Calcutta High Court (Appellete Side)
Management Limited & Ors vs The Principal Commissioner Of on 8 March, 2017
W.P. No. 26336 (W) of 2016
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
Appellate Side
M/s. Indus Integrated Information
Management Limited & Ors.
Vs.
The Principal Commissioner of
Service Tax-1, Kolkata
For the Petitioners : Mr. J.K. Mittal, Advocate
Mr. Prantik Garai, Advocate
For the Respondent : Mr. Somnath Ganguli, Advocate
Mr. Bhaskar Prasad Banerjee, Advocate Hearing concluded on : January 25, 2017 Judgment on : March 8, 2017 DEBANGSU BASAK, J.:-
The petitioners assail an order dated August 18, 2016 passed by the Principal Commissioner of Service Tax-1, Kolkata.
Learned Advocate appearing for the petitioners contends that, despite the writ petitioners having a statutory right of appeal, a writ petition is maintainable against the impugned order. He relies upon 2016 (43) S.T.R page 482 (Cal.) (Sourav Ganguly v. Union of India).
Learned Advocate for the petitioners submits that, the impugned order was passed on the basis of a show-cause notice dated October 17, 2012. He submits that, the show-cause notice is vague and has been issued on the basis of assumption. It does not contain any allegation that, the first petitioner is liable to pay Service Tax. He submits that, the burden of proof is on the taxing authority to show that, a particular receipt is taxable and relies upon 1996 (87) E.L.T. page 12 (S.C) (Union of India v. Garware Nylons Ltd.) in support of such contention. Referring to 2010 (258) E.L.T. 48 (Cal.) (Commissioner of Central Excise, Haldia v. Lord's Chemicals Ltd.) and 2007 (217) E.L.T. page 343 (Cal.) (Collector of Customs, Calcutta v. Hindalco Industries Ltd.) he submits that, a show-cause notice cannot be issued on the basis of presumptions. He relies upon 1983 (13) E.L.T. page 1342 (S.C.) (East India Commercial Co. Ltd. Calcutta v. Collector of Customs, Calcutta) and submits that, notice issued contrary to the law laid down by the High Court would be invalid and the proceedings themselves would be without jurisdiction. He relies upon 2011 (266) E.L.T.) page 422 (S.C.) (Oryx Fisheries (P) Ltd. v. Union of India) and submits that, the persons proceeded against must be told of the charges against him so that he can take his defence and prove his innocence. In the event, a new case is made out such a course of action would be without jurisdiction. He relies upon 2006 (196) E.LT. page 400 (S.C.) (Hindustan Poles Corporation v. Commissioner of Central Excise, Calcutta) and submits that, the revenue has to apply its mind before issuance of a show-cause notice. He refers to the merits of the matters and submits that, the show-cause notice does not analyze the activities of the first petitioner. The receipts which are claimed to be taxable are not taxable. The department has taken figures from the balance-sheet of the first petitioner which is bad in law. The department has also acted in violation of the principles of natural justice without putting the petitioner on notice that the receipts of the first petitioner are taxable under the provisions of the Finance Act, 1994. Referring to Section 9AA of the Central Excise Act, 1944, as applicable to service tax in view of Section 83 of the Finance Act, 1994, he submits that, the authority has no jurisdiction to impose penalty on the Directors of the first petitioner being the second and the third petitioner. He questions the ability of the department to institute any criminal proceeding against the petitioners. He submits that, an order passed under Section 9AA of the Central Excise Act, 1944 is not appealable.
Referring to the Order dated March 10, 2016, learned Advocate for the petitioners submits that, the department had dropped a demand of Rs.1.27 Crores and, thereafter, by the impugned order dated August 18, 2016 confirmed such demand. According to him, the authority does not have a power of review. Essentially a review was done on the earlier order. He questions the findings in this regard in the impugned order. He submits that, the petitioners have been put in worse off position because the petitioners had filed a writ petition. The petitioners cannot be put in a worse off position in their own appeal and relies upon 2016 (340) E.L.T. page 6 (Mad.) (Servo Packaging Ltd. v. CESTAT, Chennai) and 2015 (322) E.L.T. page 561 (S.C.) (Jaswal Neco Ltd. v.
Commissioner of Customs, Vishakhapatnam) in support of such contention.
Referring to the show-cause notice dated October 17, 2012, the learned Advocate for the petitioners submits that, the allegation contained in show-cause notice that the petitioners did not file Service Tax ST-3 return, is unfounded. He refers to the Order dated August 18, 2016 and submits that, the order is perverse. He relies upon 2009 (241) E.L.T. page 481 (S.C.) (CCE, Bhubaneswar-I v. Champdany Industries Ltd.) and submits that, unless the foundation of the case is made out in the show-cause notice, the revenue cannot take benefit of a different case at the time of hearing.
Referring to the show-cause notice dated October 17, 2012 learned Advocate for the petitioners submits that, the allegation in the show- cause notice is that although Service Tax was collected the same was not paid to the credit of the Central Government. He refers to Section 73A(3) of the Finance Act and 73(1) of the same Act and submits that, the scope of the two sections are different. He relies upon 2016 (44) S.T.R. page 211 (Guj.) (General Manager - Food Corporation of India v. Union of India), 2016 (44) S.T.R. page 526 (Del.) (Ebiz. Com Pvt. Ltd. v. Union of India) and 2016 (44) S.T.R. page 290 (Mum.) (Checkmate Industries Services v. Commissioner of Central Excise, Pune-III) in support of such contention. Learned Advocate for the petitioners submits that, the first petitioner could not pay Service Tax due to paucity of funds till July 2015. Payments were made subsequently. The authorities ought to have taken notice of such payments. He submits that, the finding in the impugned order that no Service Tax has been paid is perverse.
Referring to Section 9AA of the Central Excise Act, 1944, he submits that no appeal is provided against an order passed under such section.
Learned Advocate for the department submits that, the impugned order is appealable. The petitioners have not alleged violation of the principles of natural justice in the sense that the petitioners were afforded reasonable opportunity of hearing. The issues raised by the petitioners have been duly considered. The impugned order is reasoned. The contentions of the petitioners raised in the present writ petition can be raised in the appellate forum. The petitioners are seeking to avoid the pre-deposit of an appeal by filing the writ petition.
I have considered the rival contentions of the parties and the materials made available on record.
The issue of maintainability of the writ petition is required to be considered first. Finding that the impugned order is appealable, in the course of hearing I had inquired of the learned Advocate for the petitioners that, whether the petitioners are willing to prefer an appeal therefrom. I had also indicated to the petitioners that, in the event the petitioners wishes to proceed with the present writ petition, then the impugned order has to be adjudged on the basis of the scope of inquiry that is available to a Writ Court. In answer to such query the learned Advocate for the petitioners submits that, the petitioners are assailing the impugned order before a Writ court on the parameters available to a Writ Court to undertake such exercise. The merits of the matter are also dealt with on behalf of the petitioners.
Existence of a statutory alternative remedy is not a complete bar to the maintainability of a writ petition. The rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion as noted in Sourav Ganguly (supra). A writ petition is maintainable against an order in spite of existence of an alternative remedy, in the event it is found that, the impugned order violates any fundamental right of the petitioners, the impugned order has been passed wholly without jurisdiction, it is demonstrably perverse and it is fraught with such illegalities that it shocks the conscience of the Court. While examining an order passed by a statutory authority in a quasi judicial proceeding, the Writ Court is not called upon to sit in appeal over such order, reapprise the evidence and substitute the findings arrived at by the deciding authority with its own findings, unless it is substantiated that, the impugned findings are perverse or are contrary to public policy.
The first petitioner is liable to pay Service Tax. Such liability is acknowledged by the petitioners. The first petitioner had obtained a Service Tax Registration on April 4, 2007 for rendering manpower recruitment or agent service as defined in the then prevailing Section 65/68 of the Finance Act, 1994. The department has found the first petitioner to be indulging in businesses in respect of which the petitioners did not obtain requisite service tax registration. The department has found that, the first petitioner was undertaking five different types of businesses for which it did not take any registration. The show-cause notice dated October 17, 2012 makes such an allegation. The show-cause notice dated October 17, 2012 alleges that, the petitioners have violated the provisions of Sections 67, 68, 69, 70 and 73A of the Finance Act, read with Rules 4, 6 and 7 of the Service Tax Rules, 1994. Six broad charges are levelled in the show-cause notice against the petitioners. There is a question of willful suppression of certain facts relating to providing services, centralized billing/accounting system, amount earned by the petitioners against such services, amount of service tax collected from the recipients of taxable service but not deposited to the credit of the Government with intent to payment of Service Tax. An investigation was carried out by the department. Statements of various persons were taken in such investigation. The statements of the persons taken during investigations were analyzed. On such analysis, the department had formed prima facie opinion that the petitioners should be proceeded against. The petitioners had replied to the charges by a writing dated August 26, 2013. A request for personal hearing was made in such writing. A further reply was submitted by the petitioners on May 26, 2015. The petitioners submitted two written submissions on July 25, 2015 and August 24, 2015.
The initial order in original was passed on March 10, 2016 ex parte as the adjudicating authority had found that, the petitioners after being afforded five opportunities of personal hearing over a period of seven months the assessee remained evasive throughout such period. Being aggrieved by such order in original, the petitioners had filed a writ petition being W.P. No. 9224 (W) of 2016. The order in original was set aside conditionally upon a pre-deposit in order to afford the petitioners another opportunity of hearing by the Order dated May 18, 2016. The order was conditional upon the petitioners depositing a sum of Rs.1 Crore. The petitioners had deposited the sum of Rs.1 Crore on June 9, 2016. The petitioners having complied with the condition precedent, a further hearing was afforded to the petitioners on July 14, 2016. The authorized representatives had appeared on such date and have made submissions as noted in the impugned order. The petitioners had also submitted a Chartered Accountant's Certificate on August 8, 2016.
