Karnataka High Court
Sri.C. Suresh vs State Of Karnataka on 21 March, 2025
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
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WP No. 3108 of 2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF MARCH, 2025
BEFORE
THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 3108 OF 2025 (T-RES)
BETWEEN:
SRI.C. SURESH
AGED ABOUT 41 YEARS,
S/O RAMAKRISHNA
RESIDING AT K BELLUR
MADDUR MANDYA 571422.
...PETITIONER
(BY SMT. LAKSHMI MENON., ADVOCATE)
AND:
1. STATE OF KARNATAKA
FINANCE DEPARTMENT,
II FLOOR, VIDHANA SOUDHA,
BENGALURU 560001.
REP BY ADDL CHIEF SECRETARY
2. ASSISTANT COMMISSIONER
OF CENTRAL GST AND CENTRAL EXCISE,
BANNIMANTAP DIVISION S1 AND S2,
Digitally VINAYA MARGA, SIDDHARTHANAGAR,
signed by MYSORE - 570011.
LEELAVATHI
SR 3. THE COMMISSIONER OF CENTRAL TAX (APPEALS)
S1 AND S2, VINAYAMARG,
Location: SIDDARTHA NAGARA,
High Court of MYSORE 570004.
Karnataka ...RESPONDENTS
(BY SMT JYOTI M MARADI, ADVOCATE FOR R1
SRI ARAVIND V CHAVAN, ADVOCATE FOR R2 & R3)
THIS WP IS FILED UNDER ARTICLES 226 & 227 OF THE
CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE IMPUGNED
SHOW CAUSE NOTICE ISSUED BY RESPONDENT NO.2 AGAINST THE
PETITIONER HEREIN, DATED 24.12.2020 BEARING SCN
NO.C.NO.V/15/94/2020 ST/451/2020 VIDE DIN 20201257YY0000612026
(ANNEXURE - D) AND ETC.
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WP No. 3108 of 2025
THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS
DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
ORAL ORDER
In this petition, the petitioner seeks the following reliefs:
"a) To issue a writ of Certiorari or order or direction in the nature
of Certiorari to set aside the impugned Show Cause Notice
issued by Respondent no.2 against the Petitioner herein, dated
24.12.2020 bearing SCN no. C.NO.V/15/94/2020 ST/451/2020
vide DIN 20201257YY0000612026 (Annexure - D);
b) To issue a writ of Certiorari or order or direction in the nature
of Certiorari to set side the impugned Order-In-Original dated
02.03.2022, bearing reference no. MYS-EXCUS-000BMTPDIV-
AC-VM-40/2021-22 vide DIN-20220357YY0000333FA3 passed
by Respondent no. 2 against the Petitioner herein (Annexure -
F);
c) To issue a writ of Certiorari or order or direction in the nature
of Certiorari to set aside the impugned Order In Appeal dated
13.04.2023 bearing reference no. MYS-EXCUS-000-APP-YCS-
040-2023-24 passed by Respondent no. 3 against the Petitioner
herein (Annexure - G);
d) To issue a writ of Certiorari or order or direction in the nature
of Certiorari to set aside the Impugned Order dated 29.04.2024
in Miscellaneous application no.20495 of 2023 on the file of the
Ld. Customs Excise Service Tax Appellate Tribunal (Annexure-
K), and remand the matter back to Respondent no. 2/
adjudicating authority for fresh consideration on the merits of the
case;
e) To refund the pre-deposit paid by the Petitioner vide Challan
No.20220921133826463355 dated 21.09.2022 to the tune of
Rs. 3,74,080/- (Annexure - H);
f) To refund the pre-deposit paid by the Petitioner vide Challan
20231104133218726596 dated 4.11.2023 to the tune of Rs 1,
24, 695/-(Annexure-H1);
g) Alternatively, to issue a writ of Certiorari or order or direction
in the nature of Certiorari to set aside the Impugned Order dated
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29.04.2024 in Miscellaneous application no.20495 of 2023 on
the file of the Ld. Customs Excise Service Tax Appellate
Tribunal (Annexure - K), and direct the CESTAT allow the
application for condoning the delay being Miscellaneous
application no.20495 of 2023 as filed by the petitioner (produced
herewith as Annexure - J) and further direct that the appeal
preferred by the petitioner in Form ST-5 (Annexure - J1) be
taken on record for adjudication on merits;
h) Grant any other orders that this Hon'ble Court deems fit and
proper in the interest of justice. "
2. Heard learned counsel for the petitioner and learned
counsel for the respondents and perused the material on record.
