dmt 1 wp1902-11 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGNAL CIVIL JURISDICTION WRIT PETITION NO. 1902 of 2011 Hindustan Construction Company Ltd., .. Petitioners. versus Union of India & Ors. .. Respondents. ..... Mr. N. Venkatraman, Sr. Adv., with Mr. P.S. Colabawala and Mr. Sachin Kudalkar i/by Madekar & Co. for the Petitioners. Mr. Pradeep S. Jetly with Ms. Suchitra Kamble for the Respondent. ...... CORAM : DR.D.Y.CHANDRACHUD & A. A. SAYED, JJ. 18 October 2011. P.C. : In these proceedings under Article 226 of the dmt 2 wp1902-11 Constitution, the Petitioners have called into question the legality of notices to show cause issued by the Third Respondent, the Commissioner of Service Tax, Mumbai-II on 16 October 2009 and 22 October 2010. The Petitioners also question a circular dated 4 January 2008 of the Central Board of Excise and Customs and seek a mandamus directing the Respondents to refund taxes paid by the Petitioners under the head of Commercial or Industrial Construction Services on “ ” Works Contracts prior to 1 June 2007. A preliminary objection has been raised by learned Counsel appearing on behalf of the Revenue to the maintainability of the Petition on the ground that an adjudication is still to take place on the show cause notices issued by the Department. 2. The Petitioners have been registered with the Service Tax Department on 30 May 2007 for Commercial and Industrial Construction Services. With effect from 1 June 2007 the Petitioners have got registered under the category of Works Contract Service and have started paying dmt 3 wp1902-11 service tax at 2% or, as the case may be, at 4% under a composition scheme. 3. The allegation against the Petitioners is that during the course of audit, the following irregularities were noticed :- (i) Short payment of service tax in respect of commercial or industrial construction services by wrong availment of the Notification 1/2006 dated 1 March 2006; (ii) Wrong availment of Cenvat Credit on input services and capital goods used in providing non-taxable services; and (iii) Short payment of Service Tax by wrong classification of taxable services under Works Contract instead of Commercial or Industrial construction services. dmt 4 wp1902-11 Based on the audit objection, two show cause notices were issued on 16 October 2009 and 22 October 2010 demanding service tax for the period 2004-05 to 2008-09 and for 2009-10 respectively. The Petitioners have been called upon to show cause as to why, (i) The short paid amount of service tax under the category of Commercial or Industrial construction service should not be recovered, which is wrongly classified under Works Contract Services instead of Commercial or Industrial construction service (i.e. C.I.C.); (II) Wrongly utilized Cenvat Credit should not be demanded and recovered from the assessee under Section (1) of Section 73 of the Finance Act, 1994 and under Rule 14; dmt 5 wp1902-11 (iii) The entire service tax Cenvat Credit availed by the assessee including education cess and S.H.Ed. Cess should not be denied to them and recovered under Rule 14 of Cenvat Credit Rules, 2004; (iv) Interest as applicable should not be charged, demanded and recovered under Section 75 of Chapter V of the Finance Act, 1994; (v) Penalty should not be imposed under Section 76 of Chapter V of the Finance Act, 1994; as amended, for their failure to pay Service Tax along with interest on the said taxable value for the said service; (vi) Penalty should not be imposed under Section 77 of Chapter V of the Finance Act, 1994; for dmt 6 wp1902-11 the contravention of the various Service tax provisions; and (vii) Penalty under Rule 15 of Cenvat Credit Rules, 2004 should not be imposed on them for wrong availment & utilization of Cenvat Credit. 4. The contention of the learned Counsel appearing on behalf of the Petitioners is that the Petitioners should not be relegated to defend the notices to show cause in the adjudication proceedings since that remedy is not efficacious. This submission is based on the premise that despite the judgment of the Karnataka High Court in C.S.T., Bangalore vs. Turbotech Precision Engineering Pvt. Ltd., 1 the Tribunal in a subsequent decision in M/s. Alstom Projects India Ltd., vs. CST, Delhi 2held that the judgment of the Karnataka High Court is per incuriam and is not binding. Learned Counsel submitted 1 2010 (18) S.T.R. 545 (Kar.) 2 2011-TIOL-459-CESTAT-DEL dmt 7 wp1902-11 that the Tribunal has failed to recognize the principle that an all India revenue statute must be consistently interpreted and the judgment of the High Court would bind all the Tribunals in the absence of a decision of the