M/S Karnataka Transport Co., Vs Union of India

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11^TH DAY OF SEPTEMBER, 2025

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BEFORE

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THE HON'BLE MR. JUSTICE M.NAGAPRASANNA WRIT PETITION NO. 20351 OF 2025 (T-RES)

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BETWEEN:

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M/S KARNATAKA TRANSPORT CO., NO. 20/2, FAZAL - E - SALAR COMPLEX, 2ND MAIN, KALASIPALYAM NEW EXTENSION, BENGALURU - 560 002. REP. BY ITS PROPRIETOR, MR. SANGAPPA ANNAPPA UPPIN.

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…PETITIONER

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(BY SRI. TEJAS N., ADVOCATE)

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AND:

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Digitally signed by NAGAVENI Location: High Court of Karnataka

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UNION OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NORTH BLOCK, NEW DELHI - 110 001. REP. BY SECRETARY.

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SUPERINTENDENT OF CENTRAL TAX, RANGE BSD2, SD-2 DIVISION, BENGALURU SOUTH COMMISSIONERATE, 2ND FLOOR, TTMC BUILDING, KANAKAPURA ROAD, BANASHANKARI, BENGALURU 560 070.

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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ASSISTANT COMMISSIONER OF CENTRAL TAX DIVISION 2, BENGALURU SOUTH COMMISSIONERATE, 2ND FLOOR, BMTC BUILDING, KANAKAPURA ROAD, BANASHANKARI, BENGALURU 560070.

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THE COMMISSIONER OF CENTRAL TAX (APPEALS-I), TRAFFIC AND TRANSIT MANAGEMENT CENTRE, BMTC BUILDING NO.9, 4TH FLOOR, ABOVE BMTC BUS STAND, DOMLUR, BENGALURU - 560 071.

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…RESPONDENTS

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(BY SRI. V.C.SUDEEP, ADVOCATE FOR R1; SRI.ARAVIND V CHAVAN, ADVOCATE FOR R2 TO R4)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI OR ORDER OR DIRECTION IN THE NATURE OF CERTIORARI TO SET ASIDE THE IMPUGNED SHOW CAUSE NOTICE ISSUED BY RESPONDENT NO.2 AGAINST THE PETITIONER HEREIN DATED 18-10-2021 BEARING REFERENCE NO.GEXCOM/SCN/ST/9443/2021-CGST-DIV-SD-2-COMMRTEBENGALURU(S) VIDE DIN-2021105700000000ED21 (ANNEXURE B) IN THE INTEREST OF JUSTICE AND EQUITY AND ETC.

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THIS PETITION, COMING ON FOR PRELIMINARY

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HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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3 - NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA

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ORAL ORDER

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Petitioner is before this Court seeking the following

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prayers:

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“(a) To issue a writ of Certiorari or order or direction in the nature of Certiorari to set aside the impugned Show Cause Notice issued by respondent No.2 against the petitioner herein dated:18-10-2021 bearing reference No.GEXCOM/SCN/ST/9443/2021CGST-DIV-SD-2-COMMRTE-BENGALURU(S) vide DIN-2021105700000000ED21 (ANNEXURE-B) in the interest of justice and equity.

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(b) To issue a writ of Certiorari or order or direction in the nature of Certiorari to set aside the impugned Order In Original dated: 23-05-2023 bearing reference No.GEXCOM/SCN/ST/9443/2021-CGSTDIV-SD-2-COMMRTE-BENGALURU(S) vide DIN2023065700000000E21E passed by respondent No.2 against the petitioner herein (ANNEXURE C) in the interest of justice and equity.

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(c) To issue a writ of Certiorari or order or direction in the nature of Certiorari to set aside the impugned Order - In - Appeal No.628/2024 dated:28-11-2024 bearing reference No.GAPPL/COM/STP/1130/2024 vide DIN20241157CU000091439A passed by respondent No.3 against the petitioner herein (ANNEXURE - D1) in the interest of justice and equity.

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(d) To refund the pre-deposit paid by the petitioner through Bank of Baroda dated:01-08-2023 to the tune of Rs.1,37,151/- (ANNEXURE – F).

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(e) Issue any other writ, order or direction which deems fit for this Hon'ble Court under the facts and

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HC-KAR

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circumstances, of the case including the award of costs in the interest of justice and equity.”

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Heard Sri.Tejas N, learned counsel appearing for the

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petitioner, Sri.V.C.Sudeep, learned counsel appearing for respondent No.1, Sri.Aravind V Chavan, learned counsel appearing for respondent Nos.2 to 4 and have perused the material on record.

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Learned counsel for the petitioner submits that the issue in the lis is akin to what is decided by the Coordinate Bench in W.P.No.11154/2023 (T-IT) C/w W.P.No.15959/2021 (T-RES) and connected matters, between M/S KARNATAKA CHINMAYA SEVA TRUST vs. JOINT COMMISSIONER OF

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CENTRAL TAX AND ANOTHER , disposed on 03.07.2024. He would submit that several of the petition was disposed in the same terms.

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Learned counsel for the Revenue would not dispute

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the position.

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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I, therefore deem it appropriate to notice what the

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Coordinate Bench has held in W.P.No.11154/2023 (T-IT) C/w W.P.No.15959/2021 (T-RES) and connected matters, between

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M/S KARNATAKA CHINMAYA SEVA TRUST vs. JOINT COMMISSIONER OF CENTRAL TAX AND ANOTHER ,

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disposed on 03.07.2024, which reads as follows:

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“2. In all these matters, the proceedings by way of show-cause notice under the Finance Act for service tax liability have been initiated on the basis of inputs received from the Central Board of Direct Taxes on the basis of Form 26AS/Income Tax returns filed.

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The details of the writ petitions and the stages are as follows:

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Challenge to Show-cause Notice	Challenge to Orders-in-Original
Column No.1	Column No.2
WP No.16891/2022	WP No.12840/2023
WP No.13445/2023	WP No.15832/2022
WP No.15959/2021	WP No.3318/2023
WP No.24822/2022	WP No.14425/2022
WP No.8514/2023	WP No.15018/2022
	WP No.24650/2022
	WP No.12906/2023
	WP No.22063/2022
	WP No.19792/2022
	WP No.25156/2022
	WP No.5896/2023
	WP No.17407/2023

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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WP No.11154/2023
WP No.9765/2022
WP No.17591/2022
WP No.1754/2023
WP No.8858/2023
WP No.16501/2023
WP No.7071/2023
WP No.9906/2023
WP No.8409/2023
WP No.8184/2023
WP No.16170/2022
WP No.1198/2024
WP No.14092/2023
WP No.341/2023
WP No.274/2023
WP No.12003/2022
WP No.13813/2022
WP No.7829/2023
WP No.20282/2022
WP No.19000/2022
WP No.8336/2023
WP No.10238/2023
WP No.6756/2024

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After having heard the matters on various occasions, the Union of India have taken a stand and filed affidavit of the Principal Commissioner, Central Taxes.

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Sri.N.Venkataraman, learned Additional Solicitor General who was present before the court on 27.06.2024 had submitted that they desire that the matters be

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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resolved and accordingly have putforth a proposed mechanism and made certain suggestions in the affidavit filed. The relevant extract of the affidavit filed by the Principal Commissioner of Central Tax, presently holding charge of Bengaluru West and additional charge of Bengaluru East Commissionerate reads as hereunder:

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"I, Kiran Verma, working as Principal Commissioner of Central Tax, presently holding charge of Bengaluru West and additional charge of Bengaluru East Commissionerate, Bengaluru do hereby solemnly affirm and state on oath as follows:

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I am working as Principal Commissioner of Central Tax, Bengaluru West and holding additional charge of Bengaluru East Commissionerate, Bengaluru -560071. I am the concerned person in the above Writ Petition. I am fully conversant with the facts of the case. I am authorized to swear to this affidavit.

