Gauhati High Court
WP(C)/5236/2022 on 21 April, 2026
Author: Soumitra Saikia
Bench: Soumitra Saikia
GAHC010127892022
IN THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
PRINCIPAL SEAT
W.P(C) NO. 5236/2022
Sri Samujjal Phukan
C/O Sri Prasanta Phukan, Rupnagar, Milan Nagar,
Dibrugarh-786 003
........Petitioner
-Versus-
1. Union of India
Represented by Secretary to the Government of
India, Ministry of Finance, Department of Revenue,
New Delhi-110 001
2. The Additional Commissioner, Central Goods &
Service Tax, P.O: C.R. Building, Milan Nagar, Lane-
F, Dibrugarh- 786 003, Assam
3. The Additional Commissioner, Central Goods &
Service Tax, Aizawl, GST Building, D-31A, MG Road,
Upper Khatia, Aizawl
........Respondents
-BEFORE-
HON'BLE MR. JUSTICE SOUMITRA SAIKIA
Advocate for the petitioners :Dr. Ashok Saraf, Sr. Advocate
Assisted by Mr. J.P. More, Advocate
Page 1 of 62
Advocate for the respondents :Mr. S.C Keyal, Standing Counsel, GST
ï‚· Date on which Judgment was reserved : 09.01.2026
ï‚· Date of Pronouncement of Judgment : 21.04.2026
ï‚· Whether the pronouncement is of
the Operative Part of the Judgment : No
ï‚· Whether the full Judgment has been
Pronounced : Yes
JUDGMENT AND ORDER (CAV)
The petitioner is engaged in the business of transportation of
goods by road in his individual capacity with his vehicles mostly
within the District of Dibrugarh, Assam and its neighbouring district.
A show cause notice was served upon the petitioner vide Show Case
Notice under C. No. V915)70/ADJ/ST/COMMR/DIB/2020/7088 dated
30.12.2020 issued by the Additional Commissioner, Central Goods &
Service Tax, Dibrugarh, wherein it was alleged that the petitioner
namely had suppressed the actual value of services provided during
the financial year 2014-15 to 2017-18 and did not disclose its liability
of service tax by not obtaining the Service Tax Registration or by
filing its ST-3 returns for the Financial Year 2014-15 to 2017-18 and
had consequently short paid its service tax dues to the tune of Rs.
58,72,656/- in violation of Section 66, 66B, 67, 68, 69 and 70 of the
Finance Act, 1994 read with Rule 6 and 7 of the Service Tax Rules,
1994.
Page 2 of 62
It was also alleged that from the third party data provided by
the Income Tax Department, it appeared that the petitioner received
consideration for providing taxable services and made required
declarations under various sections of the Income Tax Act, 1961
related to provision of services and TDS deductions which were duly
reflected in its Income Tax returns but did not declare those receipts
against 'services' by obtaining service tax registration and by filing its
periodic ST-3 returns for the year 2014-15 to 2017-18 which resulted
in non-payment/short payment of service tax.
It was also alleged in the said Show Cause Notice dated
30.12.2020 that from the information received from the Income tax
Department, it was found that during the Financial Year 2014-15 to
2017-18, the petitioner suppressed taxable value amounting to
Rs.3,93,74,552/- and on such services, Service Tax amounting to
Rs.58,72,656/-was required to be paid by the Petitioner to the
Government exchequer which the Petitioner did not pay with intent
to evade service tax and hence the same was required to be
recovered under proviso to Section 73(1) of the Finance Act, 1994 by
invoking extended period of limitation along with interest at
appropriate rate under Section 75 of the Finance Act, 1994.
Therefore, the petitioner was called upon to show cause as to why
service tax amounting to Rs.58,72,756/-for the Period from 2014-15
Page 3 of 62
to 2017-18 should not be demanded and recovered from it under
proviso to Section73(1) of the Finance Act, 1994 read with Section
142(8)(a) of the Central GST Act, 2017 with applicable interest under
Section 75 and imposition of penalty under Section 77 and 78 of the
Act. Accordingly, the Petitioner was directed to show cause within 30
days from the date of receipt of the said Show Cause Notice dated
30.12.2020 failing which it was provided that the case will be decided
ex-parte on the basis of evidence available on record.
2. The learned Senior counsel submits that in the said Show
Cause Notice dated 30.12.2020, the Additional Commissioner
proposed to be treat the entire receipts of the Petitioner to be
taxable service provided by the Petitioner without ascertaining the
fact that the entire receipts were exempted under Section 66D of the
Finance Act, 1994. However due to the Covid-19 problems and other
bonafide reasons, the Petitioner could not file his Reply to the said
Show Cause Notice dated 30.12.2020 within the said 30 days as
granted to the petitioner. Further due to the raising of Covid-19
cases, lockdown was imposed by the Authority and accordingly the
instant proceeding was also kept in abeyance by the Additional
Commissioner. Finally vide a communication
No.V(15)70/ADJ/ST/COMMR/DIB/2020/4823 dated 13.12.2021 date
was fixed for personal hearing of the matter on 23.12.2021 and for
Page 4 of 62
filing the relevant documents and Reply of the Petitioner to the
impugned Show Cause Notice dated 30.12.2020. However upon a
prayer made by the Petitioner, the Additional Commissioner vide his
communication No. V(15)70/ADJ/ST/COMMR/DIB/2020/280 dated
21.01.2022 re-fixed the same again on 24.01.2022. Thereafter on
24.01.2022, the Petitioner filed an application before the Additional
Commissioner seeking further 30 days time on the ground that the
Petitioner has handed over the matter to his legal consultant and
they were in the course of examining certain issues going to the root
of the matter. Though no specific order was passed by the
Respondent No.2 upon the said application of the petitioner seeking
further time. The learned Senior counsel for the petitioner submits
that while anticipating the communication regarding the date of
personal hearing and for submission of documents, the Petitioner
was received the impugned Order-in-Original/ADJ/AIZAWL-
CGSTCOMNR/GST/NO.04 dated 18.04.2022 passed by the Additional
Commissioner which was received by the Petitioner only in the
second week of May, 2022.
In the said impugned Order-in-Original/ADJ/AIZAWLCGST-
COMNR/GST/NO.04 dated 18.04.2022, the Additional Commissioner
assessed an amount of Rs.58,72,656/- as service tax payable by the
Petitioner and also confirmed the demand of service tax of the said
Page 5 of 62
amount of Rs. 58,72,656/- for the Financial Year 2014-15 to 2017-18
in terms of proviso to Section 73(2) of the Finance Act, 1994 and
also imposed interest under Section 75 of the Act with an equal
amount of penalty of Rs. 58,72,656/- under Section 77 of the Act. In
the said impugned Order-in-Original, it was evident from Form 26AS
that the Petitioner was providing taxable service in contravention of
Section 66, 66B, 67, 68 and 70 of the Finance Act, 1994 read with
Rules 6 and 7 of the Service Tax Rules, 1994 by willful suppression of
fact with an intend to evade payment of service tax amounting
Rs.58,72,656/- relating to the period F.Y. 2014-15 (Oct-Mar) to
2017-18 (April-June). The Additional Commissioner further observed
that the petitioner had failed to obtain service tax registration nor
filed the periodical ST -3 Returns for the relevant period it was
observed that being a service tax assessee, it was the sole
responsibility of the Petitioner to disclose the amount of taxable
value rendered during the relevant period and claim exemption, if
any, from payment of service tax under specific Service Tax
notification applicable therein. Therefore, the Additional
Commissioner hold that the Petitioner has failed to comply with the
statutory obligations prescribed in the Service Tax Acts and Rules
made thereunder and the allegations made in the Demand-cum-
Show Cause Notice dated 30.12.2020 stand confirmed and the
Page 6 of 62
Petitioner was liable to pay the entire demanded amount of Service
Tax and Cess of Rs.58,72,656/- for the period from 2014-15 (Oct --
March) to 2017-18 (April-June). Regarding the invocation of
extended period of limitation, it was observed by the said Additional
Commissioner that the Petitioner suppressed the taxable value by not
obtaining service tax registration and by filling the ST -- 3 Returns
and in the regime of self-assessment, since the onus lies on the party
to declare the taxable value, applicable service tax in their periodical
ST -3 Return, therefore the non-declaration of the taxable value by
the Petitioner came to the knowledge of the Department only after
receipt of information from other sources. It was further observed
that had it not received the data from the Income Tax Department,
the suppression of the taxable value by the Petitioner would not have
been detected and therefore the Petitioner willfully suppressed the
taxable value with an intent to evade payment of Service Tax.
Therefore it was held that the service tax not paid by the Petitioner
was recoverable by invoking extended period of limitation under the
proviso to Section 73(1) of the Finance Act, 1994.
3. Dr. A. Saraf, learned Senior counsel further submits that
though the Show Cause Notice dated 30.12.2020 and various notices
for personal hearing were issued by the Additional Commissioner,
Dibrugarh, the Respondent No.2 herein however the impugned
Page 7 of 62
Order-in-Original/ADJ/AIZWL-CGSTCOMNR/GST/NO.04 Dated
18.02.4022 was passed by The Additional Commissioner, Aizawl, the
Respondent No.3 herein without issuing any notice of hearing or by
granting any opportunity of hearing by the said Respondent No.3 to
the Petitioner. Though it was mentioned in the impugned Order-in
Original/ADJ/AIZAWL-CGST-COMNR/GST/No.04 dated 18.04.2022
that the Petitioner was allowed an opportunity to appear before the
Additional Commissioner either on 8th 10th or 11th of March 2020
referring to a communication
No.V(15)70/AD/ST/COMMR/DIB/2020/860 dated 23.02.2022,
however neither such communication was served upon the Petitioner
nor the Petitioner had any knowledge about the same. Being
aggrieved by the aforesaid impugned Demand-Cum-Show Cause
Notice dated 30.12.2020 issued by the Respondent No.2 and the
impugned Order-in-Original dated 18.04.2022 passed by the
Respondent No.3, the Petitioner approached this Court under Article
226 of the Constitution of India seeking relief from such illegal and
arbitrary action of the said respondents levying service tax and
imposing penalty with interest by acting contrary to the express
provisions of law.
