Writ Petition was not maintainable against show cause notice on the issue of service tax classification as cargo handling service instead of goods transport agency–Supreme Court quashes High Court order
ABCAUS Case Law Citation:
ABCAUS 2802 (2019) (02) SC
Important Case Laws Cited/relied upon by the parties
Deputy Commissioner, Central Excise & Anr. v. Sushil and Company 2016) 13 SCC 223
Union of India & Anr. v. Guwahati Carbon Limited (2012) 11 SCC 651
Union of India v. Hindustan Dev. Corpn. Ltd. 1998 (100) ELT 14 (S.C.)
Malladi Drugs & Pharma Ltd. v. Union of India 2004 (166) ELT 153 (S.C.)
Paper Products Ltd. v. Commissioner of Central Excise 1999 (112) ELT 765 (S.C.)
In the instant case, the controversy was related to the service tax classification of services rendered by the respondents.
The Central Government (Union of India) had challenged the order of the Hon’ble High Court in quashing the SCN issued to the respondents along with rejection of preliminary objection with regard to maintainability of the writ petition by the respondent.
One of the respondent was a transport operators association whose members were engaged in the business of transportation of goods entrusted by the customers.
The Service Tax Department issued a show cause notice (SCN) proposing to demand service tax from the respondents under the category of “cargo handling service”, while it was the case of the respondents that the service provided by them fall under the taxable category of “goods transport agency” (GTA) in terms of circulars dated 06.08.2008 and circular no 186/05/2015-ST dated 05.10.2015 issued by the Central Board of Excise and Customs (CBEC).
The intelligence unit of the service tax officers gathered that several business entities including two respondent who were engaged in doing the business of cargo handling but had got themselves registered under “good transport agency”.
Searches were conducted in the premises of two respondent and several incriminating documents, including the quotations submitted by the respondent companies to their customers were seized and statements of the Directors were recorded as per the provisions of Central Excise Act, 1944 read with the provisions under Finance Act, 1994.
Subsequently, the aforesaid SCN were issued against which the respondents had filed a writ petition before the High Court.
A preliminary objection was raised on behalf of Revenue on maintainability of the petition. Firstly, it was pleaded that as the writ petition itself was directed against the show cause notices, such petition was not maintainable. Secondly, on the ground that as the controversy was related to classification of services and even if the show cause notices were to culminate into final order, appeal would lie before the Supreme Court, as such, High Court, in exercise of writ jurisdiction, should refrain from entertaining the petition which involves a classification.
Before the High Court, the case of the revenue was that the respondents, with a view to evade payment of service tax, had split the whole transportation of the consignment into three parts i.e., by road, by sea route and by road.
it was contended that once members of the respondent-association undertake the responsibility to deliver goods from consignor to consignee and more particularly, when they are also providing cargo handling service, with the help of other service providers, the service provided by them would fall within the ambit of cargo handling service, inasmuch as the help from other service providers does not change the nature of service that is being provided by them.
It was also stated that shipping lines raise bills in the name of respondents and if any service tax had been charged, the respondents would be within their rights to take cenvat credit of the same.
the High Court over-ruled the objection of maintainability of the petition and recorded a finding that the services rendered by the members of the respondent-association were classifiable under “goods transport agency” but not under “cargo handling service”.
High Court referred to the definition of “cargo handling service” under Section 65(23) of the Act, various Circulars and instructions issued and held that even after introduction of new regime w.e.f. 01st July 2012, the activity of the respondents falls within the classified category of “goods transport agency” but not “cargo handling service”.
High Court further held that so far as the service of loading and unloading at the port and shipping of goods from one port to other is concerned, the respondents were the recipients of such service from the shipping lines and/or cargo handling service on behalf of the customers.
The High Court held that so far as the service rendered by shipping line is concerned, the shipping line issued invoice in favour of the respondents, who, in turn, issued debit note to the customer without adding any charge in respect of such service. Further, it was held that, if transportation was to be included in “cargo handling service”, packing was an essential ingredient of the same.
In conclusion, it is held that in view of the binding circulars issued by the CBEC, the service rendered by the respondents had to be considered on the basis of main service provided by them, viz., good transport agency and it was not permissible for the appellants to take a stand contrary to such circulars.
The High Court held that the notices impugned in the writ petition, were contrary to the binding circulars issued by the CBEC, in such circumstances, respondents were entitled to invoke the writ jurisdiction of the court.
Further, it was held that as there were no factual disputes and only legal issue is required to be decided and by placing reliance on the judgment of the Hon’ble Supreme Court over-ruled the objection of maintainability of the writ petition raised by the Revenue.
Accordingly, the Hon’ble High Court while allowing the writ petition filed by the respondents, quashed the SCN and also rejected Civil Application filed by the Revenue raising the preliminary objection with regard to maintainability of the writ petition.
The Hon’ble Supreme Court observed that the case of the Revenue was that if service as a whole, was taken into consideration, it fall within the classifiable category of “cargo handling service” but not “goods transport agency”. On the other hand, it was the case of the respondents that they only undertake road transportation, and so far as cargo handled by shipping agencies was concerned, they prepared bills in the name of the respondent companies and in turn respondents issued debit note to their customers to the extent of charges payable to the shipping agencies, as such their service fall in the category of “goods transport agency” but not “cargo handling service”.
Also, while it was the case of the respondents that, show cause notices issued was contrary to circulars issued by the CBEC, it was the case of the Revenue that such circulars were not applicable to the respondents, and were applicable only when transportation was only by road.
The Hon’ble Supreme Court opined that the High Court had committed error in entertaining the writ petition under Article 226 of Constitution of India at the stage of show cause notices.
The Hon’ble Supreme Court pointed out that though there is no bar as such for entertaining the writ petitions at the stage of show cause notice, but it is settled by number of decisions of the Apex Court, where writ petitions can be entertained at the show cause notice stage.
The Hon’ble Supreme Court was of the view that it was neither a case of lack of jurisdiction nor any violation of principles of natural justice was alleged so as to entertain the writ petition at the stage of notice. Therefore, the High Court ought not to have entertained the writ petition, more so, when against the final orders appeal lies to the Supreme Court.
The Hon’ble Supreme Court noted that its judgment relied on by the Revenue applies to the case. In the aforesaid judgment, arising out of Central Excise Act, 1944, the Supreme Court had held that excise law is a complete code in order to seek redress in excise matters and held that entertaining writ petition is not proper where alternative remedy under statute is available. When there is a serious dispute with regard to classification of service, the respondents ought to have responded to the show cause notices by placing material in support of their stand but at the same time, there is no reason to approach the High Court questioning the very show cause notices.
The Hon’ble Supreme Court pointed out that as held by the High Court, it could not be said that even from the contents of show cause notices there were no factual disputes.
In view of the above, the Hon’ble Supreme Court allowed the appeal and set aside the judgment and order passed by the High Court.