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TMI Blog2016 (4) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... ice' with the Department for payment of service tax at Calcutta after construction service was brought under the purview of service tax with effect from 10th September, 2004 by the Finance (No. 2) Act, 2004. The petitioner is making payment of service tax as per law and filing return regularly. (4) The levy of service tax for the first time was introduced in India in the year 1994 under Chapter V of the Finance Act, 1994. It has been amended from time to time, inter alia, by introducing more categories of services within the service tax net. By the Finance Act, 1997 the 'consulting engineer service' was made taxable with effect from 7th July, 1997 for services provided in one or more disciplines of engineering. Architect service tax was made applicable with effect from 16th October, 1998. Technical testing and analysis services was made taxable with effect from 1 July, 2003. (5) The respondent Department instituted inquiry against the petitioner company regarding applicability of service tax for consulting engineering service by letter dated 11th June, 1998. The said letter was replied to by the petitioner by its letter dated 6th July, 1998 wherein it stated that it was not liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, there was silence on the part of the department for more than three years. (13) Another Show Cause-cum-Demand Notice dated 7th September, 2009 was issued by the respondent for the period 10th September, 2004 to 15th June, 2005 claiming a sum of Rs. 4.51 crores (approx.) on account of service tax. This Show Cause-cum-Demand Notice culminated in an order dated 15th February, 2012 passed by the respondent whereby the petitioner was directed to pay the sum of Rs. 1,07,39,212/- which included Rs. 1,05,28,639/- on account of service tax and Rs. 2,10,573/- on account of education cess. The petitioner was also directed to pay interest on the said sum. Further, penalty of Rs. 1,07,39,212/- was imposed on the petitioner. (14) Thereafter, the petitioner received a hearing notice dated 13th August, 2013 whereby the respondent offered a personal hearing to the petitioner on 22nd August, 2013 with regard to the Show Cause Notice dated 21st April, 2006. In response, the petitioner wrote a letter dated 26th August, 2013 contending that no hearing could be held more than seven years after issuance of a show cause notice and in the records of the petitioner no such show cause notice was found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the knowledge of the Department since the year 1998. Prior to issuance of the impugned show cause notice, three enquiries were held in the year 1998, in the year 2004 and in the year 2005. In response to the enquiry notices the petitioner had disclosed the facts and had categorically stated that it is not liable to pay service tax under 'consulting engineering service' and it had got itself registered under 'construction service' which was made taxable with effect from 10th September, 2004. This was never objected to by the Department. The petitioner has never suppressed any facts from the department and the impugned show cause notice itself states that it has been issued on the basis of records submitted by the petitioner. The petitioner always cooperated with the Department fully. In this connection reliance was placed on a decision of the Supreme Court in the case of Uniworth Textiles Ltd.-vs.-CCE, Jaipur reported in 2013 (288) ELT 161. Reliance was also placed on a Supreme Court decision in the case of Anand Nishikawa Co. Ltd.-vs.-CCE, Meerut reported in 2005 (188) ELT 149, wherein it has been held that 'suppression of fact' can have only one meaning and that is that the correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RTI Act. The department has offered no explanation as to why hearing notice has been sent after a gap of seven years. It is evident that the respondents have maliciously issued the said hearing notice in respect of the impugned show cause notice which does not exist in the departmental records for adjudication. (20) Although there may be no time limit for adjudication of show cause notices issued by the department, the same should be done within a reasonable period of time. When no time limit is prescribed under the law, it has to be done within a reasonable period of time i.e. preferably within three years and not later than five years. In this connection reliance was placed on a decision of the Hon'ble Supreme Court in the case of State of Punjab-vs.