Gujarat High Court
Nimeshbhai Gunvantbhai Patel vs Union Of India on 22 October, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/5044/2024 ORDER DATED: 22/10/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 5044 of 2024
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NIMESHBHAI GUNVANTBHAI PATEL
Versus
UNION OF INDIA & ORS.
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Appearance:
MR ABHISHEKKUMAR C MALVI(9941) for the Petitioner(s) No. 1
MR MAULIK VAKHARIYA(6628) for the Petitioner(s) No. 1
DEEPAK N KHANCHANDANI(7781) for the Respondent(s) No. 1,2,3
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 22/10/2024
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for direction to the respondent No.2 and further prayed for quashing and setting aside the show cause notice dated 22.04.2021 (Annexure-D) and order-in-original dated 31.10.2022 (Annexure-F).
2. Brief facts of the case are as under:-
2.1 The petitioner is an approved "E-1" (class contractor) for rendering Works Contracts with respect to Road & Building Department/Irrigation Department/Public Health Engineering Wing.Page 1 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024
NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined 2.2 According to the petitioner, the petitioner was not covered within the provisions of the Finance Act, 1994 which provides for Service Act as the services provided by the petitioner were not within the realm and sweep of the Service Tax.
2.3 It is the case of the petitioner that the petitioner was filing regular return of income under the provisions of the Income Tax Act, 1961 and was regularly assessed including for Financial Year 2016-2017.
2.4 It is the case of the petitioner that on coming into force of the Goods and Service Tax Act with effect from 01.07.2017 the petitioner had to obtain registration under the said Act. The petitioner accordingly applied for the GSTIN registration which was a PAN based registration. Petitioner was allotted the registration on 31.10.2017 under the GST Act.
2.5 It is the case of the petitioner that Permanent Account Number (PAN) was map for granting GST and registration and accordingly the data of the petitioner was shared with the Income Tax Department.
Page 2 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined 2.6 It is the case of the petitioner that considering the data received from the Income Tax Department, the respondent No.2 issued show cause notice dated 22.04.2021 for the period 2015-16 and 2016-17 for determining the "Income Earned" as "Value of Services"
and consequently made such Income Earned as "exigible"
to Service Tax and petitioner was also made liable to Service Tax Registration relying on the Form-26AS which is a Statement of Tax Deducted at Source issued under the provisions of Income Tax Act, 1961 by the Income Tax Department.
2.7 The petitioner filed the reply dated 19.11.2021 & 01.08.2022 to the show cause notice which included the reconciliation of Form-26AS statement vis-a-vis the receipts and all other particulars. The respondent No.2 confirmed the demand stated in the show cause notice dated 22.04.2021 by passing an order-in-original dated 31.10.2022 on the basis of the tax deducted at source reflected in Form-26AS being annual tax statement under section-203AA of the Income Tax Act, 1961.
2.8 It is the case of the petitioner that the petitioner was diagnosed with Covid-19 symptom in the second wave Page 3 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024 NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined and mother of the petitioner was also suffering from the Covid-19 which required constant attention and medical care at home, and therefore, could not challenge the order-in-original in time.
2.9 The respondent No.3 by letter dated 06.12.2022, 31.01.2023, 27.04.2023 and 02.06.2023 called upon the petitioner to provide the information of the details of appeals, if any, filed by the petitioner or to make the payment of demand raised in the adjudication order.
2.10 The petitioner, however, could not file the appeal before the Commissioner Appeals (Appeals) due to ill health.
2.11 It appears that thereafter the Mehsana Urban Cooperative Bank Limited, Idar Branch, Idar addressed a letter dated 25.01.2024 to the petitioner informing about the debit freezing of the current account and saving account by the respondent No.3 as part of the recovery proceedings based on the adjudication order dated 31.10.2022.
2.12 The petitioner, thereafter filed an application under Section 74 of the Finance Act, 1944 for rectification Page 4 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024 NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined of mistake with respect to the order-in-original on 11.03.2024.
