W.A Nos. 104 and 105 of 2008 and M.P No. 1 of 2008
Decided on March 11, 2008
The Judgment of the Court was delivered by
K. Raviraja Pandian, J.:— The appellant is the writ petitioner. The appellant filed two writ petitions in W.P Nos. 35940 and 35941 of 2007 challenging the show cause notice in reference No. 209/07 dated October 18, 2007 issued by the third respondent-Additional Commissioner of Cen tral Excise and, the circular in F. No. B-11/1/2001-TRU dated July 9, 2001 issued by the second respondent-Central Board of Excise and Customs, Ministry of Finance, New Delhi.
2. The show cause notice proceeded that on the basis of certain intelli gence report that the appellant studio is hot paying service tax.
3. The studio was visited by the officer of SIV Cell of the Commissionerate of Income-tax on July 31, 2007. The appellant was issued with a letter dated July 30/2007 directing them to furnish details of the charges collected from their clients and also the details of service tax paid, if any, by them.
4. The appellant filed a reply dated August 17, 2007 denying that they are involved in any video production and they are not video production agency in terms of section 65(119) of the Finance Act, 1994. In the show cause notice, it was stated that the appellant has not paid any service tax on the studio hire charges collected from the customers in spite of clarification issued by the Ministry on the scope of taxable services in terms of video tape production, in any manner. It was also stated that the appellants have suppressed the facts and contravened sections 67 and 68 of the Finance Act, 1994. In the light of the same the appellants were directed to show cause within thirty days as to why they should riot be charged a sum of Rs. 44,26,741 being the service tax including educational cess as per the proviso to section 73(1) of the Finance Act, 1994 and failure would also result in imposition of interest and penalty. Instead, of replying to the show cause notice, the appellant has filed the writ petition.
5. Before the learned single judge, a contention was raised on behalf of the appellant that the show cause notice was based on a clarification issued by the Central Board of Excise and Customs vide Ministry's letter dated July 9, 2001 in which the facilitation activities such as providing studio was also roped in for the purpose of taxation, which is impermissible in law. It was further contended that any amount of explanation offered by the appellant would not be taken note of by the authorities, as it is a well-recognised principle of law that the clarification issued by the department would be binding on the authorities. However, the learned single judge non-suited the appellant for the relief on the premise that the issue in controversy in the writ petition was whether the appellant's activity comes within the definition of “video production agency” as defined under the Finance Act. That has to be determined by a fact-finding body and unless the appellant has come forward with the details to the authorities so as to enable them to render a finding of fact, the question of challenging it at the stage of show cause notice cannot be legally sustainable. The said order is put in issue in these appeals. The same argument, which has been argued before the learned single judge has been placed before this court and the judgment of Pizzeria Fast Foods Restaurant (Madras) Pvt. Ltd. v. Commissioner of Commercial Taxes, Chennai reported in [2005] 140 STC 97, which has been referred to before the learned single judge has also been referred before this court.
6. We do not find any merits in this case as the learned single judge is very categoric and the show cause notice is also very categoric in its terms and it only directed the appellant to show cause as to why the sum of Rs. 44,26,741 cannot be recovered as service tax on consideration that the activity of the petitioner in leasing out the studio would come within the definition of “video production agency” as defined in the Finance Act. If the activity of the appellant does not come within the purview, it is well open to the appellant to explain the activity carried on by the appellant so as to have a finding to that effect.. It is well-settled and well established principle that a classification or whether an activity comes within the purview of the tax net has to be done by the authorities only, which cannot be determined on the basis of an affidavit and counter affidavit in a proceeding under article 226 of the Constitution of India. Useful reference can be had to the judgment of the Supreme court in the case of State of Goa v. Leukoplast (India) Ltd. reported in [1997] 105 STC 318 (SC). Hence, we are not able to take a view different than the one taken by the learned single judge.
7. The appellant has bona fidely agitated against the show cause notice before this court by way of writ petition and further appeal. We are of the view that in order to safeguard the interest of the appellant, time has to be granted so as to enable the appellant to file a reply to the show cause notice.
8. Hence, fifteen days time is hereby granted from today to the appellant to file a reply to the show cause notice. The respondent-authorities are hereby directed to consider the reply of the appellant, without being influenced by any of the observations made either in the writ petition or in the writ appeal.
9. With this observation, the writ appeals are disposed of However, there is no order as to costs. Consequently the connected M.P No. 1 of 2008 are closed.