Case Law Details
Rattan India Power Limited Vs Union of India (Bombay High Court)
Bombay High Court dismissed the present petition as petitioner has the option to file a statutory appeal to the Appellate Tribunal and there is no reason why petitioner cannot avail of the statutory remedy of appeal.
Facts- By this writ petition filed under Article 226 of the Constitution of India, the Petitioner seeks to quash and set aside the order passed by Respondent No. 3 – the Principal Commissioner of Goods and Service Tax and Central Excise. This order levied service tax on the amount paid by the Petitioner to the State of Maharashtra for irrigation restoration charges.
The Respondents have put forth a preliminary contention that the writ petition should not be entertained. They argue that the petitioner has an alternative and efficacious remedy of appeal to the Customs Excise and Service Tax Appellate Tribunal and that no exceptional circumstances exist to justify interference in writ jurisdiction. The primary issue to be decided is whether the writ petition should be entertained, given the availability of the alternative remedy of appeal, as argued by the Respondents.
Conclusion- It was held that the Finance Act 1994 provided complete machinery to challenge the order of the assessment in appeals, the last one being before the Supreme Court. Further, even assuming that the first appeal would lie in this court and not the Supreme court, this is not a case where writ jurisdiction needs to be entertained when the petitioner has a remedy of a substantive appeal.
The Adjudicating Officer had the jurisdiction to decide whether a particular activity attracts service tax or not, and the Petitioner has the option to file a statutory appeal to the Appellate Tribunal where the Petitioner can present all of its contentions. There is no reason why the Petitioner cannot avail of the statutory remedy of appeal. Considering all the circumstances, we find merit and uphold the preliminary objection raised by the Respondents that the writ petition should not be entertained.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
By this writ petition filed under Article 226 of the Constitution of India, the Petitioner seeks to quash and set aside the order passed by Respondent No. 3 – the Principal Commissioner of Goods and Service Tax and Central Excise. This order levied service tax on the amount paid by the Petitioner to the State of Maharashtra for irrigation restoration charges.
2. The Respondents have put forth a preliminary contention that the writ petition should not be entertained. They argue that the petitioner has an alternative and efficacious remedy of appeal to the Customs Excise and Service Tax Appellate Tribunal and that no exceptional circumstances exist to justify interference in writ jurisdiction. The primary issue to be decided is whether the writ petition should be entertained, given the availability of the alternative remedy of appeal, as argued by the Respondents.
3. On 21 January 2003, Respondent No. 4 – the State of Maharashtra passed a government resolution concerning water allocation for non-irrigation purposes, such as industrial use. This resolution stated that the buyer would be responsible for paying the water charges. Additionally, on 21 February 2004, the State of Maharashtra issued a Circular outlining the procedure for calculating water charges. Regarding charges incurred by the Irrigation Department of the State of Maharashtra for constructing an irrigation network, the Circular specified that the capital cost would be considered. The charges recovered to compensate for the amount of land that could not be irrigated due to water being diverted for non-irrigation use were referred to as Irrigation Restoration Charges. According to the 2004 Circular, the buyer had the option not to pay the capital contribution cost but instead pay a higher interest rate on water charges. The irrigation restoration charges would then be quantified at Rs. 5 0,000/- per hectare.
4. The Petitioner operated a thermal power plant in Amaravati district and was registered with the Service Tax department under STC No. AALCS2063DST001. To obtain water for their plant, the Petitioner sought to source it from the Upper Wardha Dam in Simbhora. The Petitioner desired to construct a pump station on government land allotted by the Vidarbha Irrigation Development Corporation to accomplish this. The Petitioner approached the State Government for permission to draw 87,600 million litres of water per year and had not paid any amount toward the proportional cost of the project’s capital outlay. On 22 May 2012, an agreement was reached between the State of Maharashtra and India-Bulls Power Ltd (the Petitioner’s previous name). As per the agreement, the Petitioner deposited a security amount of Rs. 5,60,640 with the Executive Engineer, Upper Wardha Dam, Amaravati, and agreed to pay water royalty at a higher rate. Regarding the current issue, the Petitioner agreed to pay or had already paid irrigation restoration charges at Rs. 1,00,000/- per hectare. The Agreement stipulated that Rs. 232.18 crores would be paid as irrigation restoration charges every two years, with applicable interest. Furthermore, the State Government permitted the Petitioner to draw 87,600 million litres of water annually for their plant for six years from 22 May 2012.
5. The Petitioner filed Writ Petition No.4968/2015 at the Nagpur Bench of this Court to challenge the application of irrigation restoration charges as per the Government Resolution dated 21 February 2004. By its judgment and order dated 5 May 2016, the Division Bench partially allowed the petition. It declared that the decision dated 6 March 2009 fixing the maximum rate of irrigation restoration charges prospectively from 1 April 2009 is not applicable. The Bench directed that the State of Maharashtra is entitled to irrigation restoration charges of Rs.50,000/- per hectare. This is not very relevant to the current issue as the Petitioner has already paid the amount of irrigation restoration charges to the State of Maharashtra. The dispute at hand concerns the imposition of service tax on the amount paid.
6. The Directorate General of GST Intelligence received information that the Water Resources Department of the State of Maharashtra was collecting non-irrigation charges, such as restoration charges and capital expenses, from various customers for water usage for non-irrigation purposes. Non-governmental entities paid these charges under the reverse charge mechanism but did not pay the service tax. An inquiry was initiated against the Petitioner and other institutions. During the investigation, the Petitioner provided a copy of the Agreement between the State of Maharashtra and India-bulls Private Limited. The Petitioner contended that irrigation restoration charges were meant to recover the cost of constructing the distribution network and that no service was rendered; hence, the liability to pay service tax did not arise. The statement of the Petitioner’s employee was recorded under the provisions of the Central Goods and Services Tax Act, 2017, reiterating the Petitioner’s stand.
7. On 7 July 2018, the Petitioner received a show cause notice which stated that as per the Agreement with the State of Maharashtra, the Petitioner was obligated to pay an amount of Rs.232.1 8 crore as irrigation restoration charges in five instalments over a period of two years with applicable interest. However, from October 2012 to June 2017, the Petitioner only paid irrigation restoration charges of Rs.60,53,70,273/- to the Government of Maharashtra. The show cause notice stated that this service appears to fall under the definition of the Services defined under Section 65B 44 of Finance Act, 1994, since it is not covered under the Negative List under Section 66D of Finance Act, 1994 nor under Mega Exemption notified vide Notification No.25/2012-ST dated 20 June 2012 (as amended) during the period from 1 October 2012 to 30 June 2017. Additionally, clause No.13 of the concerned Government Resolution mentioned that the expenditure to restore the land irrigation capacity should be computed at Rs.50,000/- per hectare. Clause-10 takes into consideration the total irrigation potential or capacity of the project and loss in that capacity because of the diversion of water for non-irrigational purposes, and accordingly, computation in clause 13 is required to be worked out to compensate for that loss. It was stated that the payment made to the Government of Maharashtra as irrigation restoration charges is not for assigning any rights to use natural resources, but it is a recovery of the expenditure to restore the land irrigation capacity. The Petitioner had failed to pay the required service tax on the irrigation restoration charges, despite being obligated to do so under the provisions of the Finance Act, Service Tax Rules, and Section 174 of the Act of 2017.
8. Accordingly, Petitioner was called to show cause to the Commissioner of CGST as to why the services received by the Petitioner by way of restoration of command area against the payment of consideration as non-irrigation charges should not be considered as service under section 65-B(44) of the Finance Act, 1994 read with sections 142 and 147 of the Central Goods and Services Tax Act, 2017 (Act of 2017) and why the extended period specified in the proviso to sub-section (1) of Section 73 of the Finance Act, 1994 read with Section 142 & 174 of the Act of 2017 should not be invoked for the recovery of the Service tax due from them. Regarding the amounts to be paid, the show cause notice called upon the petitioner to demonstrate why the following amount should not be recovered. Service tax amounting to Rs.7,57,01,386/- inclusive of Education Cess, Secondary & Higher Education Cess and Swatch Bharat Cess in terms of proviso to Section 73(1) of the Finance Act, read with Section 142 and 174 of the Act of 2017. Interest at appropriate rates on the aforesaid amount under the provisions of Section 75 of the Finance Act, 2004, read with Sections 142 and 174 of the Act of 2017. Penalty under the provisions of Section 78 of the Finance Act, 1994 for willful suppression of facts and contravention of the various statutory provisions with intent to evade payment of service tax read with Section 142 and 174 of the Act of 2017. Lastly, the penalty under the provisions of Section 76 of the Finance Act, 1994, read with Sections 142 and 174 of the Act of 2017. Penalty under Section 77(1) of the Finance Act, 1994, for not taking registration for Business Support Service read with Sections 142 and 174 of the Act of 2017.
9. The Petitioner submitted its response pursuant to the show cause notice, and it referred to the written submissions filed on 10 January 2019. The Petitioner took a stand that service tax is not payable on irrigation restoration charges as what is provided was not a service. The Petitioner also took objection to the invocation of the extended period. By the impugned order dated 10 December 2020, the Respondent No.3- the Principal Commissioner of Goods and Service Tax and Central Excise (Adjudicating Authority), confirmed the demand for the total Service Tax liability of Rs.7,57,01,386/- (Rupees Seven Crores Fifty-Seven Lakhs One Thousand Three Hundred Eighty-Six only) which was worked out on the total taxable value of Rs.60,53,70,273/- (Rupees Sixty Crores Fifty-Three Lakhs Seventy Thousand Two Hundred and Seventy-Three only) which was recoverable from the Petitioner under reverse charge under Section 73 of the Finance Act, 1994 along with due interest under Section 75 of the Act.
10. Challenging this order dated 10 December 2022, the Petitioner has filed the present petition.
11. We have heard Mr. Prakash Shah, learned counsel for the Petitioner, Mr. Pradeep Jetly, learned Senior Advocate for Respondent 1 to 3 and Ms. Jyoti Chavan, learned Assistant Government Pleader for Respondent No.4.
12. As stated earlier, preliminary contention is raised by the learned Senior Advocate for Respondent Nos.1 to 3 that the Petitioner has an efficacious alternate remedy in the form of filing an appeal to the Customs Excise and Service Tax Appellate Tribunal under Section 86 of the Finance Act, 1994 and therefore, this Petition filed under Article 226 of the Constitution of India should not be entertained. The Respondents contend that various facts would arise for adjudication, which will have to be dealt with in The Respondents also contend that in this case, since after the decision is rendered by the Appellate Tribunal, the further appeal would lie before the Supreme Court under Section 83 of the Finance Act 1994 read with Section 35G of the Central Excise and Salt Act, 1944 and therefore, therefore, one more reason why the writ petition should not be entertained. The learned AGP for the State of Maharashtra supported the contention of Respondent Nos. 1 to 3 that the Petitioner has an alternate remedy of filing an appeal.
13.The Petitioner contends, on various grounds set forth in the memo of the Petition, that the writ petition is maintainable because the impugned order lacks jurisdiction and is not authorised by law. The Petitioner asserts that the proceedings violate the principles of natural justice. The Petitioner argues that no service tax is leviable on irrigation restoration charges as they are a statutory levy and not paid in exchange for any service but rather for recovering construction costs. The Petitioner asserts that service tax cannot be levied under the “Business Support Service” classification. The Petitioner contends that since the jurisdictional facts are not established, the Commissioner- the Adjudicating Authority had no jurisdiction in passing the impugned order. Since the issue goes to the root and can be resolved on the existing record, it is unnecessary to relegate the Petitioner to the remedy of appeal. The Petitioner further asserts that the extended limitation period cannot be invoked. In this case, the normal limitation period was 18 months, not 30 months, for the return period up to May 2016. The Petitioner states that they had never suppressed any facts relating to their activities to evade payment of service tax and that they genuinely believed that no service tax was payable on irrigation restoration charges as these charges form part of the sale value. The Petitioner argues that the issue is not a lone incident but an industry-wide issue, that there is confusion in the industry. There was, therefore, no intention to evade tax. Whether the extended limitation period applies is a question of law and can be decided in writ jurisdiction. Petitioner contends that this is a fit case where the impugned order be quashed exercising the writ jurisdiction.
14. We have considered the rival contentions.
15. The Petitioner cannot claim that it was not given a fair opportunity to present its case. The Commissioner- the Adjudicating Authority provided ample opportunity for the Petitioner to submit its arguments in detail, and the Adjudicating Authority carefully considered these submissions before arriving at a decision. There is no violation of the principles of natural justice in this regard.
16. It is well established that the availability of an alternate remedy does not necessarily preclude a writ petition under article 226 of the Constitution of India. The rule of non-interference in writ jurisdiction when an alternate remedy is available, is self-imposed. Whether a writ petition should be entertained in such circumstances depends on various factors. In considering the present petition, three issues arise for consideration. First, the general principle that writ jurisdiction should not be exercised when a statutory remedy of appeal is available unless exceptional circumstances, such as a breach of principles of natural justice and/or it can be established without detailed scrutiny that the order is patently without jurisdiction. Second, a factual inquiry is necessary to determine the challenge to the impugned order on the ground that jurisdictional facts are not established. Finally, whether this Court should interfere at the stage of the order-in-original when a further appeal to the Hon’ble Supreme Court is available after the Tribunal has passed an order in appeal.
17. The Respondents have relied upon the decision of the Hon’ble Supreme Court in the case of State of Maharashtra v/s. Greatship (India) Limited1. This decision is directly relevant to the present issue. In this case, the respondents before the Supreme Court, who were the original writ petitioners in the High Court, were subjected to proceedings under the Maharashtra Value Added Tax (MVAT) Act, 2002. The assessing officer had issued a notice of assessment to the petitioner, requesting relevant documents and to show cause as to why they should not be assessed under Section 23 of the MVAT Act. The writ petitioner argued that they had supplied the necessary documents but were not given a hearing during the proceedings. Nonetheless, the assessing officer passed an order determining their tax liability. The writ petitioner did not file an appeal before the first appellate authority but instead filed a writ petition in the High Court to challenge the assessment order. The High Court entertained the writ petition and quashed and set aside the assessment order and the demand notice. The State of Maharashtra filed an appeal against the order of the High Court, contending that disputed questions of fact had arisen and the High Court should not have entertained the writ petition under Article 226 of the Constitution of India. The original writ petitioner sought to advance arguments on the merits of the case. The original petitioner supported the interference by the High Court in writ jurisdiction by relying on the decisions in M/s.Filterco & Anr. v. Commissioner of Sales Tax, Madhya Pradesh2; Assistant Commissioner (CT) LTU v. Amara Raja Batteries Limited3 and Whirlpool Corporation v/s. Registrar of Trademarks, Mumbai4.
However, the Supreme Court opined that the High Court ought not to have entertained the writ petition against the assessment order and ought to have relegated the original writ petitioner to prefer an appeal to the appellate authority, and when an alternate statutory remedy was available, it should have been pursued. The Supreme Court referred to its earlier decisions in the case of United Bank of India v/s. Satyawati Tandon5 and the ones cited therein that is Titaghur Paper Mills Co. Limited. v/s. State of Orissa6, CCE v/s. Dunlop India Ltd.7, Punjab National Bank v/s. O.C. Krishnan8, CCT. v/s. Indian Explosives Ltd.9, City and Industrial Development Corporation v/s. Dosu Aardeshir Bhiwandiwala10, Raj Kumar Shivhare v/s. Director of Enforcement11. After analysing the law laid down, the Supreme Court opined that the High Court had erred in entertaining the writ petition under Article 226 against the assessment order, bypassing the statutory remedies. The decisions cited by the original petitioner in support of interference in writ jurisdiction were distinguished, stating that the issue was not about the maintainability of the writ petition but its entertain ability. The Hon’ble Supreme Court observed that in that case, disputed facts existed, and no valid reason was shown why the assessee bypassed the statutory remedy of appeal. Therefore, it is a consistent view that when an alternate remedy is available, especially in cases involving public revenue, judicial prudence demands that the Court refrain from exercising writ jurisdiction unless exceptional circumstances justify such intervention.
18. The Petitioner has relied on the recent decision of the Hon’ble Supreme Court in the case of M/s. Godrej Sara Lee Ltd. v/s The Excise and Taxation Officer-cum-Assessing Authority & Ors.12 to contend that merely because there is an alternate remedy of appeal, the High Court is not divested all its jurisdiction under Article 226 of the Constitution of India, and in this case, the Hon’ble Supreme Court had set aside the order of the High Court dismissing the writ petition on the ground of availability of alternate remedy. The Petitioners have also contended that not only should the writ petition be entertained, but a decision on the merits of the matter can also be given, as done in the case of Godrej Sara Lee. Upon analysing this decision, it becomes clear that it does not assist the Petitioner. The Hon’ble Supreme Court considered an appeal from the decision of the High Court of Punjab and Haryana, which had dismissed a writ petition and directed the petitioner to seek a remedy through an appeal under Section 33 of the Haryana Value Added Tax Act, 2003. The Supreme Court was faced with two questions. Whether the High Court was right to decline interference due to the availability of an alternate remedy, and whether the matter should be heard on merits or remitted to the High Court. The issue was that the original petitioner had challenged the jurisdiction of the revisional authority to reopen the proceedings in the exercise of suo motu revisional power conferred under Section 34 of the VAT Act and to pass final orders holding that the assessment orders were illegal and improper. The High Court had dismissed the petition, holding that it was impermissible to entertain the petition and that there was no presumption that the appellate authority would not be able to grant relief. The Supreme Court firstly noted that various High Courts dispose of writ petitions as “not maintainable” simply because an alternate remedy was available. The Court stated that there can be no limitation on exercising power under Article 226 of the Constitution of India, and that any restrictions must be traceable in the Constitution itself. The Court further observed that the High Court, considering the facts of each case, would have the discretion to decide whether to entertain the writ petition or not, and that alternate remedy cannot be an absolute bar to the “maintainability” of the writ petition as there is no such Constitutional bar. The Supreme Court distinguished between “entertain ability” and “maintainability” of the writ petition and referred to various decisions regarding this position of law. As for the facts of the case, the Court noted that the litigation had been pending for almost 14 years and proceeded to examine the issue of jurisdiction of the revisional authority on merits regarding the exercise of suo motu powers. The Supreme Court noted that the revisional authority could exercise suo motu power if there was illegality or impropriety in the proceedings before the assessing authority or the orders passed. The Supreme Court found that there was an order of the Tribunal holding field, and the assessing authority was bound by it with no other option but to follow it. The decision of the Tribunal was even binding on the revisional authority. As such, the Supreme Court found no illegality or impropriety and allowed the appeal. The Hon’ble Supreme Court noted that there was a pre-existing order of the Tribunal by which the assessing officer was bound and the revisional authority, therefore, could not have exercised revisional jurisdiction. As such, the enquiry undertaken into the merits of the rival contentions in Godrej Sara Lee was completely different from what the Petitioner has called upon this Court to adjudicate, which is whether the irrigation restoration charges would attract service tax or not. Therefore, the decision of the Hon’ble Supreme Court in Godrej Sara Lee does not assist the Petitioner.
19. The decisions of the Supreme Court in Godrej Sara Lee and in Greatship do not lay down any conflicting propositions. In both decisions, the Hon’ble Supreme Court has made a distinction between the maintainability of the writ petition and the entertain ability. In the case at hand, the Respondents do not contend that the Petition is not maintainable, but they contend that it should not be entertained. This objection is based not only on the availability of an alternate remedy, but that factual enquiry is necessary for which appeal is provided under the statute.
20. The next point to consider is whether the Petitioner’s argument presents a purely legal question that can be decided without any further adjudication.
21. The Petitioner is registered with the service tax department, and its liability to pay service tax is determined by Respondent No.1 to 3 the Tax Authorities (unless specifically referred to otherwise referred to as the Respondents) under reverse charge for the service received from the water resources department of the Maharashtra Government in exchange for non-irrigation The show cause notice was issued based on information received that the Water Resources Department of the State of Maharashtra was collecting non-irrigation charges from various customers for the use of water for non-irrigation purposes. The Respondents contend that the irrigation restoration charges are simply the recovery of costs for the construction of the distribution network. During the investigation, a representative of the Petitioner stated that the irrigation restoration charges were the recovery of costs for the construction of the distribution network. The Adjudicating Authority framed the following issues to be decided:
(1) Whether the services received by the Petitioner by way of restoration of command area against payment of consideration as non-irrigation charges (i.e. restoration charges, other than water charges) should not be considered as a service under Section 65B (44) of the Finance Act, 1994 read with Section 142 and 174 of the Act of 2017 and liability to pay Service tax under reverse charge should not be demanded and recovered from the Petitioner;
(2) Whether extended period specified in the proviso to sub-section (1) of Section 73 of the Finance Act, 1994, read with Section 142 and 174 of the Act of 2017 should not be invoked for recovery of the Service tax due from the Petitioner;
(3) Whether interest is liable to be demanded and recovered under Section 75 of the Act 1994, read with Section 142 and 174 of the Act of 2017;
(4) Whether the Notice is liable for penalty under Section 76, 77(1) and 78 of the Act read with Section 142 and 174 of the Act of 2017.
The main issue to be determined was whether the services received by the Petitioner way of restoration of the command area, against payment of consideration as non-irrigation charges, should be considered as a service under Section 65B (44) of the Finance Act, 1994, read with Section 142 & 174 of the CGST Act, 2017 and the liability to pay Service Tax under reverse charge. Second was whether the extended period specified in the proviso to sub-section (1) of Section 73 of the Finance Act, 1994, read with Sections 142 & 174 of the CGST Act, 2017, should be invoked for the recovery of the Service tax.
