Heard Mr.A.N.Jaya Pratap, learned counsel for the petitioner, Mr.T.V.Krishnamachari, the learned Central Government Standing Counsel for the first respondent and Mr.V.Sundaraswaran, learned counsel for respondents 2 and 3.
2. The petitioner has filed this writ petition challenging the show-cause notice issued by the second respondent demanding Service Tax for the period from 16.06.2005 to 29.08.2008 proposing to levy penalty and demand interest by invoking the extended period of limitation. The petitioner challenges the show-cause notice contending that the petitioner is engaged in the business of retreading of tyres and the invoice raised by them gives all particulars and so far as samples purchased by them is concerned, they are all subject to Tamil Nadu General Sales Tax Act and the Service Tax is being paid only with regard to the labour component. Therefore, it is submitted that impugned show-cause notice is without jurisdiction.
3. During the pendency of the writ petition, the Honble Supreme Court considered a somewhat a similar case in Safety Retreading Co.(P) Ltd., Vs. Commissioner of Central Excise Salem, reported in 2017 (48) S.T.R 97 (SC). The issue which fell for consideration was, whether in a contract for retreading of tyres, service tax is leviable on the total amount charged for, including value of materials /goods that have been used and sold in execution of contract. The Honble Supreme Court, after taking into consideration all the factual position in the said case, which was considered by the Assessing Officer, Appellate Authority and Appellate Tribunal, held that there is no dispute with regard to the assessment of the appellant therein on its turnover under the local State, insofar as payment of Value Added Tax on that component is concerned. After taking note of the said factual position, the Court held that the Asseessee was not liable to pay service tax on the total amount for retreading including value on materials / goods that have been used and sold in execution of the contract. Therefore, the learned counsel for the petitioner would submit that the impugned show-cause notice is to be quashed.
4. I have heard the submissions of learned senior standing counsel for the respondent.
5. Admittedly the petitioner has not submitted their objection to the show-cause notice, but have filed this writ petition challenging the show-cause notice itself. The challenge to the show cause notice is not on the ground of lack of jurisdiction of the second respondent to issue the notice. What is sought to be canvassed before this Court is that the Service Tax can be levied only with regard to the retreading aspect excluding the cost of materials/goods. However, this aspect cannot be examined at this stage since the petitioner has not submitted themselves to the process of adjudication of the show-cause notice. In the Safety retreading case, cited supra, the matter travelled upto the Supreme Court exhausting all the remedies available under the Act. Therefore, the petitioner has to necessarily submit their objection to the impugned show-cause notice. Undoubtedly, the Assessing Officer, namely the second respondent, has to take note of the decision of the Honble Supreme Court in Safety Retreading case while adjudicating the show-cause notice. This is more so because, unless and until the petitioner produces the full details, which according to them is available at their hands, including the assessment under the TNGST Act and TNVAT Act, the Authority will not be able to take a decision what would be the quantum on which the Service Tax has to be remitted. Therefore, on the grounds raised by the petitioner, the impugned show-cause notice cannot be quashed.
Hence, the writ petition is dismissed. The writ petitioner is directed to submit their reply to the show-cause notice within a period of 30 days from the date of receipt of a copy of this order and produce all materials available with them and on receipt of explanation, the second respondent shall fix a date for personal hearing and hear the authorized representative of the petitioner, peruse the documents including the Assessment Order under the TNGST and TNVAT Act and take note of the decision of the Supreme Court in Safety Retreading Co. Ltd., and pass a speaking order on merits and in accordance with law. The petitioner is entitled to raise all the contentions including the contention that the invocation of extended period of issuance of show-cause notice is unwarranted. No costs. Consequently, the connected miscellaneous petition is closed.
02.08.2017 Index: yes/no gpa To
1. The Secretary to Central Government The Union of India Ministry of Finance New Delhi
2. The Additional Commissioner Office of the Commissioner of Central Excise No.1, Foluks Compound Anai Road, Salem 636 001
3.The Superintendent of Central Excise (Erode III Range) 81, Sathi Road, Bharathi Nagar Erode- 638 004 T.S.SIVAGNANAM, J., gpa W.P.No.23869 of 2010 & M.P.No.1 of 2010 02.08.2017