4. The learned senior counsel for the petitioner strenuously
submits that it is a settled principle of law that a Show Cause Notice
Page 8 of 62
is the foundation of very proceedings and that the same cannot be
vague. He further submits that the Show Cause Notice is the
foundation on which the department has to build up its case and if
allegations in the show cause Notice are not specific and are on the
contrary vague, lack details and/or unintelligible, the same are not
sufficient to meet the allegations indicated in the Show Cause Notice
and thereby the said show cause notice cannot be said to be a valid
show cause notice.The Additional Commissioner while passing the
impugned Order-in-Original dated 18.04.2022 in levying service tax,
interest and penalty has failed to consider the very primary objective
of 'taxability of the services' provided by the Petitioner. When the
services provided by the petitioner of transportation of goods by
roads was specifically excluded under Section 66 D of the Finance
Act, 1994 which was the only services provided by the Petitioner
Company during the relevant assessment year i.e 2014-15 to 2017-
18, the said Additional Commissioner completely misguided himself in
treating the entire receipts of the Petitioner as receipts from taxable
services. The Petitioner submits that by enacting the Finance Act,
1994, the Legislature imposed a levy of service tax upon such
taxable services as defined under Section 66B of the Act. Therefore,
the said Section 66B which is charging section which imposed a levy
of service tax upon such services as provided there-under under the
Page 9 of 62
said Section 66 B. For a ready reference, the said Section 66 B is
extracted below:
"Section 66 B. Charge of service tax on and after Finance Act, 2012. There
shall be levied a tax (hereafter referred to as the service tax) at the rate of
twelve percent on the value of all services, other than those services
specified in the negative list, provided or deemed to have been provided in
the taxable territory by one person to another and collected in such manner
as may be provided."
5. The learned senior counsel for the petitioner further submits
that the Legislature while enacting the said Finance Act, 1994
excluded certain services from the zone of taxability of services tax
by way of incorporating a negative list as provided Section 66D of
the Finance Act, 1994. Services by way of transportation of goods
were also included in the said negative list under Section 66D.
Section 66D is extracted below:
"Section 66 D. Negative list of Services. The negative list shall
comprise of the following services, namely :
*****
*****
(p) services by way of transportation of goods —
(i) by road except the services of
(A) a good transport agency or
(B) a courier agency
(ii) by an aircraft or a vessel from a place outside India up tothe
customs station of clearance in India, or
(iii) by inland waterways.
******”
6. The learned Senior counsel for the petitioner submits that
from a combined reading of Section 66B and Section 66D, it is clear
Page 10 of 62
that the Legislature while enacting the Finance Act, 1994 specificallyexcluded the transportation of goods by road services except by a
goods transportation agency or a courier agency. The petitioner is
neither a goods transport agency or a courier agency but engaged
himself in the business of transportation of goods in his own personal
capacity with his own vehicles. Therefore the business activities
carried out by the Petitioner clearly falls within the purview of
exemption granted under the negative list as provided under Section
66 D(i)(A) of the Finance Act, 1994 and therefore clearly falls outside
the purview of ‘service tax ‘ and as such the Respondent Authorities
had no jurisdiction to issue the impugned show cause notice and the
order in original levy of service tax as transportation of goods. The
Petitioner respectfully submits that during the relevant year 2014-15
to 2017-18, the Petitioner was providing transportation of goods by
road services as defined under the negative list contained in Section
66 D(i)(A) of the Finance Act, 1994 and therefore the receipts
procured from such excluded services provided by the Petitioner are
completely outside the purview of service tax and accordingly the
Petitioner is not liable to pay service tax.
7. The learned Senior counsel for the Petitioner submits that the
Service Tax Rules provides for Registration. The said Rule is quoted
herein below for the sake of convenience:
Page 11 of 62
“Rule 4. Registration (1) Every person liable for paying the service tax
shall make an application to the concerned Superintendent of Central
Excise in Form ST-1 for registration within a period of thirtydays from the
date on which the service tax under Section 66B of the Finance Act, 1994
(32 of 1994) is levied;
Provided that where a person commences the business of providing a
taxable service after such service has been levied, he shall make an
application for registration within a period of thirty days from the date of
such commencement.
Provided further that a parson liable for paying the service tax in the
case of taxable services referred to in sub-section (4) or subsection (5) of
Section 66 of the Finance Act, 1994 (32 of 1994) may make an application
for registration on or before the 31% day of December, 1998.
Provided also that a person liable for paying the service tax in the case
of taxable services referred to in sub-clause (zzp) of clause (105) of
Section 65 of the Act may make an application for registration on or
before the 31% day of March, 2005.
*****
****”
He therefore submits that Rule 4 (1) clearly provided that only the
person liable for paying the service tax under Section 66 B of the Act,
he shall have to apply for registration.
8. The learned senior counsel for the petitioner strenuously
submits that in the present case since the Petitioner was not liable to
pay service tax under Section 66 B of the Act by virtue of Section 66
D(i)(A) of the Act, the petitioner was not required to be registered
under the provisions of the Service Tax Rules, 1994 since the
services provided by the Petitioner were expressly excluded from the
service tax net by way of Section 66 D(i)(A) of the finance Act, 1994.
Page 12 of 62
9. The learned senor counsel further submits that under Section
70 of the Finance Act, 1994 provided for furnishing of returns. The
said Section 70 is quoted herein below for the sake of convenience:
“Section 70. Furnishing of Returns:(1) Every person liable to pay the
service tax shall himself assess the tax due on the services provided by
him and shall furnish to the Superintendent of Central Excise, a return in
such form and in such manner and at such frequency and with such late
fee not exceeding twenty thousand rupees, for delayed furnishing of
return, as may be prescribed. (2) The person or class of persons notified
under sub-section (2) of Section 69, shall furnish to the Superintendent of
the Central Excise, a return in such form and in such manner and at such
frequency as may be prescribed.”
He submits that Section 70 of the Finance Act, 1994 provided for
filing of return by every person liable to pay the service tax and not
otherwise.
10. The learned Senior counsel for the petitioner submits that in
the present case, the Petitioner was not liable to pay tax as the
service provided by the Petitioner were under the category of
negative list as contained in Section 66 D(i)(A) of the Finance Act
1994 itself, the Petitioner was not liable for file his return as
contemplated under Section 70 of the Act. The learned senior
counsel submits that the services provided by the Petitioner to the
various corporate agencies are expressly excluded under the
negative list contained under Section 66 D(i)(A) of the Finance Act
1994. However the Respondent No.3 has levied the service tax
without considering the fact that the entire receipt of the Petitioner
Page 13 of 62
was from his business of transportation of goods by roads which is
an exempted service under Section 66(D)(i)(A) of the Act.
11. The impugned order in original is further assailed on the
ground that the extended period of limitation is illegal as there was
no suppression, fraud, collusion or willful misstatement or
suppression of facts or contravention of any of the provisions of the
Act. Dr. Saraf, learned Senior counsel submits that Section 73
specifies recovery of service tax not levied or paid or short-levied or
short paid or erroneously refunded and in such an event, the
extended period of five (5) years is applicable. It is submitted that a
section itself prescribes that the provisions of the section would be
applicable for recovery of Service Tax not levied or paid or short
levied or short paid or erroneously refunded by reasons of –
(a) Fraud; or
(b) Collusion; or
(c) Willful misstatement; or
(d) Suppression of facts; or
(e) Contravention of any of the provisions of this Chapter or of
the rules made there under with intent to evade payment of service
tax.
Page 14 of 62
12. It is submitted that for initiating any proceeding under Section
73 of the Act, there must be tax levied or paid or short-levied or
short paid or erroneously refunded. Further the Notice has to be
issued within a period of eighteen (18) months from the relevant
date on the person chargeable with the service tax which has not
been levied or paid or erroneously refunded. The Proviso to the said
sub-section (1) also specifies that such notice can be issued within
such extended period of five years only if such short-levy or short-
payment or erroneous refunds were by reasons of fraud, collusion,
willful misstatement, suppression of facts or contravention of any of
the provisions of the Act or the Rules made thereunder with the
interest to evade payment of tax.
13. It is submitted by the learned Senior counsel that assuming
though not admitting that there was a failure to furnish correct
information, however, the same does not constitute suppression
unless the failure/omission to furnish information or failure to pay
taxes are made willfully in order to evade payment of tax. In support
of his contentions, the learned Senior counsel has referred to the
Judgment of the Apex Court rendered in Continental Foundation Joint
Venture Holding Vs. CCE, reported in (2007) 10 SCC 334. It is
submitted that the Apex Court in the said Judgment held that mere
omission to give correct information did not constitute suppression
Page 15 of 62
unless that omission was made willfully in order to evade duty.