3. Though several contentions have been urged by both
sides in support of their respective claims, the issue in controversy
between the parties is directly and squarely covered by the
judgment of the Co-ordinate Bench of this Court in the case of
Thamaneni Venkatareddy Vs. The Assistant Commissioner in
WP No.628/2024 & connected matters dated 10.07.2024,
wherein it was held as under;
"In all these matters, the proceedings by way of show
cause notice under the Finance Act for Service Tax liability
have been initiated on the basis of inputs received from the
Central Board of Direct Taxes (CBDT) on the basis of Form
26AS/income tax returns filed.
2. Taking note of the order dated 03.07.2024
passed by this Court in W.P.No.11154/2023 and connected
petitions, the present batch of Writ Petitions are also required
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to be disposed of in light of the observations made therein, as
the legal contentions are identical and would fall within the
consideration as reflected in the order dated 03.07.2024
passed in W.P.No.11154/2023 and connected petitions.
3. The observations made in the order dated
03.07.2024 passed in W.P.No.11154/2023 and connected
petitions, reads as follows:-
"These petitions have been filed calling in
question the action of the respondent Department in
issuing show-cause notice or having passed the
orders-in-original relating to demand sought to be
raised under the provisions of the Finance Act, 1994
relating to service tax liability.
2. In all these matters, the proceedings by
way of show-cause notice under the Finance Act for
service tax liability have been initiated on the basis
of inputs received from the Central Board of Direct
Taxes on the basis of Form 26AS/Income Tax
returns filed.
3. The details of the writ petitions and the
stages are as follows:
Challenge to Show- Challenge to Orders-
cause Notice in-Original
Column No.1 Column No.2
WP No.16891/2022 WP No.12840/2023
WP No.13445/2023 WP No.15832/2022
WP No.15959/2021 WP No.3318/2023
WP No.24822/2022 WP No.14425/2022
WP No.8514/2023 WP No.15018/2022
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4. After having heard the matters on various
occasions, the Union of India have taken a stand and
filed affidavit of the Principal Commissioner, Central
Taxes.
5. Sri.N.Venkataraman, learned Additional Solicitor
General who was present before the court on 27.06.2024
had submitted that they desire that the matters be
resolved and accordingly have putforth a proposed
mechanism and made certain suggestions in the affidavit
filed. The relevant extract of the affidavit filed by the
Principal Commissioner of Central Tax, presently holding
charge of Bengaluru West and additional charge of
Bengaluru East Commissionerate reads as hereunder:
"I, Kiran Verma, working as Principal
Commissioner of Central Tax, presently holding
charge of Bengaluru West and additional charge
of Bengaluru East Commissionerate, Bengaluru
do hereby solemnly affirm and state on oath as
follows:
I am working as Principal Commissioner of
Central Tax, Bengaluru West and holding
additional charge of Bengaluru East
Commissionerate, Bengaluru -560071. I am the
concerned person in the above Writ Petition. I am
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fully conversant with the facts of the case. I am
authorized to swear to this affidavit.
1. I submit that in the above batch of
cases, the dispute is regarding the Issuance of
the Show Cause Notice and demand of Service
Tax made on the basis of information provided by
CBDT (Central Board of Direct Taxes) as per the
assessee's Income Tax returns. The Service Tax
Levy is on the taxable services provided by one
person or Entity to another, in terms of the
provisions contained in the Finance Act, 1994
and the rules made thereunder.
2. I submit in these batch of Writ Petitions,
there are cases pertaining to various categories
of Services. It is submitted that a Memorandum of
understanding was signed between the Central
Board of Direct Taxes and the Central Board of
Indirect Taxes & Customs on 21.07.2020 for the
data exchange between the two Departments.
This Memorandum of Understanding was signed
for regular exchange of data which would help
both the departments to keep a track on the tax
evasion, which have not been reported under the
Law.
