Karnataka High Court
M/S Karnataka Transport Co vs Union Of India on 11 September, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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WP No. 20351 of 2025
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 11TH DAY OF SEPTEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE M.NAGAPRASANNA
WRIT PETITION NO. 20351 OF 2025 (T-RES)
BETWEEN:
M/S KARNATAKA TRANSPORT CO.,
NO. 20/2, FAZAL - E - SALAR COMPLEX,
2ND MAIN,
KALASIPALYAM NEW EXTENSION,
BENGALURU - 560 002.
REP. BY ITS PROPRIETOR,
MR. SANGAPPA ANNAPPA UPPIN.
...PETITIONER
(BY SRI. TEJAS N., ADVOCATE)
AND:
1. UNION OF INDIA,
Digitally MINISTRY OF FINANCE,
signed by
NAGAVENI DEPARTMENT OF REVENUE,
Location: NORTH BLOCK,
High Court of
Karnataka NEW DELHI - 110 001.
REP. BY SECRETARY.
2. SUPERINTENDENT OF CENTRAL TAX,
RANGE BSD2, SD-2 DIVISION,
BENGALURU SOUTH COMMISSIONERATE,
2ND FLOOR, TTMC BUILDING,
KANAKAPURA ROAD,
BANASHANKARI,
BENGALURU 560 070.
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3. ASSISTANT COMMISSIONER OF CENTRAL TAX
DIVISION 2,
BENGALURU SOUTH COMMISSIONERATE,
2ND FLOOR, BMTC BUILDING,
KANAKAPURA ROAD,
BANASHANKARI,
BENGALURU 560070.
4. THE COMMISSIONER OF CENTRAL TAX (APPEALS-I),
TRAFFIC AND TRANSIT MANAGEMENT CENTRE,
BMTC BUILDING NO.9,
4TH FLOOR, ABOVE BMTC BUS STAND,
DOMLUR,
BENGALURU - 560 071.
...RESPONDENTS
(BY SRI. V.C.SUDEEP, ADVOCATE FOR R1;
SRI.ARAVIND V CHAVAN, ADVOCATE FOR R2 TO R4)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &
227 OF THE CONSTITUTION OF INDIA PRAYING 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 18-10-2021 BEARING REFERENCE
NO.GEXCOM/SCN/ST/9443/2021-CGST-DIV-SD-2-COMMRTE-
BENGALURU(S) VIDE DIN-2021105700000000ED21
(ANNEXURE B) IN THE INTEREST OF JUSTICE AND EQUITY AND
ETC.
THIS PETITION, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
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WP No. 20351 of 2025
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CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA
ORAL ORDER
Petitioner is before this Court seeking the following
prayers:
"(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:18-10-2021
bearing reference No.GEXCOM/SCN/ST/9443/2021-
CGST-DIV-SD-2-COMMRTE-BENGALURU(S) vide
DIN-2021105700000000ED21 (ANNEXURE-B) in
the interest of justice and equity.
(b) To issue a writ of Certiorari or order or direction in
the nature of Certiorari to set aside the impugned
Order In Original dated: 23-05-2023 bearing
reference No.GEXCOM/SCN/ST/9443/2021-CGST-
DIV-SD-2-COMMRTE-BENGALURU(S) vide DIN-
2023065700000000E21E passed by respondent
No.2 against the petitioner herein (ANNEXURE C) in
the interest of justice and equity.
(c) To issue a writ of Certiorari or order or direction in
the nature of Certiorari to set aside the impugned
Order - In - Appeal No.628/2024
dated:28-11-2024 bearing reference
No.GAPPL/COM/STP/1130/2024 vide DIN-
20241157CU000091439A passed by respondent
No.3 against the petitioner herein (ANNEXURE -
D1) in the interest of justice and equity.
(d) To refund the pre-deposit paid by the petitioner
through Bank of Baroda dated:01-08-2023 to the
tune of Rs.1,37,151/- (ANNEXURE - F).
