Issue on Service Tax Leviability: Orissa HC sets GST Order passed without Recording Reason for Conclusion [Read Order]

In a recent case, the Orissa High Court has set aside the Good and Service Tax (GST) order passed without recording reason for conclusion on issueof service tax leviability.

Pacific International Private Limited, the petitioner, is registered under the Finance Act, 1994 as manufacturer providing technical support and consultancy service to foreign customers, supplied direct services falling under the category “export services” as enumerated in Rule 6A of the Service Tax Rules, 1994 (“the ST Rules”) during financial years 2015-16 and 2016-17. Claiming such services as exempt from the purview of levy of service tax, the petitioner having received consideration during the aforesaid periods filed returns and also filed annual income tax returns.

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Having considered the submission of the petitioner and examining the documents produced, the Assistant Commissioner of Central Tax, Goods and Services Tax & Central Excise Commissionerate, Rourkela-I, Rourkela (“Assessing Authority”) by Order-in-Original 26.05.2023 dropped proceeding initiated under Section 73 of the Finance Act, 1994 taking cognizance of the fact that the consideration received on account of rendering technical support and consultancy service to the overseas customers does fall within the connotation of “export of service” as envisaged under Rule 6A of the Service Tax Rules, 1994.

The Commissioner, Goods and Service Tax & Central Excise, Rourkela Commissionerate, Rourkela (“Reviewing Authority”) on reading of Rule 9 of the Provision of Service Rules, 2012 read with Section 66C of the Finance Act, 1994, opined that the service provided by the petitioner would be comprehended within the meaning of “intermediary service” as per Rule 2(f) of said Rules, and suggested for filing of appeal under Section 84(3) of the Finance Act, 1994. Accordingly an appeal was filed enumerating grounds therein for setting aside the Order-in-Original dated 26.05.2023.

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Notice dated 20.09.2024 was issued fixing date of personal hearing on 27.09.2024 which was served on the petitioner on 23.09.2024. A petition for adjournment was moved citing short notice. Again notice dated 07.10.2024 fixing date of personal hearing on 15.10.2024 was received on 10.10.2024. As notices did not accompany memorandum of appeal, a petition seeking copy thereof was filed. On 15.10.2024 copy of appeal petition was served on the petitioner.

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It was submitted that in absence of appearance of the petitioner or its representative, it was incumbent on the Appellate Authority to scrutiny the assessment record and evidence available. Without discussing the merit of the grounds of appeal as taken by the Revenue, the Appellate Authority could not have acted mechanically and passed laconic, bald and cryptic order. Therefore, he insisted for setting aside the Appellate Order for de novo hearing on merits.

Sri Choudhury Satyajit Misra,Senior Standing Counsel appearing for the Central Goods and Services Tax, Central Excise and Customs Department-opposite parties submitted that the petitioner should not be granted any opportunity since he made attempts to thwart hearing of the appeal on one pretext or the other. Since the counsel for the petitioner did not choose to appear before him, he had no other option but to proceed with the matter and dispose of the appeal in absence of petitioner/counsel representing it.

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Since no response/explanation has been proffered by the petitioner with reference to grounds contained in the appeal petition, the Appellate Authority has allowed the appeal based on the material on record with reference to Review Order.

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It was found that the Appellate Authority has not made any discussion as to category under which the consideration with respect to services rendered during the periods in question would be exigible to service tax. The Appellate Authority while deciding the appeal is duty bound to consider the grounds of challenge. The Appellate Authority is also required to pass a reasoned and speaking order considering and dealing with those grounds.

It was evident that the Appellate Authority has failed to discuss the fact and the law with respect to each ground taken in the appeal petition of the Revenue. Since the appeal order does not emanate reason for the conclusion, the  Court of Chief Justice Mr. Harish Tandon and Justice Mr. Murahari Sri Raman is constrained to observed that “absence of reason in the Appellate Order do tantamount to negating the purpose of hearing in appeal and right to know the reason as to why the view expressed in Order-in-Original has been reversed and viewed as flawed.”

To Read the full text of the Order CLICK HERE

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