3. I submit that all the petitioners have
averred that the Show Cause Notices (SCN) were
issued without the application of mind and further
that the department has not verified the books of
account and only on presumption have issued
these Show Cause Notices. This averment of the
petitioner is denied as false, as the department
has taken utmost care by applying its mind and
by examining the data received from the CBDT.
4. I submit that, Section 66B Finance Act,
1994 is the charging Section and Service is
defined in Section 65B(44) and taxable Service is
defined in Section 65B(51).The assessee is
mandated to get the registration and secure
compliance of the obligations placed on him by
the Act which is prescribed in Chapter V of the
Finance Act, 1994 (hereinafter called "the Act")
read with the Service Tax Rules, 1994, the
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CENVAT Credit Rules, 2004, the Place of
Provision of Services Rules, 2012, the Point of
Taxation Rules, 2011, and the Service Tax
(Determination of Value) Rules, 2006. In terms of
Section 70 of the Finance Act, 1994, the
petitioner is obligated to self-assess their liability
and discharge the applicable tax as per the
statutory provisions and the entire burden of
compliance to statutory provisions is on the
assessee themselves. As per the Act, the Show
Cause Notice were issued in-terms of Section
73(1) of the Finance Act, 1994, as the services
rendered by the assesses appeared to be
classifiable as taxable service in terms of Section
65B(44) read with section 66B of the Finance Act,
1994.
5. I submit that the department received a
total number of 49,665 cases from the CBDT and
after receipt of the data the department has
verified the same. After preliminary verification,
the department initially filtered the cases and
where there was no component of Service Tay
dropped 21,549 such cases after detailed
verification. Thereafter the department issued
Show Cause Notices to the Assessee in the
remaining 28,116 cases and called for
clarification/explanation. The adjudicating
authority during the course of adjudication, after
providing a hearing opportunity to the notice,
dropped the show cause notices in about 8,816
cases wherever the Service tax component was
not found. The adjudicating Authority after
providing reasonable opportunity and hearing
opportunities proceeded to confirm the show
cause notice by way of an Order-In-Original in a
total number of 19,300 cases by following the due
process of law and following the principles of
natural justice. The department in further course
of action has also recovered the Service Tax in
587 cases where the service Tax component was
confirmed during the adjudication.
6. I state that there is no prohibition under
the provisions of the Finance Act 1994 or under
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the Service tax Rules to rely upon the third party
information that is furnished by the IT department.
The information need not be confined only in
respect of information provided by the assessee.
The object of sharing the data by the C.B.D.T to
C.B.E.C (Now C.B.I.C) is to keep track of the
statutory compliances by various categories of
assessee. Hence there is no irregularity or
illegality in relying upon the date obtained from
the Income Tax department.
7. I state that the provisions of the Finance
Act 1994 or Service Tax Rules do not
contemplate any enquiry before issuing a show
cause notice. No such procedure is contemplated
either under the act or rules. The only preliminary
enquiry to be undertaken was to examine the
data obtained from the C.B.D.T, issue of
intimations/ letters calling upon the assessees' to
furnish their documents which are necessary to
determine as to whether the assesses had
provided taxable service and whether the activity
of the assessee falls under the category of the
taxable service or non-taxable service.
8. I further submit that, in many of the writ
petitions the assessees' did not respond to the
letters issued by the department seeking
documents/information/clarifications. In spite of
several reminders there was no response from
the assesses. Hence, the department in absence
of any other option, issued the Show Cause
Notices on the address provided by the
CBDT(address as in PAN/ITR).These show
cause notices were issued keeping in mind the
statutory time lines. In some cases, even after the
issuance of Show Cause Notices, the assessee
did not render their reply or failed to produce any
document/clarifications.
9. Therefore, in the absence of any
clarifications or documents by the assessee,
decisions were taken based on available
information and the Order-In-Original were
passed. No Show Cause Notices were issued by
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the department where the clarifications with
requisite documents were provided in time.