22. Upon analysing the Agreement dated 22 May 2012 between M/s. India bulls Power Ltd. and the Government of Maharashtra, the Adjudicating Authority, found that it granted permission to draw 87600 Million litres of water. The Adjudicating Authority found that, under the Agreement, the Petitioner was liable to pay Rs. 232.18 crores as irrigation restoration charges to the Government of Maharashtra. In a letter dated 18 October 2017, the Petitioner stated that irrigation restoration charges are meant to recover the construction costs of the canal network for distribution in the area. The Petitioner raised contentions that required an enquiry into facts. For instance, if the distribution network is only partially constructed, the cost of construction should still be recovered. But if there is no expenditure, then no such recovery should occur. To support their case, the Petitioner had referred to Part B of Circular BWS-1003 dated 21 February 2004, issued by the Irrigation Department. It stated that only if any expenditure is incurred it can be recovered in the name of irrigation restoration charges; otherwise no irrigation restoration charges should be recovered. The Petitioner further contended that irrigation restoration charges are not defined in the Agreement. However, in view of the Agreement and the Circular dated 21 February 2004, it should be understood as a cost towards the loss in irrigation capacity due to water reservation for non-irrigation purposes.
23. Section 66D of the Finance Act, 1994, and the definition of “support service” defined in Clause-49 of Section 65B of the Act are of relevance. Negative list of services is mentioned in Section 66D. The relevant part of Section 66D reads thus:
” 66D. The negative list shall comprise of the following services, namely:-
(a) Services by Government or a local authority excluding the following services to the extent they are not covered elsewhere-
i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government;
ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport:
iii) transport of goods or passengers: or
iv) support services, other than services covered under clauses (i) to (iii) above, provided to business entities.”
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“65B …………………….
(49) Support services means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis.”
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The words “support service” were later substituted by the words “any service” with effect from 1 April 2016 by the Finance Act 2015. The Adjudicating Authority had to analyse the factual position in light of various provisions of the Finance Act 1994. Specifically, it had to examine subsection 44 of Section 65B, which defines ‘Service’, as well as Section 66D, which contains the Negative list of services. Additionally, it had to consider the definition of ‘Support Services’ as defined under Clause 49 of Section 65B. This definition includes various functions that entities carry out in the ordinary course of their operations but may outsource from others as services. The words “support service” were substituted by the words “any service” with effect from 1 April 2016. The Adjudicating Authority applied the Reverse Charge Mechanism with reference to Section 68 (2) of the Finance Act, 1994, read with Clause I (A) (iv) (C) (2) of Notification No. 30/2012-ST dated 20 June 2012. This notification specified that the specified services provided by the government to the business entity are liable for service tax paid on a reverse charge basis by the business entity. The Circulars provided for prioritisation to be accorded to demands for water, with domestic users at S. No. 1, industrial users at S. No. 2, and irrigation at S. No. 3. Calculations were made to determine the expenditure required to restore the land’s irrigation capacity. The total irrigation potential or capacity of the project was evaluated, along with the loss in that capacity because of the diversion of water for non-irrigational purposes. This calculation was necessary to compensate for that loss, and it, too required factual adjudication.
24. After examining the Agreement, the Adjudicating Authority observed that the Government of Maharashtra charges fees for water restoration services in the command area. Since the Petitioner received this service to support their business activity of power generation, it falls under the definition of Services as defined under Section 65B (44) of the Finance Act, 1994. This service is not covered under the Negative List under Section 66D of the Finance Act, 1994, nor is it exempted under the Notification dated 20 June 2012. The Adjudicating Authority’s conclusion was reached after analysing the Agreement and documents. It found that the charges were not for water but for support services for the diversion of natural resources, which is not allowed under the Agreement. It observed that the Petitioner could have easily applied for a connection for commercial water supply and paid water charges as per usage, but it did not do so. Therefore, the Authority determined that any payment made or fee charged for a service is taxable, regardless of the name used for such payment, unless it is specifically exempted or covered in the mega exemption notification. This finding raised questions regarding the applicability of Circulars issued by the State Government and the interpretation of the Agreement. The nature of the service provided had to be established as a matter of finding of fact, and thus it is evident that the question of whether this activity attracts a service charge or not requires a factual inquiry.
