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TMI Blog2020 (8) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1; b) Pending the present Petition, this Hon'ble Court may be pleased to stay further proceedings against the Petitioner No.1 pursuant to the Show Cause Notice (F. No. V ST(Adj)15/Linde/Commr-I/2017-18) dated 10.11.2017 issued by the Respondent No.3; c) Ex-parte ad-interim relief in terms of prayer (c) may kindly be granted; d) Such other and further reliefs as may be deemed appropriate by this Hon'ble Court." 4. The facts giving rise to this petition may be summarized as under: 4.1. The petitioner No.1 is a Private Limited Company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of providing taxable output services under the category of consulting engineer services, erection, commissioning and installation service, construction services other than residential complex, including commercial/industrial buildings or civil structures and works contract services etc. to various entities located in and outside India. Petitioner No.1 is subsidiary of Linde AG, Germany. The petitioner No.1- Company was filing its returns regularly and was paying appropriate service tax in accordance with law. 4.2. It is the case of the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.2016, there was no further inquiry or response from the respondent Nos.2 and 3. The petitioner No.1 was therefore, under a bona fide belief that the respondents were satisfied with the response submitted by the petitioner No.1. However, the petitioner No.1 again received communication dated 18.08.2017, which was replied by the petitioner No.1 vide its reply dated 28.08.2017. 4.6. It is the case of the petitioners that thereafter, the petitioner No.1 was served with the show cause Notice dated 10.11.2017 based upon the observations of the Audit Officer leveling following allegations against the petitioner No.1 : "i. Linde AG, Germany which are legal entities, were mere establishments of the Petitioner No.1, as contemplated under Rule 6A of the STR read with Explanation 3 of the Section 65B (44) of the Act; ii. in view of (I) above, the services rendered by the Petitioner No.1 to Linde AG, Germany would not fall within the ambit of "Export of Services" and would therefore fall within the definition of the term 'exempted service' as defined in Rule 2(e) of the Cenvat Rules; ii. in view of (ii) above, according to the SCN, Rule 6(3) of the Cenvat Rules becomes appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that the interpretation made on the part of the respondents is contrary to the purpose and object of the statute as well as the same is contrary to the language of the provisions, which requires strict interpretation. 5.4. Learned senior advocate submitted that the respondent No.3 has no jurisdiction to issue show cause notice under the provisions of the Act, 1994 and if the proceedings are permitted to continue, it would only lead to a multiplicity of the proceedings and would cause grave and irreparable loss, harm and injuries to the petitioners. 5.5. It was submitted that the plain reading of Rule 6A of the Rules, 1994 with Explanation 3 to Section 65B (44) of the Act, 1994, which clearly stipulates that in the event, the conditions prescribed there under stands fulfilled, the provision of service by a service provider in India to a service recipient outside India shall be considered as an "export of service" amenable to the benefits available under the law. It was submitted that the conditions prescribed under Rule 6A of the Rules, 1994 and as to how the conditions stand fulfilled in the facts of the present case are tabulated as under: Condition under Rule 6A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exclusion of services provided by a service provider to its establishment in a non-taxable territory is that "one cannot render service to one's own self". 5.9 It was further contended that in the facts of the case, the petitioner No.1 and Linde AG Germany are distinct legal entities and therefore, the provisions of Rule 6A of the Rules, 1994 cannot be applied in the facts of the case. 5.10 Learned senior advocate submitted that the basis of issuance of show cause notice, considering the holding Company of the petitioner i.e. Linde AG Germany as its other establishment is contrary to the object and purpose of encouraging the export of services from India to locations outside India. 5.11 It was submitted that if the interpretation as sought to be adopted by the respondent No.3 is approved, the same would effectively tantamount to brining within the tax ambit every provision of service by an entity incorporated in India to its holding Company or other group Companies located outside India, which is neither the intention of the said provisions nor it is the scheme of the Act. It was therefore, submitted that such interpretation made by the respondent authority is wholly arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with law. It was submitted that the respondent No.3 has jurisdiction to issue show cause notice. 6.2) Learned advocate for the respondents further relied upon the averments made in the affidavit-in-reply filed on behalf of the respondents to contend that the issuance of show cause notice does not give rise to a cause of action to the writ petitioners under Article 226 of the Constitution of India and it does not amount to an adverse order, which affects the right of any party unless the show cause notice has been issued by a person having no jurisdiction to do so, which is not fact in the present case. Reliance was placed on the following averments made in para 8 of the Affidavit-in-reply wherein various judgments are cited and it reads thus : "8. It is respectfully submitted that the Hon'ble Supreme Court of India has deprecated practice of entertaining writ petitions filed at the show cause notice stage and held that in such cases High Court may refrain from entertaining such petitions. The answering respondent craves leave of this Hon'ble Court to refer to and rely upon the following cases, in support of its preliminary objection as to the maintainabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Housing Board vs. Ramdesh Kumar Singh and others JT 1995 (8) SC 331, Special Director and another vs. Mohd. Ghulam Ghouse and another AIR 2004 SC 1467, Ulagappa and others vs. Divisional Commissioner, Mysore and others 2001(10) SCC 639, State of U.P. vs. Brahm Datt Sharma and another AIR 1987 SC 943 etc. The reason why ordinarily a writ petition should not be entertained