By TIOL News Service

ERNAKULAM, MAY 27, 2014: KOTHAMANGALAM is situated in the eastern part of Ernakulam district, Kerala State. It is known as a trading center for spices and forest products. It is also famous for its ancient Syrian Christian churches. Kothamangalam Municipality had approached the Kerala High Court with a Writ Petition against the actions initiated by the Additional Commissioner of CE & ST and also the Superintendent of CE & Service Tax.

The short point is that the Municipality was adjudged to have provided the following Services but not paid Service Tax during the period 2007-08 under the category of Renting of Immovable Property Services and during the period 2007-08 to 2010-11 under the categories of "Business Support Services" viz. collection of bus stand fee & "Sale of Space or Time for Advertisement Services" respectively. Later, upon noticing that there is a mistake apparent from the record, by exercising the power contained in s. 74(1) of the FA, 1994, the adjudicating authority enhanced the liability by including 'interest' payable under Section 75 of the FA, 1994 in respect of the amount confirmed. It needs mention that the petitioner is a registered service provider under the category of "Renting of Immovable Property Service" from 03.11.2008.

Incidentally, no appeal has been filed by the petitioner against these orders within the prescribed time and the present petition has been filed after more than a year.

Nonetheless, in the Petition filed, the petitioner contends that they are actually not supposed to bear any liability for the reason that they are discharging statutory functions under the Municipality Act, 1994 and hence outside the purview of the Service Tax net. Reference is also made to the Circular No.89/7/2006- ST dated 18.12.2006 in the proceedings.

The Revenue authorities have filed a counter affidavit raising a question of maintainability of the writ. The specific case of the respondents is that the petitioner was having an effective alternate remedy by way of appeal as provided under Section 85 of the FA, 1994 before the Commissioner of Central Excise (Appeals) but the petitioner admittedly did not avail any such statutory remedy within the specified time, or even within the extended time, offering any satisfactory explanation for the delay. Inasmuch as by virtue of the law declared by the Apex Court in Singh Enterprises v. Commissioner of Central Excise, Jamshedpur - 2007-TIOL-231-SC-CX and reiterated in Amchong Tea Estate v. Union of India - 2010-TIOL-63-SC-CX and also several other decisions rendered, it is contended that, once the statutory period to file appeal is over, the party cannot be permitted to resurrect the cause by invoking the discretionary remedy under Article 226 of the Constitution of India.

The petitioner relies on the decision in M/s. Panopharam v. Union of India [ILR 2010 (2) Kerala 909] to contend that the writ petition is maintainable despite the fact that the statutory period for filing appeal is over.

It is also submitted that the petitioner is not in a position to demand or realise the differential tax from the parties to whom the service was rendered, as the right to collect the Bus stand fee Advertisement tax etc. was being allotted to the successful bidder/concerned parties on yearly basis, by way of public auction. It is also pointed out that the liability to satisfy Service Tax was not incorporated in the tender conditions/contract earlier and as such, there is much hardship (technical and legal) in recovering the arrears from the parties concerned.

The High Court observed that the petitioner did not choose to contest the matter by filing any appeal, but has made a belated attempt by way of this writ petition filed after more than one year. The High Court also agreed with the reliance placed on the case laws cited by the Revenue.

In the matter of the decision relied by the petitioner, the High court extracted the observation made in paragraph 19 of the judgment and observed -

"From the above, it is clear that the Bench specifically observed that the case of a person who did not choose to avail the statutory remedy within the specified time, is never seated on a better position than a person who approached this Court directly by filing a writ petition instead of availing a statutory remedy before expiry of the time and driven out relegating to avail the statutory remedy declining interference under Article 226. Undisputedly, the petitioner was simply sleeping over the issue."

And further noted -

++ The only observation made by the Division Bench of this Court in M/s. Panopharam v. Union of India [ILR 2010 (2) Kerala 909] is that, writ petition can be entertained even if the alternate statutory remedy had become time barred, provided the petitioner is able to establish a justifiable right. If the writ petition raises issues on which ordinary relief could not be given by the statutory authority, then, the fact that writ petition has been filed beyond the period prescribed under the Statute, cannot be a ground for dismissal of the writ petition. Referring to the facts of the case, as disclosed from paragraph 3 of the judgment (non-filing of the statutory appeal under Section 85 of the Finance Act, 1994 within the prescribed time), the Bench observed in paragraph 24 of the above verdict, that the reliefs sought for in the said writ petition were reliefs which ordinarily could be granted by the appellate authority and therefore, there was no extraordinary situation for invoking the power under Article 226 of the Constitution of India, even if the writ petition was filed within the period of limitation. It was accordingly, that interference was declined and the writ petition was dismissed. This Court finds that the above decision cited on behalf of the petitioner does not come to the rescue of the petitioner at all.

Referring to Circular No. 89/7/2006-S.T. dated 18.12.2006 relied by the petitioner, the High Court said it had doubts as to whether the petitioner's activity does come within the purview of the Circular. Inasmuch as there is specific observation in the said Circular that the fee being charged is ultimately deposited in the Government treasury whereas in the case of petitioner, being an institution of Local Self Government, it is not deposited in the Government Treasury, but goes to the funds of the petitioner Municipality.

On the aspect as to whether the petitioner had approached the High Court at least within 'reasonable time', after expiry of the statutory period for filing the appeal, the High Court observed that the orders are dated 24.05.2012 and 23.08.2012 respectively, whereas the writ petition has been filed only about 1+ years after passing the said orders. And, therefore, it cannot but be held, that the petitioner has not approached the Court within a reasonable time, so as to call for interference by this Court in exercise of the discretionary jurisdiction under Article 226 of the Constitution of India.

Holding that there is absolutely no merit or bonafides in the writ petition, the same was dismissed.

(See 2014-TIOL-838-HC-KERALA-ST)