By TIOL News Service

KOLKATA, MAY 02, 2014: THIS is Writ Petition filed against the order of Tribunal under Section 35F directing the assessee to deposit 25% of the service tax.

The main challenge of the Petitioner is that the authorities cannot make out a new case divorced from the show cause notice and to impose the service tax followed by the penalty and the interest. According to the petitioner, the service tax was demanded under the category of Commercial or Industrial Construction Services whereas the Commissioner imposed the duty under the category of Works Contracts Services. The order of the CESTAT is impugned on the plea that the Tribunal could not have directed the payment of 25% of the service tax when a strong prima facie case is made out and, therefore, the said order is an outcome of non-application of mind.

After hearing both sides, the High Court held:

The principle behind the issuance of the show-cause notice is not only to make aware the person against whom the action is intended to be taken but it must contain the language in precision which on reading thereof, make the person understand, the case which he has to defend. The show-cause notice is the foundation of an action and, therefore, a plea, which is not taken, shall not be permitted, as the person did not have an opportunity to meet the same. In the instant case, the show cause notice was issued on the plea of non-deposit of the service tax for the services rendered under the “Commercial or Industrial Construction Services” as a Sub-Contractor amounting to the deliberate suppression.

The Commissioner (sic Tribunal) did not consider the aforesaid aspect and have simply proceeded in casual and mechanical manner to say that the full case of waiver is not made out and directed 25% of the service tax to be deposited, though the petitioner have been able to make out a strong prima facie case that the Commissioner has gone beyond the scope of the show cause notice.

Accordingly, the High Court modified the pre-deposit amount from 25% to 10% of the demand.

On the question of maintainability of Writ Petition against the order passed under Sec 35F of the Central Excise Act, 1944, the High Court held:

There is no absolute bar in entertaining the writ petition under Article 226 of the Constitution despite existence of an alternative efficacious remedy. This Court finds that there has been a manifest injustice apparent on the face of the record. This Court does not feel that the jurisdiction under Article 226 of the Constitution is completely ousted. Since a strong prima facie case is made out by the petitioner, the deposit of 25% of the demand would certainly cause an undue hardship.

(See 2014-TIOL-622-HC-KOL-ST)