TaxTMI 
TaxTMI 
2026 (8) TMI 335
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....2 proposing levy of Service Tax, interest and penalty without a pre-show cause consultation as No. 1053/02/2017 per Master Circular CS dated 10.03.2017 issued by the Central Board of Excise and Customs and subsequently clarified by Circular dated 19.11.2020 be set aside quashed. ii) The order dated 04.01.2024 (as contained in Annexure P 4) passed by the respondent no. 1 imposing Service Tax, interest and penalty without consideration of the written submissions, the exemption Notification No. 25/2012-Service Tax dated 20.06.2012 issued by the Central Government; Service Tax (Determination of Value) Rules, 2006; Notification No. 30/2012-Service Tax dated 20.06.2012 and in violation of Article 366 (29Ab) read with Entry 54 of List II of the Constitution of India on the gross value of the contract as per Form 26AS and in contravention to Section 102 of the Finance Act inserted by the Finance Act, 2016 only on ground that the agreement was entered into after 31.03.2015 being wholly without jurisdiction be set aside and quashed. iii) The order dated 04.01.2024 (as contained in Annexure -P 4) passed by the respondent no. 1 imposing Service Tax, Interest and Penalty witho....
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.... 6. Learned counsel further submitted that the foundation of the show cause notice was the receipts reflected in Form 26AS, on the basis whereof it was alleged that the petitioner had received consideration towards execution of works contracts without payment of Service Tax. According to the petitioner, the respondent authorities committed a fundamental error in treating the gross figures reflected in Form 26AS as the basis for determining Service Tax liability. 7. Learned counsel further submitted that respondent no. 1 has erred in levying Service Tax on the gross value of the works contract without following Rule 2A of the Service Tax (Determination of Value) Rules, 2006 (Annexure: P/10). Learned counsel submitted that Rule 2A specifically provides the manner in which the service component of a works contract is to be determined by excluding the value of property in goods transferred during execution of the works contract. The adjudicating authority, however, ignored the statutory mechanism and proceeded to levy tax on the entire contract value reflected in Form 26AS, which is impermissible in law. It was also contended that the impugned order is contrary to Article 366(....
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.... works contract. 25. That the Notification No. 30/2012-Service Tax also provide that service tax is to be paid in equal proportions by the person providing service and the person receiving the service. 26. That the petitioner states that in terms of the Service Tax (Determination of Value) Rules Service Tax is to be paid only on the 40% of the amount charged for the works contract. Needless to say, that this rule confirms to Article 366 (29 (ab) of the Constitution of India by allowing necessary direction on account of transfer of property in goods in the execution of the works contract. The Notification No. 30/2012 dated 20.06.2012 fix the liability both on the service provider and the recipient of taxable service in equivalent proportions. 27. That the petitioner submits that the respondent no. 1 in passing the order brought to tax the gross value of the works contract to tax in his hands only. The petitioner submits that the respondent no. 1 was rather obliged to levy service tax only on the value of transfer of property in goods in the execution of the works contract not only in accordance with the Determination of Value Rules but also in accordance w....
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....ion. The same on this ground alone, merit to be set aside and quashed." 10. On the aforesaid grounds, learned senior counsel submitted that the order dated 04.01.2024 is wholly unsustainable in law and deserves to be quashed. SUBMISSIONS ON BEHALF OF RESPONDENTS: 11. Per Contra, learned counsel appearing for the respondents raised a preliminary objection regarding the maintainability of the writ petition. It was submitted that against the adjudication order dated 04.01.2024, an efficacious statutory remedy of appeal was available under Section 86 of the Finance Act, 1994 before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). Without availing the said statutory remedy, the petitioner had directly invoked the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. Learned counsel submitted that where an effective statutory remedy exists, the writ jurisdiction ought not to be invoked except in exceptional circumstances. It was accordingly submitted that the writ petition is not maintainable and is liable to be dismissed on the ground of availability of an alternative statutory remedy. 12. Learned counsel appearing for the r....
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..... FINDINGs: 14. Having heard learned counsels appearing on behalf of the parties at length and upon perusal of the pleadings, the Order-in-Original dated 04.01.2024, the statutory notifications relied upon by the parties, and the materials brought on record, this Court proceeds to examine the controversy. 15. At the outset, the preliminary objection raised by the respondents regarding availability of an alternative remedy under Section 86 of the Finance Act, 1994 deserves consideration. It is true that ordinarily this Court, in exercise of jurisdiction under Article 226 of the Constitution of India, would be slow in entertaining a writ petition where a statutory appellate remedy is available. However, the rule regarding alternative remedy is a rule of self-imposed restraint and not one of jurisdiction. Where the challenge goes to the very manner in which the adjudicating authority has exercised jurisdiction, where relevant statutory provisions and binding notifications are alleged to have been ignored, or where the order ex facie suffers from non-consideration of material issues having a direct bearing on tax liability, the existence of an alternative remedy would not oper....
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....act shall not include value added tax or sales tax, as the case may be, paid or payable, if any, on transfer of property in goods involved in the executive of the said works contract; (b) value of works contract service shall include,- (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect's fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable to supply of labour and services; (c) Where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of the works contract, then, such value adopted for the purposes of payment of value added tax ....
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....NVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004." The impugned order also does not disclose any meaningful discussion regarding the applicability of the valuation rules, the determination of the service component, or the impact of the constitutional principles governing taxation of works contracts. A quasi-judicial authority exercising adjudicatory powers is under an obligation to deal with every substantial contention having a bearing upon the tax liability. Mere reference to the submissions of a party is not sufficient; there must be an adjudication thereof supported by reasons. The impugned order, in the opinion of this Court, falls short of this requirement. 18. Equally significant is the petitioner's contention regarding Notification No. 30/2012-ST and the reverse charge mechanism. The respondents have sought to repel the contention by asserting that the petitioner is a private limited company and therefore ineligible to claim the benefit of the notification. The petitioner, however, has specifically asserted that it is a partnership firm and that the description....