2.13 As there was no response to the said application of rectification filed by the petitioner the present petition is filed to quash and set aside the order, show cause notice dated 22.04.2021 and the order-in-original dated 31.10.2022 passed by the respondent.
3. Learned Senior Advocate Mr. S.N. Soparkar with learned advocate Mr. Maulik Vakharia and learned advocate Mr. Abhishek Kumar Malvi for the petitioner submitted that the impugned show cause notice based upon the particulars in Form-26AS is without jurisdiction more particularly when the respondent authorities have failed to take into consideration the reply filed by the petitioner that the petitioner is not subject to Service Tax under the provisions of the Finance Act, 1994.
4. It was submitted that the impugned show cause notice and the adjudication order based on the particulars mentioned in the Form-26AS is impermissible in view of the decision of this Court in case of Pradip Kumar Contractor Vs. Additional Commissioner in Special Civil Page 5 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024 NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined Application No.7666 of 2023 rendered on 29.11.2023.
5. It was further submitted that the reasoning that the show cause notice dated 22.04.2021 after recording the various provisions of the Finance Act, 1994 has only referred to the total of sales and Gross Receipts as per the Income Tax Data and alleged that there was a concealment of the value of the service rendered by the petitioner. It was submitted that there is no concealment as alleged, and therefore, if the impugned notice is also time barred as the same is issued beyond the prescribed period by invoking extended period of 5 years under first proviso to sub-section-1 of section 73 of the Finance Act, 1994 without specifying as to what was the concealment by the petitioner in the facts of the case when the petitioner was not liable to the service tax in any manner whatsoever.
6. Learned Senior Advocate Mr. Soparkar submitted that the petitioner had provided the details of the name of the service recipient whether the contract is direct or sub contract, date of contract, nature of work, income offered in the profit and loss account, amount reflected in Form- 26AS alongwith the copy of the work order except few cases. Where the same was not available. It was submitted Page 6 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024 NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined that the details were bifurcated into various parts for both the year 2015-16 and 2016-17, however the respondent No.3 without considering such details applied the provisions of Finance Act, 1994 even to the works contract carried out by the petitioner of Municipality contrary to the benefit of Serial No.12(A) of the Exemption Notification No.25/2012-service tax dated 20.06.2012 on the ground that the petitioner failed to reconcile the alleged value of service of Rs.5,60,23,542/- as proposed in the show cause notice. It was further submitted that the Income of Rs.5,60,23,542/- for Financial Year 2015-16 and that of Rs.3,08,11,139/- for Financial Year 2016-17 could not have been considered as a taxable income under Section-67 of the Finance Act, 1994 subject for levy of Service Tax, Interest and Penalty.
7. It was further submitted that the respondent authorities have also failed to consider the rectification of mistake application filed by the petitioner at the repeated reminders made thereafter to rectify the impugned order- in-original, and therefore, the petitioner was constrained to prefer this petition.
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8. On the other hand, learned advocate Mr. Deepak N. Khanchandani for the respondents submitted that the petitioner has failed to reconcile the amount of income as stated in the show cause notice with that of the various details called for.
9. In support of his submissions, reliance was placed on the following averments made in the affidavit-in-reply filed on behalf of the respondent Nos.1 to 3.
"8. It is to submit that the proceeding against the taxpayer was only be initiated after the Income Tax Department shared the data of the income received by the petitioner for the Financial Year 2015-16 and 2016-17. The Income Tax Authority provided the following information about the petitioner:-
Sr. no. Period Income received (In Rs.) Business Description (F.Y.) (Service Sector) 1 2015-16 26230725 Others 2 2016-17 38404296 Others 64635031 Others The petitioner had been engaged in the business of Works Contract Services but did not obtain Service Tax Registration from the Central Excise & Service Tax department as per the provisions of Section 69 of the Finance Act, 1994. The petitioner failed to self-assess the revenue collected as shown by him in the income tax returns and did not inform to the indirect tax authority about the alleged collected income/revenue. On receiving the data from the Income Tax Department, the Jurisdictional Range Officer initiated inquiry against the petitioner and asked the petitioner to submit particulars of the income received vide letters dated 08.04.2021 & 12.04.2021 marked as ANNEXURE-R-1 (Colly), but he ignored to comply with letters issued to him. Therefore, a Page 8 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024 NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined Show Cause Notice dated 22.04.2021 was issued to the petitioner after considering the facts available with the office.