jurisdictional High Court or Supreme Court to the contrary. Moreover, it has been submitted that the law laid down by the Karnataka High Court is consistent with the judgment of the Constitution Bench of the Supreme Court in Builder s Association of India vs. Union ’ of India, 3. Learned Counsel also submitted that with effect from 1 June 2007, the relevant entries in the Finance Act of 1994 came to be amended by the introduction of Section 65 (105) (ZZZZa) so as to cover services provided in relation to the execution of works contracts. In view thereof it was urged that there would be a presumption that prior to 1 June 2007 the services provided by the Petitioners would not be a taxable service. In this regard reliance is placed on the observations contained in a judgment of a Division Bench of this Court in Indian National Shipowner s Association vs. Union of India ’ 4. 3 (1989) 2 SCC 645 4 2009 (14) S.T.R. 289 (Bom.) dmt 8 wp1902-11 5. On the other hand, learned Counsel appearing on behalf of the Revenue has relied upon the following averments contained in para 7.4 of the affidavit in reply. 7.4 “ One of the conditions for availing the benefit of Notification 1/2006 dt. 01.03.06 is that no Cenvat Credit on inputs, input services & capital goods should be availed. However, it is observed from ST-3 Returns filed by the assessee for the period from April 07 to September 07, the assessee had ’ ’ availed simultaneously Cenvat Credit on input services and Capital goods as well as abatement of 67% of the taxable value as provided under Notification No. 1/2006 dt. 01.03.06 and had paid the service tax only on the balance taxable value of the 33% of the amount received by them in respect of the taxable output services, namely in Commercial or Industrial Construction services.” dmt 9 wp1902-11 Learned Counsel submitted that in this case the assessee has been registered with the Service Tax Department; has collected tax and has deposited tax with the Department in respect whereof the refund has been sought in prayer clause (c). Learned Counsel submitted that recourse must be taken to the procedure established under the law and that is one more reason as to why the Petition should not be entertained at this stage. 6. Having heard the learned Counsel appearing on behalf of the Petitioners and learned Counsel for the Revenue, we are of the view that the present case does not fall within the exceptional category of cases where the Court would entertain a Petition under Article 226 of the Constitution directly without requiring the assessee to exhaust all alternative remedies provided under the statute. As noted earlier, the case of the Revenue is that a condition for availing of the benefit of Notification 1/2006 dated 1 March 2006 is that dmt 10 wp1902-11 no Cenvat Credit on input services and capital goods should be availed of. However, according to the Department, the assessee availed simultaneously of Cenvat Credit on input services and Capital goods as well as abatement of 67% of the taxable value as provided under Notification No. 1/2006 and paid service tax only on the balance taxable value of 33% of the amount received by them in respect of the taxable output services, namely, in Commercial or Industrial Construction services. We are mentioning this facet not with a view to rendering any decision on the allegations but in support of the legal position that in such a case it would be only appropriate and proper if an adjudication takes place before the Competent Authority where all the issues both of fact and law can be considered. The fact that the Tribunal has in Alstom s’ case come to the conclusion that the judgment of the Karnataka High Court was per incuriam is not reason enough for this Court to entertain a writ petition under Article 226 directly. We clarify that it would be open to the Petitioners to urge all the contentions which they have urged in this petition on the binding nature dmt 11 wp1902-11 of the judgment of the Karnakata High Court on which reliance has been placed by the Petitioners. We leave it open to the Competent Authority upon hearing the parties to arrive at a conclusion both on facts and law. We also clarify that since the adjudication of the notices to show cause is a quasi judicial proceeding, the circular of the Central Board of Excise and Customs dated 4 January 2008 shall not conclude the merits of the adjudication which shall take place independently in accordance with law. 7. we accordingly, we dispose of the Petition by relegating the Petitioners to the pursuit of the alternative remedy. There shall be no order as to costs. (Dr. D.Y. Chandrachud, J.) (A. A. Sayed, J.)