2021 (3) TMI 950 - HC - Service Tax

Validity of order passed by the commissioner when the application for Advance Ruling is pending - Search and seizure - evasion of service tax - levy of service tax on the transaction of SDB with its members based on the concept of mutuality - levy of interest and penalty as claimed by the department when there was no liability to pay service tax given that the amount collected was in the nature of refundable deposit - HELD THAT - The issues raised by the writ-applicants before the ARA have been gone into by the Commissioner in the Order in Original. In other words the Authority in its order dated 16th July 2020 has adjudicated upon both the issues. In such circumstances for all purposes the application before the ARA has become academic and we should ask the Appellate Tribunal to hear the appeal preferred by the writ-applicants herein and decide the same expeditiously in accordance with law. A vibrant system of advance ruling can go a long way in reducing the taxation litigations. However in the matters of the present type sometimes the delay at the end of the ARA may frustrate the investigation which may not be in the interest of the Revenue. The impugned order passed by the Commissioner need not be interfered with only on the ground that he should have waited for the ruling of the ARA. Thus in the peculiar facts and circumstances of the case no relief to be granted to the writ-applicants and relegate them to pursue the appeal preferred by them before the Tribunal - application disposed off.

Summary

Issues Involved:
1. Quashing of the Show-Cause Notice (SCN)
2. Pendency of proceedings before the Authority for Advance Ruling (AAR)
3. Imposition of Service Tax, Interest, and Penalties
4. Maintainability of the Writ Application
5. Alternative Remedy of Appeal before the Tribunal

Detailed Analysis:

1. Quashing of the Show-Cause Notice (SCN):
The writ-applicant sought relief to quash the SCN issued by the Respondent No.4. The SCN dated 22nd October 2019 culminated in a final order by the Commissioner, Central Excise and CGST, Surat, confirming the demand of Service Tax amounting to Rs. 24,67,98,056/- and imposing penalties under various sections of the Finance Act, 1994. The final order included the appropriation of the Service Tax already paid and the imposition of penalties on the company and its directors.

2. Pendency of Proceedings before the Authority for Advance Ruling (AAR):
The writ-applicant argued that the Commissioner should have waited for the final order from the AAR before making a decision. The application for advance ruling was filed in 2016, but no final order had been passed by the AAR. The Supreme Court's decision in National Co-operative Development Corporation vs. Commission of Income Tax, emphasizing the importance of a vibrant system of Advance Ruling, was cited to support this argument. However, the court noted that the issues raised before the AAR had already been adjudicated by the Commissioner, making the application before the AAR academic.

3. Imposition of Service Tax, Interest, and Penalties:
The final order confirmed the demand of Service Tax, recovery of interest, and imposition of penalties under Sections 75, 78(1), 78A, and 77(1) of the Finance Act, 1994. The penalties were imposed for failure to obtain Service Tax Registration, failure to file ST-3 returns, and other violations. The court observed that the writ-applicants had received an advance of Rs. 3.40 crore during the Financial Year 2014-15, which was not reported in the ST-3 returns, leading to the investigation and subsequent imposition of penalties.

4. Maintainability of the Writ Application:
The respondents raised a preliminary objection regarding the maintainability of the writ application, arguing that the writ-applicants had an alternative remedy of appeal before the Customs, Excise, and Services Tax Appellate Tribunal (CESTAT). The court agreed with this argument, noting that the writ-applicants had already preferred an appeal and should pursue it before the Tribunal.

5. Alternative Remedy of Appeal before the Tribunal:
The court emphasized that the writ-applicants should pursue their appeal before the Tribunal, which is the appropriate forum for addressing their grievances. The Tribunal was directed to decide the appeal expeditiously in accordance with the law, without being influenced by any observations made by the court in this order.

Conclusion:
The court declined to interfere with the impugned order passed by the Commissioner on the ground that he should have waited for the ruling of the AAR. The writ-applicants were relegated to pursue their appeal before the Tribunal. The Civil Application was disposed of, and the Tribunal was directed to decide the appeal expeditiously.