9. During course of adjudication, personal hearing was granted to petitioner by the department. The authorised representative of petitioner, Shri Akshay Barad, CA, appeared for hearing on 27.07.2022 and submitted that the gross receipts received during the FY 2015-16 AND 2016-17 were in relation to restoration work of flood damanged existing check dams and widening of existing ponds in various villages/districts of Gujarat by Executive Engineer, Himmatnagar Irrigation Division and sub-
contractors for the related services and as per Entry No.12(d) of Mega Exemption Notification No.25/2012 dated 20.06.2012 provides an exemption for services provided to the Government or local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of canal, dam or other irrigation works. He also submitted that Entry No.29 (h) of Mega Exemption Notification provides exemption where sub-contractor providing services by way of works contract to another contractor providing works contract services, are exempt. Contrary to the submission,examination of the work orders (submitted by the petitioner during the adjudication proceedings), revealed that the contracts were related to the construction of roads, construction of walls, filling up land in society area, concrete construction etc. and all the contracts were entered into after 01.03.2015. That is why, the benefit of Sr. No.12(A) of Exemption Notification No.25/2012-Service Tax dated 20.06.2012 cannot be extended to the petitioner and hence, the Order in Original dated 31.10.2022 confirming the liability of the service tax along with penalty is legitimate and as per the law. Therefore, the averments of the petitioner are beyond the provisions of the Act and liable to be dismissed."
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10. With regard to the contention raised on behalf of the petitioner for not filing the appeal as prescribed under Section 85 of the Finance Act, 1994 and the rectification application filed by the petitioner it was submitted that the Adjudicating Authority has not refused to adjudicate the rectification application as the petitioner failed to challenge the impugned order-in-original and there was no mistake in the same. It was pointed out that the respondents have called for the information and clarification from the various forms and persons, and therefore, the reliance was placed on the data provided by the Income Tax Department in ITR as well as the Form- 26AS which is considered for the purpose of determining the Taxable Services of the petitioner.
11. Considering the submissions made by the learned advocates for both sides and it is not in dispute that the petitioner did not prefer an appeal though provided under the provisions of the Finance Act, 1994. On perusal of the impugned show cause notice as well as order-in-original it appears that the respondents have called for the information from the Income Tax Department regarding tax deducted at source with respect to the payments made to the petitioner by the principals or the contractors which Page 10 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024 NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined are in any case for exempted from service as per the Exemption Notification No.25/2012 dated 20.06.2012 read with Amendment Notification No.6/2015 dated 01.03.2015 and Amendment Notification No.9/2016 dated 01.03.2016.
12. As per Clause-12(A) of the Notification No.25/2012, the services rendered provided to Government Local Authority etc. under a contract which have been entered into prior to 01.03.2015 was exempted.
13. The Clause-12(A) of the Notification reads as under:-
"12A. Services provided to the Government, a local authority or a government authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or altercation of -
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
(b) a structure meant predominantly for use as (I) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or
(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause (44) of section 65B of the said Act;
under a contract which had been entered into prior to the 1st March, 2015 and on which appropriate stamp duty, Page 11 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024 NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined where applicable, had been paid prior to such date:
Provided that nothing contained in this entry shall apply on or after the 1st April, 2020;]"
14. The petitioner has also placed on record the reply dated 01.08.2022 filed before the respondent in respect of the show cause notice dated 22.04.2021 alongwith additional affidavit dated 02.07.2024 which provides all the relevant documents to reconcile of the Income offered by the petitioner in profit and loss account vis-a-vis the details of tax deducted at source as per Form-26AS as provided by the Income Tax Department.