25. The Petitioner has raised several contentions on merits, including those based on Article 243-W of the Twelfth Schedule of the Constitution of India, Section 65B(49) of the Finance Act, and Section 66D of the Finance Act, 1994. Additionally, the Petitioner has cited circulars from the CBSE Education guides dated 20 June 2012 to support the argument on the meaning of support services.
However, the question at hand is how these circulars and provisions of law apply to the facts of the case and to determine the liability for service tax. Furthermore, the Petitioner has also referred to a Circular issued by the Tax Research Unit of the Department of Revenue, dated 13 April 2016, regarding service tax on services provided by the Government or Local Authority. Although there is no dispute about the circulars or the provisions of law, the issue lies arriving at the libility.
26. The Petitioner argues that the irrigation restoration charges are part of the water charges and are not separate and that the Agreement between the Petitioner and the State of Maharashtra does not split the water charges and restoration charges. This aspect also requires an examination of the relevant provisions of the Act and the factual position. The Respondents argue that post-2012, when the concept of the Negative List was introduced, there was a shift in the burden of demonstrating whether the activity attracts service tax or not. The Petitioner relies on Section 66D of the Finance Act and the Circular of the Board on the meaning of support services. The relevant period for payment, as referred to in the impugned order, is from 22 November 2012 to 31 May 2016. The Agreement between India bulls Power Ltd. and the Government of Maharashtra also provided that the amount of Rs. 232.18 crores as irrigation restoration charges to be paid in five instalments over a period of two years with applicable interest. During this period, the concept of a negative list was introduced, which changed the definition of support services. As such, a factual enquiry into the implications of this development in law during the period in question is necessary.
27. The Petitioner has placed a compilation of various case laws before us. The Petitioner has relied upon the decision of the Hon’ble Supreme Court in Union of India v/s. Garware Nylons Ltd.13, the State of Madhya Pradesh v/s. Marico Industries Ltd.14, Commissioner of Customs, Mumbai v/s. Foto Centre Trading Co.15 and Commissioner of Central Excise, Chandigarh v/s. Khalsa Charan Singh and Sons16. It is not necessary to burden the record with reference to all the cases in the compilation. Many decisions in the compilation are orders passed by the Tribunal, High Court, and Supreme Court in relation to appeals and references arising from assessment proceedings. The Petitioner has submitted a compilation of decisions that deal with the principles of natural justice and cases where the issue of levy of service taxes has arisen. These decisions are either of the Tribunal or have been appealed to the High Court or the Supreme Court from the orders of the High Court from refund claims. No decision from any High Court or the Supreme Court that directly answers the issue at hand has been placed before us. Furthermore, no statutory provision exists that ex-facie states that no service tax on the activity in question is leviable. Therefore, it is
28. The second issue, in this case, concerns whether the extended period specified in the proviso to sub-section (1) of Section 73(1) of the Finance Act, 1994, read with Sections 142 & 174 of the CGST Act, 2017, can be invoked. The Adjudicating Authority found that the Petitioner intentionally and deliberately suppressed the taxable services from the Respondents and avoided compliance with an intent to evade payment of service tax. However, the issue of whether the extended period can be invoked is intertwined with the first issue regarding tax liability. The Respondents argued that there was a clear service tax liability imposed on the Petitioner, and not paying the service tax would amount to concealment, justifying the invoking of the extended period of limitation for issuance of show On the other hand, the Petitioner claimed that there was no such liability and therefore no concealment. The answer to the second issue is also dependent on the answer to the first issue. Moreover, the circumstances in which the service was not paid will entail adjudication of factual aspects. While the Petitioners seek to argue that the extended period is also a question of law based on the specific decision, the issue is intermixed with the first issue of liability, which should be a subject matter of an appeal.
29. Section 83 of the Finance Act, 1994 makes certain provisions of sections of the Central Excise Act, 1944, as in force from time to time applicable in relation to service tax as they would apply in relation to a duty of excise. One of them is Section 35L of the Act of 1944. Section 35L(b) provides that an appeal from any order passed by the Appellate Tribunal relating to, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purpose of assessment would lie to the Supreme Court. Section 35L(2) provides that determination of any question having a relation to the rate of duty shall include the determination of taxability or excise ability of goods for the purpose of assessment.