Suppression would mean failure to disclose full and true information
with the intent to evade payment of duty. When the facts are known
to both the parties, omission by one party would not constitute
suppression. An incorrect statement cannot be equated with a willful
mis-statement. The latter implies making of an incorrect statement
with the knowledge that the statement made was not correct. It was
further held therein that a mere omission to give correct information
is not suppression of facts unless it was deliberate to stop the
payment duty in order to evade duty.
14. Referring to the Judgment of Apex Court rendered in CCE Vs.
Chemphar Drugs & Liniments, reported in (1989) 2 SCC 127 , the
learned Senior Counsel, Dr Saraf, submits that the Apex Court while
interpreting the provisions of Section 11A of the Central Sales Tax
Act, 1944 held that something positive other than mere inaction or
failure on the part of the manufacture or producer or conscious or
deliberate withholding of information when the manufacturer knew
otherwise, is required before it is saddled with any liability of
invoking the extended period of limitation.
15. Reliance is also placed upon the Judgment of the Apex Court
rendered in Cosmic Dye Chemical Vs. CCE., reported in (1995) 6 SCC
Page 16 of 62
117, it is submitted that the Apex Court therein held that the words
“contravention of an of the provisions of the Act or Rules” are
qualified by the immediately following words “with intent to evade
payment of duty”, and therefore it was not correct to say that there
can be a suppression or misstatement of fact, which was not willful
and yet constitutes a permissible ground for the purpose of the
proviso to Section 11A. It is submitted that the law laid down by the
Apex Court in this Judgment are squarely applicable in the present
case inasmuch as there is no such finding the adjudicating authority
while invoking the powers under Section 73 by invoking the extended
period of limitation. It is submitted that the intent to evade payment
of tax cannot be established by peering into the minds of the tax
payer but has to be established through evaluation of the tax
behavior.
16. Referring to the Judgments pressed into service in support of
his contention, Dr. Saraf urges that from the law laid down by the
Apex Court and referred to by him, it is clear that without examining
the fact as to whether there was any suppression, mis-statement,
fraud, collusion, or contravention of any of the provisions if the Act
and the rules with the intent to evade payment of any tax, the
Adjudicating Authority simply on the basis of the tax behavior has
invoked the extended period of limitation without fulfilling the
Page 17 of 62
preconditions laid down in proviso to Section 73(1) of the Act and
thereby the impugned show cause notice is clearly barred by
limitation and consequently the impugned order in original as well as
the show cause notice are liable to be set aside and quashed.
The learned Senior counsel therefore submits that the order-in-
original has been passed by invoking extended period of limitation of
five (5) years without providing any tangible evidence to show that
any material fact or information was willfully suppressed from the
Revenue with the intent to evade payment of any tax and thereby
the issuance of the show cause notice itself is barred by the
limitation and consequently the impugned show cause as well the
order in original are liable to be set aside and/or quashed.
17. The further limb of argument by the learned Senior counsel for
the petitioner is that the only reason recorded by the Respondent
No.3 in its impugned Order-in-Original/ADJ/ AIZAWL-CGST-
COMN/GST/NO.04 dated 18.04.2022 passed by the Respondent No.3
in levying service tax upon the Petitioners was that it is evident from
Form 26AS that the notice was providing taxable service in
contravention of Section 66, 66B, 67, 68 and 70 of the Finance Act,
1994 read with Rules 6 & 7 of the Service Tax Rules, 1994 and by
way of willful suppression of fact with an intend to evade payment of
Page 18 of 62
service tax amounting to Rs.58,72,756/-relating to the period 2014-
15 (Oct — Mar) to 2017-18 (Apr-Jun). In this regard the learned
senior counsel for the Petitioners submits that the Form 26AS is the
Certificate of Tax Deduction at Source issued by the Income Tax
Department showing the total amount of tax deducted at source
under the Income Tax Act, 1961 against the total receipts during the
relevant assessment years. In the present case the relevant ‘Form
26AS’ issued by the Income Tax Department clearly shows the
details of the Agencies which made payments to the Petitioner with
the amount oftax deduct at source. In the said Form 26AS, out of
various agencies made payment to the Petitioner during the year
2014-15 to 2017-18 and all are against the services specifically
excluded under Section 66 D(p)(i) of the Finance Act, 1994.
However, without having any evidence on record, the Respondent
No.3 proceeded erroneously and levied service tax upon the entire
receipts made out of service that are specifically excluded under
Section 66 D(p)(i) of the Finance Act, 1994. Such action of the
Respondent No.3 in levying service tax upon the entire receipts of
the Petitioner without considering the fact that the entire receipts
were from excluded services are absolutely illegal, without
jurisdiction, not tenable in law and liable to be interfered with by this
Court.
Page 19 of 62
18. Mr. Saraf, learned senior counsel submits that invocation of
extended period of limitation is not proper in the present case as pre-
condition for such invocation was not existed so as to re-open and
initiate the proceeding after the regular period of limitation is
expired. In the present case there is no element of any fraud,
collusion, willful misstatement, suppression of facts or contravention
of any of the provisions of the Act as the services provided by the
Petitioner Company were excluded service as provided under the
negative list contained in Section 66 D(i)(A) of Finance Act, 1994 in
the relevant year 2014-15 to 2017-18 and therefore there was no
short payment of service tax on account of any fraud, collusion,
willful misstatement, suppression of facts or contravention of any of
the provisions of the Act and therefore in that view of the matter the
extended period of limitation cannot be invoked in the present case
only on the basis of documents like Form 26AS and therefore the
impugned Order-in-Original/ADJ/AIZAWL-CGST-COMMNR/GST/NO.04
dated 18.04.2022 passed by the Respondent No.3 by Invoking the
extended period of limitation in the present case is bad in law and
liable to be set aside and quashed.
19. The learned senior counsel for the petitioner further submits
that the respondent authorities committed manifest error in treating
the entire receipts of the Petitioner Company during the relevant
Page 20 of 62
year 2014-15 to 2017-18 as the receipts of the Petitioner as against
taxable service and consequential assessment and confirmation of
the demand treating the said amount to be receipts of the Petitioner
without having any co-relation to the alleged ‘taxable service’ as the
entire receipts were from services which was excluded by theFinance
Act, 1994 under Section 66D(p)(1). He further submits that in the
Show Cause Notice it was mentioned that the demand has been
raised on basis of the financial statements furnished by the Income
Tax department. However the Additional Commissioner, Aizawl has
blindly proceeded to demand service tax from the Petitioner without
even analyzing the nature of services provided by the Petitioner
which is specifically excluded from the zone of Service Tax Act.
Therefore such assessment made by the Respondent No.3 contrary
to the statutory provision of the Finance Act, 1994 under Section 66
D(p)(i) which is in complete violation of the established principle of
law.
20. The learned Senior counsel for the petitioner submits that for
imposition of tax, there must be a declaration of liability under the
statute and which the assessee is required to comply with. It is
submitted that tax cannot be imposed on an analogy and inferences
based on Form 26AS statement received from the Income Tax
Department. In support of his contention, the learned Senior Counsel
Page 21 of 62
has pressed into service Judgment of the Apex Court rendered in
ChatturamHorilram Ltd. Vs. Commissioner of Income Tax, reported in
1955 (2) SCR 290. It is submitted that in the said Judgment, the
Apex Court by referring to a Judgment of the Federal Court held that
there are three stages of imposition of taxes. There must be a
declaration of liability which is the part of the statute which
determines the liability in respect of the assessee, next there must be
an assessment. The liability does not depend on the assessment it is
already fixed under the statute but the assessment particularizes the
exact sum which a person liable is required to pay and lastly there
must be modes of recovery of tax, in the event the assessee who is
taxed does not pay voluntarily.
21. The learned Senior counsel for the petitioner also presses into
service the Judgment of the Apex Court rendered in A.V Fernandez
Vs. State of Kerala, reported in (1957) 8 STC 561. It is submitted
that before any assessment is made levying any tax there must be a
liability to tax. If there is no liability to tax the question of making an
assessment in respect of the same does not arise. In the present
case, there was no liability to pay the taxes inasmuch as either the
services liability to pay tax was on the recipient of the services on
reverse charge basis and whichever tax was payable.
Page 22 of 62
22. The learned Senior counsel submits that the Judgments of the
Apex Court cited are subsequently followed in Commissioner of
Income Tax Vs. Provident Investment Company Ltd. reported in
(1957) 32 ITR 190. The learned Senior counsel also presses into
service Judgments in support of his contention by referring to
Venkateswara Stainless Steel and Wire Industries Vs. Union of India ,
reported in (1987) 27 ELT 648 and M/S N.E Logistics &Anr. Vs. Union
of India & 2 Ors. [W.P(C) No. 1870/2020]. It is submitted that in N.E
Logistics (Supra) , similar show cause notice was issued based on
information collected from the Income Tax Department through Form
26AS. It is submitted that the High Court remanded the matter back
to the authorities on the ground that the department had proceeded
on a presumption that the assessee therein was liable to pay tax. It
was held that the liability to pay tax of a service tax is not based on
presumption nor can it be based upon the State of indeterminateness
on the part of the authorities. Liability to pay the tax has to be
conclusively determined for a given transaction for which the tax is
imposed and for which the noticee has been held to be liable to pay
tax as the same determination has not been made, the matter was
remanded back to the Principal Commissioner, CGST for fresh
determination and the assesses therein were given a opportunity to
produce any relevant materials to show cause that the contract
Page 23 of 62
works for the service tax has been imposed for which the noticee is
not liable to pay for such transaction.
