Ivyakrest Vs Assistant Commissioner of Central Taxes (Karnataka High Court)
Summary: Karnataka High Court partly allowed the writ petition filed by M/s Ivyakrest challenging an ex-parte Order-in-Original dated 20.03.2024 raising a service tax demand under the Finance Act, 1994. The proceedings had been initiated on the basis of information received under an arrangement with the Central Board of Direct Taxes (CBDT), and the adjudicating authority proceeded ex-parte after recording that the petitioner had neither responded to the show cause notices nor availed the opportunity of personal hearing. Before the High Court, the petitioner relied upon a Circular dated 19.09.2013 and contended that its activity of providing pre-school education was excluded from the service tax regime.
The Court considered two material aspects: first, that the proceedings had originated from information received from the CBDT; and second, the petitioner’s claim regarding the exclusion of pre-school education from the tax regime. Observing that in similar circumstances the Court had intervened to restore proceedings so that a registered taxable person could place all relevant circumstances and supporting material before the adjudicating authority, the High Court quashed the Order-in-Original and remanded the proceedings to the respondent for reconsideration.
The relief was made conditional upon the petitioner depositing 10% of the tax in demand, subject to the ultimate outcome of the proceedings. The petitioner was granted liberty to file its response along with all supporting documents by 15.10.2026. The Court further clarified that, once the adjudication order had been interfered with, there could be no precipitative recovery action even if a garnishee notice had been issued.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner’s grievance is with the Order-in-Original dated 20.03.2024 [Annexure – A], which is for a demand of service tax under the Finance Act, 1994. The proceedings are begun based on the information received from under an agreement with the Central Board of Direct Taxes [CBDT], and the proceedings are completed ex-parte resulting in the impugned Adjudication Order and the Demand therein. The Adjudicating Officer has observed that the petitioner has not responded to the Show Cause Notices and the opportunity of personal hearing extended.
Mr. Balasubbaiah B G, the learned counsel for the petitioner, and Mr. Aravind V Chavan, a learned Standing counsel for the respondent, are heard for disposal of the petition considering two material aspects: [i] the proceedings are begun based on the information by the CBDT and [ii] the petitioner, relying upon the Circular dated 19.09.2013, canvasses that its services of providing Pre-school Education is excluded from the tax regime. In similar circumstances, this Court has intervened to restore the proceedings so that an opportunity is available to the Registered Taxable Person to bring on record all circumstances to justify the defense that could be against the proposed demand. As such, the following.
ORDER
A. The petition is allowed in-part.
B. The impugned Order-in-Original dated 20.03.2024 [Annexure – A] is quashed restoring the proceedings to the respondent for reconsideration subject to the petitioner depositing 10% of the tax in demand subject to the outcome in such proceedings and reserving liberty to the petitioner to file response by 15.10.2026 with all supporting documents.
C. It is needless to observe that with the Adjudication Order being interfered with there cannot be any precipitation even if garnishee notice is issued.
