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Shafiqahmed Dongarkhe Vs Principal Commissioner of Central Tax (Karnataka High Court)
The petitioner approached the Karnataka High Court seeking quashing of three actions by the tax authorities: a show cause notice dated 27.12.2020, an Order-in-Original dated 31.08.2023/03.10.2023, and an Order-in-Appeal dated 27.11.2024/28.11.2024. Alternatively, the petitioner sought condonation of delay in filing the statutory appeal and a direction to the appellate authority to hear the matter on merits.
The petitioner’s counsel argued that the legal position governing the dispute had already been settled by a co-ordinate bench of the High Court in Karnataka Chinmaya Seva Trust v. Joint Commissioner of Central Tax, decided on 03.07.2024. In that decision, the Court had examined the framework applicable to similar service tax matters and issued comprehensive directions concerning how authorities must reconsider pending proceedings. These directions required the tax officers to examine specific issues, including whether the petitioners’ activities fell within the definition of “service” under Section 65B(44) of the Finance Act, 1994; whether they were covered under the negative list or exemption notifications such as Notification No. 25/2012-ST; whether liability arose under Rule 2(1)(d) and relevant notifications; and whether the claims were barred by limitation as per Supreme Court precedent.
The co-ordinate bench had also clarified that the disposal of those petitions should not be treated as an adjudication on merits or jurisdiction, and all contentions remained open. It further directed that petitions challenging show cause notices and Orders-in-Original be remitted to the authorities for reconsideration from the stage of reply to the show cause notice. Where appeals were pending, petitioners were permitted to withdraw them so that the Orders-in-Original would also stand set aside under the same arrangement. The bench also held that any recovery proceedings based on the impugned orders were to be set aside.
In the present case, counsel for the respondents accepted the legal position established in the earlier judgment but sought that the matter be remitted to the stage of submission of reply to the show cause notice. After considering the submissions of both sides, the Court observed that the petitioner was similarly placed to the petitioners in the earlier batch of cases and that the directions issued by the co-ordinate bench squarely applied.
The High Court therefore deemed it appropriate to remit the matter back to the adjudicating authority. It allowed the writ petition and quashed the impugned Order-in-Original, the Order-in-Appeal, and the show cause notice. The petitioner was directed to submit a fresh reply to the show cause notice within four weeks of receiving the Court’s order. The authority was instructed to consider the petitioner’s reply and pass orders in accordance with law, keeping in view the principles and directions laid down in the earlier Chinmaya Seva Trust judgment. The authority was also permitted to regulate its procedure and take the matter to its logical conclusion.
Thus, the entire service tax proceedings arising from the show cause notice, Order-in-Original, and Order-in-Appeal were quashed and the matter was remanded for reconsideration from the stage of submission of reply.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner is before this Court seeking the following prayer:
A. Issue a writ, order or direction in the nature of Certiorari by quashing the impugned show cause notice bearing SCN Sl.No.19/2020-21(ST)/AC/RURAL DIVISION (DIN no.20201257tc0000000CB5) dated 27.12.2020 issued by the 2nd Respondent (Annexure-A), the impugned Order-in-Original bearing OIO Sl.No.31/2023-24 (ST) dated 31.08.2023/03.10.2023 passed by the 2nd Respondent (Annexure-B) and the impugned Order-in-Appeal No. BEL-EXCUS-000-APP-AS-225-2024-25 dated 27.11.2024/28.11.2024 passed by the Commissioner of Central Tax (Appeals), Belgaum in Appeal No.63/2024/BM/ST (Annexure-C).
B. Alternatively, issue a writ, order or direction in the nature of any writ by condoning the delay if any, in filing the appeal no.63/2024/BM/ST before the Commissioner of Central GST and Central Excise (Appeals), Belgaum and thereby issue a writ, order or direction in the nature of Mandamus directing the Commissioner of Central GST and Central Excise (Appeals), Belgaum to hear the appeal on merits.
C. Pass any such Order/s as this Hon’ble Court deems fit and proper in the facts and circumstances of the case in the interest of justice.
