M/s. Metal India Products Morasapudi V. Hon'ble Sri Justice U. Durga Prasad Rao and Hon'ble Smt Justice V. Jyothirmai Pratapa

WP/37475/2022

AI Insights

The case involves a writ petition filed by a sole proprietary concern, which contested the levy of service tax under 'Commercial or Industrial Construction service' and 'Works contract services' for construction work done in 2008. The petitioner argued that the proceedings were arbitrary, barred by limitation, and lacked jurisdiction, as they were not served with a show cause notice or given an opportunity for a personal hearing. The respondents countered that the petitioner was engaged in works contract services, and relevant notices and orders were served appropriately. The court found that the petitioner had an alternative statutory remedy available through an appeal, which should be pursued instead of a writ petition.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 810892 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 18-12-2023
• Assessment Year: misc
• Other Referred Cases: The State of Maharashtra v. Greatship (India) Limited
• Laws Referred To: Article 226 of the Constitution of India, Finance Act 1994, A.P. VAT Act, 2005
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Commercial or Industrial Construction Service; Jurisdiction; Limitation of time; Natural Justice; Service tax; Works Contract Services; Writ of Mandamus
• Section: 87; 87; 73(2); 65(105)(zzq); 65(25b); 65(b)44

Judgement Text

"1 HON’BLE SRI JUSTICE U.DURGA PRASAD RAO AND HON’BLE SMT JUSTICE V.JYOTHIRMAI PRATAPA Writ Petition No.37475 of 2022 ORDER: (Per Hon’ble Sri Justice U. Durga Prasad Rao) In this writ petition filed under Article 226 of the Constitution of India, the petitioner prays for writ of mandamus declaring the proceedings of 1st respondent passed in OIO No. -02/2013-ST dated 30.01.2013 (Annexure P-1) for levy of service on tax “Commercial or Industrial Construction service” considering as “Works contract services” along with interest and penalty for the tax period March-2008 to May-2008, got served on 20.10.2022 (Annexure P-2) in pursuance of the request letter dt. 23.09.2022 (Annexure P-3) without service of show cause notice and opportunity of personal hearing, as arbitrary, barred by limitation of time and without jurisdiction, against the principles of natural justice and against to Article 366 (29-A) of the Constitution of India and contrary to the provisions of Sec.65 (105) (zzq) r/w Sec.65 (25b) (Commercial or industrial Construction Services) and more particularly is not a service as per interpretation at Sec.65(B)(44) of Service Tax-CHAPTER-V of Finance Act 1994 to declare as null and void and pass such other order or orders as the Hon’ble Court may deem fit and proper in the circumstances of the case. 2 2. The petitioner’s case briefly is thus: (a) The petitioner is a sole proprietary concern and executed the work of construction of factory shed / premises consisting of Guest House, Security Cabin and main Gate other civil works to M/s. Metal India Products Morasapudi, which is engaged in manufacture of metal tins, corrugated boxes etc. and said work was commenced in March 2008 and completed in May 2008. Since the work receipts were taxable as deemed sales and leviable under the A.P. VAT Act, 2005, the petitioner filed monthly returns under the said Act. However, the said activity is not a taxable service falling under Section 65(B)(44) of the Service Tax-CHAPTER V of the Finance Act. (b) While so, the 2nd respondent treating that the petitioner was engaged in the business of works contract services and upon examining the petitioner and her husband and in spite of their submission that their firm has undertaken only one work i.e., the construction of factory shed to M/s. Metal India Products and that the amount received by them was inclusive of the cost of material used in construction of the factory sheds and that their firm was closed in the year 2010 by surrendering the VAT registration, did not heed to their words and seems to have passed Assessment Order dated 30.01.2013 raising a demand of service tax of Rs.4,12,858/- u/s 73(2) of the Finance Act, 1994 with 100% penalty and interest and other charges. On 11.04.2022, the petitioner for the first time came to know that their bank account maintained with 5th respondent was attached by 1st respondent for the realization of tax and penalty dues of 3 Rs.27,92,353/-. The petitioner also came to know that their residential property was provisionally attached u/s 87 of the Finance Act, 1994. (c) The petitioner submitted letter dated 23.09.2022 to 1st respondent for providing copies of notices allegedly served and Assessment Order passed with respect to the impugned attachment order served on the respondents 5 & 6. The 1st respondent then served copies of show cause notice dated 01.05.2012 served on the husband of the petitioner and the impugned assessment proceedings dated 30.01.2013 said to be sent by registered post to the registered address of the petitioner, which was said to be returned undelivered with the remark “Addressee left”. The petitioner contends that the service of notice and panchanama at the known address of the petitioner is erroneous and against to the address known by 1st respondent. The petitioner was never served with the impugned show cause notice dated 01.05.2012 nor provided any opportunity of personal hearing dated 14.08.2012, 24.08.2012, 10.10.2012 and 16.11.2012 before passing the impugned Assessment Order dated 30.01.2013. The entire evidence relating to service of the notices was fabricated with malicious intention. The 1st respondent failed to serve the copies of (i) statement of the petitioner’s husband dated 13.04.2012 (ii) copies of the notices of personal hearing granted on 14.08.2012, 24.08.2012, 10.10.2012 and 16.11.2012 (iii) proof of service of Assessment Order [OIO] dated 30.01.2013 sent to registered address and previous correspondence address (iv) Panchanama dated 05.03.2013. 4 (d) It is the further case of petitioner that the 1st respondent erred in levying the tax for works contract services u/s 65(105)(zzzza) for the tax period March 2008 to May 2008 knowingly that the constructions are taxable w.e.f. 01.07.2010. The said provision of the act does not arise. (e) It is further contended that the impugned proceedings for the tax period March 2008 to May 2008 passed u/s 73(2) of the Finance Act, 1994 is barred by limitation, being the latest half yearly return for April 2008 to September 2008 has to be filed in Form ST-3 on 20.10.2008, for which the notice has to be initiated within 30 months i.e., on or before 30.04.2011. (f) The petitioner further contends that the 1st respondent erred in fabricating the entire case with malice for the reasons best known to them which substantially proves their failure in service of copies of (i) statement of the petitioner’s husband dated 13.04.2012 recorded by 4th respondent (ii) copies of the notices of personal hearing granted on 14.08.2012, 24.08.2012, 10.10.2012 and 16.11.2012 (iii) proof of service of OIO dated 30.01.2012 sent to registered address and previous correspondence address (iv) Panchanama dated 05.03.2013. Hence, the writ petition. 5 3. The 2nd respondent filed counter and opposed the writ petition inter alia contending thus: (a) The petitioner executed works contract and the 2nd respondent gathered information from Income Tax Department and called upon the petitioner several times for submission of the relevant documents by issuing summons. Finally Sri Kasireddy Adinarayana Reddy, the husband of petitioner and the authorized person, appeared before 4th respondent on 13.04.2012 and rendered statement and submitted relevant documents. (b) A show cause notice was served on the said authorized person on 09.05.2012 and thereafter the 1st respondent passed the impugned order in OIO No. 02/2013-ST dated 30.01.2013. The petitioner approached the 1st respondent through letter dated 23.09.2022 for providing copies and the 1st respondent vide letter dated 20.10.2022 gave the relevant information. (c) It is further stated that service tax on Commercial or Industrial Construction was imposed w.e.f. 10.09.2004 and service tax on works contract was imposed w.e.f. 01.06.2007. Similarly service tax was imposed on construction of residential complex having more than 12 residential units, w.e.f. 16.06.2005. Be that as it may, the 1st respondent initiated recovery proceedings on the petitioner for her failure to discharge service tax on commercial constructions which is not in dispute like that of construction of residential buildings. The Adjudicating Authority has rightly classified the provision of service by the petitioner under commercial construction. 6 (d) In view of the above law, the writ petition is not maintainable. The writ petition is not maintainable also for the reason that a statutory remedy of appeal is available. Therefore, the writ petition is liable to be dismissed in limini. 4. Heard learned counsel for the petitioner Sri K.Adi Siva Vara Prasad, and Sri Y.N.Vivekananda, Standing Counsel for the respondents. 5. Both the learned counsel reiterated their pleadings in their respective arguments. While it is the contention of the petitioner’s counsel that the construction activity undertaken by the petitioner is taxable as deemed sales under the AP VAT Act, 2005 but not under the provisions of the Finance Act, 1994 and that no show cause notices were issued to the petitioner calling for explanation and the alleged OIO proceedings dated 30.01.2013 were not served on the petitioner and it was only after attachment of the bank accounts of the petitioner, she came to know about all the stealthy activities of the respondents and that at any rate the Assessment proceedings were barred by limitation; in oppugnation, learned Standing Counsel for respondents argued that the show cause notices were served on the husband of petitioner viz., K.Adinarayana Reddy by 4th respondent on 09.05.2012 and after securing the information from him, the impugned proceedings in OIO No. 02/2013–ST dated 30.01.2013 were issued by 1st respondent and the same was sent to the registered address of the petitioner, but the same was returned undelivered with the remark “Addressee 7 left”, but the same was sent through another correspondence and it was also returned with remarks “Addressee not traceable by the postal authorities”. He further argued that the Inspector tried to serve the OIO personally, but the taxpayer was not available at the registered address and hence, in unavoidable circumstances the proceedings were pasted on the wall of the apartment of the petitioner in the presence of the witnesses on 05.03.2013 and a panchanama was drafted to that effect. Learned Standing Counsel thus argued that the assessment proceedings were procedurally correct. The construction activities undertaken by the petitioner squarely fall within the ambit of works contract service and excisable to tax under the provisions of the Finance Act. (a) In addition to above, learned Standing Counsel raised a preliminary objection that as against the impugned proceedings the statutory appeal is available to Commissioner of Central Excise (Appeals) which is clearly mentioned in the impugned order and in view of the availability of efficacious alternative remedy and also in view of the involvement of serious questions of facts as to the issuance of show cause notices to the husband of petitioner, who is her authorized agent, and the examination and recording of his statement and also service of the impugned order by registered post to the registered address of the petitioner and return of the said order due to the fact that addressee left and denial of all these facts by the petitioner, the writ petition is not 8 maintainable. He placed reliance on The State of Maharashtra v. Greatship (India) Limited1. 