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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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PJ/Case Laws/2010-11/1039

Exercise of Writ Jurisdiction at Show Cause Notice stage
Case: M/s L R Sharma & Co v/s Union of India & ORS
 
Citation: 2011-TIOL-07-HC-DEL-ST 

Issue:-Whether the writ jurisdiction can be exercised at the stage of show cause notice itself? Whether the public utility services like laying of pipelines for carrying of drinking water, sewerage, untreated effluent water for Delhi Jal Board will be liable for service tax?
 
Brief Facts:- Petitioner is engaged in laying of long distance pipelines for the purpose of carrying of drinking water, sewerage, untreated effluent water for Delhi Jal Board. Department alleged that the said service was a taxable service and Petitioner was liable to pay service tax for providing the said service.
 
Petitioner had made a representation to the Revenue that they were not liable to pay the service tax as the activities carried on by it pertain to the public utility service on behalf of the Delhi Jal Board and Delhi Metro Rail Corporation Ltd. Representation was rejected. Thereafter, writ petition was filed and order was passed providing that as this was only a preliminary inquiry and not demand, taking of coercive action did not arise. It was also provided that the concerned authority was required to give an opportunity of hearing to the petitioner.
 
Thereafter, Revenue issued show cause notice to the petitioner. Against the issuance of show cause notice, petitioner has filed writ petition before the High Court. 
 
Petitioner’s Contentions:- Petitioner has prayed for issue of writ of Certiorari for quashing of the show cause notice on the ground that the same is without jurisdiction and violative of the provisions of law and further to issue a writ of Mandamus/ direction declaring that the provisions is not liable to pay service tax in respect of laying of long distance pipelines.
 
Petitioner submitted that the notice to show cause is absolutely vulnerable as the levy is totally impermissible. Reference is made to various provisions of the Finance Act, 1994 and to the Circular No. 80/10/2004-ST which has clarified, as pleaded, that the construction of the buildings which are used by government organization established for charitable or philanthropy purposed, etc. are non-commercial in nature and would not attract service tax.
 
Petitioner also referred to the amendment that was incorporated in the Finance Act, 1994 by the Act by introducing another taxable service as “Works Contract” of the Finance Act, 1994 and in the service tax vide notification No. 23/2007 dated 22.5.2007. Also drawn inspiration from the Circular No. 123/5/2010-TRU dated 24.5.2010 whereby the certain aspects have been clarified.
 
It was urged by the petitioner that in order passed pursuant to their representation that no coercive action would be taken against them. It was submitted that despite of this order, Revenue have taken a decision directing the petitioner to submit various documents including ST-2 registration certificate, complete contracts for all works done, year wise bills for providing and copy of audited balance sheets for the period 2005-06 to 2009-10.
 
It is contented that the same has been demanded regardless of the said order passed by this court and a show cause notice has been issued. Petitioner submitted that the show cause notice is barred by limitation. Petitioner has relied upon the decisions rendered in A. Suresh v. State of Tamil Nadu [AIR 1997 SC 1889], Gupta Sanitary Stores v. Union of India [AIR 1985 Del. 122, 132 (FB)], Sub-Divisional Inspector of Post, Vaikam and others v. Theyyam Jospeh and others [AIR 1996 SC 1271], Baktawar Singh Bal Kishan v. UOI & Ors. [(1988) 2 SCC 293], CC, Calcutta & Others v. Indian Oil Corporation and another [(2004) 3 SCC 488], ITW Signode India Ltd. V. Collector of Central Excise [2003 (158) E.L.T. 403 (SC)], Hindustan Poles Corporation v. Commissioner of C. Ex., Calcutta [2006 (196) E.L.T 400 (SC)] andState of Punjab v. Bhatinda District Co-op. Milk P. Union Ltd. [2007 (217) E.L.T. 325 (SC)].
 
Respondent’s Contentions:- Respondent submitted that in the notice to show cause the statutory provisions have been referred to and a prime facie opinion has been formed but that does not necessarily mean the stand and stance put forth by the petitioner has been totally brushed aside. Moreover, an opportunity of hearing has been extended in the show cause notice to the petitioner.
 
Reasoning of Judgment:- The High Court found that the plea of the Petitioner is that it is not required to get itself registered and is not liable to pay service tax. There can be no bar that the petitioner cannot contented before the statutory authority that it is not liable to pay the service tax and hence, there is no necessity for getting itself registered.
 
Further, the High Court perused the judgment relied upon by the petitioner in the cases of ITW Signode India Ltd, Bhatinda District Co-op Milk P. Union Ltd and Hindustan Poles Corporation.
 
On a perusal of the aforesaid decisions, the High Court was of the opinion that the present notice to show cause is not a one where the question of limitation can be decided straightaway on law without adverting to intrinsic facts. It is also not a case where it can be said that the revenue has sent an indiscriminate show cause without proper application of mind.
 
In the opinion of the High Court the issues involved in this case require to be adjudicated by the Adjudicating Authority and the show cause notice on the grounds urged cannot be lanceted. Liberty was granted for filing reply within prescribed time as the reply to the show cause has not been filed.
 
Decision:- Petition disposed off accordingly.
 
Comment:- The first issue in this decision is that the writ cannot be filed at the issuance of show cause notice. The alternative remedy is available with the party. The second issue is that whether the laying of pipelines for drinking water is chargeable to service tax under “Commercial construction services”. The wording under this service is that it should be for commerce or industry. But this is not for commerce or industry. The department has changed the stand now and says that it falls under installation and commissioning. There is no clause under these categories that it should be used for commerce or industry. Even while classifying under works contract also, they say that laying of pipeline is not construction service but it is installation of pipeline.    

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