against a mere show-cause notice or charge-sheet is that at that stage the writ petition may be held to be premature. A mere charge-sheet or show-cause notice does not give rise to any cause of action, because it does not amount to an adverse order which affects the rights of any party unless the same has been issued by a person having no jurisdiction to do so. It is quite possible that after considering the reply to the show-cause notice or after holding an enquiry the authority concerned may drop the proceedings and/or hold that the charges are not established. It is well settled that a writ lies when some right of any party is infringed. A mere show-cause notice or charge-sheet does not infringe the right of any one. It is only when a final order imposing some punishment or otherwise adversely affecting a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax Rules, 1994 so referred to in paragraph 3 of the show cause notice, is to be interpreted in the backdrop of following substantial question of law:- "i. Whether in terms of Explanation 3 to Section 65B(44) of the Act, a holding company of the Petition No.1 being Linde AG, incorporated in Germany, or any other subsidiary of Linde AG, can be construed as 'establishments of the Petition No.1'? ii. Whether in the facts and circumstances of the present case and on a reading of the provisions of Rule 6A of the Service Tax Rules, 1994 (hereinafter referred to as "STR") read with the provisions of Section 65B(44) of the Act, the consulting engineering services rendered outside India by the Petition No.1 to any other subsidiary of Linde AG or holding company would qualify as 'Export of Services' as contended by the Petitioner, or Exempted Service under Rule 2 (e) of the Cenvat Rules, thereby requiring proportionate reversal of Credit under Rule 6A of the STR as is contended by the Department?" 3. Accordingly, it is submitted that action of the respondent in issuing show cause notice is without jurisdiction and contrary to the provisions of Rule 6A of Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1 . - For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,- (A) the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or (B) the duties performed by any person who holds anypost in pursuance of the provisions of the Constitution in that capacity; or (C) the duties performed by any person as a-Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local authority and who is not deemed as an employee before the commencement of this section. 'Explanation 2. - For the purposes of this clause, the expression "transaction in money or actionable claim" shall not include- (i) any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any service tax has not been levied or paid or has been shortlevied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; 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 "thirty 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 thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empted services and the credit not allowed shall be calculated and paid by the manufacturer or the provider of output service, in terms of the provisions of sub-rule (2) or sub-rule (3), as the case may be:" 11. On perusal of the above provisions of the Act, 1994 and the Rule, 1994 read with Rules, 2004, it emerges that Rule 6A of the Rules, 1994 provides that services rendered would be treated as "Export of services" when clause (a) to clause (d) refers to provider of service is located in the taxable territory and recipient of service is located outside India and the service is not a service specified in Section 66D of the Act and the place of the provision of the service is outside India and as per clause (e) the payment for such service has been received by the provider of service in convertible Foreign Exchange. It emerges that the petitioner is fulfilling all the conditions, however, so far as the clause (f) of Rule 6A of Rules, 1994 is concerned, it provides that the provider of service and recipient of service are not merely establishments of a distinct person in accordance with Item (b) of explanation 3 of clause (44) of Section 65B of the Act. As per clause (44) of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have to be considered "export of service" as per Rule 6A of the Rules, 1994 and Clause (f) of Rule 6A of the Rules, 1994 would not be applicable in the facts of the case as the petitioner No.1, who is the provider of service and its parent Company, who is the recipient of services cannot be said to be merely establishment so as to be distinct persons in accordance with Item (b) explanation 3 of Clause (44) of Section 65B of the Act, 1994. 13. In such circumstances, the respondents would not have any jurisdiction to invoke the provisions of the Act, 1994 read with Rules, 1994 to bring the services rendered by the petitioner No.1 to its parent Company within the purview of levy of service tax under the provisions of the Act, 1994. 14. Moreover, the impugned show cause notice is also not tenable in law as the same is issued invoking Section 73 of the Act,1994 for extending the period for the issuing the Notice on the ground of alleged willful mis-statement or suppression of the facts on the part of the petitioner No.1. The petitioners cannot be said to have made any willful mis-statement or suppressed any fact as the petitioners cannot be made liable for levy of service tax by wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is was followed by another Rashid case, namely, K.S. Rashid & Son v. Income Tax Investigation Commission 2 which reiterated the above proposition and held that where alternative remedy existed, it would be a sound exercise of discretion to refuse to interfere in a petition under Article 226. This proposition was, however, qualified by the significant words, "unless there are good grounds therefor", which indicated that alternative remedy would not operate as an absolute bar and that writ petition under Article 226 could still be entertained in exceptional circumstances. 17. A specific and clear rule was laid down in State of U.P. v. Mohd. Nooh 3 as under: "But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discretion rather than a 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." 18. This proposition was considered by a Constitution Bench of this Court in A.V. Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwani 4 and was affirmed and followed in the following words: "The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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