Smart Graph Art Advertising Pvt. Ltd. V. Union of India

SCA/1709/2020

AI Insights

In this case, Smart Graph Art Advertising Pvt. Ltd., represented by its directors, filed a Writ Application under Article 226 of the Constitution of India against the Union of India, challenging the legality of two letters issued by the Superintendent (prev.), CGST, Ahmedabad South. These letters demanded explanations and documents concerning alleged discrepancies in service tax payments for the years 2015-16 to 2017-18. The petitioner argued that the demands were based on provisions that had been repealed and that they had not received a crucial preliminary letter dated 27th June, 2019, referenced in the subsequent Reminder-I letter dated 2nd December, 2019. The court directed the department to provide the missing letter and allowed the petitioner to contest the demands once they received the document.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 802590 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 29-01-2020
• Assessment Year: misc
• Other Referred Cases: Special Civil Application No.14195 of 2019
• Laws Referred To: Article 226 of the Constitution of India, Finance Act, 1994, Goods and Service Tax Act, 2017, Central Excise Act, 1944, CGST Act, 2017
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Assessee Lawyers: HARSHIT PUROHIT; HIRAK GANGULY; JAYESH CHAUDHARY
• Keywords: Audit; Discrepancies; Non-payment; Service tax; Short payment; Writ of Mandamus
• Section: 14; 174; 83

Judgement Text

"C/SCA/1709/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 1709 of 2020 ========================================================== SMART GRAPH ART ADVERTISING PVT. LTD. Versus UNION OF INDIA ========================================================== Appearance: HARSHIT R PUROHIT(8385) for the Petitioner(s) No. 1 HIRAK P GANGULY(8002) for the Petitioner(s) No. 1 JAYESH B CHAUDHARY(8908) for the Petitioner(s) No. 1 for the Respondent(s) No. 1,2,3 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 29/01/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. By this Writ Application under Article 226 of the Constitution of India, the writ applicant-a Private Limited Company, through one of its Directors, has prayed for the following reliefs: “A. That Your Lordship may be pleased to issue a Writ of Mandamus or any other appropriate Writ, Order or Diretion, so as to quash and set aside Reminder-I letter bearing F.No.IV/16-01-PI-II/Misc./Third Party/2019-20 dated 02.12.2019 and letter dated 27.06.2019 both issued by the Superintendent (prev.), CGST, Ahmedabad South; B. That the Hon’ble Court pending the hearing and final disposal of this petition, be pleased to stay operation and execution of Reminder-I letter bearing F.No.IV-16- 01/PI-II/Misc./Third Party/2019-20 dated 02.12.2019 and letter dated 27.06.2019 both Page 1 of 6 C/SCA/1709/2020 ORDER issued by the Superintendent (prev.), CGST, Ahmedabad South; C. That ad interim relief as sought for in prayer (B) may kindly be granted; D. For costs; E. For such other and further reliefs as the circumstances may require.” 2. The case of the writ applicant, in his own words, as pleaded in the memo of the Writ Application, is as under: “3.1. The petitioner company herein is registered with the department and was providing taxable services in the nature of Advertising agency services, Mandap keeper service, Architect services, Event management, Outdoor Catering Service, Construction services other than residential complex, including commercial/industrial buildings or civil structures, Construction of residential complex service, Design service other than interior decoration and fashion designing. The petitioner herein was granted registration under Chapter V of the Finance Act, 1994 by way of Form ST 2. A copy of the Form ST-2 is annexed herewith and marked as Annexure B. 3.2. The petitioner herein humbly states that he has filed his service tax returns and has always paid the appropriate service tax from time to time without any queries of the department. The last service tax return was filed by the petitioner herein on 22.09.2017 which covered a period from April 2017 to June 2017. A copy of the ST 3 return dated 22.09.2017 filed by the petitioner company is annexed herewith and marked as Annexure C. 3.3 The petitioner herein humbly states that after July 2017 the petitioner herein has continued the business and have duly registered themselves under the provisions of Goods Page 2 of 6 C/SCA/1709/2020 ORDER and Service Tax Act, 2017. The petitioner company received its registration no.24AAMCS0355H1ZE on 19.09.2017 and since then has been complying with all the necessary provisions of the Goods and Service Tax Act, 2017. A copy f the certificate of registration is annexed herewith and marked as Annexure D. 3.4. The petitioner herein humbly states that as the audit was conducted by the department on 15.09.2017 and 18.09.2017 and pursuant to the audit an order dated 25.01.2018 came to be passed by the learned Asst. Commissioner of CGST, Audit, Circle-IV, Ahmedabad. The said order for audit was passed for the period 2014-2015 to 2016-2017. In compliance with the said order various discrepancies raised by the department were put to an end as the differential amount of service tax along with interest and penalty were paid by the petitioner herein. A copy of the Audit order dated 25.01.2018 passed by the learned Asst. Commissioner of CGST, Audit, Circle-IV, Ahmebadad annexed herewith and marked as Annexure E 3.5. The petitioner herein humbly states that the department vide their letter dated 21.02.2019 pointed out further discrepancies with regards to the service tax payment and thereby called upon the petitioner herein to pay the said amounts. Copies of the letters dated 21.02.2019 are annexed herewith and marked as Annexure F Collectively. 3.6. The petitioner herein humbly states that the petitioner vide his letter dated 25.03.2019 replied to the letters dated 21.02.2019 issued by the department pointing out discrepancies. The petitioner vide his reply made it amply clear that the provisions of the service tax have been repealed and therefore the discrepancies pointed out cannot survive as the department does not have proper authority to issue the same. A copy of the reply dated 25.03.2019 is annexed herewith and marked as Annexure G. 3.7. The petitioner herein humbly states that the Department vide its Page 3 of 6 C/SCA/1709/2020 ORDER Reminder-I letter dated 02.12.2019 directed the petitioner herein to submit details with regards to the short payment of service tax. It is pertinent at this stage to point out that the said letter is referred as a reminder letter to the letter dated 27.06.2019 issued by the department, but the petitioner herein has never been served with the letter dated 27.06.2019 as stated in the Reminder-I letter dated 02.12.2019.” 3. Our attention is drawn to the Reminder-I dated 2nd December, 2019, issued by the Office of the Principal Commissioner, Central GST, Commissionerate- Ahmedabad South. The same reads thus: “To, M/s Smart Graph Art Advertising Private Limited, (STC AAMCS0355HST001) N-002,Shrinand Nagar, Shrinand Nagar Part-I, Vejalpur, Ahmedabad Gujarat-380051. Gentleman, Sub:-Inquiry regarding non-payment / short payment of Service Tax-m/r. Please refer to this office letter of even no. dtd 27.06.2019 on the above mentioned subject. On the basis of the information / records available with this office, there has been found mismatch in the value of services provided by you as per ITR/Form 26 AS and ST-3 returns. 2. Therefore, you are requested to explain the same by submitting self certified copies of each of the following documents in respect of the financial year 2015-16 to 2017-18. 1. Copy of 26AS 2. Balance Sheet, Profit & Loss Account along with schedules. 3. Trail Balance Sheet from Page 4 of 6 C/SCA/1709/2020 ORDER 2015-16 to April-2017 June- 2017. 4. Reconciliation statement of service Income reflected in your Service Tax returns with returns filed by you with Income Tax & Vat authorities and Balance Sheet / Profit and Loss Account. 5. Sales ledger 2015-16 to June- 2017, 6. Copy of FAR (audit report) issued by department if any. 7. Cenvat ledger if Cenvat availed. The above information is being called for u/r Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 and Section 174 of the CGST Act, 2017. Please submit the aforesaid information / details to this office within 15 days of receipt of this letter.” 4. In the aforesaid Reminder, we find reference of the office letter of even no. dated 27th June, 2019. It is the case of the writ applicant that no such letter has been received till this date and, therefore, the writ applicant has no idea about the contents of such letter. 5. It is also the case of the writ applicant that the letter issued, demanding documents for Audit, under Sub-rule 2 of the Rule 5(A) of the Services Tax Rules, is illegal as there is no sufficient cause in favour of the Department to issue such a letter, demanding documents at this stage, more particularly, when the provisions of the Services Tax Act, 1994,, i.e. Chapter-V of the Finance Act, 1994, have been repealed. Page 5 of 6 C/SCA/1709/2020 ORDER 6. According to the learned advocate for the writ applicant, this issue is being looked into by this Court in the Special Civil Application No.14195 of 2019. 7. We are of the view that the writ applicant should file a detailed reply to the impugned Reminder dated 2nd December, 2019. The grounds which are urged before this Court, shall be put forward before the concerned Authority. 8. We dispose of this Writ Application with a direction to the respondent No.3 to furnish a copy of the letter of the even no. dated 27th June, 2019 at the earliest. Once the writ applicant is in receipt of such office letter dated 27th June, 2019, as referred to in the Reminder-I, the writ applicant shall look into the same and file an appropriate reply making good his case that the demand is not justified in law. Let this exercise be undertaken at the earliest. 9. With the above, this Writ Application stands disposed of. It is always open for the writ applicant to come back to this Court in case of any difficulty. Direct service is permitted. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) PALAK Page 6 of 6 "