(e) Issue any other writ, order or direction which deems
fit for this Hon'ble Court under the facts and
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circumstances, of the case including the award of
costs in the interest of justice and equity."
2. Heard Sri.Tejas N, learned counsel appearing for the
petitioner, Sri.V.C.Sudeep, learned counsel appearing for
respondent No.1, Sri.Aravind V Chavan, learned counsel
appearing for respondent Nos.2 to 4 and have perused the
material on record.
3. Learned counsel for the petitioner submits that the
issue in the lis is akin to what is decided by the Coordinate
Bench in W.P.No.11154/2023 (T-IT) C/w W.P.No.15959/2021
(T-RES) and connected matters, between M/S KARNATAKA
CHINMAYA SEVA TRUST vs. JOINT COMMISSIONER OF
CENTRAL TAX AND ANOTHER, disposed on 03.07.2024. He
would submit that several of the petition was disposed in the
same terms.
4. Learned counsel for the Revenue would not dispute
the position.
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5. I, therefore deem it appropriate to notice what the
Coordinate Bench has held in W.P.No.11154/2023 (T-IT) C/w
W.P.No.15959/2021 (T-RES) and connected matters, between
M/S KARNATAKA CHINMAYA SEVA TRUST vs. JOINT
COMMISSIONER OF CENTRAL TAX AND ANOTHER,
disposed on 03.07.2024, which reads as follows:
"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-cause Challenge to Orders-in-Original
Notice
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
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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 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.
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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 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 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
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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 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
01 02 03 04 05 06 07
Commissi No. of No. of No. of No.of No. of No. of
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onerate's cases cases cases Cases cases cases
received dropped where where where where
from prior to SCNs were SCNs SCNs were demand is
CBDT issuance issued were Confirmed recovered
of SCN dropped
East
North
West
South
Mangalore 3,632 2,847 785 490 295 -
North
West
Summary of the same is produced below:
Table-2
Sl Number of Percentage
No. Cases
(i) Number of references received from 49,665 100%
CBDT
(ii) Dropped before issuance of Show 21,549 43%
Cause Notice
(iii) Dropped after Show Cause Notice 8,816 18%
issued and adjudicated.
(iv) No. of cases confirmed after Show 19,300 39%
Cause Notice issued and adjudicated.
department's contention and paid the
tax liability to the exchequer
before/after the issuance of the Show
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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".
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
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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 ?
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:
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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
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."
6. In the light of the submissions so made, the petition
deserves to be disposed in the same terms as is done by the
Coordinate Bench in the judgment quoted supra.
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7. For the aforesaid reasons, the following:
ORDER
a. The writ petition is allowed.
b. The impugned Show Cause Notice issued by
respondent No.2 against the petitioner herein
dated:18-10-2021 bearing reference
No.GEXCOM/SCN/ST/9443/2021-CGST-DIV-
SD-2-COMMRTE-BENGALURU(S) vide DIN-
2021105700000000ED21 (ANNEXURE-B),
stands quashed.
c. The impugned Order-In-Original dated:
23-05-2023 bearing reference
No.GEXCOM/SCN/ST/9443/2021-CGST-DIV-SD
-2-COMMRTE-BENGALURU(S) vide DIN-
2023065700000000E21E passed by respondent
No.2 against the petitioner herein (ANNEXURE
C), stands quashed.
d. Impugned Order-In-Appeal No.628/2024
dated:28-11-2024 bearing reference
No.GAPPL/COM/STP/1130/2024 vide DIN-
20241157CU000091439A passed by
respondent No.3 against the petitioner herein
(ANNEXURE - D1), stands quashed.
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e. The matter is remitted back for reconsideration
from the stage of show-cause notice afresh, to
the hands of the concerned respondent, in
accordance with law, bearing in mind the law
laid down in KARNATAKA CHINMAYA SEVA
TRUST supra.
f. The petitioner is at liberty to file his pleadings
within a reasonable time as may be fixed by
the concerned Officer of the Revenue.
Ordered accordingly.
Sd/-
(M.NAGAPRASANNA)
JUDGE
CBC
