Karnataka HC Quashes OIA Since Issue Already Settled by Coordinate Bench, Remands Service Tax Dispute on Labour Charges [Read Order]
Going by the Reasoning applied in Earlier batch of Matters, the Court Quashed Impugned Order-in-Appeal and Directed Reconsideration of Case
The Karnataka High Court has set aside an Order-in-Appeal relating to a service tax valuation dispute and remanded the matter to the original adjudicating authority for reconsideration from the stage of reply to the show cause notice. The Court held that the case must be re-examined in light of an earlier coordinate bench ruling that laid down the proper framework for such disputes.
The writ petition had been filed by Sidram Bhuthappa Hirekurabar, who, challenging the OIA, contended that the department had incorrectly levied service tax on the entire value of labour charges for the period April 2015 to June 2017, without allowing the apportionment or set-off available under the Service Tax (Determination of Value) Rules, 2006. He further sought a declaration that the levy itself was unsustainable.
The matter was heard by Justice M.Nagaprasanna, who recorded that the petitioner relied on the 2024 judgment of a coordinate bench in Karnataka Chinmaya Seva Trust v. Joint Commissioner of Central Tax. In that decision, the Court had directed that similar service tax disputes must be reconsidered from the show cause notice stage after examining essential statutory parameters, including Section 65B(44) of theFinance Act, the negative list, applicable exemption notifications, the liability framework under Rule 2(1)(d) and the law on limitation laid down by the Supreme Court.
The respondents did not dispute the applicability of the precedent and submitted that the matter could be remanded so that the petitioner could file a reply to the show cause notice.
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Following the same reasoning applied in the earlier batch of matters, the Court quashed the impugned Order-in-Appeal and directed the Assistant Commissioner to reconsider the case from the stage of the petitioner’s reply. The petitioner has been granted four weeks to file a fresh reply to the show cause notice dated 17.04.2021. The authority has been directed to pass appropriate orders in accordance with law and in light of the coordinate bench ruling.
The Court further clarified that the adjudicating authority is free to regulate its own procedure and take the matter to its logical conclusion.
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