Creative Infospace Pvt. Ltd. vs Additional Commissioner

T.S. Sivagnanam, J.—The prayer in the writ petition is to quash a show cause notice dated 17-9-2009 issued by the first respondent calling upon the petitioner to show cause notice within a period of 30 days as to why service tax should not be demanded for the period from July, 04 to

February, 05 under proviso to Section 73(1) of the Finance Act, 1994 and as to why interest at applicable rate should not be demanded u/s 75 of the Act and penalty u/s 76 and 78 of the Act, should not be imposed. This show cause notice is impugned in the present writ petition. Primarily on two grounds the show cause notice is challenged. Firstly, on the ground that it is in violation of principles of natural justice, since, when the second respondent had sent a communication on 21-5-2009 directing the petitioner to submit his reply to audit report, the petitioner promptly responded to the same on 25-6-2009 and without conducting any further enquiry the first respondent has issued the show cause notice. The other ground of attack is that the authority has already pre-decided the issue and the learned Counsel relied upon the findings in paragraph 3 of the show cause

notice, and submitted that the tax has already been quantified which shows that the show cause notice is an empty formality.

The learned Counsel for the petitioner by placing reliance on the decision of the Hon'ble Supreme Court in Siemens Ltd. Vs. State of

Maharashtra and Others, contended that the writ petition is maintainable against a show cause notice if the respondent has already determined the liability of the appellant.

I have perused the show cause notice which is impugned in the writ petition. It has been stated that during the course of the audit of the accounts

of the assessee by the officers of the Internal Audit Group of the respondent department, noticed that the assessee has not paid Service Tax for a stated period. Thereafter, the office had directed the assessee to pay the Service Tax, for the said period for which the assessee by letter dated

24-6-2009 denied his liability. These material were placed before the first respondent and the first respondent in the impugned show cause notice has stated that the contention of the assessee appears to be not tenable for certain reasons. Paragraph 3 and 4 of the show cause notice has set out the reasons based on which the first respondent has stated that the prima facie the contention of the petitioner is not tenable. I find that there is no predetermination of the issue or any foregone conclusion arrived at by the first respondent. In paragraph 5, of the show cause notice the petitioner has been given opportunity to submit his explanation to the allegations contained in the show cause notice as well as to the quantum said to have been computed. Further u/s 73 of the Finance Act at is stood prior of its amendment by Finance (No. 2) Act, 2004, with effect from 10-9-2004

and subsequently, the officer demanding service tax is required to issue a show cause notice on the person calling upon him to show cause why he should not pay the amount specified in the notice. Therefore, the quantification of the tax in the show cause notice is a statutory requirement and cannot be stated that the authority has pre-decided the issue. Therefore, the decision relied on by the learned Counsel rendered by the Hon'ble

Supreme Court in Siemens Ltd. Vs. State of Maharashtra and Others, has no application to the facts of the present case. Further the question whether the extended period could be invoked or not is also a factual question which should be best left to the adjudicating authority to decide based on the reply to be submitted by the petitioner and the documents, if any, to be produced. This issue, therefore cannot be gone into in a proceeding under Article 226 of the Constitution.

Hence, I find that there are no reasons to quash the impugned show cause notice and hence writ petition stands dismissed. However, since the

time stipulated in the show cause notice for submitting the reply has already expired, the petitioner is granted 30 days time from the date of receipt of a copy of this order to submit his explanation to the show cause notice and on receipt of the same the first respondent shall adjudicate the case on merits and in accordance with law, after affording opportunity to the petitioner as contemplated under the provisions of the Finance Act. No

costs. Consequently, connected miscellaneous petition is closed.