23. It is submitted on behalf of the petitioner that by the said
Judgment directed that after arriving at a conclusive determination
reasoned order or a further demand notice as the case may be
issued by the authorities. However, if on the other hand in the
conclusion arrived at that the petitioner is not liable to pay service
tax appropriate reason order is to be passed. It is submitted that the
order has attained finality as no appeal has been preferred against
the said Judgment.
24. The learned Senior Counsel for the petitioner also pressed into
service Judgment rendered in Luit Developers Private Limited Vs.
Commissioner of CGST & Central Excise, Dibrugarh (Service Tax
Appeal No. 75792 of 2021) by the Customs, Excise & Service Tax
Appellate Tribunal, Kolkata. While dealing with the imposition of
service tax levied on the basis of entries in Form 26AS of the Income
Tax Act. The Tribunal held that Form 26AS cannot be used to
determine service tax liability unless there is any evidence shown
that it was due to a taxable service. The Tribunal also came to the
conclusion that there was no mala fide intention and therefore
extended period of limitation cannot be invoked on the ground and
Page 24 of 62
service tax, interest and penalty was not sustainable and the same
was accordingly set aside.
25. The learned Senior counsel for the petitioner submits that in
the present case the Service Tax has been levied on the basis of the
information reflected in the 26AS statement of the Income Tax. The
26AS statement only reflects the Income Tax deducted at source and
the amount from which the said tax has been deducted. The said
26AS statement cannot determine the liability of the Service Tax of
the petitioner inasmuch as only because Income Tax was deducted
at source from certain receipts in respect of the various services
rendered, it cannot be said that the said services were taxable under
the Finance Act of 1994. A particular receipt on account of services
rendered though may be liable to Income Tax under the Income Tax
Act, 1961, the same may not be liable for payment of service tax
because of the exemptions granted under the Finance Act of 1994,
or because the liability for payment of service tax may have been
fastened on the service recipient on reverse charge basis. As such
the information contained in the 26AS statement cannot by any
stretch of imagination be said to be indicative of the fact that the
services in respect of which the amount was received and the income
tax was deducted at source on the said receipt were also taxable
under the Finance Act of 1994 and liable to Service Tax. The
Page 25 of 62
Adjudicating Authority simply on the basis of inferences and analogy
levied Service Tax on the entire receipts as reflected in the 26AS
statement without examining the fact as to whether those Services
were liable to Service Tax under the Finance Act of 1994. Without
undertaking such an exercise and examination, the Adjudicating
Authority cannot levy the Service Tax on the said receipts as has
been held by the Apex Court that Tax cannot be imposed on the
basis of Inferences and analogy. Since in the present case the entire
Service Tax liability has been imposed any on inferences and analogy
without coming to a finding that the said services were liable to
Service Tax under the Finance Act of 1994 the impugned
Adjudication Order is absolutely illegal, without jurisdiction, and the
same is liable tobe set aside and quashed.
25. It is submitted that in so far as the levy of the penalty is
concerned, it is a settled law that in order to justify imposition of
penalty the authority concerned must find out not only that there has
been a default but should also consider the question whether there
were good and sufficient reasons for the default and only when such
grounds are available the authorities can proceed to impose penalty.
Referring to the finding of the Adjudicating authority, it is submitted
that it clear that the adjudicating authority has imposed penalty most
mechanically without considering as to whether the assessee had
Page 26 of 62
acted deliberately in defiance of law or was guilty of conduct
contumacious or dishonest or acted in conscious disregard of its
obligation. In support of his contention, the learned Senior counsel
refers to the Judgments rendered in Hindustan Steel Ltd. Vs State of
Orissa, reported in (1972) 83 ITR 26; B.D Khaitan Vs. Income Tax
Officer, reported in (1978) 113 ITR 556 (Cal) and Brajalal Banik Vs.
State of Tripura and Ors, reported in (1989) 2 GLR 220. Referring to
the Judgments, the learned Senior Counsel submits that the
adjudicating authority has not applied its mind to the facts and
circumstances of the case but has acted mechanically while imposing
penalty and the order does not contain any reason legally sustainable
whatsoever as to why the officer concerned had decided to levy
penalty and also why he has levied the maximum amount of penalty.
It is submitted that the maximum amount of penalty cannot be
imposed in all the cases inasmuch as the authority has to decide the
relevant factors such as the period of delay conduct of dealer and
such other considerations and the levy of maximum penalty without
stating any reasons may not be sustainable. It is therefore submitted
that the imposition of interest and penalty in the instant case is
absolutely illegal without jurisdiction and thereby the same is liable to
be set aside and quashed. Such a non-speaking order is not
maintainable in law and same is liable to be set aside and quashed.
Page 27 of 62
26. It is further submitted by the learned Senior counsel that if an
authority while acting within its jurisdiction makes an error of law
which is revealed on the face of its recorded determination, then the
Court, in the exercise of its supervisory function, may correct the
error unless there is some provision preventing a review by a Court
of law. In support of his contentions, the learned Senior counsel
refers to the Judgment rendered in Anisminic Ltd. Vs. Foreign
Compensation Commission and another, reported in (1969) 2 WLR
163.Referring to the said Judgment, it is submitted that lack of
jurisdiction may also arise if the authority in the intervening stage,
while engaged on a proper enquiry, departs from the roots of natural
Justice, or ask itself a wrong questions or takes into accounts
matters which it was not directed to take into account. In such a
situation it would amounts to a steps outside it jurisdiction.
27. In so far as the question of maintainability of the writ petition is
concerned in view of the statutory remedy of appeal being provided
under the Act, the learned Senior counsel submits that the existence
of other adequate legal remedy will not per se act a bar for issuance
of a writ of certiorari and in an appropriate case it may issue
prerogative writs. The duty of the superior Court to issue a writ of
certiorari to correct the errors of an inferior court or tribunal called
upon to exercise judicial or quasi-judicial functions and not to
Page 28 of 62
relegate the petitioner to other legal remedies available to him and a
Superior Court in a proper case exercise its jurisdiction in favour of a
petitioner who has allowed the time to appeal to expire or has not
preferred his appeal. It cannot then be laid down as an inflexible rule
that the superior Court must deny the writ when an inferior Court or
tribunal by discarding the principles of natural justice and all
accepted principle of procedure arrive at a conclusion which shocks
the sense of justice and fair play.
28. Referring to the Judgment of this Court rendered in Hardeodas
Jagannath Vs. Income Tax Officer, reported in (1961) 47 ITR 56, it
is submitted that there is no inflexible rule that the existence of an
alternative remedy is a bar to the issue of a writ of certiorari. The
issue of various writs or directions is in the discretion of the Court
and the Court while exercising its jurisdiction may take into
consideration the existence of an alternative remedy as a matter of
policy, but the existence of an alternative remedy and it is not per so
as bar to the issue of a writ of certiorari. It is submitted by the
learned Senior counsel that this position laid down by the Assam
High Court has also summarised by the Apex Court in the case of
Hari Vishnu Kamath Vs. Ahmed Ishaque, reported in AIR 1955 SC
233.
Page 29 of 62
29. Similar views have been laid down by the Apex Court in TELCO
Vs Assistant Commissioner, reported in AIR 1967 SC 1401; State of
U.P. Vs. Mohd. Nooh, reported in 1958 SCR 595; Bhopal Sugar
Industries Vs. D.P. Dubey, reported in AIR 1967 SC 549;Altafur
Rahman Vs. Union of India, reported in (1986) 1 GLR 14 and
Assistant Commissioner of State Taxes Vs. Commercial Steel
Company Ltd., reported in 2021 SCC Online SC 884.
30. The learned Senior Counsel submits that a very recent decision
of the Apex Court consistently has held that exhaustion of alternative
remedy is not an inflexible rule. Where the Court finds that there has
been violation of natural justice or the invocation of the jurisdiction
itself is contrary to the provision of law, a writ Court is not denuded
of it’s powers to invoke the prerogative writs notwithstanding the
availability of statutory alternative remedy.
31. The learned Senior counsel for the petitioner further fortifies
his submissions by referring to the Judgments of the Apex Court
rendered in Whirlpool Corporation Vs. Registration of Trade Mark,
reported in (1998) 8 SCC 1; Union of India Vs. Parashotam Dass,
reported in 2023 SCCOnline SC 314; State of Tripura Vs. Monoranjan
Chakraborty, reported in (2001) 10 SCC 740; Assistant Commissioner
of State Taxes Vs. Commercial Steel Co. Ltd., reported in 2021
Page 30 of 62
SCCOnline SC 884 and Godrej Sara Lee Ltd. Vs. Com. Assessing
Officer, reported in 2023 SCCOnline SC 9695.
32. The learned Senior counsel therefore submits that the writ
petition be allowed. The impugned order-in-original be interfered
with and set aside interfering with the demand of service tax as well
as the imposition of penalty imposed on the writ petitioner.
