Service Tax - Supreme Court upholds quashing of Show Cause Notice

By Vijay Kumar

CAN a Show Cause Notice be quashed when there is a statutory adjudication and appellate procedure?

An assessee who supplied manpower was stuck with a Show Cause Notice to pay tax under the category of cargo handling service. The assessee challenged the Show Cause Notice in the High Court and the High Court quashed the Show Cause Notice. The Department took the matter to the Supreme Court pleading that it was not appropriate for the High Court to deal with the writ petition, bypassing the adjudicatory machinery provided under the Act, more so when the statutory appeals against the adjudication orders are also provided.

The Supreme Court found that the High Court has simply gone by the contract in question and taking into consideration all the averments, which were made in the show cause notice, on the basis of admitted facts, it has come to a conclusion that even when the allegations in the show cause notice are accepted, the said contract does not amount to providing any 'Cargo Handling Service' as defined under Entry 23 of Section 65 of the Act.

Therefore, Supreme Court was of the opinion that the High Court did not commit any mistake or illegality in entertaining the writ petition when no disputed questions of fact were involved and the legal issue was to be decided on the basis of the facts, as admitted by the parties, which were so specifically recorded by the High Court itself.

For more details on this case, please see Breaking News