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1. I submit that in the above batch of cases, the dispute is regarding the Issuance of the Show Cause Notice and demand of Service Tax made on the basis of information provided by CBDT (Central Board of Direct Taxes) as per the assessee's Income Tax returns. The Service Tax Levy is on the taxable services provided by one person or Entity to another, in terms of the provisions contained in the Finance Act, 1994 and the rules made thereunder.

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2. I submit in these batch of Writ Petitions, there are cases pertaining to various categories of Services. It is submitted that a Memorandum of understanding was signed between the Central Board of Direct Taxes and the Central Board of Indirect Taxes & Customs on 21.07.2020 for the data exchange between the two Departments. This Memorandum of Understanding was signed for regular exchange of data which would help both the departments to keep a track on the tax evasion, which have not been reported under the Law.

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3. I submit that all the petitioners have averred that the Show Cause Notices (SCN) were issued without the application of mind and further that the department has not verified the books of account and only on presumption have issued these Show Cause Notices. This averment of the petitioner is denied as false, as the department has taken utmost care by applying its mind and by examining the data received from the CBDT.

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HC-KAR

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4. I submit that, Section 66B Finance Act, 1994 is the charging Section and Service is defined in Section 65B(44) and taxable Service is defined in Section 65B(51).The assessee is mandated to get the registration and secure compliance of the obligations placed on him by the Act which is prescribed in Chapter V of the Finance Act, 1994 (hereinafter called "the Act") read with the Service Tax Rules, 1994, the CENVAT Credit Rules, 2004, the Place of Provision of Services Rules, 2012, the Point of Taxation Rules, 2011, and the Service Tax (Determination of Value) Rules, 2006. In terms of Section 70 of the Finance Act, 1994, the petitioner is obligated to self-assess their liability and discharge the applicable tax as per the statutory provisions and the entire burden of compliance to statutory provisions is on the assessee themselves. As per the Act, the Show Cause Notice were issued in-terms of Section 73(1) of the Finance Act, 1994, as the services rendered by the assesses appeared to be classifiable as taxable service in terms of Section 65B(44) read with section 66B of the Finance Act, 1994.

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5. I submit that the department received a total number of 49,665 cases from the CBDT and after receipt of the data the department has verified the same. After preliminary verification, the department initially filtered the cases and where there was no component of Service Tay dropped 21,549 such cases after detailed verification. Thereafter the department issued Show Cause Notices to the Assessee in the remaining 28,116 cases and called for clarification/explanation. The adjudicating authority during the course of adjudication, after providing a hearing opportunity to the notice, dropped the show cause notices in about 8,816 cases wherever the Service tax component was not found. The adjudicating Authority after providing reasonable opportunity and hearing opportunities proceeded to confirm the show cause notice by way of an Order-InOriginal in a total number of 19,300 cases by following the due process of law and following the principles of natural justice. The department in further course of action has also recovered the Service Tax in 587 cases where the service Tax component was confirmed during the adjudication.

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6. I state that there is no prohibition under the provisions of the Finance Act 1994 or under the Service tax Rules to rely upon the third party information that is furnished by the IT department. The information need not be confined only in respect of information provided

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HC-KAR

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by the assessee. The object of sharing the data by the C.B.D.T to C.B.E.C (Now C.B.I.C) is to keep track of the statutory compliances by various categories of assessee. Hence there is no irregularity or illegality in relying upon the date obtained from the Income Tax department.

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7. I state that the provisions of the Finance Act 1994 or Service Tax Rules do not contemplate any enquiry before issuing a show cause notice. No such procedure is contemplated either under the act or rules. The only preliminary enquiry to be undertaken was to examine the data obtained from the C.B.D.T, issue of intimations/ letters calling upon the assessees' to furnish their documents which are necessary to determine as to whether the assesses had provided taxable service and whether the activity of the assessee falls under the category of the taxable service or non-taxable service.