33. Mr. S.C Keyal, learned counsel appearing for the Respondents
has strongly disputed the contentions made on behalf of the writ
petitioner. On the question of maintainability of the writ petition, it
issubmitted that where there is elaborately prescribed statutory
provisions providing for alternative remedy, the petitioner
assesseeshould not be permitted to invoke the writ jurisdiction
without first availing of the statutory prescribed remedies. The GST is
a complete code in itself and elaborate provisions are prescribed for
ventilating grievances of the assesses who are aggrieved by any
orders passed by the GST authorities. Therefore the writ petition
should be dismissed and the petitioner should be relegated to avail of
the statutory alternative remedies prescribed. Unless the petitioner
had availed of these remedies, there is no scope for entertaining the
instant writ petition. Therefore, since the petitioners did not avail
statutory remedy, the petition should be dismissed on this limited
Page 31 of 62
ground and the parties be relegated to the avail of the statutory
remedy prescribed. In support of his contentions, the learned
counsel for the respondent relies upon the following Judgments:
1. GNRC Limited Vs. Union of India, reported in 2024 0 Supreme (Gau)
973;
2. PHR Invent Educational Society Vs. UCO Bank and Ors, reported in 2024
0 Supreme SC 333;
3. Brahmaputra Television Network Vs. Union of India, reported in 2024 0
Supreme (Gau) 855
4. M/S Sailaja Commercial Construction Pvt. Ltd. Vs Union of India & Ors,
(W.A. No. 188/2022)
5.Bekem Infra Projects Ltd Vs. Deputy Commissioner of State Tax, [SLP(C)
No. 27712/2024];
6. Sanjib Das Vs. Union of India, reported in 2022 0 Supreme (Gau) 284;
7. Sunil Gulati Vs. Additional Commissioner, CGST, Delhi South
Commissioner &Anr. [W.P(C) No. 4383/2025];
8. M/S Vishwanath Traders Vs. Union of India and Ors [SLP(C) No.
15594/2023];
9. Union of India and Ors. Vs. Coastal Container Transpiration Association
and ors, reported in 2019 0 Supreme (SC) 215.
34. The respondents refers to the judgment of rendered in GNRC
Limited vs Union of India reported in (2024) 0 Supreme (Gau) 973.
The learned counsel for the respondents also pressed into service the
judgment rendered in PHR Invent Educational Society Vs. UCO Bank
and Ors, reported in 2024 0 Supreme SC 333. Pressing these
judgments into service, the learned counsel for the respondents
submit that in the face of well anointed procedures prescribed under
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the GST providing for appeals, the petitioner should be relegated for
filing appeal before the appropriate authority.
35. Heard learned counsel for the parties. Pleadings available on
records have been carefully perused as also the demand made by
the show cause notice which ultimately came to be confirmed by the
impugned order in original which is the issue in the present
proceedings has been assailed primarily on the ground.
36. The first ground urged before this Court by the writ petitioner
assessee is that there were no dues of service tax payable by the
petitioner in respect of the services rendered.
37. The first limb of argument by the learned Senior counsel for
the petitioner before this Court is imposition of tax on solely on the
basis of data available in Form 26AS which is obtained from the
Income Tax Department. In Chatturam Holiram Ltd (Supra), the
Apex Court held that there are three stages in the imposition of tax.
There has to be a declaration of liability, which is the part of the
statute which determines what persons in respect of what property
are liable to pay the tax. Then there has to the assessment. The
liability to pay taxes does not depend on the assessment which has
already been fixed by the statute. But the assessment specifies the
exact sum which a person is found to be liable to pay and finally the
Page 33 of 62
modes of recovery of taxes which are assessed in the event the
assessee refuses to pay voluntarily. The relevant paragraphs of this
Judgments are extracted below:
“As has been pointed out by the Federal Court in Chatturam Vs.
Commissioner of Income-tax, Bihar [(1947) F.C.R. 116 at 126; 15 ITR
302, at 302] (quoting from the judgment of Lord Dunedin in Whitney Vs.
Commissioners of Inland Revenue [(1926) A.C. 37] ‘there are three
stages in the imposition of a tax. There is the declaration of liability, that
is the part of the statute which determines what persons in respect of
what property are liable. Next, there is the assessment. Liability does not
depend on assessment. That, ex-hypothesi, has already been fixed. But
assessment particularses the exact sum which a person liable has to pay.
Lastly, come the methods of recovery, if the person taxed does not
voluntarily pay”
38. Again in A.V Fernandez Vs. State of Kerala, reported in (1957)
8 STC 561, the Apex Court held that the three stages in the
imposition of tax which are laid down predicate, in the first instance,
a declaration of liability as the starting point. If there is a liability to
pay tax which is imposed in terms of the taxing statute, then the
provisions with regard to the assessment of such liability is to be
followed. If there is no liability to tax there cannot be any
assessment either. Sales or purchases in respect of which there is no
liability to tax imposed by the statute cannot at all be included in the
calculation of turnover for the purpose of assessment and the exact
sum which the dealer is liable to pay must be ascertained without
any reference whatever to the same.
Page 34 of 62
It was further held that if under the statute, it is found that the
assessee is not liable to tax, no tax can be levied or imposed on
them and they do not come under the purview of such a statute. The
Apex Court went on to hold that no tax can be imposed by inference
or by analogy or by trying to probe into the intentions of the
legislature and by considering what was the substance of the matter.
It was held that regard must be had to the actual provision of the Act
and the Rules made thereunder before any conclusion can be arrived
at that the assessee is liable to assessment as contended by the
revenue authorities. The relevant provisions this Act are extracted
below:
“The three stages in the imposition of a tax which are laid down
here predicate, in the first instance, a declaration of liability as the
starting point. If there is a liability to tax, imposed under the terms of
the taxing statute, then follow the provisions in regard to the
assessment of such liability. If there is no liability to tax there cannot be
any assessment either. Sales or purchases in respect of which there is
no liability to tax imposed by the statute cannot at all be included in the
calculation of turnover for the purpose of assessment and the exact sum
which the dealer is liable to pay must be ascertained without any
reference whatever to the same.
The legislature cannot enact a law imposing or authorizing the
imposition of a tax thereupon and they are not liable to any such
imposition of tax. If they are thus not liable to tax, no tax can be levied
or imposed on them and they do not come within the purview of the Act
at all. The very fact of their non-liability to tax is sufficient to exclude
them from the calculation of the gross turnover as well as the net
turnover on which sales tax can be levied or imposed.
It is no doubt true that in construing fiscal statutes and in
determining the liability of a subject to tax one must have regard to the
strict letter of the law and not merely to the spirit of the statute or thePage 35 of 62
substance of the law. If the Revenue satisfies the Court that the case
falls strictly within the provisions of the law, the subject can be taxed. If,
on the other hand, the case is not covered within the four corners of the
provisions of the taxing statute, no tax can be imposed by inference or
by analogy or by trying to probe into the intentions of the legislature and
by considering what was the substance of the matter. We must of
necessity, therefore, have regard to the actual provisions of the Act and
the rules made thereunder before we can come to the conclusion that
the appellant was liable to assessment as contended by the Sales Tax
Authorities.”
39. Coming to the facts of the present case, in the absence of any
specific averments made before this Court, it is seen that in the
impugned order-in-original, the respondent authorities had held that
the assessee had failed to the reply to the show cause notice within
the stipulated period.
40. Therefore, under such circumstances, this Court is of the
considered view that the determination made by the respondent
authorities by issuing the demand cum show cause notice and the
confirmation in the impugned order-in-original is contrary to the
provisions of the Act and the law declared by the Apex Court as well
as by the High Court. The impugned order-in-original is therefore is
bad and the same is liable to set aside.
41. Coming to the question of the invocation of the extended
period of limitation, it is necessary to refer to the provisions of
Section 73 of the Finance Act, the same is extracted below:
Section 73: – Recovery of Service tax not levied or paid or short-
levied or short-paid or erroneously refunded.-
Page 36 of 62
73 (1) where any service tax has not been levied or paid or short -levied or
short-paid or erroneously refunded, the Central Excise Officer may,
within eighteen months from the relevant date serve notice on the person
chargeable with the service tax which has not been levied or paid or which
has been short-levied or short-paid or the persons to whom such tax
refund has erroneously been made, requiring him to show cause why he
should not pay the amount specified in the notice;
Provided that where any service tax has not been levied or paid or has
been short-levied or short-paid or erroneously refunded by reason of-
(a) fraud; or (b) collusion; or (c) willful misstatement ;or (d) suppression of facts; or
(e) contravention of any of the provisions of this chapter or of the rules
made there under with intent to evade payment of service tax,
by the person chargeable with the service tax or his agent the provisions of
this sub-section shall have effect, as if for the words eighteen months, the
words “five years” had been substituted.
Explanation-where the service of the notice is stayed by an order of a
court, the period of such stay shall be excluded in computing the aforesaid
period of eighteen months or five years as the case may be.
(1A) Notwithstanding anything contained in sub-section (1), the Central
Excise Officer may serve, subsequent to any notice or notices served under
that sub-section, a statement, containing the details of service tax not
levied or paid or short levied or short paid or erroneously refunded for the
subsequent period, on the person chargeable to service tax, then, service
of such statement shall be deemed to be service of notice on such person,
subject to the condition that the grounds relied upon for the subsequent
period are same as are mentioned in the earlier notices
(2) The Central Excise Officer shall after considering the representation, if
any, made by the person on whom notice is served under sub-section (1),
determine the amount of service tax due from, or erroneously refunded to,
such person (not being in excess of the amount specified in the notice) and
thereupon such person shall pay the amount so determined.
(3) ……………….
Page 37 of 62
42. A perusal of the Section 73 of the Finance Act reveals that the
extended period in respect of recovery of service tax not levied or
paid or short levied or short paid or erroneously refunded can be
invoked only when any or more of the conditions prescribed under
the proviso to the said section is present. Under the proviso to the
said section, there are five situations when the extended period of
limitation can be invoked. These are:
(a) Fraud; or
(b) Collusion; or
(c) Willful misstatement; or
(d) Suppression of facts; or
(e) Contravention of any of the provisions of this Chapter or of
the rules made there under with intent to evade payment of service
tax.