Garware Nylons Ltd. (supra) is of the view that, the burden of proof is on the taxing authority to show that, a particular case or item in question, is taxable in the manner claimed by them. Lord's Chemicals Ltd. (supra) is concerned with a show-cause notice which was issued on the presumption that, the entries as recorded in the private note book maintained by the labour contractor should be taken as the clearance figures of finished products of the factory. It returns a finding that, such a presumption is not permissible. East India Commercial Co. Ltd. (supra) is of the view that, a show-cause notice for launching proceedings contrary to law declared by a Court would be invalid and the proceedings would be without jurisdiction. Hindustan Poles Corporation (supra) is of the view that, the revenue must carefully take into consideration the settled law which has been crystallized by the judgments of the Supreme Court and should refrain from sending indiscriminate show-cause notice without proper application of mind. Oryx Fisheries (P) Ltd. (supra) is of the view that, the person proceeded against must be made aware of the charges in the show-cause notice.
Champdany Industries Ltd. (supra) is of the view that, the foundational basis of the claim of the department has to be found from the show-cause notice.
In the present case, it cannot be said that the authorities had acted without any basis in issuing a show-cause notice. The show- cause notice was issued on the basis of materials as narrated above. It is detailed. The department has valid reasons to issue the same. The charges are based on cogent materials and evidence. It does not violate any law. The petitioners have not been able to establish that, the department had violated any law in issuing the show-cause notice or that the show-cause notice contains any charges which is contrary to any law. In the previous writ petition filed by the petitioners, issues regarding the proceedings in the basis of the show-cause notice were raised. The Hon'ble Court did not set aside the show-cause notice. In the facts of the present case it is no longer open to the petitioners to complain about the legality and validity of the show-cause notice, not having succeeded in having it set aside in the earlier writ petition.
Servo Packaging Ltd. (supra) is of the view that, an assessee cannot be put in a worse off position for filing an appeal unless there is a cross appeal by the department. Jaswal Neco Ltd. (supra) is of similar view. In the present case, the question of the petitioners being put into a worse off condition by filing the first writ petition does not arise. The first writ petition was disposed of permitting a right of hearing to the petitioners. The earlier order was set aside. The petitioners were heard. The petitioners have not substantiated that any portion of the impugned order is perverse.
General Manager - Food Corporation of India (supra) is of the view that, where Section 73A of the Finance Act, 1994 is sought to be invoked, the same has to be stated in the show-cause notice. In such case, an allegation under Section 87 of the Finance Act, 1994 was made in the show-cause notice. The allegation in the show-cause notice relates to non-payment of Service Tax. Violation of Section 73A is noted therein. The adjudicating authority notes the difference between Section 73A and Section 73. The Tribunal in Checkmate Industries Services (supra) is of the view that, there are substantial differences between the provisions of Section 73 and Section 73A of the Finance Act. The appreciation of the difference between the two sections by the adjudicating authority cannot be faulted. The petitioner has no case when it contends that, since the show-cause notice specify Section 73A, it cannot be charged under Section 73(1) of the Finance Act, 1994. The petitioners have been found to be guilty under Section 73(2) of the Act of 1994. The petitioner has not been charged with failing to deposit tax collected to the credit of the Central Government as is the scenario covered under Section 73A. The impugned order deals with this aspect of the matter. It finds that, the Service Tax collected by the assessee is neither an amount collected in excess of Service Tax nor a collection where collection was not required. Sections 73 and 73A are two charging sections operating in different scenarios. The liability to pay Service Tax is admitted by the assessee. The adjudicating authority is entitled to apply the law as applicable to the facts of the case, notwithstanding a show-case notice containing a different charging section. The applicability of the section under which the petitioners have been charged is not substantiated to be incorrect. Although there are differences between Section 73A and Section 73 of the Act of 1994, the assessee was well aware of the charges levelled against it. The assessee had answered the charges. The objections were duly considered and negated in the impugned order.
The contention that, the impugned order has reviewed the earlier Order dated March 10, 2016 is of no avail as the Order dated March 10, 2016 was set aside by the High Court by the Order dated May 19, 2016. The question of review of the Order dated March 10, 2016 after it being set aside does not arise.
The impugned order notes that, the assessee has cited diverse judgments without having any substance on the merits. The contentions of the petitioners in this petition are gargantuan verbose devoid of any merit whatsoever. The reliance on the numerous authorities by the petitioners is wholly unnecessary.
W.P. No. 26336(W) of 2016 is devoid of merits and is dismissed. Urgent certified website copies of this judgment, if applied for, be made available to the parties upon compliance of the requisite formalities.
[DEBANGSU BASAK, J.]