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8. I further submit that, in many of the writ petitions the assessees' did not respond to the letters issued by the department seeking documents/information/clarifications. In spite of several reminders there was no response from the assesses. Hence, the department in absence of any other option, issued the Show Cause Notices on the address provided by the CBDT(address as in PAN/ITR).These show cause notices were issued keeping in mind the statutory time lines. In some cases, even after the issuance of Show Cause Notices, the assessee did not render their reply or failed to produce any document/clarifications.

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9. Therefore, in the absence of any clarifications or documents by the assessee, decisions were taken based on available information and the Order-In-Original were passed. No Show Cause Notices were issued by the department where the clarifications with requisite documents were provided in time. Therefore, the allegations of non-application of mind etc. are factually untenable and cannot be sustained. The following consolidated data is submitted to support the above contention: -

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Table-1

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		BAN	GALORE ZONE -	DATA
01	02	03	04	05	06	07
Commissi	No. of	No. of	No. of	No.of	No. of	No. of

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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onerate's	cases received from CBDT	cases dropped prior to issuance of SCN	cases where SCNs were issued	Cases where SCNs were dropped	cases where SCNs were Confirmed	cases where demand is recovered
Bangalore East	11,113	6,387	4,726	801	3,925	310
Bangalore North West	4,355	1,465	2,890	952	1,938	44
Bangalore South	12,120	4,447	7,673	2,340	5,333	99
Mangalore	3,632	2,847	785	490	295	-
Bangalore North	5,564	1,928	3,636	1,629	2,007	9
Mysore	2,703	843	1,860	441	1,419	32
Belagavi	5,842	2,549	3,293	864	2,429	58
Bangalore West	4,336	1,083	3,253	1,299	1,954	35
*Total*	*49,665*	*21,549*	*28,116*	*8,816*	*19,300*	*587*

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Summary of the same is produced below:

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Table-2

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Sl No.		Number of Cases	Percentage
(i)	Number of references received from CBDT	49,665	100%
(ii)	Dropped before issuance of Show Cause Notice	21,549	43%
(iii)	Dropped after Show Cause Notice issued and adjudicated.	8,816	18%
(iv)	No. of cases confirmed after Show Cause Notice issued and adjudicated.	19,300	39%
(v)	No. of assesses who agreed to the department's contention and paid the tax liability to the exchequer before/after the issuance of the Show	587

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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Cause Notice.

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Out of the 49,665 references received from CBDT a major portion i.e. 61% demands have been dropped and only 39% of the cases have been confirmed which shows that quasi-judicial authorities have taken independent decisions on merit. Where ever the demands were confirmed the aggrieved party have an appellate remedy under the Law.

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10. I submit that when 587 assessees have complied with the law & paid up the taxes confirmed, grant of any relief to the present petitioners will put the compliant taxpayers into a disadvantageous position. Therefore, it is submitted that the quasi-judicial authority has taken independent decisions based on facts & law. When department has acted upon CBDT data to examine tax compliance all over the country, granting any relief to the petitioners in Karnataka alone will amount to disadvantage to the tax payers who have complied with the law.

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11. I therefore submit that this Hon'ble High Court may direct the petitioners to appear before the quasijudicial authorities as the petitions are premature and a robust appellate remedy is provided by the Law.

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12. I submit that the contents stated above are as per records and correct to the best of my knowledge, information and belief which I believe to be true".

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Learned Senior Counsel Sri.V.Raghuraman has also filed a note in response to the proposal and the same is taken on record.

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After hearing both sides and though certain issues were raised, however both sides eventually have made a submission that the Court can take note of the affidavit and pass appropriate orders.

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Upon suggestion of the court, learned Additional Solicitor General has responded positively and has stated that a team of Officers who are competent to pass orders without reference to the territorial jurisdiction would be constituted and from amongst such team of officers designation would be made and cases allotted in order to pass necessary orders from the stage of post show-cause

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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notice which would be done within a period of three months.

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Needless to state, a bare perusal of all the petitions reveals that the petitioners have raised various contentions which are required to be referred back for consideration by the appropriate authorities so that officers concerned may take note of the same while disposing off the petitions at the stage of post show-cause notice.

