Gauhati High Court Declines Writ Petition, Directs Assessee to Pursue CESTAT Appeal Under Section 86 of Finance Act, 1994

Case Overview: Brahmaputra Television Network Vs Union of India

The Gauhati High Court recently adjudicated a writ petition filed by an advertising agency challenging a Service Tax demand, declining to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India in favour of the available statutory appellate remedy before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). This decision reinforces the well-established judicial principle that High Courts ordinarily refrain from entertaining writ petitions where an efficacious statutory remedy remains available and no exceptional circumstances warranting interference have been demonstrated.

Background of the Dispute

The Assessee and Nature of Services

M/s Brahmaputra Television Networks, a proprietorship firm registered in Guwahati, had been engaged in providing advertising agency services to both State Government bodies and private parties since 2000. For the purpose of Service Tax compliance, the assessee held Service Tax Code (STC) Registration no. ATTPS7285FST001 along with VAT Registration Certificate no. GRN18530220383. Post implementation of the Goods and Services Tax regime with effect from 01.07.2017, both registrations were migrated to GST with Registration no. 18ATTPS7285F1ZR.

The Demand-cum-Show Cause Notice

The Department issued a Demand-cum-Show Cause Notice bearing no. C.No. V[15]75/ADJ/CGST-HQRS/GHY/ST/2021/1421 dated 26.04.2021 calling upon the assessee to explain why:

  1. Service Tax of Rs. 1,34,54,383/- for Financial Year 2015-2016 should not be demanded and recovered under the proviso to Section 73(1) of the Finance Act, 1994 read with Section 174(2) of the CGST Act, 2017;
  2. Interest should not be recovered under Section 75 of the Finance Act, 1994;
  3. Penalty should not be imposed under Section 77 of the Finance Act, 1994 for non-furnishing of information and documents; and
  4. Penalty should not be imposed under Section 78 of the Finance Act, 1994 for alleged suppression of taxable value with intent to evade Service Tax payment.

Basis of the Demand

The demand arose from data shared by the Central Board of Direct Taxes (CBDT), which revealed a discrepancy between amounts reflected in the assessee's Income Tax Returns and TDS records on one hand, and the periodic ST-3 returns filed for Financial Year 2015-2016 on the other. The Department alleged that the assessee had:

  • Suppressed the actual value of taxable services provided during Financial Year 2015-2016;
  • Failed to fully disclose its Service Tax liability in the ST-3 returns;
  • Short-paid Service Tax dues amounting to Rs. 1,34,54,383/-

The violations were alleged to be in contravention of Section 66B, Section 67, Section 68, and Section 70 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994.

Assessee's Response and Submissions

Reply to Show Cause Notice

The assessee filed a detailed reply dated 17.02.2022, contending that its gross sales/turnover for Financial Year 2015-2016 stood at Rs. 40,38,06,352/-, of which:

  • Rs. 31,18,68,087/- represented gross value of services on which Service Tax was payable;
  • Rs. 9,19,38,265/- represented transactions on which VAT had already been paid; and
  • The balance of Rs. 1,165/- constituted bank interest.

The assessee argued that imposing Service Tax on the portion of Rs. 9,19,38,265/- on which VAT had already been discharged would amount to double taxation. It further stated that upon noticing a difference of Rs. 8,50,586/- between the Income Tax Return figures and the ST-3 returns, it had voluntarily deposited this amount on 26.07.2016.

Orders Passed Against the Assessee

Order-in-Original no. 61/Addl. Commr./ST/GHY/2021-22 dated 01.03.2022:

The Adjudicating Authority (Additional Commissioner, GST & Central Excise Commissionerate, Guwahati) rejected the assessee's contentions and confirmed:

  • Service Tax demand including cess of Rs. 1,34,54,383/- under Section 73(2) of the Finance Act, 1994;
  • Interest at applicable rates under Section 75 of the Finance Act, 1994;
  • Penalty of Rs. 1,34,54,383/- under Section 78 of the Finance Act, 1994; and
  • Penalty of Rs. 10,000/- under Section 77 of the Finance Act, 1994.

The Order-in-Original also provided an option to the assessee to pay a reduced penalty equivalent to 25% of the penalty confirmed under Section 78, subject to deposit of the confirmed Service Tax, interest, and the penalty under Section 77 within 30 days from the date of receipt of the Order-in-Original.

Order-in-Appeal bearing no. 528/GHY[A]/COM/ST/GHY/2023 dated 21.09.2023: