Arun Enterprises Vs Union of India And 3 Others (Allahabad High Court)
Allahabad High Court has dismissed a writ petition filed by Arun Enterprises against the Union of India and others, upholding orders that confirmed a service tax demand and rejected the firm’s appeal as time-barred. The court’s decision, delivered after considering arguments from both sides and reviewing various judicial precedents, emphasizes the strict adherence to statutory limitation periods in tax matters and the principle of alternative efficacious remedy.
Arun Enterprises, a partnership firm engaged in providing manpower for maintenance work to Paschimanchal Vidyut Vitran Nigam Limited (PVVNL), challenged an order dated March 31, 2017, which confirmed a service tax demand. The firm also sought the quashing of subsequent appellate orders that dismissed their appeal as time-barred and a refund of over Rs. 2.23 crore in deposited amounts along with interest and penalty.
Background of the Dispute
The core of the dispute originated from an agreement executed on December 9, 2010, between Arun Enterprises and U.P. Power Corporation Limited. According to the petitioner, Clause 29 of this agreement stipulated that service tax was to be paid by the department (PVVNL) to the external agency, meaning Arun Enterprises. Despite this, a notice was issued to Arun Enterprises on October 18, 2016, demanding payment of short-paid service tax under Section 73(1) of the Finance Act.
Arun Enterprises contended that they were not liable to pay service tax, a position they maintained in statements recorded on March 16, 2016, and September 30, 2016. However, the authorities proceeded to pass the impugned order on March 31, 2017, confirming the demand.
The Limitation Hurdle
The significant hurdle for Arun Enterprises was the delay in filing their appeal against the March 2017 order. The firm asserted that the appeal was filed on January 13, 2021, a delay of 1325 days. They attributed this substantial delay to the personal circumstances of Shri Arun Kumar Sharma, one of the two partners, who was reportedly incarcerated from May 30, 2017, to August 2, 2017, and subsequently released on bail on July 15, 2019, finally coming out of jail on August 2, 2019. The other partner had reportedly resigned earlier. Arun Enterprises argued that these circumstances constituted “sufficient cause” for condoning the delay, citing the Supreme Court’s judgment in ITC Limited & Another Vs. Union of India & Others [(1998) 8 SCC 610].
Respondents’ Stance and Judicial Precedents
Counsel for respondent no. 2, Shri Gaurav Mahajan, countered these submissions, arguing that the impugned orders were correctly passed as the appeal was filed beyond the prescribed period of limitation, which could not be condoned beyond the statutorily permissible extent. He further contended that the writ petition was not maintainable due to the availability of an equally efficacious alternative remedy of filing an appeal under Section 35-J of the Central Excise Act before the Division Bench of the High Court.
In support of their arguments, the respondents relied on several pronouncements from the Supreme Court and the High Court:
