2024(09)LCX0567
JAGADISH ADVERTISING
Versus
THE PRINCIPAL ADDITIONAL DIRECTOR GENERAL
WRIT PETITION NO. 5816 OF 2022 decided on 04-09-2024
NC: 2024:KHC:36319
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 4TH DAY OF SEPTEMBER, 2024
BEFORE
THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 5816 OF 2022 (T-RES)
BETWEEN:
M/S JAGADISH ADVERTISING
JAGADISH MANSION, SANKEY ROAD,
SHESHADRIPURAM,
BANGALORE - 560 020.
ALSO AT: No.124, JAGADISH HOTEL
OPPOSITE BRIGADE TOWERS,
BRIGADE ROAD,
BANGALORE - 560 025
REPRESENTED HEREIN BY ITS
MANAGING PARTNER
MR.P.JAGADISH
…PETITIONER
(BY SRI.PRABHULING K NAVADGI, SENIOR COUNSEL FOR
SRI. BASAVARAJ PATIL, ADVOCATE)
AND:
1. THE PRINCIPAL ADDITIONAL
DIRECTOR GENERAL
DIRECTORATE GENERAL OF GST INTELLIGENCE
BENGALURU ZONAL UNIT No.112, SP ENCLAVE,
ADJACENT TO KARNATAKA BANK
KH ROAD, BENGALURU - 560 027.
2. THE PRINCIPAL COMMISSIONER OF
CENTRAL TAX,
NORTH COMMISSIONERATE
GROUND FLOOR, HMT BHAVAN,
BELLARY ROAD,
GANGA NAGAR, BENGALURU - 560 032.
3. THE UNION OF INDIA,
REPRESENTED HEREIN BY THE SECRETARY,
DEPARTMENT OF REVENUE, MINISTRY OF FINANCE,
GOVERNMENT OF INIDA, NORTH BLOCK,
NEW DELHI-110 001.
4. CENTRAL BOARD OF INDIRECT
TAXES AND CUTOMES
REPRESENTED HEREIN BY THE CHAIRMAN
DEPARTMENT OF REVENUE,
MINISTRY OF FINANCE,
GOVERNMENT OF INDIA, NORTH BLOCK,
NEW DELHI - 110 001.
…RESPONDENTS
(BY SRI.UNNIKRISHNAN.M., CGSC)
THIS W.P. IS FILED UNDER ARTICLE 226 OF THE CONSTITUTIN OF INDIA PRAYING TO QUASH THE IMPUGNED SHOW CAUSE NOTICE DTD 07.09.2018 PASSED BY THE R-1 UNDER SECTION 73 OF THE FINANCE ACT, 1994 READ WITH SECTION 174 OF THE CENTRAL GOODS AND SERVICES ACT, 2017 VIDE ANNX-A.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
ORAL ORDER
In this petition, petitioner has sought for the following reliefs:-
“i. Quashing the impugned show cause notice dated: 07.09.2018 bearing DGCEI. F. No. Va/108/2015-16/Buz/5479/2018 and SCN No.109/2018-19 passed by the 1st Respondent under Section 73 of the Finance Act, 1994 read with Section 174 of the Central Goods and Services Act, 2017 (Annexure-‘A’);
ii. Quashing the order dated: 21.03.2022 passed by the 2nd Respondent under the provisions of the Finance Act, 1994 read with Section 174 of the Central Goods and Services Act, 2017, bearing DIN No.20220357YV000000000FD9 and Order-in-Original No. BLR -NORTH-COMM-54/2021-22 and GEXCOM/ADJN/ST/ COM/56/ 2021-ADJN-CMMR -CGSTBENGALURU (N) 858/22 (ANNEXURE H);
iii. Pass such order or further orders as this Hon’ble court may deem fit in the facts and circumstances of the case, and in the interest of justice and equity.”
2. Briefly stated the facts
giving rise to the present petition are as under:-
The petitioner is a partnership firm engaged in the business of providing
advertising services and was registered with service tax under the Service Tax
Regime and subsequently, also registered under the GST regime. It is contended
that the activities of the petitioner constitute obtaining space at prominent
locations on rent from landlords assisting in erecting and mounting structures
to hold bill boards and providing space on the said structures on rent to
companies. It is contended that pursuant to agreement dated 07.10.2011 entered
into between petitioner and South Western Railways, the petitioner paid the
licence fee and was carrying on business.
2.1 Pursuant to introduction of the GST regime on 01.07.2017, the 1st
respondent issued the impugned Show Cause Notice (SCN)dated 07.09.2018 to the
period for alleged evasion of tax by the petitioner from October 2012 to June
2017 on the ground that the transactions, under which, the petitioner had
obtained on lease a space for erecting bill board, which is then let out for
advertising services, the petitioner had not remitted tax in reverse mechanism.
In the impugned SCN, it was also alleged that the petitioner had failed to pay
service tax for letting out space to various agencies which comes within the
ambit of taxable services and accordingly, the 1st respondent issued the
impugned SCN not only demanding tax, interest, penalty etc., but also called
upon the petitioner to show cause as to why CENVAT credit should not be denied
to the petitioner.
2.2 The petitioner submitted a reply dated 23.11.2018 to the impugned SCN
disputing and denying the various allegations and claim made by the 1st
respondent. Subsequently on 25.01.2022, the petitioner appeared in the personal
hearing and reiterated the submissions made in the aforesaid reply dated
23.11.2018 and also filed written submissions. In this context, it is relevant
to state that meanwhile certain proceedings to the SVLDRS scheme had also taken
place between the petitioner and respondents.
2.3 In the first instance, in the present petition which was filed on
09.03.2022, this Court passed an interim order of stay on 17.03.2022 staying the
operation of the impugned SCN and restraining respondents from initiating
further steps pursuant thereto. Subsequently, on 21.03.2022, during the pendency
of the petition, the 2nd respondent passed the impugned order at
Annexure-H dated 21.03.2022 confirming the demand made in the impugned SCN.
Accordingly, the petitioner got the petition amended and challenged the impugned
order at Annexure-H dated 21.03.2022. Under these circumstances, the petitioner
is before this Court by way of the present petition.
3. The respondents have filed their statement of objections supporting the
impugned SCN as well as the impugned order and has contended that there is no
merit in the petition and that the same is liable to be dismissed.
4. Heard Sri. Prabhuling K. Navadgi, learned Senior counsel for the petitioner
and Sri. M. Unnikrishnan, learned counsel for the respondents and perused the
material on record.
5. In addition to reiterating the various contentions urged in the petition and
referring to the material on record, learned Senior counsel for the petitioner
submitted that apart from the fact that the impugned show cause notice is
illegal, arbitrary and contrary to the provisions of Section 73 of the Finance
Act, 1994 in addition to being without jurisdiction or authority of law, the
claim of the respondents is barred by limitation and as such, the impugned show
cause notice as well as the impugned order deserve to be quashed. It is
submitted that though the petitioner had submitted a detailed reply dated
23.11.2018 to the impugned show cause notice as well as detailed written
submissions on 25.01.2022, the 2nd respondent neither considered or
appreciated the same nor provided any opportunity to the petitioner before
passing the impugned order at Annexure-H dated 21.03.2022 after filing the
present petition and the impugned order deserves to be quashed on this ground
also. In support of his contentions, learned Senior counsel for the petitioner
placed reliance upon the following judgments:-
“I. Escprts Limited vs. Commissioner of Central Excise, Faridabad-(2015) 9 SCC 109;
II. Continental Foundation Joint Venture Holding, Nathpa, H.P vs. Commissioner of Central Excise, Chandigarh. (2007) 10 SCC 337;
III. Commissioner of GST and Central Excise v. City Bank N.A. (2023) 8 SCC 483
IV. Uniworth Textiles Limited v. Commissioner of Central Excise, Raipur. (2013) 9 SCC 753.
5.1 So also, a detailed written submissions have been filed on behalf of the petitioner as hereunder:-
WRITTEN SUBMISSIONS ON BEHALF OF THE PETITIONER
“1. The Petitioner has been subjected to assessment proceedings under Section 73 of the Finance Act, 1994 read with Section 174 of the Central Goods and Services Tax Act, 2017 for alleged evasion of tax for the period from October 2012 to June 2017.
2. It is the case of the Revenue Authorities that during this period the Petitioner had obtained on lease a space for erecting billboards which is then let out for advertising services.
3. That for the transaction re referred to above, the Petitioner ought to have remitted tax in 'reverse mechanism'. Apart from the above he has also failed to pay service tax for the letting out of space to various agencies which comes within the ambit of 'taxable service'.
4. The contention of the Petitioner is as follows:
a. That initiation proceedings by the Respondent Revenue authorities viz. Respondent no. 1 is hit by Section 73 of the Finance Act, 1994 – that the jurisdiction to invoke the proceedings is beyond the period of limitation time.
b. That the authority that passed the final order vide Annexure H dated 21.03.2022 has failed to consider the contentions raised by the Petitioner.
c. Section 73 of the Finance Act, 1994 reads as under;"Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded.
(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within thirty 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 person 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) wilful mis-statement; or
(d) suppression of facts; or(e) contravention of any of the provisions of this Chapter or of the rules made thereunder 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 "thirty months", the words "five years" had been substituted."
The aforesaid Section prescribes that if there is an allegation of non-payment of tax then proceedings can be initiated from 30 months from the relevant date. The proviso to the section provides that in circumstances wherein it is alleged that there is fraud, suppression of fact, contravention of the provisions of the chapter with the intent to evade tax could be a ground to extend the period of limitation from 30 months to 5 years.
d. Indisputably, the period of assessment is from October 2012 to June 2017. The Show cause Notice dated 07.09.2018, if calculated backwards from 07.09.2018, the reckoning date would be March 2016 (the period is arrived at calculating 30 months backwards from the date of Show Cause Notice; because in the deciding the clause, does not speak of assessment year, it only mentions 30 months).
e. In these circumstances the Show Cause Notice is without jurisdiction and beyond the period of limitation from October 2012 to March 2016.
f. That the extended Period of 5 years is also not available as the Show Cause Notice does not mention the extended period of time nor does it allege any of the ingredients mentioned in the proviso.
g. The Hon'ble Supreme Court of India in the following decisions has declared to the effect that the case of fraud, wilful suppression etc. are serious issues which extend far beyond the simple non-payment of taxes.I. Continental Foundation Joint Venture Holding v. CCE, (2007) 10 SCC 337
"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."
II. Uniworth Textiles Ltd. v. CCE, (2013) 9 SCC 753 : (2013) 19 GSTR 246: 2013 SCC OnLine SC 76 at page 762"12. We have heard both sides, Mr R.P. Bhatt, learned Senior Counsel, appearing on behalf of the appellant, and Mr. Mukul Gupta, learned Senior Counsel appearing on behalf of the Revenue. We are not convinced by the reasoning of the Tribunal. The conclusion that mere non-payment of duties is equivalent to collusion or wilful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of non-payment would amount to ordinary default? Construing mere non-payment as any of the three categories contemplated by the proviso would leave no situation for which a limitation period of six months may apply. In our opinion, the main body of the section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso."