Therefore, the allegations of non-application of
mind etc. are factually untenable and cannot be
sustained. The following consolidated data is
submitted to support the above contention: -
Table-1
BANGALORE ZONE - DATA
Commission No. of cases No. of cases No. of No.of Cases No. of cases No. of cases
rate's received from dropped prior cases where SCNs where SCNs were where
CBDT to issuance where were dropped Confirmed demand is
of SCN SCNs were recovered
issued
Bangalore East 11,113 6,387 4,726 801 3,925 310
North West
South
Mangalore 3,632 2,847 785 490 295 -
North
Bangalore West 4,336 1,083 3,253 1,299 1,954 35
Summary of the same is produced below:
Table-2
Sl Number Perce
No. of ntage
Cases
(i) Number of references 49,665 100%
received from CBDT
(ii) Dropped before 21,549 43%
issuance of Show
Cause Notice
(iii) Dropped after Show 8,816 18%
Cause Notice issued
and adjudicated.
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(iv) No. of cases 19,300 39%
confirmed after Show
Cause Notice issued
and adjudicated.
agreed to the
department's
contention and paid
the tax liability to the
exchequer before/after
the issuance of the
Show Cause Notice.
Out of the 49,665 references received from
CBDT a major portion i.e. 61% demands have
been dropped and only 39% of the cases have
been confirmed which shows that quasi-judicial
authorities have taken independent decisions on
merit. Where ever the demands were confirmed
the aggrieved party have an appellate remedy
under the Law.
10. I submit that when 587 assessees
have complied with the law & paid up the taxes
confirmed, grant of any relief to the present
petitioners will put the compliant taxpayers into a
disadvantageous position. Therefore, it is
submitted that the quasi-judicial authority has
taken independent decisions based on facts &
law. When department has acted upon CBDT
data to examine tax compliance all over the
country, granting any relief to the petitioners in
Karnataka alone will amount to disadvantage to
the tax payers who have complied with the law.
11. I therefore submit that this Hon'ble
High Court may direct the petitioners to appear
before the quasi-judicial authorities as the
petitions are premature and a robust appellate
remedy is provided by the Law.
12. I submit that the contents stated above
are as per records and correct to the best of my
knowledge, information and belief which I believe
to be true".
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6. Learned Senior Counsel Sri.V.Raghuraman has
also filed a note in response to the proposal and the same is
taken on record.
7. After hearing both sides and though certain issues
were raised, however both sides eventually have made a
submission that the Court can take note of the affidavit and
pass appropriate orders.
8. Upon suggestion of the court, learned Additional
Solicitor General has responded positively and has stated that
a team of Officers who are competent to pass orders without
reference to the territorial jurisdiction would be constituted
and from amongst such team of officers designation would be
made and cases allotted in order to pass necessary orders
from the stage of post show-cause notice which would be
done within a period of three months.
9. Needless to state, a bare perusal of all the petitions
reveals that the petitioners have raised various contentions
which are required to be referred back for consideration by
the appropriate authorities so that officers concerned may
take note of the same while disposing off the petitions at the
stage of post show-cause notice.
10. The officers while disposing off the petitions to
keep in mind the following:
1) Whether petitioners do not qualify under
Section 65B(44) of the Finance Act, 1994 ?
2) Whether services are covered under
negative list ?
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3) Whether services are covered under the
exemption list under the Notification
No.25/2012-ST dated 28.06.2012 or under
any other applicable Notifications?
4) Whether the person is liable to remit service
tax in terms of Rule 2 (1) (d) read with
applicable notification?
5) Whether claims are barred by limitation in
terms of the law laid down by the Apex
Court?
11. It is also clarified that disposal of present petitions
must not be construed as having adjudicated any of the
contentions including jurisdiction. All contentions of both
sides on merits are kept open.
12. Needless to state, upon conclusion of
proceedings, if any of the petitioners are still aggrieved, legal
remedies are kept open. It is also clarified that wherever,
replies to show-cause notice have not been made out, the
same may be filed upon matter being relegated as noticed
above.
13. Accordingly, the following:
ORDER
In light of observations made above, the writ petitions
relating to challenge to show-cause notice, such matters will
stand relegated to the officers to be designated in terms of the
observations made in para 8 above, at the same stage.
Accordingly, such of the petitions at Sl.No.1 to 5 in Column
No.1 of the table relating to challenge to show-cause notice
are disposed off.
Insofar as such writ petitions as detailed in Column 2 of
the table relating to challenge to Orders-in-Original, in light of
the discussion made above, the Orders-in-Original stand set
aside and the matters are relegated to the Officers to be
designated to be reconsidered from the stage of show-cause
notice. Accordingly, such of the petitions at Sl.No.1 to 35 in
Column No.2 of the table relating to challenge to Orders-in-
Original are disposed off.
The petitioners who are now relegated before the
authorities concerned are at liberty to file their pleadings
within a reasonable time as may be fixed by the Officers
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concerned. Wherever the matters are pending in appeal in
light of the arrangement that is made, petitioners to file a
memo for withdrawal of appeal and accordingly, the orders-in-
original in question would also receive the same treatment,
i.e. be set aside as per the directions made above.
Wherever demands have been made pursuant to the
impugned orders, such proceedings are also set aside."
4. The details of Writ Petitions and stages are as
follows:-
Sl. Writ Petition Stage of proceedings
No. Number (order-in-original/order in
appeal/ appeal proceedings
pending)
1 628/2024 Order-in-original
2 22017/2022 Order-in-original
3 6765/2023 Order-in-original
4 19943/2023 Order-in-original
5 22946/2023 Order-in-original
6 23317/2023 Order-in-original
7 26201/2023 Order-in-original
8 27259/2023 Order-in-original
9 1863/2024 Order-in-original
10 3523/2024 Order-in-original
11 7608/2024 Order-in-original
12 8299/2024 Order-in-appeal/order in original
13 9674/2024 Order-in-original
14 14354/2024 Order-in-original
15 16020/2024 Order-in-original
16 16309/2024 Order-in-original
17 16623/2024 Order-in-original
18 17141/2024 Order-in-original
19 18106/2024 Order-in-original
20 18151/2024 Order-in-original
5. In light of the observations made above, the
writ petitions relating to challenge to show-cause notice, such
matters will stand relegated to the Officers to be designated in
terms of the observations made in para-8 above, at the same
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stage. Accordingly, such of the writ petitions relating to
challenge to show-cause notice are disposed off. The
reconsideration must be made with reference to the issues
raised in para-10 of W.P.No.11154/2023 and connected writ
petitions extracted supra.
6. Insofar as Writ Petitions relating to challenge to
Orders-in-Original, in light of the discussion made
hereinabove, the Orders-in-Original stand set aside and the
matters are relegated to the Officers to be designated (as
referred to in para-8 of W.P.No.11154/2023 and connected
writ petitions as extracted hereinabove) to be reconsidered
from the stage of show-cause notice. The reconsideration
must be made with reference to the issues raised in para-10
of W.P.No.11154/2023 and connected writ petitions extracted
supra.
Accordingly, the Writ Petitions relating to challenge to
the Orders-in-Original are disposed off.
7. The petitioners who are now relegated before
the Authorities concerned are at liberty to file their
replies/additional replies within a reasonable time as may be
fixed by the Officers concerned.
8. Wherever the matters are pending in appeal, in
light of the arrangement that is made, the petitioners to file a
memo for withdrawal of appeal. If orders are passed in
appeal and proceedings challenging Orders-in-appeal are
pending before this Court, the Orders-in-appeal would stand
set aside. The Orders-in-original in matters where Orders-in-
appeal are challenged, would also receive the same
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treatment, i.e. be set aside as per the directions made
hereinabove and be proceeded with from the stage of post
show cause notice.
9. Needless to state that the petitioners are at
liberty to file replies/additional replies to the show cause
notice within the time fixed by the designated Officers.
10. Wherever demands have been made pursuant
to the impugned orders, such proceedings including
attachment are also set aside.
Accordingly, the petitions are disposed off."
4. Under these circumstances, the present petition is also
disposed of in terms of the aforesaid judgment of the Co-ordinate
Bench of this Court.
5. Accordingly, the impugned order at Annexure-F dated
02.03.2022 passed by respondent No.2 and impugned order at
Annexure-G dated 13.04.2023 passed by respondent No.3 are
hereby quashed.
Ordered accordingly.
Sd/-
(S.R.KRISHNA KUMAR)
JUDGE
