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2024 Supreme(Guj) 560
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Bhargav D. Karia, Niral R. Mehta, JJ.
Z R Enterprise - Appellant
Vs.
State Of Gujarat - Respondent
Special Civil Application No. 21738, 21950 of 2023 With Special Civil Application No. 803 of 2024
Decided On : 04-04-2024
Advocate Appeared:
For the Appellant : Mr. Rutvij M Bhatt
For the Respondent: Mr. CB Gupta
IMPORTANT POINT
The main legal point established in the judgment is the requirement for jurisdiction and proper basis for issuance of a show-cause notice under the Finance Act, 1994. The court emphasized the need for the authority to verify the nature of services provided before issuing such notices.
Headnote:
Service Tax - Jurisdiction of Show-Cause Notice - Finance Act, 1994 - [Goods Transport Agency] - [Section 73(1), Section 78, Section 77(2)] - The court examined the jurisdiction of the show-cause notice issued by the respondent authority under the Finance Act, 1994. It found that the notice was issued solely based on information obtained from the Income Tax Department without verifying the nature of services provided by the petitioner. The court held that the show-cause notice was contrary to the provisions of the Finance Act, 1994 and quashed it, along with all consequential proceedings.
Fact of the Case:
The petitioner, a goods transport agency, challenged the order passed by the appellate authority dismissing the appeal on the ground of limitation. The petitioner contended that the show-cause notice issued by the respondent authority for non-filing of service tax returns was based on information retrieved from the Income Tax Department and was issued without jurisdiction. The petitioner cited medical reasons and the COVID-19 pandemic as reasons for not replying to the notice in time.
Finding of the Court:
The court found that the show-cause notice was issued without jurisdiction and solely based on information obtained from the Income Tax Department. It held that the notice was contrary to the provisions of the Finance Act, 1994 and quashed it, along with all consequential proceedings.
Issues: 1. Jurisdiction of the show-cause notice issued by the respondent authority under the Finance Act, 1994. 2. Whether the petitioner's failure to reply to the notice was justified due to medical reasons and the COVID-19 pandemic.
Ratio Decidendi: The court held that the show-cause notice was issued without jurisdiction and solely based on information obtained from the Income Tax Department. It found that the notice was contrary to the provisions of the Finance Act, 1994 and quashed it, along with all consequential proceedings.
Final Decision: The court quashed the show-cause notice and all consequential proceedings, allowing all three petitions. No orders as to costs.
ORDER :
Bhargav D. Karia, J.
1. Learned advocate Mr.Rutvij Bhatt for the petitioner has tendered draft amendment. The same is allowed in terms of the draft. To be carried out forthwith.
2. Since the issue involved in all the three petitions is common, they have been heard together and would be disposed of by this common order. For the sake of convenience, facts are recorded from Special Civil Application No.21738 of 2023.
3. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has challenged the order passed by the appellate authority dismissing the appeal of the petitioner on the ground of limitation.
4. The brief facts of the case are as under.
4.1 The petitioner was running business of goods transport agency with Mahindra Logistics Pvt. Ltd. as per the agreement executed on 02nd January, 2017 in transportation of hiring buses. The petitioner has also entered into similar agreement with DTDC for transportation and hiring buses. The petitioner was hiring vehicles and was providing such vehicles to above parties.
4.2 It is the case of the petitioner that petitioner is exempted from payment of service tax as per the amended list of categories of transport goods vehicles. The petitioner, therefore, raised invoices accordingly.
4.3 The petitioner has filed return of income for F.Y. 2015-16 and 2016-17 as per the income generated from the operations of hiring vehicles and supplying the same for transportation to above parties.
4.4 It is the case of the petitioner that respondent authorities issued show-cause notice dated 21st July, 2020 upon the petitioner for not filing service tax returns in Form ST-3 for the period 2015-16 and 2016-17 though the petitioner was liable to discharge the service tax liability. Prior to issuance of show-cause notice, respondent also issued letters dated 07th May, 2020 and 20th May, 2020 to provide details of services provided during the aforesaid period.
4.5 According to the respondent, the petitioner was engaged in business activity of courier agent service and registered with effect from 03rd February, 2016 with Service Tax Registration No.AABFZ0090QSD001.
4.6 From the details provided by the income tax department of various noticee from the income tax returns and Form 26AS (TDS) for F.Y. 2015-16 and 2016-17, inquiry was made by the respondent by issuing aforesaid letters and show-cause notice.
4.7 It is the case of the petitioner that petitioner could not reply to either of the letters or show-cause notice due to COVID-19 pandemic situation prevailing at the relevant point of time. Moreover, it is also the contention of the petitioner that he was having diabetes and premorbid condition and could not reply to the show-cause notice issued by the respondent.
4.8 The petitioner has also contended that he was affected during the second wave of COVID-19 and had to undergo treatment since February, 2021 and was advised not to leave his residence. Thereafter, the petitioner was seriously infected in the month of April, 2021 and due to COVID-19, had to undergo operation of eye due to mukormycosis infection and was advised to stay at home. The petitioner was also advised not to travel for more than one hour and hence, it was contended that he could not reply to the notice in time. However, the petitioner did approach the respondent under such strenuous condition and apprised the respondent with the fact of the medical treatment being taken by the petitioner.
4.9 The respondent, however, passed an ex parte order-in-original on 31st March, 2022 issued on 13th April, 2022 confirming the service tax demand of Rs.33,23,826/- with interest and equivalent penalty under Section 78 of the Finance Act, 1994 and further penalty of Rs.10,000/- under Section 77(2) of the Finance Act.
4.10 According to the petitioner, the order- in-original was passed without considering the reply filed by the petitioner to the show-cause notice dated 21st July, 2020. The petitioner had filed reply on 22nd April, 20
