Engineering Projects INDIA Limited vs. Additional Director General Directorate General Of GST Intelligence

Facts

Engineering Projects India Limited (the petitioner) received a show-cause notice dated December 27, 2020, from the Additional Director General, Directorate General of GST Intelligence (respondent no. 1). The notice alleged service tax liability, including cesses, for construction/renovation of educational institutes under agreements with the Government of Jharkhand dated February 28, 2007, March 7, 2012, and June 20, 2014. The petitioner claimed exemption under various notifications, including Notification No. 25/2012 as amended. The respondents contended that the petitioner failed to pay appropriate stamp duty on the agreements, a condition for exemption, and also failed to register with the Service Tax Department. The petitioner challenged the show-cause notice, arguing it was against the law and sought its quashing.

Held

The Court consciously refrained from commenting on the merits of the contentions regarding the levy of service tax and the claim for exemption from stamp duty, as the petitioner had only been asked to respond to a show-cause notice. The Court found that the show-cause notice did not suffer from a lack of jurisdiction. It held that the petitioner's plea required scrutiny and examination of service contracts in light of the exemption notifications, which involved a mixed question of law and facts. Therefore, the Court concluded that the writ petition was not fit to be entertained at this stage, citing well-settled principles regarding the availability of an effective alternative remedy. The Court emphasized that when a right or liability is created by a statute, the prescribed statutory remedy should be resorted to before invoking writ jurisdiction. The Court quoted extensively from the Supreme Court's decision in M/s Magadh Sugar & Energy Ltd. v. The State of Bihar & Ors. regarding the exercise of writ jurisdiction in the presence of an alternate remedy. The petitioner was granted liberty to respond to the show-cause notice.

Key Issues

1. Whether the show-cause notice issued by the Additional Director General, Directorate General of GST Intelligence, suffers from want of jurisdiction, warranting interference under Article 226 of the Constitution of India? 2. Whether the petitioner is liable to pay service tax on the value of Works Contract Services provided to the Government of Jharkhand, considering their claim for exemption under various notifications and their reliance on the Indian Stamp Act, 1899? Petitioner's arguments: The petitioner argued that the impugned show-cause notice is against the provisions of law and should be quashed. They relied on Section 3 of the Indian Stamp Act, 1899, particularly the proviso, to assert that instruments executed in favour of the Government are exempted from stamp duty, which they believed was a prerequisite for service tax leviability in their case. They also claimed that the agreements were entered into prior to March 1, 2015, and thus entitled to exemption. Respondents' arguments: The respondents contended that the petitioner is mistaken in their understanding of the Indian Stamp Act, 1899. They argued that while the agreements were executed before March 1, 2015, the petitioner failed to fulfill the second condition for exemption, which was the payment of appropriate stamp duty. They asserted that the petitioner, as a service provider to the Government and using sub-contractors, could not avail the exemption based on the proviso to Section 3 of the Indian Stamp Act, 1899. They further argued that the show-cause notice does not suffer from want of jurisdiction and that the petitioner should avail the alternative remedy of responding to the notice before the Adjudicating Officer.