2. Heard Sri. Raghavendra B. Hanjer, learned counsel for petitioner and Sri. Shivaraj S. Balloli, learned counsel for respondents.
3. Learned counsel appearing for the petitioner submits that the issue in the lis stands answered by the judgment rendered by a co-ordinate bench in the case of M/S KARNATAKA CHINMAYA SEVA TRUST VS. JOINT COMMISSIONER OF CENTRAL TAX, in P.No.11154/2023 AND CONNECTED MATTERS, disposed on 03.07.2024.
4. Learned counsel for the respondents would not dispute the position of law, except the fact that the matter should be remitted to the stage of the submission of reply to the show cause notice by the petitioner.
5. The co-ordinate bench in the aforesaid W.P.No.11154/2023 and connected matters, considering the entire spectrum of the law and issue, passed the following order:
“10. The officers while disposing off the petitions to keep in mind the following:
1) Whether petitioners do not qualify under Section 65B(44) of the Finance Act, 1994 ?
2) Whether services are covered under negative list?
3) Whether services are covered under the exemption list under the Notification No.25/2012-ST dated 28.06.2012 or under any other applicable Notifications?
4) Whether the person is liable to remit service tax in terms of Rule 2 (1) (d) read with applicable notification?
5) Whether claims are barred by limitation in terms of the law laid down by the Apex Court ?
11. It is also clarified that disposal of present petitions must not be construed as having adjudicated any of the contentions including jurisdiction. All contentions of both sides on merits are kept open.
12. Needless to state, upon conclusion of proceedings, if any of the petitioners are still aggrieved, legal remedies are kept open. It is also clarified that wherever, replies to show-cause notice have not been made out, the same may be filed upon matter being relegated as noticed above.
13. Accordingly, the following:
ORDER
In light of observations made above, the writ petitions relating to challenge to show-cause notice, such matters will stand relegated to the officers to be designated in terms of the observations made in para 8 above, at the same stage. Accordingly, such of the petitions at Sl.No.1 to 5 in Column No.1 of the table relating to challenge to show-cause notice are disposed off.
Insofar as such writ petitions as detailed in Column 2 of the table relating to challenge to Orders-in-Original, in light of the discussion made above, the Orders-in-Original stand set aside and the matters are relegated to the Officers to be designated to be reconsidered from the stage of show-cause notice. Accordingly, such of the petitions at Sl.No.1 to 35 in Column No.2 of the table relating to challenge to Orders-in-Original are disposed off.
The petitioners who are now relegated before the authorities concerned are at liberty to file their pleadings within a reasonable time as may be fixed by the Officers concerned. Wherever the matters are pending in appeal in light of the arrangement that is made, petitioners to file a memo for withdrawal of appeal and accordingly, the orders-in-original in question would also receive the same treatment, i.e. be set aside as per the directions made above.
Wherever demands have been made pursuant to the impugned orders, such proceedings are also set aside.”
In the light of the afore-quoted judgment of the coordinate bench and that the fact the petitioner is similarly placed, I deem it appropriate to remit the matter back to respondent No.2 – Authority.
6. For the aforesaid reasons, the following:
ORDER
a. The writ petition is allowed and remitted back to respondent No.2 – Authority.
b. The impugned order-in-original dated 08.2023/03.10.2023 at Annexure ‘B’, the impugned order in Appeal No.BEL-EXCUS-000-APP-AS-225-2024-25 at ANNEXURE-A and order in Appeal dated 17.11.2024/28.11.2024 and the show cause notice dated 27.12.2020 stand quashed.
c. The petitioner shall now submit his reply to the show cause notice dated 27.12.2020, within four weeks from the date of receipt of a copy of the order.
d. Respondent No.2 shall, from the stage of submitting reply to the show cause notice by the petitioner, consider the same and pass necessary orders in accordance with law, bearing in mind the afore-quoted judgment of the co-ordinate bench.
e. It is open to the authority to regulate its procedure and take the issue to its logical conclusion.
Ordered accordingly.
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