Case Law Details
G N Krishna Vs Additional Commissioner of Central Tax (Karnataka High Court)
The Karnataka High Court examined a challenge to an Order-in-Original relating to service tax liability determined on the basis of inputs received from the Central Board of Direct Taxes and figures reflected in TDS statements and Form 26AS. The petitioner contended that the authority failed to properly consider Entry 13 of Notification No.25/2012-ST dated 20.06.2012 while examining the services provided. The petitioner also relied on an earlier decision in W.P.No.11154/2023 and connected petitions, where matters involving service tax demands primarily based on income tax returns had been remanded for fresh consideration.
The Court noted that the observations made in the earlier batch of petitions required consideration. In that decision, the Court had directed authorities to examine whether the petitioners qualified under Section 65B(44) of the Finance Act, 1994, whether the services fell within the negative list, whether exemptions under Notification No.25/2012-ST or other notifications applied, whether liability arose under Rule 2(1)(d), and whether the claims were barred by limitation. The earlier judgment had also clarified that all contentions on merits and jurisdiction remained open.
Relying on those observations, the Karnataka High Court set aside the impugned Order-in-Original and remitted the matter back to the stage of reply to the show cause notice. The Court directed the authorities to reconsider the matter in light of the observations made in the earlier judgment, particularly paragraph 10. It further clarified that the petitioner was at liberty to file a fresh reply to the show cause notice and directed the petitioner to appear before the respondent on 25.05.2026 without waiting for further notice.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Learned Counsel Sri.Aravind Chavan accepts notice for the respondents.
2. The petitioner has assailed the validity of the Order-in-Original at Annexure-A. Petitioner submits that the order-in-original is based on adjudicated liability of the petitioner relating to service tax on the basis of inputs received from the Central Board of Direct Taxes and on the basis of figures appearing in the TDS statement, Form 26AS.
3. It is further submitted that service provided by the petitioner was examined in light of Entry 13 of Notification No.25/2012-ST dated 20.06.2012 and such aspect was not taken note by the authority in a proper manner.
4. It is further submitted that this court while dealing with the cases where adjudication has been completed and demand of service tax raised primarily relying on income tax returns has remitted back the matters for fresh consideration in light of observations made in W.P.No.11154/2023 and connected petitions.
5. It is accordingly submitted that on parity, identical order may be passed.
6. Learned Counsel Arvind Chavan submits that petitioner was heard in the matter.
7. However, the observations made in W.P.No.11154/2023 and connected petitions requires consideration.
8. This Court while disposing of the said petitions by remanding it to the stage of reply to the show cause notice had made certain observations to be kept in mind by the concerned officials. The observations made from para-10 onwards reads as follows:-
“10. The officers while disposing off the petitions to keep in mind the following:
i. Whether petitioners do not qualify under Section 65B(44) of the Finance Act, 1994 ?
ii. Whether services are covered under negative list ?
iii. 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?
iv. Whether the person is liable to remit service tax in terms of Rule 2 (1) (d) read with applicable notification?
v. 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 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.”
9. In light of the above, the order-in-original at Annexure-‘A’ is set aside. The matter is remitted to the stage of reply to the show cause notice. The Authorities to take note of the observations made in the order dated 03.07.2024 passed in W.P.No.11154/2023 and connected petitions as extracted supra, in specific, to the observations at para-10 of the order as may be applicable. All contentions are kept open.
10. Needless to state that the petitioner is at liberty to make out a fresh reply to the show cause notice.
11. The petitioner to appear before the respondent on 25.05.2026 without waiting for any notice.
12. Accordingly, the petition is disposed of.
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