A two-judge bench of the Delhi High Court, while annulling the Service Tax proceedings, held that since the demand is above Rs. 50 lakhs, a pre-notice consultation was mandatory as per the Master Circular issued by the Central Board of Excise and Customs (CBEC).
The Petitioner provides computer data processing software, which is used by travel agents and ticket booking entities in the Airline industry. In consequent to a search conducted by the Anti-evasion Unit of the Service Tax Commisionerate, the department said that the said services are subject to Service Tax. A show cause notice was issued by the department alleging that the tax was not paid on taxable services rendered by the Petitioner.
The petitioner claimed that as per a Master Circular issued by the CBEC on 10th March, 2017, a pre-show cause notice consultation was mandatory in cases involving demand of duty above Rs. 50 Lakhs. A reminder was again sent by the Petitioner on 13th November, 2018. When no response was received, the petitioner approached the High Court for relief.
The bench comprising of Justice S Muralidhar and Justice Prateek Jalan found that it was necessary in terms of para 5.0 of the Master Circular for the Respondent to have engaged with the Petitioner in a pre SCN consultation, particularly, since in the considered view of the Court neither of the exceptions specified in para 5.0 were attracted.
“Accordingly, without expressing any view on the merits of the case of either party in relation to the issues raised in the impugned SCN, the Court sets aside the impugned SCN dated 4th September 2018 and relegates the parties to the stage prior to issuance of impugned SCN. The Respondent will now fix a date on which the authorised representative of the Petitioner would be heard in relation to the issues highlighted in the submissions dated 24th August 2018 of the Petitioner in response to the communication dated 20th August 2018 addressed to it by the Respondent. Needless to state that the Petitioner will extend its full cooperation to the Respondent by providing the necessary information,” the bench said.To Read the full text of the Judgment CLICK HERE