43. It is only in the event that any or more of these conditions are
found to be applicable in the facts and circumstances of the case that
the provisions for extension of limitation under Section 73 can be
invoked. In the event, it is invoked a notice has to be issued within a
period of 18 months from the relevant date on the person chargeable
with service tax.
Page 38 of 62
44. In this context, it is necessary to refer to the case laws cited
before this Court. In Continental Foundation Joint Venture Holding
(Supra), the extended period of limitation under Section 11A of the
Central Excise and Salt Act, 1944 was under consideration. The Apex
Court held that mere omission to give correct information did not
constitute suppression unless that omission was made willfully in
order to evade duty. The Apex Court held that suppression would
mean failure to disclose full and true information with the intent to
evade payment of duty. When the facts are known to both the
parties, omissions by one party would not constitute suppression. It
was held that an incorrect statement cannot be equated with a willful
mis-statement. The latter implies making of an incorrect statement
with the knowledge that the statement made was not correct. The
relevant paragraphs of the Judgment are extracted below:
12. The expression “suppression” has been used in the proviso to
Section 11-A of the Act accompanied by very strong words as “fraud”
or “collusion” and, therefore, has to be construed strictly. Mere
omission to give correct information is not suppression of facts unless it
was deliberate to stop (sic evade) the payment of duty. Suppression
means failure to disclose full information with the intent to evade
payment of duty. When the facts are known to both the parties,
omission by one party to do what he might have done would not
render it suppression. When the Revenue invokes the extended period
of limitation under Section 11-A the burden is cast upon it to prove
suppression of fact. An incorrect statement cannot be equated with a
wilful misstatement. The latter implies making of an incorrect
statement with the knowledge that the statement was not correct.
Page 39 of 62
45. In CEE Vs Chemphar Drugs & Liniments (Supra), while
interpreting provisions of Section 11A of the Act of 1944, the Apex
Court held that something positive other than mere inaction or failure
on the part of the manufacturer or producer or conscious or
deliberate withholding of information when the manufacturer knew
otherwise is required, before it is saddled with any liability, before
(sic beyond) the period of six months. Whether in a particular set of
facts and circumstances there was any fraud or collusion or willful
misstatement or suppression or contravention of any provision of any
Act, is a question of fact depending upon the facts and circumstances
of a particular case.
46. In Cosmic Dye Chemical (Supra), the Apex Court again while
examining Section 11 A of the Act of 1944 held that the emphasis is
on the requisite intent i.e the intent to evade payment of duty which
is built into the very works of section. The Apex Court held that even
misstatement or suppression of fact are clearly qualified by the words
“willful” preceeding the words “misstatement or suppression of facts”
which means with intent to evade duty. The Apex Court therefore
held that it will not be correct to say that there can be a suppression
or misstatement of fact, which is not willful and yet constitutes a
permissible ground for the purpose of the provisio to Section 11-A.
Page 40 of 62
Misstatement or suppression of fact must be willful. The relevantparagraph is extracted below:
“6. Now so far as fraud and collusion are concerned, it is evident that
the requisite intent, i.e., intent to evade duty is built into these very
words. So far as misstatement or suppression of facts are concerned,
they are clearly qualified by the word ‘wilful’ preceding the words
“misstatement or suppression of facts” which means with intent to evade
duty. The next set of words “contravention of any of the provisions of
this Act or rules” are again qualified by the immediately following words
“with intent to evade payment of duty”. It is, therefore, not correct to
say that there can be a suppression or misstatement of fact, which is not
wilful and yet constitutes a permissible ground for the purpose of the
proviso to Section 11-A. Misstatement or suppression of fact must be
wilful.
47. Coming to the fact and the present proceedings from the
recital of the impugned order-in-original, it is seen that Form 26AS
mentioned, the petitioner suppressed taxable value amounting to
Rs.3,93,74,552/- and on such services, Service Tax amounting to
Rs.58,72,656/- including Ed. Cess. S&HE Cess, Krishi Kalyan Cell and
Swachh Bharat Cess was required to be paid by the Petitioner.
Therefore, assessing authority found that the petitioner did not
obtain the registration and suppressed the material fact to the
Department willfully by way of providing taxable services without
discharging service tax liabilities with the intent to evade payment of
service tax and therefore the extended period under Section 73(1) of
the Finance Act, 1994 is invocable. The petitioner also violated the
provisions of Sections 66, 66B, 67, 68, 69 and 70 of the Finance Act,
Page 41 of 62
1994 read with Rules 4, 6 and 7 of the Service Tax Rule, 1994 and
thus evaded payment of Service Tax amounting Rs. 58,72,656/-
including Ed. Cess, S&SE Cess, Krishi Kalyan Cess and Swachh Bharat
Cess against the taxable services provided by the petitioner along
with interest as applicable under Section 75 ibid. The petitioner was
also liable for penal action under Section 78 of the Finance Act, 1994
for suppression of facts with the intent to evade payment of service
tax.
47. Such conclusions as have been discussed above are contrary to
the facts which are evident from the pleadings. In any view of the
matter for invocation of the provisions of Section 73 for extension of
the period of limitation, it must necessarily be a case which falls
under any or all the conditions specified under the proviso to Section
73(1) of the CGST Act. From a plain reading of the impugned Order-
in-Original and the relevant portions of which have been extracted
above, it is evident that there is no finding by the Adjudicating
Authority that the case of the petitioner can be considered to be a
case which falls under the conditions specified in proviso to Section
73(1). Under such circumstances, the impugned Order-in-Original
appears to the Court to have been assumption of jurisdiction by the
revenue authorities which was not otherwise vested on the said
authority. For the revenue authorities to invoke powers under Section
Page 42 of 62
73(1), there must be a finding and a conclusion arrived at based on
the facts of the case that the petitioner assessee had willfully and
deliberately resorted to fraud, collusion, willful misstatement,
suppression of facts of contravention of any of the provision
thereunder with the intent to evade payment of service tax.
Therefore, for invocation of the powers proviso to Section 73(1),
there must be a conclusive finding arrived at by the Revenue
authorities that the petitioner assessee had resorted to any or all for
these acts or omissions with the sole intention to evade payment of
service tax. Such finding is not discernable from the impugned Order-
in-Original passed by the Revenue Authorities. Therefore, the
assumption of jurisdiction of the Revenue under the proviso to
Section 73(1) has to be concluded to be a jurisdiction assumed by
the Revenue authorities not vested on it by the statute. Such
assumption of jurisdiction therefore, being contrary to the provisions
of the statute itself, the same is colourable and therefore it is held to
be unauthorized.
48. Where a subordinate Tribunal and an authority is found to have
assumed jurisdiction not vested on it a superior Court may invoke its
extraordinary jurisdiction to correct such errors which were exercises
by the authorities. The powers of a superior Court to examine the
authority assumed by a Tribunal was the issue in Anisminic Ltd
Page 43 of 62
(Supra). It was held therein that the jurisdiction of the superior Court
is to see that the inferior court has not exceeded its own, and for
that very reason it is bound not to interfere in what has been done
within that jurisdiction, for in so doing it would itself, in turn,
transgress the limits within which its own jurisdiction of supervision,
not of review, is confined. That supervision goes to two points: one
is the area of the inferior jurisdiction and the qualification and
conditions of its exercise; the other is the observance of the law in
the course of its exercise. If, therefore, a tribunal while within the
area of its jurisdiction committed some error of law and if such error
was made apparent in the determination itself (or, as it is often
expressed, on the face of the record) then the superior court would
certainly be competent correct that error unless it was otherwise
forbidden to do so under the statute. It would be so forbidden if the
determination was “not to be called in question in any court of law”.
If so forbidden it could not then even hear argument which
suggested that error of law had been made. It could, however, still
consider whether the determination was within “the area of the
inferior jurisdiction.
By referring to Reg. Vs. Cotham, reported in (1898) 1 Q.B. 802,
808, it was noted that the distinction between, on the one hand,
disregarding the provisions of a statute and considering matters
Page 44 of 62
which ought not to be considered and, on the other hand, what is
called “a mere misconstruction of an Act of Parliament”. This perhaps
illustrates the clear distinction which exists between an error when in
the exercise of jurisdiction and an error in deciding whether
jurisdiction can be assumed: in the latter case an error may have the
consequence that jurisdiction was lacking and was wrongly assumed
and the result would be that any purported decision would have no
validity.
The Court held that lack of jurisdiction may arise in various
ways. There may be an absence of those formalities or things which
are conditions precedent to the tribunal having any jurisdiction to
embark on an inquiry. Or the tribunal may at the end make an order
that it has no jurisdiction to make. Or in the intervening stage, while
engaged on a proper inquiry, the tribunal may depart from the rules
of natural justice; or it may ask itself the wrong questions; or it may
take into account matters which it was not directed to take into
account. Thereby it would step outside its jurisdiction. It would turn
its inquiry into something not directed by Parliament and fail to make
the inquiry which Parliament did direct. Any of these things would
cause its purported decision to be a nullity.
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49. Again in Bunbury Vs. Fuller, reported in (1853) 9 Exch 111, 140
on the question of excessive jurisdiction of a Court of limited
jurisdiction, it was held that no court of limited jurisdiction can give
itself jurisdiction by a wrong decision on a point collateral to the
merits of the case upon which the limit to its jurisdiction depends;
and however its decision may be final on all particulars, making up
together the subject matter which, if true, Is within its jurisdiction,
and however necessary in many cases it may be for it to make a
preliminary inquiry, whether some collateral matter be or be not
within the limits, yet upon this preliminary question, its decision must
always be open to inquiry in the superior court.
