Case Law Details
Kerala State Consumer Federation Ltd. Vs Commissioner of Central Tax & Central Excise (Kerala High Court)
The Kerala State Consumer Federation Ltd., being the apex body of Consumer Co-operative Societies in Kerala, was issued a show cause notice (Ext.P1) alleging non-payment or short payment of service tax under the Finance Act, 1994 (the ‘1994 Act’). The petitioner contested the notice, but the respondent confirmed the demands in the show cause notice through an order (Ext.P3), directing the petitioner to pay the specified sums.
The petitioner, represented by Senior Counsel Sri. A. Kumar, argued that it didn’t have a proper opportunity to present its case before the Adjudicating Authority. It was highlighted that the audited accounts weren’t available at the time of adjudication. Moreover, similar issues had been decided in favor of the petitioner in previous adjudications. The petitioner sought a remand for fresh consideration by the respondent, emphasizing the importance of the service tax liability on incentives and discounts, which, if considered, would substantially reduce the demand in Ext.P3.
On the other hand, the Department’s Standing Counsel contended that Ext.P3 was appealable, and no grounds were provided for interference under Article 226 of the Constitution of India. The Department maintained that the issue of previous adjudications could be addressed by the Appellate Authority and that the failure to produce audited balance sheets couldn’t warrant intervention under Article 226 or a reconsideration by the respondent.
After considering both arguments, the court concluded that the petitioner should be granted an opportunity to substantiate its case before the respondent. This decision was influenced by several factors: the petitioner’s claim that previous issues had been decided in its favor, the unavailability of audited balance sheets during adjudication, and the petitioner’s status as an entity wholly owned by the Government of Kerala. The court noted that the delay in producing audited balance sheets was primarily due to delays by statutory auditors under the Kerala Co-operative Societies Act, 1969.
As a result, the court disposed of the writ petition by setting aside Ext.P3 and restoring the adjudication of Ext.P1 show cause notice to the respondent’s file. The respondent was directed to pass fresh orders after providing the petitioner with an opportunity to present additional materials, if any. The petitioner or its authorized representative was required to appear before the respondent on a specified date, and fresh orders were to be passed within three months from the date of receipt of the judgment.
In essence, the court’s decision provided the petitioner with the chance to present its case anew, taking into account the issues raised and the evidence available. It emphasized fairness and due process, ensuring that the petitioner had a proper opportunity to defend itself against the allegations of non-payment or short payment of service tax.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner is the apex body of Consumer Co-operative Society in the State of Kerala. It is wholly owned and controlled by the Government of Kerala. It was issued with a show cause notice (Ext.P1) under the provisions of the Finance Act, 1994 (In short ‘the 1994 Act’) alleging that it has not paid or it had short paid the amount of service tax payable under the provisions of the 1994 Act. The petitioner contested the show cause notice. However by Ext.P3 order the respondent confirmed the demands in the show cause notice and called upon the petitioner to pay the sums set out in Ext.P3.
2. Sri. A. Kumar, learned Senior Counsel appearing for the petitioner on the instructions of Adv. G. Mini would submit that the petitioner did not get a proper opportunity to substantiate its case before the Adjudicating Authority. It is submitted that the audited accounts of the petitioner were not available at the time when the show cause notice was adjudicated. It is submitted that the same issue has been considered earlier in other adjudications where the issues have been answered in favour of the petitioner. It is submitted that the question of service tax liability of the petitioner on incentives and discounts was decided in favour of the petitioner and if this is taken into consideration a substantial portion of the demand in Ext.P3 order will be wiped out. It is submitted that the concluded issues are set out in paragraph 7 of the writ petition. It is submitted that the petitioner will be satisfied if the matter is remanded for fresh consideration of the respondent.
3. The learned Standing counsel appearing for the Department would submit that Ext.P3 is an appealable order and no ground has been made out for interference under Article 226 of the Constitution of India. It is submitted that the claim of the petitioner that similar or substantially similar demands have been adjudicated in favour of the petitioner on earlier occasions is also a matter that can be considered by the Appellate Authority. It is submitted that the failure of the petitioner to produce audited balance sheet in support of its claim cannot be a ground to now state that the issue must be considered at the hands of this court under Article 226 of the Constitution of India and / or that the matter must be reconsidered by the respondent.
4. Having heard the learned Senior Counsel appearing for the petitioner and the learned Standing counsel for the respondent, I am of the view that in the facts and circumstances of the case the petitioner can be granted an opportunity to substantiate its case before the respondent. I am inclined to take such a view especially taking into account the submission of the learned Senior Counsel appearing for the petitioner that several of the matters upon which demands are now raised against the petitioner have been adjudicated in favour of the petitioner and also the fact that the audited balance sheet of the petitioner could not be produced before the respondent at the time of adjudication. I also take note of the fact that the petitioner is an entity wholly owned by the Government of Kerala and the delay in producing the audited balance sheet was principally on account of the delay on the part of the statutory auditors under the provisions of the Kerala Co-operative Societies Act, 1969. Therefore, this writ petition will stand disposed of setting aside Ext.P3 order and restoring the adjudication of Ext.P1 show cause notice to the file of the respondent. The respondent shall pass fresh orders after affording an opportunity of hearing to the petitioner and after providing to the petitioner an opportunity to produce any further materials that it may rely upon. The petitioner or its authorised representative shall appear before the respondent at 11 a.m on 20-03-2024. Thereafter the matter shall be adjudicated afresh as directed above after providing to the petitioner an opportunity to produce additional materials, if any. Fresh orders shall be passed by the respondent within a period of 3 months from the date of receipt of a certified copy of this judgment.
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