The Bombay High Court quashed the show cause raising service tax demand against Larsen & Toubro.
The court ruled that since show cause notice has been issued without jurisdiction. All the details of the show cause notice is alleged to have not been submitted.
Facts
Larsen & Toubro Limited (L & T) is a public limited company comprising of various divisions such as, L & T Hydrocarbon Division, L & T Heavy Engineering Division, L & T Power Division and L & T Construction Groups. L & T decided to hive off of its Hydrocarbon Division as an independent business unit with identifiable revenue streams, dedicated employees etc. L & T filed a scheme of arrangement under Section 391 read with Section 394 of Companies Act, 1956 before the Company Court for approval of the said scheme of arrangement.
The Company Court approved the scheme from the appointed date which was 1st April 2013. As per the said scheme, for the period between appointed date and effective date, the transferor company (L & T) would be deemed to have been carrying on the business relating to the transferred undertaking for and on account of and in trust of the transferee company (LTHE) and all compliances with regard to was to be done by transferor company and same was deemed to have been done by transferee. The order approving the scheme has become final and there is no challenge to the same by any authority or any other person before any higher forum. Registration with the service tax department was also granted in the name of LTHE, post approval of the scheme.
The Director General of Goods and Services Tax Intelligence, Chennai initiated investigation against Petitioner on the ground that Petitioner-LTHE, as a legal entity had not paid service tax for the financial year 2013-14. Petitioner has stated in paragraphs 46 to 73 that they have given all the details called for in support of its contention that service tax on forward basis and reverse charge basis on domestic as well as import of service has been discharged by L & T, the transferor company on behalf of Petitioner-LTHE for the financial year 2013-14. Various statements of the officers of Petitioner were also recorded. Based on the investigation by the Chennai Officer, the information was transferred to Gujarat Excise Officials who issued show cause notice for recovery of excise duty and Bombay Officers issued show cause notice for recovery of service tax for the period of 2013-14.
Arguments
The petitioner argued that show cause notice is without jurisdiction. The foundation or the basis on which the show causes notice is contrary to the order passed by the Bombay High Court approving the scheme of arrangement. The transferor company (L & T) has discharged all the liability of the transferee company (LTHE) for the period 2013-14 and, therefore, any attempt to recover the same from the transferor company would amount to double taxation and also contrary to the scheme approved by the High Court. Petitioners, therefore, prayed for quashing of the impugned show cause notice dated 23rd October 2018.
The department argued that petitioners have not given the details as more particularly of the show cause notice and, therefore, the present show cause notice was issued. The petition involves disputed questions of fact and, therefore, the Court should not entertain the present petition and should relegate Petitioners to answer the show cause notice.
Conclusion
“We have exercised our discretion under Article 226 of the Constitution of India and further respectfully agreeing with the decision of the Gujarat High Court in case of this very Petitioners, we quash and set aside the impugned show cause notice dated 23rd October 2018,” the court said.
Case Details
Case Name: Larsen & Toubro Ltd. v/s The Union of India
Citation: Writ Petition No.9404 Of 2019
Judges: Justice K. R. Shriram & Justice Jitendra Jain
DATE OF DECISION: 13.08.2024