-Bhatinda District Co-op. Milk P Union Ltd. reported in 2007 (11) SCC 363. In that case, at paragraphs 18 and 19 of the judgment the Hon'ble Supreme Court observed that if no period of limitation has been prescribed, a statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that 'it appears that most of the services provided by the said company do not fall under the category consulting engineering service and without any documentary support the SCN on 33 per cent of their annual income shown in the balance sheet, if issued may not sustain.' Thus, the department was also conscious that the petitioner was not liable to pay service tax under consulting engineering service for the period covered by the impugned show cause notice and the department issued such notice under the pressure and direction from CERA. (23) The impugned show cause notice was purportedly issued 'on scrutiny of annual accounts (profit and loss account) and other relevant records', without giving any details of such accounts and records and without providing copies of such documents and records which have been relied upon by the department. Further, in the impugned show cause-cum-demand notice service tax has been computed on 33 per cent of the receipt by referring to RAC meeting of Mumbai II Commissionerate, without mentioning the number or date of such meeting and without providing copy of minutes of such meeting. In this connection, reliance is placed on the Division Bench decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is valid. In this connection he relied on a decision of this court in the case of Surya Alloy Industries Ltd.-vs.-Union of India reported in 2014 (305) ELT 340 wherein after referring to a catena of decisions including the decision of this court in Indian Cardboard Industries-vs.-Collector reported in 1992 (58) ELT 508, it was observed as follows:- "Power of judicial review, under Article 226 of the Constitution of India, can be exercised where challenge to a show cause notice is made provided it is patently demonstrated that the same is issued without jurisdiction or it does not disclose any offence to have been committed. Ordinarily High Court should not embark to decide the factual disputes but relegate the party to submit the reply before the authority concerned who is obliged to decide the same. The aforesaid rule is, however, not free from exception. The exception, carved out in the case of Indian Cardboard Industries Limited (supra), in my opinion, still holds the field. The aforesaid exception can be aptly quoted hereunder: 'On the basis of the decisions cited it appears that the court in exercise of its jurisdiction under Article 226 of the Constitution will interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apcotex Industries-vs.-Union of India reported in 2011 (271) ELT 46 in this regard. (27) It was then submitted that the impugned show cause notice has been validly issued under the proviso to Section 73(1) of the Finance Act, 1994 as substituted by Finance (No. 2) Act, 2004. The provision having been substituted completely prior to the issuance of the show cause notice dated 21st April, 2006, it was incumbent upon the assessing officer to issue notice in accordance with the law prevailing on the date of its issuance as the old provision was no longer in force. In support of this proposition he relied on a decision of the Karnataka High Court in the case of CST-vs.-The People's Choice reported in 2014 (36) STR 10, wherein the Karnataka High Court upheld the decision of the Tribunal cancelling the show cause notice issued on 10th September, 2004 under Section 73 (1) of the Finance Act, 1994 as it stood prior to the amendment for a period prior to the amendment as the show cause notice should have been issued under the amended provision and not under the old provision. (28) Mr. Saraf then argued that even assuming but not admitting that the interpretation offered by the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inconsistent stand taken by the petitioner and the incorrect submission made by it about the nature of its services clearly shows that it has suppressed material facts which brings them squarely under the purview of the proviso to Section 73 (1)(a) of the Finance Act, 1994. (31) On the issue of classification involved in the present case, the regular benches of the Tribunal in the case of Daliem Industrial Co. reported in 2003 (155) ELT 457 (Delhi) and in the case of Jyoti Ltd. reported in 2008 (9) STR 373 (Ahmedabad) had held in favour of the assessee. In both the cases the Revenue Department filed special leave petitions. The Hon'ble Apex Court dismissed the SLP in the case of Daliem Industrial Co. without making any observation on facts or law. In the case of Jyoti Ltd., the Hon'ble Supreme Court was pleased to admit the SLP and the matter is pending before the Hon'ble Supreme Court. Simpliciter dismissal of the SLP in the Daliem Industrial Company's case does not create a binding precedent and does not amount to pronouncement of law. This has been held by the Hon'ble Supreme Court in the case of SS Nadar-vs.