The Gujarat High Court has quashed a writ petition contesting a service tax show cause notice issued under section 73(1) of the Finance Act, 1994, holding that the department has the authority to initiate and continue service tax proceedings even after the repeal of the service tax norms after the rollout of the GST regime.
The bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati specified the saving provisions u/s 174(2)(e) of the CGST Act, which cites that the legislature intended to keep the power of authorities to continue and even commence proceedings related to service tax liabilities even after the dismissal of Chapter V of the Finance Act, 1994.
Also Read: Orissa HC Sets Aside GST Orders Passed U/S 73 and 161 Over Violation of Natural Justice Principles
The applicant had contested the jurisdiction of the service tax authorities to issue and pursue proceedings under the Finance Act, 1994, after the legislation of the Central Goods and Services Tax Act, 2017 (CGST Act).
The main claim was that Chapter V of the Finance Act, 1994, which controlled service tax, was removed by virtue of Section 173 of the CGST Act, and hence, fresh proceedings could not be started thereafter.
The petition asked to cancel the GST Show Cause Notice (SCN) issued under section 73(1) of the Finance Act, 1994, through which the department asked to recover the service tax, including applicable interest and penalties.
In the hearing, the representative of the applicant accepted that the issue raised in the writ petition had earlier been conclusively determined by a Coordinate Bench of the High Court in Sahitya Mudranalaya Pvt. Ltd. v. Additional Director General, reported in 2021 (46) GSTL 245 (Guj.). Thus, the applicant requested that it be relegated to the adjudication proceedings.
The earlier decisions have been analysed by the Court, which had interpreted Sections 173 and 174 of the CGST Act. While Section 173 removed the service tax provisions, Section 174 has a comprehensive saving clause preserving ongoing and future investigations, inquiries, audits, assessments, adjudications, recovery proceedings, and other legal actions concerning taxes that existed before GST.
The coordinate bench had earlier mentioned that investigations, inquiries, verifications, assessments, adjudications, and recovery proceedings could continue “as if” the Finance Act, 1994, had not been quashed.
Therefore, the claim that tax authorities lacked jurisdiction to begin fresh service tax proceedings after GST came into effect was not accepted. The Court stated that the respondent authorities have the authority to institute and continue legal proceedings related to service tax liabilities, despite the legislation of the GST regime.
The Gujarat High Court said that there is no reason to consider the writ petition and dismissed it. The Court said that the quashing of the writ petition must not prejudice the applicant in adjudication and asked that the adjudicating authority analyse the case as per the law. Therefore, the rule was dismissed.
| Case Title | M/s North Western Carrying Corporation Vs Union of India |
| Case No. | R/Special Civil Application No. 496 of 2019 |
| For Petitioner | Mr Anand Nainawati |
| For Respondent | Ms Pruth D. Bhavsar, Mr Ankit Shah |
| Gujarat High Court | Read Order |