6. We gave our anxious consideration to the above respective arguments. Admittedly, the efficacious and alternative remedy of appeal is available to the petitioner. Further, as rightly argued by the learned Standing Counsel, there are a number of disputed facts involved in this case. The petitioner denied receiving any show cause notices before passing the Assessment Order. She claimed that thereby she was deprived of the valuable opportunity of hearing. She further denied that her husband was examined and his statement was recorded by 2nd respondent. The petitioner also pleads that the impugned proceedings in OIO dated 30.01.2013 were not known to her knowledge and she was not served with the copies of the order. The claim of the respondents that initially the show cause notices and subsequently the impugned proceedings were sent to her registered address and the same were returned unserved with an endorsement “the address left” is staunchly denied by the petitioner. She also contends that the impugned proceedings are barred by limitation. In our considered view, all these aspects need to be examined and decided by the concerned Appellate Authority after hearing both parties. In The State of Maharashtra’s case (1 supra), the Apex Court, in similar circumstances, observed thus: 1 MANU/SC/1206/2022 = AIR 2022 SC 4408 9 “4.1. It is next submitted by the learned counsel appearing on behalf of the appellants that the assessee had a statutory alternative remedy available by way of appeal before the first appellate authority and the said remedy ought to have been pursued, more so because, there were very serious disputed facts as to whether the assessment order was passed on 20.03.2020 or on 14.07.2020 (as alleged by the assessee). 4.2. Making the above submissions and relying upon the decisions of this Court in the case of Titaghur Paper Mills Co. Ltd. v. State of Orissa (1983) 2 SCC 433; Punjab National Bank v. O.C.Krishnan (2001) 6 SCC 569; Raj Kumar Shivhare v. Directorate of Enforcement (2010) 4 SCC 772; and United Bank of India v. Satyawati Tondon and others (2010) 8 SCC 110, it is prayed to allow the present appeal. 6. We have heard the learned counsel for the respective parties at length. At the outset, it is required to be noted that against the assessment order passed by the Assessing Officer under the provisions of the MVAT Act and CST Act, the assessee straightway preferred writ petition under Article 226 of the Constitution of India. It is not in dispute that the statutes provide for the right of appeal against the assessment order passed by the Assessing Officer and against the order passed by the first appellate authority, an appeal/revision before the Tribunal. In that view of the matter, the High Court ought not to have entertained the writ petition under Article 226 of the Constitution of India challenging the assessment order in view of the availability of statutory remedy under the Act. At this stage, the decision of this Court in the case of Satyawati Tondon (supra) in which this Court had an occasion to consider the entertainability of a writ petition under Article 226 of the Constitution of India by by-passing the statutory remedies, is required to be referred to xxxxxx. 7. Applying the law laid down by this Court in the aforesaid decision, the High Court has seriously erred in entertaining the writ petition under Article 226 of the Constitution of India against the assessment order, by-passing the statutory remedies. 8. Now so far as the reliance placed upon the decisions of this Court by the learned Senior Advocate appearing on behalf of the respondent, referred to hereinabove, are concerned, the question is not about the maintainability of the writ petition under Article 226 of the Constitution, but the question is about the entertainability of the writ petition against the order of assessment by-passing the statutory remedy of appeal. There are serious disputes on facts as to whether the assessment order was passed on 20.03.2020 or 14.07.2020 (as alleged by the assessee). No valid reasons have been shown by the assessee to by-pass the statutory remedy of appeal. This Court has consistently taken the view that when there is an alternate remedy available, judicial prudence demands that the court refrains from exercising its jurisdiction under constitutional provisions.” 10 7. Needless to emphasize that the above judgment of the Hon’ble Apex Court applies to the facts of the present case on hand. As such we hold that the writ petition is not entertainable before this Court in view of the availability of efficacious alternative remedy of appeal to the petitioner. 8. Accordingly, this Writ Petition is dismissed, however, granting liberty to the petitioner to file appeal against the impugned proceedings before the concerned Appellate Authority within four (4) weeks from the date of receipt of a copy of this order, in which case, the said Appellate Authority shall admit the appeal and after affording an opportunity of hearing to both parties, dispose of the same in accordance with the governing law and rules expeditiously. No costs. As a sequel, interlocutory applications pending, if any, shall stand closed. _________________________ U. DURGA PRASAD RAO, J ___________________________________ VENKATA JYOTHIRMAI PRATAPA, J 18.12.2023 MVA "