There has to be....
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.... the legislature and by considering what was the substance of the matter. It was held that regard must be had to the actual provision of the Act and the Rules made thereunder before any conclusion can be arrived at that the assessee is liable to assessment as contended by the revenue authorities. The relevant provisions this Act are extracted below: "The three stages in the imposition of a tax which are laid down here predicate, in the first instance, a declaration of liability as the starting point. If there is a liability to tax, imposed under the terms of the taxing statute, then follow the provisions in regard to the assessment of such liability. If there is no liability to tax there cannot be any assessment either. Sales or purchases in respect of which there is no liability to tax imposed by the statute cannot at all be included in the calculation of turnover for the purpose of assessment and the exact sum which the dealer is liable to pay must be ascertained without any reference whatever to the same. The legislature cannot enact a law imposing or authorizing the imposition of a tax thereupon and they are not liable to any such imposition of tax. If they ar....
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.... amount specified in the notice; Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) willful misstatement ;or (d) suppression of facts; or (e) contravention of any of the provisions of this chapter or of the rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax or his agent the provisions of this sub-section shall have effect, as if for the words eighteen months, the words "five years" had been substituted. Explanation-where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of eighteen months or five years as the case may be. (1A) Notwithstanding anything contained in sub-section (1), the Central Excise Officer may serve, subsequent to any notice or notices served under that sub-section, a statement, containing the details of service tax not levied or paid or short levied or short paid or erroneously refunded for the subsequent period, ....
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....pression. It was held that an incorrect statement cannot be equated with a willful mis-statement. The latter implies making of an incorrect statement with the knowledge that the statement made was not correct. The relevant paragraphs of the Judgment are extracted below: 12. The expression "suppression" has been used in the proviso to Section 11-A of the Act accompanied by very strong words as "fraud" or "collusion" and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop (sic evade) the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. 44. In CEE Vs Chemphar Drugs & Liniments (Supra), whil....
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.... department wilfully by not filing the prescribed ST-3 returns during the period and by way of providing taxable services without discharging services tax liabilities with the intent to evade payment of service tax. 47. Such conclusions as have been discussed above are contrary to the facts which are evident from the pleadings. In any view of the matter for invocation of the provisions of Section 73 for extension of the period of limitation, it must necessarily be a case which falls under any or all the conditions specified under the proviso to Section 73(1) of the CGST Act. From a plain reading of the impugned Order-in-Original, it is evident that there is no finding by the Adjudicating Authority that the case of the petitioner can be considered to be a case which falls under the conditions specified in proviso to Section 73(1). Under such circumstances, the impugned Order-in-Original appears to the Court to have been assumption of jurisdiction by the revenue authorities which was not otherwise vested on the said authority. For the revenue authorities to invoke powers under Section 73(1), there must be a finding and a conclusion arrived at based on the facts of the case that th....
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....rgument which suggested that error of law had been made. It could, however, still consider whether the determination was within "the area of the inferior jurisdiction. By referring to Reg. Vs. Cotham, reported in (1898) 1 Q.B. 802, 808, it was noted that the distinction between, on the one hand, disregarding the provisions of a statute and considering matters which ought not to be considered and, on the other hand, what is called "a mere misconstruction of an Act of Parliament". This perhaps illustrates the clear distinction which exists between an error when in the exercise of jurisdiction and an error in deciding whether jurisdiction can be assumed: in the latter case an error may have the consequence that jurisdiction was lacking and was wrongly assumed and the result would be that any purported decision would have no validity. The Court held that lack of jurisdiction may arise in various ways. There may be an absence of those formalities or things which are conditions precedent to the tribunal having any jurisdiction to embark on an inquiry. Or the tribunal may at the end make an order that it has no jurisdiction to make. Or in the intervening stage, while engaged on a pr....
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.... held that where a duty to determine a question is conferred on a authority which state their reason for the decision and the reasons which they state show that they have taken into account matters which they ought not to have taken into account or that they have failed to take matters into account which they ought to have taken into account, the court to which an appeal lies can and ought to adjudicate on the matter. 52. Similar views have been expressed by Courts in India and followed in several cases in the context of examination of jurisdiction vested on Tribunals and Court of limited jurisdiction. In Dhirajlal Girdharilal Vs. CIT, Bombay, reported in AIR 1955 SC 271, the Apex Court held that when a Court of fact acts on materials partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the Court was affected by the irrelevant materials used by it in arriving at its finding and such a finding is vitiated because of use of inadmissible material and thereby a question of law arises. 53. In Ram Avtar Sharma Vs. State of Haryana, reported in AIR 1985 SC 915, the Apex Court held that discretionary power must be exercised on relevant and not on ....
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.... a non-existing fact or circumstance. 58. From a careful analysis of the judicial pronouncements as discussed above, it is clear that if an authority while making the inquiry rejects a consideration which is relevant and/or takes into consideration materials and other information which are not relevant, the said decision can be said to be a decision in excess or without jurisdiction. In the present case the adjudicating authority took into consideration the information available in form 26AS of the Income Tax Act, the sole basis for the purpose of levy of service tax. The authority did not consider the services rendered by the petitioner were exempted from levy of service tax or the liability to pay the service tax on the said services was on the recipient on the services. Since the adjudicating authority did not take into consideration those relevant materials which it was bound to take into consideration and on the other hand it had taken into consideration factors and materials, which if not irrelevant and not germane for deciding the liability of the service tax, cannot establish the liability of the assessee, then the said actions of the adjudicating authority is certainly ....
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....nt Commissioner, reported in AIR 1967 SC 1 401 held that though ordinarily High Court leaves an aggrieved party to take recourse to the remedies available under the ordinary law, if they are equally efficacious, yet there are certain exceptions and one of such exceptions pointed out is where action is being taken arbitrarily and without the sanction of law. 62. In State of U.P Vs. Mohd. Nooh, reported in 1958 SCR 595, the Apex Court held that the rule requiring the exhaustion of statutory remedies before the writ is granted is a rule of policy, convenience and discretion rather than rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies. 63. In Bhopal Sugar Industries Vs. D.P Dubey, reported in AIR 1967 SC 549, the Apex Court held that the High Court has undoubted jurisdiction to decide the writ application whether the taxing authority has arrogated to itself, powers which it does not posses or has committed serious errors of procedure which has affected the validity of the decision or where the taxing authority threatens to recover tax on an interpretation of the statut....
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.... had claimed before the High Court that the suo motu revisional power could not have been exercised by the Revisional Authority in view of the existing facts and circumstances leading to the only conclusion that the assessment orders were legally correct and that the final orders impugned in the writ petition were passed upon assuming a jurisdiction which the Revisional Authority did not possess. In fine, the orders impugned were passed wholly without jurisdiction. Since a jurisdictional issue was raised by the appellant in the writ petition questioning the very competence of the Revisional Authority to exercise suo motu power, being a pure question of law, we are of the considered view that the plea raised in the writ petition did deserve a consideration on merits and the appellants writ petition ought not to have been thrown out at the threshold." 67. Again in Union of India Vs. Parashtom Dass, reported in 2023 SCC Online SC 314, the Apex Court held that the provision of Article 226 of the Constitution forming part of the basic structure of the Constitution and that the self-restraint of the High Court under Article 226 of the Constitution is distinct from putting an embargo o....
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....ause notice and the consequential confirmation of demand by the impugned order in original was a proceeding initiated by the respondent authority after invoking the extended period of limitation under Section 73(1). Therefore, in an ordinary course of proceedings seeking recovery of tax demanded, the normal course would be to avail of the statutory remedies. However, before the authorities invoke their jurisdiction under section 73(1), it is the mandate of the statute that the authorities must come to a specific conclusion that the jurisdiction conferred on the revenue authorities under Section 73 (1) can be invoked in the facts and circumstances of the present case. As have been elaborately discussed in the preceeding paragraphs that for invocation of jurisdiction under section 73(1), the respondent authorities must come to a conclusion that the invocation of the powers under section 73 (1) is necessary as the petitioner's case falls under any of the conditions mentioned in the proviso to section 73(1) of the CGST Act. However, from the recital of the order impugned, it is seen that the primary reason for invoking the jurisdiction under section 73(1) is non furnishing of the requi....
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....lity and diligence on the part of the revenue authorities before they can proceed to invoke the powers conferred under section 73(1). 70. It is a trite law that greater the power prescribed under the statute greater will be the responsibility on the authorities on whom it has been bestowed to ensure that no infraction of the provisions of the Act and the Rules are made and no injustice is caused to the assessee during the process of demand and recovery. This Court while examining the facts and circumstances in minute detail and the exposition of the law laid down by various Courts including this Court as well as the Apex court of the country has held that for the Revenue authorities to invoke the powers under section 73(1), there must be a conclusive finding by the Revenue authorities that the petitioner assessee under the facts and circumstances, had wilfully and deliberately evaded or neglected to pay the GST. This conclusion by the Revenue authorities is not apparent and discernible from a plain reading of the impugned order in original. It is not a case that the petitioner assessee never responded to the notices. It is not a case that the documents which were called for requ....