THE GAUHATI HIGH COURT v. THE UNION OF INDIA & Anr.

For State respondents : Mr. S.C. Keyal, standing counsel. Date of hearing Date of judgment : 25.05.2023. : 22.06.2023. ORDER Heard Mr. A. Jain, learned counsel for the petitioner and Mr. S.C. Keyal, learned standing counsel for the CGST & Central Excise Commissionerate, appearing for all the respondents.

2. By filing this writ petition under Article 226 of the Constitution of India, the petitioner has assailed the validity of the demand -cum- show- cause notice dated 07.11.2019 as well as the order-in-original dated 28.12.2021, passed by the Principal Commissioner, CGST & Central Excise, Guwahati (respondent no.2). By the said order dated 28.12.2021, the respondent no.2 had (i) confirmed the service tax demand of Rs.2,95,33,148/- under Section 73(2) of the Finance Act, 1994, (ii) interest under section 75 of the Finance Act, 1994, (iii) penalty of Rs.10,000/- under section 77(1) of the Finance Act, 1994, (iv) penalty of Rs.10,000/- under Section 77(2) of the Finance Act, 1994, and (v) penalty of Rs.2,95,33,148/- under section 78 of the Finance Act, 1994.

3. The learned counsel for the respondents had raised preliminary issue on the point of maintainability by submitting that alternative and efficacious remedy is available to the petitioner by filing an appeal before the appellate authority. It was submitted that the departmental authorities had issued demand -cum- show-cause notice dated 07.11.2019 to the petitioner, wherein the respondent no.2 had provided all the necessary particulars. It Page No.# 3/11 contained the details of (i) computation of service tax liability, (ii) details of contravention of provisions of the Finance Act, 1994 and rules framed thereunder, (iii) invoking of extended period of limitation, (iv) penal provisions, (v) savings clause, and (vi) break-up of nature of demand. However, the petitioner had provided only with a two paragraph reply dated nil, served on

05.12.2019, wherein it was admitted that the petitioner had disclosed gross receipts from contract to the extent of Rs.23,89,41,323/- and merely stated that the petitioner was a government contractor mainly of Irrigation Department whose contract receipt does not fall into taxable category, and copy of 26AS and copies of various work orders of the department was submitted along with the said show-cause reply.

4. It was submitted that in this writ petition, the petitioner has suppressed material facts that he was served with letters dated 10.11.2016 and

22.07.2019 to furnish details, which was not responded to. It was also submitted that the reference to the said two letters dated 10.11.2016 and

22.07.2019 were referred to in the demand -cum- show cause notice, but in reply the petitioner had not denied the receipt of the said two letters. It is submitted that the contract work otherwise carries an incidence of service tax and therefore, if any service fell in the exempted category, the assessee has a duty to disclose all facts and then claim exemption from service tax liability. Thus, it is submitted that the petitioner has not been able to make out a case that the show-cause notice dated 07.11.2019 or the impugned order-in-original dated 28.11.2021 was vitiated by any reason whatsoever. In support of his submissions, the learned standing counsel for the respondents has placed reliance on the case of Magadh Sugar & Energy Ltd. v. State of Bihar & Ors., (2021) 0 Supreme(SC) 517 (para-19): 2021 SCC OnLine SC 801. Page No.# 4/11

5. Per contra, the learned counsel for the petitioner, while opposing the preliminary issue of maintainability, has submitted that in this case, the petitioner was awarded contract of (i) Irrigation related works for the Irrigation Department, Govt. of Assam, (ii) Construction of Fish Market for the Directorate of Fisheries, Govt. of Assam, (iii) NF Railway for earthwork, construction of retaining walls, side drains and other ancillary works. Accordingly, against the bills issued by the petitioner, the authorities of the said departments had deducted income tax at source while releasing payment, which is reflected in Form 26AS. It was submitted that the contract works qualify as “works contract” and that on such works contract, the incidence of service tax is exempted vide Mega Exemption notification no. 25/2012-ST dated 20.06.2012. It was accordingly, submitted that the petitioner had not taken service tax registration and also did not pay service tax on the payment received for service portion. It was submitted that in respect of the goods component, the concerned authorities have deducted VAT, as applicable. It was also submitted that existence of alternative remedy is always not a ground for the writ Court to relegate the parties to avail such remedy. In support of his submissions, the following cases have been relied upon, viz., (i) Godrej Sara Lee Ltd. v. Excise and Taxation Officer- cum- Assessing Authority & Ors., 2023 SCC OnLine 95, (ii) Magadh Sugar (supra), (iii) Assistant Commissioner of State Tax v. Commercial Steel Ltd., 2021 (52) GSTL 385 (SC), (iv) M.P. State Agro Industries Development Corpn. Ltd. & Anr. v. Jahan Khan, (2007) 10 SCC 88, (v) J.M. Baxi & Co. v. Commissioner of Customs, New Kandla & Anr., (2001) 9 SCC 275, (vi) State of Tripura v. Manoranjan Chakraborty & Ors., (2001) 10 SCC 740, (vii) M/s. N.E. Logistics & Anr. v. Union of India & Ors., W.P.(C) 1870/2022, decided on 23.03.2022, (viii) Anup Trade and Transport Pvt. Ltd. v. Union of India & Page No.# 5/11 Anr., W.P.(C) 3106/2022, decided on 14.02.2023, (ix) G.B. Chowdhury Holdings Pvt. Ltd. v. Union of India & Anr., W.P.(C) 2382/2022, decided on 04.04.2022.

