Karnataka High Court
M/S. Khoday India Limited vs Joint Director on 13 October, 2022
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF OCTOBER, 2022
BEFORE
THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION No.8837 OF 2019 (T-RES)
BETWEEN:
M/S. KHODAY INDIA LIMITED
BREWWERY HOUSE, 7TH MILE
KANAKAPURA ROAD
BANGALORE-560 062
(REPRESENTED BY SRI K.L SWAMY
S/O K.LAKSHMANSA
72 YEARS
DIRECTOR OF M/s KHODAY INDIA LIMITED)
... PETITIONER
(BY SRI C.R.RAGHAVENDRA, ADVOCATE)
AND:
1. JOINT DIRECTOR
DIRECTORATE GENERAL OF
GST INTELLIGENCE
BENGALURU ZONAL UNIT
#112, K.H. ROAD, S.P. ENCLAVE
ADJ. TO KARNATAKA BANK
BENGALURU - 560 027
2. ADDITIONAL / JOINT COMMISSIONER
OF CENTRAL GST
BENGALURU WEST COMMISSIONERATE
BMTC BUILDING, BANASHANKARI
BANGALORE-560 001
3. CENTRAL BOARD OF INDIRECT
TAXES AND CUSTOMS
2
NORTH BLOCK
REP. BY CHAIRMAN
NEW DELHI-110 001
4. UNION OF INDIA
MINISTRY OF FINANCE
REPRESENTED BY SECRETARY
NORTH BLOCK
NEW DELHI-110 001
... RESPONDENTS
(BY SRI JEEVAN J.NEERALGI, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA, PRAYING TO DECLARE THAT
THE PROVISIONS OF SECTION 66D(a)(iv) OF THE FINANCE ACT,
1994 AND ENTRY NO.6 OF NOTIFICATION No.30 / 2012-ST DATED
20.06.2012, AS AMENDED WITH EFFECT FROM 01.04.2016,
(ENCLOSED AS ANNEXURE-A), IS UNCONSTITUTIONAL BEING
VIOLATIVE OF ARTICLES 14 AND 19(1) (g), 246, 265 AND ARTICLE
289 OF THE CONSTITUTION AND ETC.
THIS PETITION COMING ON FOR ORDERS THIS DAY, THE
COURT MADE THE FOLLOWING:
ORDER
1. In this writ petition, the petitioner has sought for the following reliefs:
"(A) Writ or Declaration or any other appropriate writ, order or direction to declare that the provisions of Section 66D(a)(iv) of the Finance Act, 1994 and entry No.6 of Notification 30/2012-ST dated 20.06.2012, as amended with effect from 01.04.2016, (enclosed as Annexure-A), is unconstitutional being 3 violative of Articles 14 and 19(1)(g), 246, 265 and Article 289 of the Constitution; (B) Writ or direction in the nature of a writ of certiorari or any other writ or direction, to quash the impugned show-cause notice SCN Sl.No.156/2018-19 BZU dated 30.11.2018 issued by Respondent No.1 enclosed as Annexure-B as violative of Articles 14, 19, 246, 246A and 265 being unreasonable, without jurisdiction, arbitrary, excessive and without the authority of law;
(C) Direct the respondents by an appropriate writ or order in the nature of mandamus or otherwise, not to proceed with the confirmation and recovery of the amounts proposed in the impugned show cause Notice No.156/2018-19-
BZU dated 30.11.2018 issued by respondent No.1 enclosed as Annexure-B and to withdraw the same in the light of the decision taken by the GST Council as set out in Annexure-H. (D) Writ or direction in the nature of a writ of certiorari or any other writ or direction, to quash the Notification No.2/2017-CT, dated 19.06.2017 (enclosed as Annexure-C) as being illegal and ultra vires the provisions of Section 3 of CGST Act, 2017 to the extent of 4 appointment of 'Officers under CGST Act' and declare it as illegal and ultra vires the provisions of CGST Act, 2017;
(E) Writ or direction in the nature of a writ of certiorari or any other writ or direction, to quash the Notification No. 14/2017-CT, dated 01.07.2017 enclosed as Annexure-D issued by respondent No.3 to the extent of appointment of officers of DGGST (respondent No.1) as 'Officers under CGST' having jurisdiction throughout the territory of India and declare it as illegal being violative of Articles 14, 19, 265, 300A of the constitution besides being ultra vires the provisions of the CGST Act, 2017. (F) Writ or direction in the nature of a writ of certiorari or any other writ or direction, to quash the Notification No.22/2014-ST, dated 16.09.2014 enclosed as Annexure-E issued by respondent No.3 to the extent of appointment of officers of DGCEI as 'Central Excise Officers' having all India jurisdiction and declare it as illegal and ultra vires the Service Tax Rules, 1994 as also being violative of Articles 14, 19, 265, 300A of the Constitution.
AND 5 (G) Grant such other consequential reliefs as this Hon'ble High Court may think fit including refund of amounts paid, if any, and the cost of this writ petition"
2. Heard the learned counsel for the petitioner and the learned counsel for the respondents and perused the materials on record.