"13. This Court in Pushpam Pharmaceuticals Co. v. CCE [1995 Supp (3) SCC 462: (1995) 78 ELT 401] while interpreting the proviso of an analogous provision in Section 11-A of the Central Excise Act, 1944, which is pari materia to the proviso to Section 28 discussed above, made the following observations: (SCC pp. 463-64, para 4)
"4. Section 11-A empowers the Department to reopen proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression."h. In the case on hand it is not in dispute that at least for the period between October 2012 to 01.10.2014, the activities carried on by the Petitioner is in the negative services. Kindly see in this regard Section 66 (8) (g) of the Finance Act, 1994, came to be substituted by the Amendment w.e.f. 01.10.2014 which read earlier as,
"g. Selling of space or time slots for advertisements other than advertisements broadcast by radio/ television"
i. Apart from this the Petitioner had seriously disputed the petitioner activities not coming within the advertising services as they did not render taxable services.
j. It is not the case that the Petitioner was conducting its activities under any cover/suppression. In these circumstances the factors provided in the proviso does not apply.
k. Thus, the Petitioner had raised substantial grounds for the recall of the Show Cause Notice. Kindly refer to Annexure C of the Writ Petition at Page 82.
l. These aspects have not been considered in the Final Order. The non-consideration of the aspects vitiates the order of assessment for the period of assessment from March 2016-June 2017.
m. Applying the Doctrine of Severability, this Hon'ble Court is to hold that the impugned proceedings require to be set aside and for the period from March 2016 to June 2017, it requires to be reconsidered by the authorities on account of their failure to consider the contentions raised by the Petitioner.
6. Per contra, learned counsel
for the respondents would reiterate the various contentions urged in the
statement of objections and vehemently opposed the petition and sought for its
dismissal by placing reliance upon the judgment of the Apex Court in the case of
Horticulture Experiment Station, Gonikoppal, Coorg vs. The Regional
Provident Fund Organisation – (2022) 4 SCC 516.
7. I have given my anxious consideration to the rival submissions of both the
parties.
8. A perusal of the material on record will indicate that the petitioner had
initially challenged the impugned SCN dated 07.09.2018 urging various grounds
including inter alia contending that the impugned SCN was beyond the period of
limitation of 5 years as contemplated under Section 73(1) of the Finance Act,
1994. Subsequently, the petitioner challenged the impugned order at Annexure-H
dated 21.03.2022 which had been passed during the pendency of the present
petition not only on the ground that the demands made therein were barred by
limitation but also that various contentions urged by the petitioner had not
been considered by the 2nd respondent and that no opportunity was
provided to the petitioner before passing the impugned order, which was
violative of principles of natural justice and deserves to be set aside.
9. A perusal of the material on record including the impugned order dated
21.03.2022 passed during the pendency of the present petition will indicate that
the various contentions, grounds etc., urged by the petitioner in its reply to
the impugned show cause notice as well as the written submissions filed before
the 2nd respondent have not been considered in their proper perspective by the 2nd
respondent, who has not provided sufficient or reasonable opportunity to the
petitioner, especially when the 2nd respondent passed the impugned
order at Annexure-H dated 21.03.2022 during the pendency of the present
petition. Under these circumstances, in order to enable the 2nd respondent to
consider and appreciate all the contentions, claims, submissions etc., of the
petitioner by providing sufficient and reasonable opportunity, without
expressing any opinion on the merits / demerits of the rival contentions, I deem
it just and appropriate to set aside the impugned order and remit the matter
back to the 2nd respondent for reconsideration afresh in accordance with law.
10. In the result, I pass the following:-
ORDER
(i) Petition is hereby partly allowed.
(ii) The impugned order at Annexure-H dated 21.03.2022 passed by the 2nd respondent is hereby set aside.
(iii) The matter is remitted back to the 2nd respondent for reconsideration afresh in accordance with law.
(iv) Liberty is reserved in favour of the petitioner to submit additional replies, pleadings, documents, citations etc., before the 2nd respondent who shall reconsider the same and provide sufficient and reasonable opportunity to the petitioner and hear him and proceed further in accordance with law.
(v) All rival contentions on all aspects of the matter are kept open and no opinion is expressed on the same.
Sd/-
(S.R.KRISHNA KUMAR)
JUDGE