M/S Shivalik Silica vs. Union Of INDIA

Held

The Court held that it would not entertain the writ petition against the show cause notice as the adjudication process was not yet complete. While acknowledging that a writ petition could be entertained if the issuing authority lacked jurisdiction, the Court found that in this case, the issues were not concluded against the petitioner. The Court referred to a Division Bench judgment of the Rajasthan High Court in 'Udaipur Chambers of Commerce and Industry Vs. Union of India' which had decided against the assessee on the question of service tax on royalty for mining leases. The Court also considered the Supreme Court's 5-judge bench decision in 'State of West Bengal Vs. Kesoram Industries and Ors.' as applicable. The Court reasoned that a mere doubt cast on the correctness of a previous Supreme Court decision and a subsequent reference to a larger bench would not be sufficient grounds to stay the department's proceedings. The Court also expressed concern that staying all proceedings pending the reference judgment could lead to the loss of evidence. Therefore, the Court declined to stop the department from adjudicating the demand.

Facts

M/s Shivalik Silica, a partnership firm, filed a writ petition challenging a show cause notice dated 14/10/2021 issued by the Assistant Commissioner, CGST Division-F, Bharatpur. The notice proposed recovery of service tax amounting to Rs. 46,61,707/- along with interest and penalty under Section 73(1) of the Finance Act, 1994. The petitioner's primary contention was that service tax is not leviable on royalty paid for mining operations, an issue purportedly pending before a 9-judge bench of the Supreme Court. The petitioner cited orders from the Gujarat High Court and a single bench of the Rajasthan High Court staying recoveries in similar matters.

Key Issues

1. Whether the High Court should entertain a writ petition challenging a show cause notice when the adjudication process is ongoing, particularly when the authority issuing the notice is alleged to have no jurisdiction. 2. Whether the pendency of a reference to a 9-judge bench of the Supreme Court on the issue of service tax on royalty for mining operations warrants a stay on the adjudication and recovery proceedings initiated by the revenue. Petitioner's Arguments: The petitioner argued that service tax is not leviable on royalty paid for mining operations and that the issue is pending before a larger bench of the Supreme Court. They contended that recoveries should be stayed, citing orders from other High Courts and the Supreme Court. They also implied that the authority issuing the notice might lack jurisdiction due to the unsettled nature of the law. Revenue's Arguments: The judgment does not explicitly record arguments made by the revenue. However, the court's reasoning suggests the revenue's position was that adjudication should proceed, and a pending reference does not automatically halt departmental proceedings.