The Kerala High Court dismissed the writ petition as the assessee failed to appeal within the prescribed limitation period against the service tax demand under the Central Goods and Service Tax (CGST)Act, 1961.
Mithlaj P, the petitioner challenged the orders passed by the 2nd respondent. The petitioner is engaged in providing services by way of the right to admission to the private spice garden and services by way of joy rides, such as elephant rides. Based on the information received from a third party, CBDT, it was noticed that the value of the service provided by the petitioner, as declared in the Income Tax Returns filed by the petitioner for the Financial Year 2016-17, was Rs.2,42,62,747/-
The petitioner was not registered under the provisions of the Finance Act regarding service tax, and the petitioner did not file the return under the provisions of the service tax. The petitioner was put to notice regarding the data made available by the CBDT in respect of his income, and the petitioner was directed to submit month-wise details of services provided, including exemption/ abatement notices availed and month-wise details of payments received for the services provided by the petitioner.
The petitioner was also directed to furnish the balance sheet, Profit and Loss Account, and Income Tax returns along with Annexures and 26AS for the Financial Years 2016-17 and 2017-18. The petitioner was issued a show cause notice to show cause as to why the services rendered by the petitioner in respect of which the petitioner had received consideration from April 2016 to June 2017 should not be classified as ‘Other taxable services – Other than the 119 listed’ in terms of Sections 65B(44) and 65B(51) of Chapter V of the Finance Act 1994 and in turn why services rendered by the petitioner were not liable to service tax under Section 66B of the Act read with Section 174(2) of CGST Act 2017.
The petitioner took the stand that the petitioner had disclosed this amount of consideration as income from business in the Income Tax Returns submitted for the Financial Years 2016-17 and 2017-18, and due income tax was paid on such receipts. The petitioner also said that several persons are carrying out similar activities, but no one is paying service tax as no one has registered for the payment of service tax.
The Income Tax Department did not reject the income tax returns submitted by the petitioner, and the tax remitted by the petitioner, including the amounts earned by way of the sale of tickets for spice garden visits or elephant rides, was accepted without any demur by the Income Tax Department
The petitioner was also afforded an opportunity for a hearing by the Assistant Commissioner, the 2nd respondent. Vide impugned order, the demand of service tax amounting to Rs.33,96,785/- together with Swacch Bharat Cess and Krishi Kalyan Cess totalling Rs.36,19,736/- has been confirmed in respect of the alleged services rendered by the petitioner from 01.04.2016 to 30.06.2017 under the proviso to Section 73(2) of the Finance Act 1994 read with Section 174(2) of the CGST Act 2017.
A penalty of the equal amount was also imposed under Section 78 of the Finance Act 1994 read with Section 174(2) of the CGST Act 2017, and a penalty of Rs.10,000/- under the provisions of Section 77 of the Finance Act 1994 read with Section 174(2) of the CGST Act 2017 were imposed. It was also observed that in case the petitioner pays the service tax and interest within thirty days from the date of receipt of the order, the penalty payable under Section 78 shall be 25% of the service tax so determined, instead of 100%.
The petitioner neither filed an appeal nor paid the tax and penalty as determined, and therefore, notice under Section 87(b) of Chapter V of the Finance Act 1994 came to be issued for freezing the bank account of the petitioner.
It was evident that the petitioner neither made use of the statutory remedy of appeal within the time prescribed as per Section 85(3A) of the Finance Act 1994 nor did he reply to the notice issued in and after the expiry of the maximum period of appeal of three months, the petitioner approached this Court by filing this writ petition.
A single bench of Justice Dinesh Kumar Singh held that “Since the order does not appear to be without jurisdiction, nor has there been a violation of Article 14 of the Constitution of India since the petitioner was issued show cause notice, he filed a reply, and he was also granted an opportunity of hearing, I do not find any ground to interfere with the impugned order and notice. “
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