Ramaniyam Real Estates Pvt. Ltd. vs The Commissioner of Service Tax and Customs Excise and Service Tax

M. Jaichandren, J.—Heard Mr. N. Venkataraman, the learned Counsel appearing for the Petitioner and Mr. M. Ravindran, the learned

Additional Solicitor General, appearing for the Respondent.

This writ petition has been filed to quash the order passed by the second Respondent Appellate Tribunal, dated 26.5.2011, and consequently,

direct the second Respondent to hear the appeal filed by the Petitioner, in ST/Appeal No. 578/09, by following the decision of the High Court of

Karnataka, rendered in C.S.T Bangalore v. Turbotech Precision Engineering Pvt. Ltd. 2010 (18) S.T.R. 545 (Kar.).

It has been stated that the Petitioner Company is carrying on its business, primarily, in executing works contracts, by carrying out commercial

and residential construction works involving men, materials, labour and overheads. The first Respondent, while proposing the payment of service

tax by the Petitioner, had confined the proposal only to 33% of the total contract value, granting various exemptions for the balance 67% of the

contract value.

It has been further stated that the first Respondent had issued a show cause Notice No. 78/2008, dated 31.3.2008, seeking to levy tax on the

Petitioner, in respect of the works contract service. The show cause notice issued by the first Respondent had proposed a demand of Rs.

1,66,06,432/-, along with the applicable interest and penalty. The Petitioner had submitted a reply to the said notice, on 27.6.2008. Thereafter, an

Order-in-Original No. 27/2009, dated 31.7.2009, had been passed, confirming the demand of Rs. 1,66,06,432/- and a penalty of Rs.

1,75,00,000/- had also been imposed on the Petitioner.

It has been further stated that the Petitioner had preferred an appeal against the Order-in-Original No. 27/2009, dated 31.7.2009, before the

second Respondent appellate tribunal. Further, the Petitioner had filed an application for waiving the requirement of pre-deposit and for a stay of

the recovery of the service tax demand and the penalty, in terms of Section 35F of the Central Excise Act, 1944.

Various grounds had been raised by the Petitioner before the second Respondent appellate tribunal. It had been stated that works contract

service had been made taxable, for the first time, from 1.6.2007, by the introduction of the definition, u/s 65(105)(zzzza) of the Finance Act, 1994.

There was no charging section for the levy of tax on works contract service, prior to 1.6.2007. Therefore, the entire tax demand made by the first

Respondent for the period, prior to 1.6.2007, cannot be sustained and as such, the Petitioner is entitled to total waiver of pre-deposit of the tax,

the penalty and the interest.

It had also been submitted that works contract service, executed prior to 1.6.2007, cannot be charged to service tax, under any head, including

`commercial or industrial construction'' or `residential construction'', as held by the Supreme Court in its various decisions, wherein it has been held

that the definition of `sale'' cannot, per se, be sufficient to tax works contracts.

It had also been submitted that a Division Bench of the High Court of Karnataka had held, in C.S.T. Bangalore v. Turbotech Precision

Engineering Private Limited 2010 (18) S.T.R. 545 (Kar.) that works contract service is liable to tax, under the provisions of Finance Act, 1994,

only with effect from 1.6.2007, and the said judgment is binding on the second Respondent appellate tribunal.

It was also contended that no reliance can be placed on the three member Bench decision, rendered in since, the three member bench had

overlooked the earlier decision, rendered in 2010 (18) S.T.R. 577 and 2008 (9) S.T.R. 373 . Therefore, the decision rendered in 2010 (253)

ELT 522 is per incuriam and as such, the said decision could not have been considered to be a precedent, having the necessary binding value.

In such circumstances, the second Respondent appellate tribunal ought to have referred the matter to a larger bench for the hearing of the

appeal and for its disposal, to settle the issues, finally. It had also been submitted that the second Respondent appellate tribunal ought not to have

ignored the decision of the High Court of Karnataka made in C.S.T. Bangalore v. Turbotech Precision Engineering Pvt. Ltd. 2010 (18) S.T.R.

545 (Kar.) which is of a binding nature.

The learned Counsel appearing on behalf of the Petitioner had raised various grounds, by way of elaborate arguments, and had placed a

number of decisions of the various Tribunals, the High Courts and the Supreme Court of India, in support of his contentions to persuade this Court

to set aside the impugned order of the second Respondent appellate tribunal, dated 26.5.2011, and to direct the second Respondent appellate

tribunal to refer the matter to a larger Bench, to settle the contentious issues.

Per contra, the learned Counsel Mr. M. Ravindran, appearing on behalf of the first Respondent had submitted that the impugned order is only

an interim order. No final decision had been rendered by the second Respondent appellate tribunal, with regard to the various issues raised by the

Petitioner. He had further submitted that all the issues could be left open to be decided by the second Respondent appellate tribunal at the time of

the final hearing of the appeal, in ST/Appeal No. 578/09.

He had further submitted that even if certain observations had been made by the second Respondent appellate tribunal, while passing the

impugned order, dated 26.5.2011, the same would not be binding on it at the time of the passing of the final order. All the issues raised by the

Petitioner, including the issue relating to the referring of the matter to a larger bench could be raised and decided at the time of the final hearing of

the appeal before the second Respondent appellate tribunal. As such, the present writ petition is premature in nature. He had also submitted that

this Court could direct the second Respondent appellate tribunal to hear and dispose of the appeal, in ST/Appeal No. 578/09, within a time frame,

as fixed by this Court.

In view of the submissions made by the learned Counsels appearing for the Petitioner, as well as the first Respondent and on a perusal of the

records available, this Court is not inclined to grant the reliefs, as prayed for by the Petitioner in the present writ petition, at this stage. However,

without going into the merits of the matter, this Court finds it appropriate to direct the second Respondent appellate tribunal to hear and dispose of

the appeal, in ST/Appeal No. 578/09, pending on its file, within a period of twelve weeks from the date of receipt of a copy of this order.

It is made clear that it would be open to the Petitioner, as well as the first Respondent, to raise all the issues available to them, including the

issue relating to the referring of the matter to a larger bench, at the time of the hearing of the appeal. It is for the second Respondent appellate

tribunal to consider the issues raised before it and to pass an appropriate order, without being influenced by the observations made by it in the

impugned order, dated 26.5.2011.

The writ petition is ordered accordingly. No costs. Consequently, connected miscellaneous petition is closed.