-Tamil Nadu reported in (2002) 8 SCC 361, wherein the Hon'ble Apex C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the permissible time frame whereas in the aforesaid cases cited by the petitioner proceedings were sought to be initiated after inordinate delay. (34) Ld. Counsel then submitted that the show cause notice dated 21st April, 2006 was issued by the respondent authorities within seven months of the letter dated 28th September, 2005 whereby the respondents had summoned the representatives of the petitioner. Reliance by the petitioner on the decision in Mohan Bakers (P) Ltd. (supra) and Gammon India Ltd. (supra) is misplaced as in those cases the show cause notices were issued two years after inspection. In Giriraj Industries (supra) the show cause notice was issued after fifteen months and accordingly quashed. In the instant case, the inspection was made in 1998 for a period which is not covered by the show cause notice dated 21st April, 2006. Thereafter, enquiries were made in 2004 and 2005 and the impugned show cause notice was issued within seven months from the last enquiry made in the matter. (35) The next submission of Ld. Counsel was that the assessing officer having based his findings on the documents provided by the assessee himself and not any outside document, the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner's own statements made in the replies dated 19th May, 2004 and 6th July, 1998. In the reply dated 6th July, 1998, the petitioner stated that 'a firm' would include a company, etc providing engineering services and consultancy. In the reply dated 19th May, 2004, the petitioner stated that 'consulting engineering' may include a company. In the case of MN Dastur & Co. Ltd.-vs.-UOI reported in 2002 (140) ELT 341, this court held that no distinction can be made between different categories of service providers, be they individuals, partnership firms or incorporated companies and all such service providers come within the purview of service tax. This decision was upheld by a decision of a Division Bench of this court reported in 2006 (4) STR 3. (38) Ld. Counsel then submitted that the RTI response dated 10th October, 2013 does not vitiate the proceedings initiated under the Finance Act, 1994. In the instant case, the petitioner filed the RTI application dated 27th August, 2013 only after receiving the notice dated 13th August, 2013 providing it with the opportunity of personal hearing. Hence, the petitioner was aware of the fact that the proceedings initiated under notice dated 21st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice. Mr. Saraf submitted that none of these circumstances exist in the facts of the present case and as such the Writ Petition should not be entertained. (42) Appearing on behalf of the Petitioner, Mr. Mittal submitted that the show cause notice has been issued admittedly beyond the stipulated period of 18 (Eighteen) months and is without jurisdiction. The notice has been issued by invoking the extended time period of 5 (Five) years without there being any justification for invoking such extended period of limitation. The invocation of the extended period of limitation is erroneous and such error cause to the jurisdiction of the authority issuing the show cause notice. An authority cannot clothe itself with jurisdiction by erroneously deciding a point of fact or law. (43) Having considered the submissions of the learned Counsel on the point of maintainability of the Writ Petition, I am of the view that if it be held finally that the extended period of limitation was wrongly invoked by the authority in issuing the impugned show cause notice, the logical conclusion would be that the show cause notice was issued without jurisdiction. In that event, this Court will be justified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, would issue appropriate orders or direction to prevent the same. (49) In view of the above, the preliminary issue of maintainability of the Writ Petition is decided in favour of the Petitioner. I hold that the writ petition cannot be dismissed in limine as unmaintainable. (50) On merits, the first point that has been urged on behalf of the Petitioner is that the impugned show cause notice is barred by limitation and is thus without jurisdiction. The show cause -cumdemand notice is dated 21st April, 2006 and pertains to the period 1st October, 2000 to 31st March, 2005. In this connection, Section 73 of the Finance Act, 1994 is relevant and the same, in so far as material for the present purpose is set out hereunder:-- "S. 73. Recovery of service tax not levied or paid or shortlevied or short-paid or erroneously refunded --- (1) Where any service tax has not been levied or paid or has been shortlevied or short-paid or erroneously refunded, the (Central Excise Officer) may, within (eighteen months) from the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Five) years if non-payment or short payment of the service tax is by reason of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of Chapter 1 of the Finance Act, 1994 or the Rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax. (53) In the instant case the impugned show cause notice has admittedly been issued much beyond 18 (Eighteen) months from the date when, according to the Department, the service tax was payable by the Petitioner. However, the Department invoked the extended period of limitation. In the impugned notice it is stated inter-alia as follows:- "It would be evident from the foregoing that had the investigation not been conducted, the fact of providing such service by the said noticee would have remained unearthed. Hence, the extended period of 5 years is invocable