Veer Bhadra Singh vs. Union Of INDIA

Held

The High Court consciously declined to interfere at the show cause notice stage. While acknowledging the petitioner's arguments regarding the nature of license fees and their relation to sales, and the constitutional provisions governing taxation, the Court refrained from expressing any opinion on these merits. The Court reasoned that expressing an opinion at this juncture might adversely affect the parties' interests. The primary reason for dismissal was that the competent authority should consider the issues and contentions in the first instance. The Court thus dismissed the writ petition, granting the petitioner 15 days from the receipt of the judgment to submit their reply and documents to the Assistant Commissioner, Central Excise and Service Tax, Bilaspur, who was directed to finalize the proceedings expeditiously.

Facts

The petitioner, Veer Bhadra Singh, a dealer in English and country-made liquor, challenged a show cause notice issued by the Assistant Commissioner, Central GST & Central Excise, Bilaspur. The notice alleged non-payment of service tax amounting to Rs. 38,09,732/- (including cess) for the period November 2016 to March 2017, and proposed recovery of tax, interest, and penalties under various sections of the Finance Act, 1994. The petitioner argued that the license fee paid to the State for selling liquor is generated from sales and thus cannot be subject to service tax. The petitioner sought to quash the show cause notice, contending that the authorities lacked the power to issue it.

Key Issues

1. Whether the license fee paid by the petitioner to the State for selling liquor is part of the revenue generated from sales and therefore cannot be subject to service tax under the Finance Act, 1994? Petitioner's argument: The petitioner contended that the license fee is intrinsically linked to the sale of liquor and is generated from such sales. Therefore, it cannot be considered a service liable for service tax. They relied on constitutional provisions like Article 366(29A) and Entry 92C of List I of the Seventh Schedule, contrasting it with State taxing powers under List II. They argued that the same transaction cannot be both a 'sale' and a 'service', citing Apex Court decisions. Revenue/State's argument: The respondents argued that the petitioner's understanding was incorrect and that the license fee has no bearing on the service tax payable on sales. They also submitted that it was open for the petitioner to present their case before the concerned authorities.