6. In this case, admittedly, the petitioner had not registered himself under the Central Goods and Service Tax Act, 2017. The petitioner claims that his receipts from the Government are in respect of construction works undertaken for Irrigation Department of the Government of Assam, and also claims that the service component of those receipts do not fall into the taxable category service.

7. Admittedly, the petitioner had not filed his service tax return and also did not disclose his gross contractual dues receipt or disclosed service tax component which is exempt from the incidence of service tax.

8. The learned standing counsel for the respondents has demonstrated that when notices were issued to the petitioner on 10.11.2016 and 22.07.2019, referred to in the “demand-cum-show cause notice” dated

07.11.2019, the petitioner had not produced documents like (i) copies of invoices issued, (ii) calculation sheet of service tax, (iii) copies of ST-3 return, (iv) income tax returns, (v) balance sheet and profit and loss accounts, etc.

9. The learned counsel for the petitioner contends that all the payments received by him are from (i) Irrigation related works for the Irrigation Department, Govt. of Assam, (ii) Construction of Fish Market for the Directorate of Fisheries, Govt. of Assam, (iii) NF Railway for earthwork, construction of retaining walls, side drains and other ancillary works, and that such receipts are covered by Mega Exemption notification no. 25/2012-ST dated 20.06.2012. If the said contention is true, then perhaps the petitioner can make out a case that the State cannot enrich itself by claiming service tax on service component Page No.# 6/11 of contractual receipts, which are otherwise exempt from the incidence of service tax. Unfortunately, the materials available in this writ petition is insufficient for the Court to prima facie satisfy itself that the petitioner had produced the proof before the respondent no. 2 that all receipts for which TDS is shown to have been deducted as per Form 26AS was against contractual dues received from (i) Irrigation related works for the Irrigation Department, Govt. of Assam, (ii) Construction of Fish Market for the Directorate of Fisheries, Govt. of Assam, (iii) NF Railway for earthwork, construction of retaining walls, side drains and other ancillary works, and that service component is exempt from incidence of service tax.

10. It would be relevant to refer to the decision of the Supreme Court of India in the case of The State of Maharashtra & Ors. v. Greatship (India) Ltd., AIR 2022 SC 4408: (2022) 0 Supreme(SC) 948, wherein it has been observed and held as under:-

6. We have heard the learned counsel for the respective parties at length. At the outset, it is required to be noted that against the assessment order passed by the Assessing Officer under the provisions of the MVAT Act and CST Act, the assessee straightway preferred writ petition under Article 226 of the Constitution of India. It is not in dispute that the statutes provide for the right of appeal against the assessment order passed by the Assessing Officer and against the order passed by the first appellate authority, an appeal/revision before the Tribunal. In that view of the matter, the High Court ought not to have entertained the writ petition under Article 226 of the Constitution of India challenging the assessment order in view of the availability of statutory remedy under the Act. At this stage, the decision of this Court in the case of United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110 in which this Court had an occasion to consider the entertain ability of a writ petition under Article 226 of the Constitution of India by by-passing the statutory remedies, is required to be referred to. After considering the earlier decisions of this Court, in paragraphs 49 to 52, it was observed and held as under: "49. The views expressed in Titaghur Paper Mills Co. Ltd. vs. State of Orissa, Page No.# 7/11