50. Again in Rex Vs. Shoreditch Assessment Committee, Ex parte
Morgan, reported in (1910) 2 K.B. 859, it was held that no tribunal of
inferior jurisdiction can by its own decision finally decide on the
question of the existence or extent of such Jurisdiction: such
question is always subject to review by the High Court, which does
not permit the inferior tribunal either to usurp a jurisdiction which it
does not possess, whether at all or to the extent claimed, or to
refuse to exercise a jurisdiction which it has and ought to exercise.
Subjection in this respect to the High Court is a necessary and
inseparable incident to all tribunals of limited jurisdiction; for the
existence of the limit necessitates an authority to determine and
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enforce it: it is a contradiction in terms to create a tribunal with
limited Jurisdiction and unlimited power to determine such limit at its
own will and pleasure — such a tribunal would be autocratic,not
limited — and it is immaterial whether the decision of the inferior
tribunal on the question of the existence or nonexistence of its own
jurisdiction is founded on law or fact.
51. In Pilling Vs. Abergele Urban District Council, reported in
(1950) 1KB 636, it was held that where a duty to determine a
question is conferred on a authority which state their reason for the
decision and the reasons which they state show that they have taken
into account matters which they ought not to have taken into
account or that they have failed to take matters into account which
they ought to have taken into account, the court to which an appeal
lies can and ought to adjudicate on the matter.
52. Similar views have been expressed by Courts in India and
followed in several cases in the context of examination of jurisdiction
vested on Tribunals and Court of limited jurisdiction. In Dhirajlal
Girdharilal Vs. CIT, Bombay, reported in AIR 1955 SC 271, the Apex
Court held that when a Court of fact acts on materials partly relevant
and partly irrelevant, it is impossible to say to what extent the mind
of the Court was affected by the irrelevant materials used by it in
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arriving at its finding and such a finding is vitiated because of use of
inadmissible material and thereby a question of law arises.
53. In Ram Avtar Sharma Vs. State of Haryana, reported in AIR
1985 SC 915, the Apex Court held that discretionary power must be
exercised on relevant and not on irrelevant or extraneous
considerations. It means that power must be exercised taking into
account the considerations mentioned in the statute. If the statute
mentions no such considerations, then the power is to be exercised
on considerations relevant to the purpose of which it is conferred. On
the other hand, if the authority concerned pays attention to, or takes
into account, wholly irrelevant or extraneous circumstances, events
or matters or considerations then the action taken by it is invalid and
will be quashed.
54. In Jt. Reg., Co-operative Societies Vs. Rajagopal, reported in
AIR 1970 SC 992, the Apex Court held that even though an authority
may act in its subjective satisfaction, there must be cogent materials
on which the authority has to form its opinion.
55. In Indian Railway Construction Co. Ltd. Vs. Ajay Kumar,
reported in AIR 2003 SC 1843, the Apex Court held that in the
purported exercise of its discretion, the authority conferred with
discretion must not do what it has been forbidden to do, nor must it
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do what it has not been authorized to do. It must act in good faith,
must have regard to all relevant considerations, must not be
influenced by irrelevant considerations, must not seek to promote
purposes alien to the letter and to the spirit of the legislation that
gives it power to act, and must not act arbitrarily or capriciously.
56. Again in Shalini Soni Vs. Union of India, reported in (1980) 4
SCC 544, it was held by the Apex Court that it is an unwritten rule of
law, constitutional and administrative, that whenever a decision-
making function is entrusted to the subjective satisfaction of a
statutory functionary, there is an implicit obligation to apply his mind
to pertinent and proximate matters only, eschewing the irrelevant
and the remote. Applying this principle in CIT Vs Mahindra &
Mahindra, reported in (1983) 4 SCC 392, the Supreme Court quashed
a decision under Section 72-A of the Income Tax Act, as the
government was “clearly influenced by irrelevant and extraneous
materials vitiating the impugned conclusion.
57. In S.R Venkataraman Vs. Union of India, reported in AIR 1979
SC 49, the Apex Court held that an administrative order which is
based on reasons of facts which do not exist is infested with an
abuse of power. There will be an error of fact when a public body is
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promoted by a mistaken belief in the existence of a non-existing fact
or circumstance.
58. From a careful analysis of the judicial pronouncements as
discussed above, it is clear that if an authority while making the
inquiry rejects a consideration which is relevant and/or takes into
consideration materials and other information which are not relevant,
the said decision can be said to be a decision in excess or without
jurisdiction. In the present case the adjudicating authority took into
consideration the information available in form 26AS of the Income
Tax Act, the sole basis for the purpose of levy of service tax. The
authority did not consider the services rendered by the petitioner
were exempted from levy of service tax or the liability to pay the
service tax on the said services was on the recipient on the services.
Since the adjudicating authority did not take into consideration those
relevant materials which it was bound to take into consideration and
on the other hand it had taken into consideration factors and
materials, which if not irrelevant and not germane for deciding the
liability of the service tax, cannot establish the liability of the
assessee, then the said actions of the adjudicating authority is
certainly without jurisdiction and/or is in excess of jurisdiction and
thereby the impugned actions, orders and notices issued by the
adjudicating authority are liable to interfered with by this Court in
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exercise of its extra ordinary jurisdiction under Article 226 of the
Constitution of India.
59. Coming to the question of maintainability of the writ petition in
view of the availability of statutory alternative remedy, the
respondents have raised objections that whatever issues have been
urged by the petitioner before this Court canvery well be looked into
by the appellate authority prescribed under the statute. Therefore,
the question of exercise of prerogative writs by this court is not
called for and the writ petition should be dismissed and the
petitioners should be relegated to avail the statutory remedy. That
60. While the respondents are within their rights to raise their
objections, time and again the question of issuance of prerogative
writs even where statutory alternative remedies are available and/or
are not availed of by the assessee, has come up before this Court as
well as the Apex Court in a Catena judgments. The Assam High Court
in Hardeodas Jagannath Vs. Income Tax Officer , reported in (1961)
47 ITR 56 had clearly held that there is no inflexible rule that the
existence of an alternative remedy is a bar to the issue of writ of
certiorari. The issuance of prerogative writs or directions is always to
the discretion of the Court and the Court while exercising its
discretion may take into consideration the existence of an alternative
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remedy as a matter of policy, but the existence of an alternative
remedy is not per se a bar to the issue of writ of certiorari.
The High Court at Paragraph 42 held as under:
“42 No Tribunal and no Officer can confer jurisdiction or authority
or competence upon itself or himself by misconstruing a section. An
authority cannot claim to exercise jurisdiction by construing a section
erroneously and thereby contending that the section so wrongly
construed gives him the necessary power. In such a case, if the section
has been wrongly construed, it would be a clear case of absence of
jurisdiction apparent on the face of the record because the Court has got
to look at the section and to decide whether the officer construing the
section was in the right or in the wrong.”
61. The Apex Court in TELCO Vs. Assistant Commissioner, reported
in AIR 1967 SC 1 401 held that though ordinarily High Court leaves
an aggrieved party to take recourse to the remedies available under
the ordinary law, if they are equally efficacious, yet there are certain
exceptions and one of such exceptions pointed out is where action is
being taken arbitrarily and without the sanction of law.
62. In State of U.P Vs. Mohd. Nooh, reported in 1958 SCR 595, the
Apex Court held that the rule requiring the exhaustion of statutory
remedies before the writ is granted is a rule of policy, convenience
and discretion rather than rule of law and instances are numerous
where a writ of certiorari has been issued in spite of the fact that the
aggrieved party had other adequate legal remedies.
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63. In Bhopal Sugar Industries Vs. D.P Dubey, reported in AIR
1967 SC 549, the Apex Court held that the High Court has undoubted
jurisdiction to decide the writ application whether the taxing
authority has arrogated to itself, powers which it does not posses or
has committed serious errors of procedure which has affected the
validity of the decision or where the taxing authority threatens to
recover tax on an interpretation of the statute which is erroneous.
64. In Altafur Rahman Vs. Union of India, reported in (1986) 1 GLR
14, this Court held that when the challenges of the petitioner go to
the root of the jurisdiction of the Controller and therefore the writ
petition cannot be dismissed without disposing the contentions of the
petitioner on merits.
65. In Whirlpool Corporation Vs. Registration of Trade Mark,
reported in (1998) 8 SCC 1, the Apex Court on the question of
alternative remedy held that exception on the existence whereof a
Writ Court would be justified in entertaining a writ petition despite
the party approaching it not having availed the alternative remedy
provided by the statute were laid document was the exceptional land
document by the Apex Court were as under :
(i) where the writ petition seeks enforcement of any of the
fundamental rights.