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The officers while disposing off the petitions to keep in mind the following:

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1. Whether petitioners do not qualify under Section 65B(44) of the Finance Act, 1994 ?

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1. Whether services are covered under negative list ?

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1. Whether services are covered under the exemption list under the Notification No.25/2012-ST dated 28.06.2012 or under any other applicable Notifications?

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1. Whether the person is liable to remit service tax in terms of Rule 2 (1) (d) read with applicable notification?

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1. Whether claims are barred by limitation in terms of the law laid down by the Apex Court ?

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It is also clarified that disposal of present petitions must not be construed as having adjudicated any of the contentions including jurisdiction. All contentions of both sides on merits are kept open.

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Needless to state, upon conclusion of proceedings, if any of the petitioners are still aggrieved, legal remedies are kept open. It is also clarified that wherever, replies to show-cause notice have not been made out, the same may be filed upon matter being relegated as noticed above.

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Accordingly, the following:

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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ORDER

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In light of observations made above, the writ petitions relating to challenge to show-cause notice, such matters will stand relegated to the officers to be designated in terms of the observations made in para 8 above, at the same stage. Accordingly, such of the petitions at Sl.No.1 to 5 in Column No.1 of the table relating to challenge to show-cause notice are disposed off.

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Insofar as such writ petitions as detailed in Column 2 of the table relating to challenge to Orders-in-Original, in light of the discussion made above, the Orders-inOriginal stand set aside and the matters are relegated to the Officers to be designated to be reconsidered from the stage of show-cause notice. Accordingly, such of the petitions at Sl.No.1 to 35 in Column No.2 of the table relating to challenge to Orders-in-Original are disposed off.

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The petitioners who are now relegated before the authorities concerned are at liberty to file their pleadings within a reasonable time as may be fixed by the Officers concerned. Wherever the matters are pending in appeal in light of the arrangement that is made, petitioners to file a memo for withdrawal of appeal and accordingly, the orders-in-original in question would also receive the same treatment, i.e. be set aside as per the directions made above.

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Wherever demands have been made pursuant to the impugned orders, such proceedings are also set aside.”

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In the light of the submissions so made, the petition

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deserves to be disposed in the same terms as is done by the Coordinate Bench in the judgment quoted supra .

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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HC-KAR

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For the aforesaid reasons, the following:

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ORDER

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a. The writ petition is allowed .

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b. The impugned Show Cause Notice issued by respondent No.2 against the petitioner herein dated:18-10-2021 bearing reference No.GEXCOM/SCN/ST/9443/2021-CGST-DIVSD-2-COMMRTE-BENGALURU(S) vide DIN2021105700000000ED21 (ANNEXURE-B), stands quashed.

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c. The impugned Order-In-Original dated: 23-05-2023 bearing reference No.GEXCOM/SCN/ST/9443/2021-CGST-DIV-SD -2-COMMRTE-BENGALURU(S) vide DIN2023065700000000E21E passed by respondent No.2 against the petitioner herein (ANNEXURE C), stands quashed.

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d. Impugned Order-In-Appeal No.628/2024 dated:28-11-2024 bearing reference No.GAPPL/COM/STP/1130/2024 vide DIN20241157CU000091439A passed by respondent No.3 against the petitioner herein (ANNEXURE - D1), stands quashed.

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NC: 2025:KHC:36079 WP No. 20351 of 2025

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e. The matter is remitted back for reconsideration from the stage of show-cause notice afresh, to the hands of the concerned respondent, in accordance with law, bearing in mind the law laid down in KARNATAKA CHINMAYA SEVA

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TRUST supra .

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f. The petitioner is at liberty to file his pleadings within a reasonable time as may be fixed by the concerned Officer of the Revenue.

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Ordered accordingly.

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Sd/(M.NAGAPRASANNA) JUDGE

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CBC

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List No.: 1 Sl No.: 23

M/S Karnataka Transport Co., v. Union of India

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M/S Karnataka Transport Co., v. Union of India

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