3. In addition to reiterating the various contentions urged in the writ petition and referring to the materials on record, the learned counsel for the petitioner invites my attention to the impugned show-cause notice in order to point out that Item Nos.1 to 5 are directly covered under the amendment to the Finance (No.2) Act, 2019 whereby Section 117 granted retrospective exemption from service tax on service by way of grant of liquor licence.
4. The said retrospective effect granted in favour of the assessees under Section 117 of the said Amendment to the Finance (No.2) Act, 2019 vide Act No.23 of 2019 6 has been clarified by Notification dated 30.09.2019 as well as Circular dated 11.10.2019 produced by the petitioner.
5. It is also submitted that insofar as the Items in the impugned show-cause notice at Sl.Nos.6 to 14 are concerned, the petitioner-assessee has discharged the said liability and nothing further survives in the present writ petition. It is therefore submitted that in view of the aforesaid amendment to the Finance (No.2) Act, 2019 which covers Item Nos.1 to 5 and the discharge of liability by the petitioner in respect of the remaining Item Nos.6 to 14, and impugned show-cause notice and all further proceedings pursuant thereto deserve to be quashed.
6. Per contra, learned counsel for the respondents submits that there is no merit in the present writ petition and the same is liable to be dismissed. 7
7. As rightly, contended by the learned counsel for the petitioner, a perusal of the impugned show-cause notice will indicate that Item Nos.1 to 5 read as under:
(i) the activity of parting with the exclusive privilege/right or transferring/ granting the exclusive right or privilege of the State(s) to M/s Khoday India Limited by allowing M/s Khoday India Limited to deal with or carry out the activities relating to manufacture of or distill liquor for human consumption, for consideration termed as 'fee' and the activities provided by State Excise department and other government departments/agencies for which M/s Khoday India Limited had paid the consideration in the form of 'fee', as taxable service in terms of section 65B(44) read with section 65B (51) of the Finance Act, 1994;
(ii) M/s.Khoday India Limited, recipient of services, should not be held as the person liable to pay service tax on the taxable services received from the State Excise department and other government departments/agencies, in terms of section 68(2) of the Finance Act, 1994 read with rule 2(1) (d) (i) (E) of Service Tax Rules, 1994;8
(iii) fees/charges of Rs.6,55,43,054/- paid to the State Excise department and various other government departments/agencies during the period from April, 2016 to June, 2017, should not be considered as the taxable value of the above mentioned services, in terms of section 67(1) of the Finance Act, 1994 read with Service Tax (Determination of Value) Rules, 2006;
(iv) Service tax of Rs.98,31,457/- (inclusive of cesses) payable on the value of Rs.6,55,43,054/- of the taxable services provided by the State Excise department and other government departments/agencies during the period from April, 2016 to June, 2017, should not be demanded and recovered from them, in terms of proviso to section 73(1) read with section 68(2) of the Finance Act, 1994 also read with rule 2 (1)(d)(i)(E) of the Service Tax Rules, 1994, notification no.30/2012 ST dated 20.06.2012 and rule 7 of Point of Taxation Rules, 2011;
(v) interest at applicable rates on service tax of Rs.98,31,457/- (inclusive of cesses) demanded at para no.14(iv) above, should not be demanded and recovered from them under the provisions of section 75 of the Finance Act, 9 1994 read with notifications issued thereunder from time to time;
8. In this context, it is relevant to state that a perusal of the Amendment to the Finance (No.2) Act, 2019 clearly indicates that retrospective exemption has been granted in favour of the assessees, including the petitioner, from payment of service tax on service by way of grant of liquor licence. Under these circumstances, in view of the amendment vide Finance (No.2) Act, 2019, vide Act No.23 of 2019 which came into force with effect from 01.08.2019, I am of the considered opinion that the said amendment would enure to the benefit of the petitioner-assessee and consequently, Item Nos.1 to 5 of the impugned show- cause notice at the operative portion of paragraph No.14 of the notice referred to supra deserve to be quashed.
9. Insofar as the remaining Item Nos.6 to 14 of the impugned show-cause notice are concerned, in view of the specific assertion on the part of the petitioner that 10 the liability along with interest has been discharged already by the petitioner, I deem it just and proper to direct the respondents to consider the claim of the petitioner of discharge of liability insofar as Item Nos.6 to 14 of the show-cause notice by providing an opportunity in this regard to the petitioner and considering the pleadings and documents submitted by him, and proceed to pass appropriate orders in accordance with law.
10. In the result, I pass the following order:
ORDER (I) The writ petition is hereby disposed off;
(II) The impugned show-cause notice dated 30.11.2018, insofar as it relates to Item Nos.1 to 5 at paragraph No.14 thereof, is hereby set aside;
(III) Insofar as Item Nos.6 to 14 of the impugned show-cause notice dated 11 30.11.2018 are concerned, the respondents are hereby directed to consider the claim of the petitioner for discharge of the liability and interest bearing in mind the observations made in this order and the pleadings and documents submitted by the petitioner, in accordance with law, as expeditiously as possible.
(iv) Liberty is reserved in favour of the
petitioner to submit additional
representations, pleadings, documents, etc., to the respondents, who shall consider the same and proceed further in accordance with law.
Sd/-
JUDGE RK CT:AN