for issuing show cause notice to the said noticee as per proviso to Section 73(1) of the said Act since the said noticee wilfully suppressed the material facts to the Department with intent to evade payment of service tax and education cess as stated in foregoing paragraphs." (54) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was included within the ambit of service tax with effect from 10th September, 2004. Then again, there was a long gap and there was no communication from the Department. More than one and half years thereafter the Department issued the show cause notice which is impugned in the present Writ Petition. (57) From the aforesaid it appears that the Petitioner was diligent in responding to all the notices issued by the Department and in its replies, the Petitioner clearly explained the nature and scope of its business. Specimen copies of contracts entered into by the Petitioner when its clients were also made available to the Department. In my view there was full and sufficient disclosure of the nature of the Petitioner's business to the Department and it cannot be said that the Petitioner suppressed material facts to keep the Department in the dark with an intent to evade payment of service tax. (58) It is also pertinent to note that it is stated in the impugned show cause notice itself that the same has been issued on the basis of the records submitted by the Petitioner. Hence, there appears to be no basis in the Department's contention that the Petitioner suppressed material facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department was aware of the activities of the assessee and nothing prevented the Department from visiting the assessee's site to make enquiries, it had to be held that there was no suppression on the part of the assessee to warrant invocation of the extended period of limitation. (62) In Collector of Central Excise, Hyderabad -Vs- Chemphar Drugs and Liniments, Hyderabad reported in (1989) 2 SCC 127, the Supreme Court held:-- "In order to make the demand for duty sustainable beyond a period of 6 months and up to a period of 5 years in view of the proviso to sub-section (1) of Section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invoking the extended period of limitation. (68) In my considered view and in view of the law as discussed above, the impugned show cause notice is hopelessly barred by limitation. There was absolutely no ground or justification for issuing such notice by invoking the extended period of limitation. None of the preconditions necessary for taking recourse to the extended period of limitation exists in the facts of this case and by wrongfully invoking the extended period of limitation the Commissioner conferred on himself a jurisdiction which he otherwise did not have. (69) In view of the aforesaid the impugned show cause notice and consequently, the impugned notice of hearing cannot be sustained. (70) Even if I were to decide the issue of limitation in favour of the department, there are other grounds on which I would have been compelled to quash the impugned show cause notice and I think I should briefly indicate those grounds. (71) The impugned show cause notice dated 21st April, 2006 pertains to the period 1st October, 2000 to 31st September, 2009. Subsequently, the department issued another show cause notice dated 7th September, 2009 covering the period 10th September, 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already formed an opinion as regards the liability of the petitioner and hence, the impugned notice does not remain in the realm of a show cause notice. For this reason also I would be inclined to quash the impugned show cause notice. (73) It would appear from the documents on record as also the pleadings filed by the parties that the impugned show cause notice was issued by the Commissioner of service tax in view of the observations of and at the instance of the audit team of CERA. In this connection one may refer to a letter dated 12th April, 2006 written by the Assistant Commissioner, Service Tax Division-III to the Assistant Commissioner (ADJN) (copy at page 22 of Affidavit-in-Reply) wherein at the concluding paragraph it was stated as follows:- "Under the situation, as stated above, prima facie, it appears that most of the services provided by the said company do not fall under the category Consulting Engineer Service and without any documentary support the SCN on 33% of their annual income shown in the balance sheet, if issued may not sustain. However, since it is a CERA case, the revised draft SCN was prepared on the basis of available records covering the period October, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. 41. We are afraid that there are several errors in this paragraph. The High Court first correctly holds that in the case of composite works contracts, the service elements should be bifurcated, ascertained and then taxed. The finding that this has, in fact, been done by the Finance Act, 1994 Act is wholly incorrect as it ignores the second Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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