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(ii) where there is violation of principles of natural justice;
(iii) Where the order or the proceedings are wholly without
jurisdiction; or
(iv) Where the vires of an Act is challenged
66. In Godrej Sara Lee Ltd (Supra), the Apex Court held that mere
availability of an alternative remedy of appeal or revision, which the
party invoking the jurisdiction of the High Court under Article 226 has
not pursued, would not oust the jurisdiction of the High Court and
render a writ petition “not maintainable”. The Court made it clear
that availability of an alternative remedy does not operate as an
absolute bar to the “maintainability” of a writ petition and that the
rule, which requires a party to pursue the alternative remedy
provided by a statute, is a rule of policy, convenience and discretion
rather than a rule of law. The Apex Court in further held that
dismissal of a writ petition by a high court on the ground that the
petitioner has not availed the alternative remedy without, however,
examining whether an exceptional case has been made out for such
entertainment would not be proper. The Apex Court further held that
where the controversy is a purely legal one and it does not involve
disputed questions of fact but only questions of law, then it should
be decided by the high court instead of dismissing the writ petition
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on the ground of an alternative remedy being available. The relevant
paragraph is extracted below:
“9. Now, reverting to the facts of this appeal, we find that the appellant
had claimed before the High Court that the suo motu revisional power
could not have been exercised by the Revisional Authority in view of the
existing facts and circumstances leading to the only conclusion that the
assessment orders were legally correct and that the final orders impugned
in the writ petition were passed upon assuming a jurisdiction which the
Revisional Authority did not possess. In fine, the orders impugned were
passed wholly without jurisdiction. Since a jurisdictional issue was raised
by the appellant in the writ petition questioning the very competence of
the Revisional Authority to exercise suo motu power, being a pure
question of law, we are of the considered view that the plea raised in the
writ petition did deserve a consideration on merits and the appellants writ
petition ought not to have been thrown out at the threshold.”
67. Again in Union of India Vs. Parashtom Dass, reported in 2023
SCCOnline SC 314, the Apex Court held that the provision of Article
226 of the Constitution forming part of the basic structure of the
Constitution and that the self-restraint of the High Court under Article
226 of the Constitution is distinct from putting an embargo on the
High Court in exercising this jurisdiction under Article 226 of the
Constitution while judicially reviewing a decision arising from an
order of the Tribunal. The relevant Paragraphs are extracted below:
“A High Court Judge has immense experience. In any exercise of
jurisdiction under Article 226, the High Courts are quite conscious of the
scope and nature of jurisdiction, which in turn would depend on the
nature of the matter.
We believe that there is no necessity to carve out certain case from
the scope of judicial review under Article 226 of the Constitution, as was
suggested by the learned Additional Solicitor General. It was enunciated inPage 55 of 62
the Constitution Bench Judgment in S.N. Mukherjee case that even in
respect of courts-martial, the High Court could grant appropriate relief in
a certain scenario as envisaged therein, i.e., “if the said proceedings have
resulted in denial of the fundamental rights guaranteed under Part III of
the Constitution or if the said proceedings suffer from a jurisdictional error
or any error of law apparent on the face of the record.”
There appears to be a misconception that the High Court would re-
appreciate the evidence, thereby making it into a second appeal, etc. WE
believe that the High Courts are quite conscious of the parameters within
which the jurisdiction is to be exercised, and those principles, in turn, are
also already enunciated by this Court.”
68. From a careful analysis of the judgments discussed above, it is
clear that the writ Court can interfere any arbitrary action
notwithstanding the availability of alternative remedy when the
authorities acts within jurisdiction or in exercise of jurisdiction or
there is a procedural irregularity or were the order is high handed
and is palpably illegal order in as much the same would amount to
violation of Article 14 of the Constitution of India.
69. Although ordinarily it is the law enunciated by this court as well
as by the Apex Court that an aggrieved assessee ought to avail of
statutory remedies ascribed or prescribed under the statute, there is
no quarrel on this principle of law. The GST is a complete code in
itself providing for filing of returns, assessments, recovery as well as
for appeals before the appropriate appellate authority. The facts
involved in the present proceedings are however peculiar in essence
that this show cause notice and the consequential confirmation of
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demand by the impugned order in original was a proceeding initiated
by the respondent authority after invoking the extended period of
limitation under Section 73(1). Therefore, in an ordinary course of
proceedings seeking recovery of tax demanded, the normal course
would be to avail of the statutory remedies. However, before the
authorities invoke their jurisdiction under section 73(1), it is the
mandate of the statute that the authorities must come to a specific
conclusion that the jurisdiction conferred on the revenue authorities
under Section 73 (1) can be invoked in the facts and circumstances
of the present case. As have been elaborately discussed in the
preceeding paragraphs that for invocation of jurisdiction under
section 73(1), the respondent authorities must come to a conclusion
that the invocation of the powers under section 73 (1) is necessary
as the petitioner’s case falls under any of the conditions mentioned in
the proviso to section 73(1) of the CGST Act. However, from the
recital of the order impugned, it is seen that the primary reason for
invoking the jurisdiction under section 73(1) is non furnishing of the
required documents by the petitioner assessee to be full satisfaction
of the respondent authorities. This mere non furnishing of
documents or information in itself cannot be construed to have given
rise to a situation under any or all of these five conditions under
proviso to section 73(1) in order to levy service tax by extending
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limitation by the revenue authorities who have invoked this powers
under section 73(1). Under such circumstances, ordinarily the
revenue authorities could not have issued the impugned notice in
demand followed by the order in original as it would have been hit by
limitation. It is only by invocation of Section 73(1) under the GST Act
that the revenue authorities have assumed powers for issuance of
the show cause and the consequential confirmation by the impugned
order in original by extension of the limitation. Therefore, the
parameters prescribed under the proviso to section 73 (1) are to be
scrupulously and diligently followed by the revenue authorities. It
does not depend on the ipse dixit of the revenue authorities. They
must certainly arrive at a specific conclusion that the non-furnishing
of documents leading to non-payment of GST is a deliberate and
willful attempt by the petitioner assessee to evade from payment of
the taxes due. The revenue authorities were within their rights to
issue appropriate notices and carry out proceedings within the
ordinary period of limitation prescribed, if it was their conclusion on
due examination of the materials before them that there was any
shortfall in the payment of GST and the same was required to be
recovered. However, this process for demand and recovery was not
initiated within the period of limitation ordinarily prescribed under the
provisions of the Act. Therefore, the revenue authorities invoked the
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provisions under Section 73(1) to issue the demand cum show cause
notice and the consequential impugned order in original confirming
the demand and imposition of penalty and interest. It is the view of
this Court that while demand and recovery of taxes as ordinarily
prescribed under the provisions of the Act requires careful
consideration of the facts and circumstances and satisfaction of all
the parameters prescribed upon, the demand and recovery under the
extended period of limitation under section 73(1) being an exception
to the General Rule, requires a higher degree of responsibility and
diligence on the part of the revenue authorities before they can
proceed to invoke the powers conferred under section 73(1).
70. It is a trite law that greater the power prescribed under the
statute greater will be the responsibility on the authorities on whom
it has been bestowed to ensure that no infraction of the provisions of
the Act and the Rules are made and no injustice is caused to the
assessee during the process of demand and recovery. This Court
while examining the facts and circumstances in minute detail and the
exposition of the law laid down by various Courts including this Court
as well as the Apex court of the country has held that for the
Revenue authorities to invoke the powers under section 73(1), there
must be a conclusive finding by the Revenue authorities that the
petitioner assessee under the facts and circumstances, hadwilfully
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and deliberately evaded or neglected to pay the GST. This conclusion
by the Revenue authorities is not apparent and discernible from a
plain reading of the impugned order in original. It is not a case that
the petitioner assessee never responded to the notices. It is not a
case that the documents which were called for required to be
submitted were not furnished. The ST-3 Returns filed by the
petitioner assessee were available in the records of the revenue
authorities and which would have given a complete picture of the
services rendered by petitioner assessee and/or whether such
services come within the ambit of service taxes or are excluded by
any circular or notification issue. However, there is no finding by the
revenue authorities as to why this aspect was not examined. There is
no conclusion of the revenue authorities in this aspect of the matter
as is evident from the impugned order in original.
71. Therefore, under such circumstances the invocation of
extended period of limitation under section 73(1) has been held by
this Court to be invalid and contrary to the prescriptions mandated
by law. This being a position, it is a clear case of assumption of
jurisdiction by the Revenue authorities where the statutes did not
confer them such jurisdiction by default. A Writ Court while
exercising its powers under Article 226 can certainly examine
whether the Tribunal or the quasi-judicial authority by exercising its
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jurisdiction mandated under the statute has fulfilled the necessary
pre-conditions prescribed by the statute itself.
72. In the facts and circumstances of the case, it is the conclusion
arrived at by this Court that such preconditions mandated by law
under section 73(1) having not been fulfilled by the Revenue
authorities, their assumption of jurisdiction under section 73(1) of
the GST Act was completely unwarranted and revenue authorities
could not have assumed the jurisdiction under section 73(1) unless
these pre-conditions mandated and a conclusion thereto has been
arrived at by the Revenue authorities before assumption of such
jurisdiction. It is under these circumstances that notwithstanding the
availability of statutory alternative remedy, this Court considers it an
appropriate case to invoke its jurisdiction under Article 226 to
interfere with the impugned order in original and to set aside and
quash the order-in-original. Under these circumstances, the case
laws referred to by the respondents will have no bearing in the facts
and circumstances of the present proceedings. There is also no
quarrel with the general proposition of law that in the face of
statutory alternative remedy being available, a Writ Court would
ordinarily not invoke its power of issuance of prerogative Writs. Since
this Court has held that the levy of service tax on the petitioner by
extending the limitation is contrary to the provisions of law, the
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natural corollary that would follow is that the levy of all penalty,
surcharge and interest are also not leviable on the petitioner, this
Court therefore issues a writ of certiorari setting aside the impugned
demand cum show cause notices and impugned order in original and
it is ordered accordingly.
73. Therefore the writ petition stands accordingly allowed.
However no order as to cost. Pending I.A.s are also dismissed and
the interim order if any stands merged.
JUDGE
Comparing Assistant
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