30. The Adjudicating Officer framed a question as to whether the services received by the Petitioner by way of restoration of command area, against payment of consideration as non-irrigation charges, was a service and whether liability to pay service tax under reverse charge arose. According to the Respondents, this issue would clearly fall within the ambit of Section 35L(2) of the Act of 1944, and the appeal from the order passed by the Tribunal would lie in the Hon’ble Supreme Court and not in the High Court. In this context of the above decision of the Supreme court in the case of Union of India v/s. Coastal Container Transporters Association17 will have to be noticed. The original writ petitioner was an association whose members were transport operators engaged in the transportation business. A show cause notice was issued by the revenue demanding service tax from the writ petitioner under the category of “cargo handling service”. The writ petitioners argued that the service they provided fell under the taxable category of “goods transport agency.” They relied on circulars issued by the Central Board of Excise and Customs to support their claim. On the other hand, the revenue alleged that the writ petitioners had split the transaction into three parts to evade service tax. In the High Court, the revenue raised preliminary objections regarding the maintainability of the petition, including that the controversy related to the classification of service, and even if the show cause notice resulted in a final order, the appeal would lie before the Supreme Court. The revenue argued that a different position of law would apply from 1 July 2012, when the scheme of service tax changed, and the negative list came into force. However, the High Court overruled these objections and held that the service rendered by the petitioners was classifiable under “goods transport agency” and not “cargo handling service.” The Supreme Court disapproved of the High Court entertaining the writ petition, stating that when there was a serious dispute regarding the classification, the High Court should not have entertained the writ petition, especially when the final appeal would lie in the Supreme Court. The Hon’ble Supreme Court noted that the application of the legal position itself was in serious dispute, and the nature of the service would need to be examined to determine whether it falls within the parameters of the negative list or whether it was a support service.
31. Further, the Division Bench of this Court in the case of Hover Automotive India Private Limited v/s. Union of India and Ors.18 considered a challenge to the order-in-original passed by the Principal Commissioner, GST assessing service tax dues of the Petitioner. The Respondents took a preliminary objection that since the final appeal lies to the Hon’ble Supreme Court, the writ court should not interfere. Reliance was placed on the decisions of the Hon’ble Supreme Court in the case of the Coastal Container Transporters Association. The petitioner therein sought to distinguish the decision of the Coastal Container Transport Association, submitting that in that case, the petition was filed at the stage of show cause notice and not when the order on show cause notice was passed. The Division Bench did not accept this distinction and found that the writ petition ought not to be entertained. The Division Bench also found that there was no breach of principles of natural justice, and no case was made out. It was held that the Finance Act 1994 provided complete machinery to challenge the order of the assessment in appeals, the last one being before the Supreme Court. This decision is, thus, directly applicable to the case at hand. Further, even assuming that the first appeal would lie in this court and not the Supreme court, this is not a case where writ jurisdiction needs to be entertained when the petitioner has a remedy of a substantive appeal.
32. There is no patent lack of jurisdiction or complete absence of jurisdictional facts in the impugned order that would allow us to declare that there is no liability upon the Petitioner to pay the service tax. The issue at hand requires adjudication and the applicability of the provisions to the facts is disputed. The Adjudicating Officer had the jurisdiction to decide whether a particular activity attracts service tax or not, and the Petitioner has the option to file a statutory appeal to the Appellate Tribunal where the Petitioner can present all of its contentions. There is no reason why the Petitioner cannot avail of the statutory remedy of appeal. Considering all the circumstances, we find merit and uphold the preliminary objection raised by the Respondents that the writ petition should not be entertained. However, we make it clear that our reference to the rival contentions and the issue at hand in this judgment is to ascertain whether writ jurisdiction needs to be exercised, and are not on merits.
33. The Writ Petition is dismissed.
34. If the Petitioner approaches the Appellate Tribunal within a period of four weeks from today, the Appellate Tribunal will consider the fact that the writ petition was pending in this Court if the issue of delay arises.
Notes :
1. 2022 Live Law (SC) 784
2. (1986) 2 SCC 103
3. (2009) 8 SCC 209
4. (1998) 8 SCC 1
5. 2010 (8) SCC 110
6. 1983 (2) SCC 433
7. 1985 (1) SCC 260
8. 2001 (6) SCC 569
9. 2008 (3) SCC 688
10. 2009 (1) SCC 168
11. 2010 (4) SCC 772
12. S.C. Civil Appeal No. 5393/10 dtd. 01/02/2023
13. 1996 (10) SCC 413
14. 2016 (338) ELT 335 SC
15. 2008 (225) ELT 193 (Bom.)
16. 2010 (255) ELT 379 (P & H)
17. 2019(22) GSTL 481(SC)
18. O.S.W.P. 2223/21 dtd. 29.10.2021
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