15. This Court in case of Pradeep Kumar Contractor in similar facts has held as under:-
"9. As per Section 66B of the Act, 1994 the charge of service tax on or after is to be levied as a tax at the rate of 14% on the value of all services other than those services specified under negative list. The petitioner was required to file return for the service provided by it for the construction of road in view of the provisions of the Service Tax Act. The respondent-authorities on the basis of the GST registration made by the petitioner in the year 2020 after obtaining the Form No.26AS presumed that the petitioner failed to file return of income without verifying as to whom the petitioner has provided the services who had deducted the tax at source for the payment made to the petitioner for the services rendered by the petitioner. On bare perusal of the Form No.26AS placed on record, it is revealed that the none of the Page 12 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024 NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined parties from whom the petitioner has received the amount for rendering the services and the tax was deducted at source was situated in the State of Gujarat and accordingly, the respondent Authority has no jurisdiction to issue any show-cause notice for the services rendered by the petitioner at Rajasthan as none of the parties to whom the services were rendered was situated in the State of Gujarat. Therefore, even considering the Form No.26AS on the face value, respondent-authority have no jurisdiction to issue the show-cause notice and therefore, the show-cause notice is liable to be quashed and set aside and is accordingly, quashed and set aside. As a consequence thereof, the Assessment Order as well as the recovery proceedings are also quashed and set aside. Rule is made absolute. No orders as to cost."
16. The respondent No.2, Additional Commissioner, who has passed the impugned order-in-original penalized the details submitted by the petitioner in the reply to come to the conclusion that the services provided by the contracts mentioned at Serial No.127 of the table-D was held to be leviable on the ground that such contracts related to construct of roads entrusted to the main contractor namely Jivanbhai A. Patel and Kanubhai Amrutbhai Patel which is not the petitioner noticee and petitioner did not produce the copies of respective sub contracts entered with the said main contractor in proof of the construction work entrusted to them by the main contractor. Further, it was found that in contracts mentioned in Serial No.327 in the Page 13 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024 NEUTRAL CITATION C/SCA/5044/2024 ORDER DATED: 22/10/2024 undefined said table-D pertain to construction of wall, filling up land in society area, concrete construction etc. which were entered after 01.03.2015, and therefore, the benefit of para-12(A) of the Notification No.25/2012 was not available. It was therefore further held that the petitioner failed to reconcile the remaining value as proposed in the show cause notice and accordingly considering such facts the addition was made and the petitioner was held liable to pay service tax on the total income of Rs.5,60,23,542/- for F.Y. 2015-16 and Rs.3,08,11,139/- for F.Y. 2016-17 under Section 67 of the Finance Act, 1994. However, on perusal of the details in Item No.327 of table-D for Financial Year 2016-17 the work was carried out by the petitioner was of the Idar Nagarpalika which is squarely covered by the clause-12(A) of the Circular No.25/2012 being a local authority. Therefore, considering the facts on record it is evident that the petitioner was not at all liable for service tax and the respondent authorities could not have assume the jurisdiction to issue the show cause notice on the basis of the data provided by the Income Tax Department in Form-26AS and thereafter failed to consider the details provided by the petitioner in reply to the show cause notice.
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17. It is also pertinent to note that no justification is given in the impugned show cause notice as well as the order-in-original for assumption of jurisdiction by invoking extended period of 5 years under the priviso to sub- section-1 of section 73 of the Finance Act, 1994.
18. In view of the foregoing reasons, the impugned show cause notice is not tenable as the same is issued without jurisdiction and consequently the order-in-original also would not survive. The petition is accordingly succeeds. The impugned order and show cause notice dated 22.04.2021 and the order-in-original dated 31.10.2022 are hereby quashed and set aside. Consequently the order of attachment of the bank account of the petitioner would not survive. Rule is made absolute to the aforesaid extent. No order as to costs.
(BHARGAV D. KARIA, J) (D.N.RAY,J) Manoj Kumar Rai Page 15 of 15 Uploaded by MANOJ KR. RAI(HC01072) on Tue Nov 12 2024 Downloaded on : Fri Nov 15 21:42:06 IST 2024