Orissa State Beverages Corporation Ltd. Vs. Union of India (Uoi) and ors. - Court Judgment

Excerpt:
service - registration - sections 68, 69, 70, 73, 75, 76, 77 and 78 of finance act, 1994 and rules 4, 6 and 7 of service tax rules, 1994 - petitioner was company engaged in business rendering taxable 'storage and warehousing service' - show cause notice issued to petitioner alleging that it had been providing storage and warehousing service and also business auxiliary services without registration and not paying service tax leviable thereon - service tax accordingly held liable for recovery under proviso to section 73(1) of act of 1994 along with interest as per section 75 of act of 1994 - further allegation was that petitioner had violated provisions of sections 68,69 and 70 of act of 1994 read with rules 4, 6 and 7 of rules of 1994 - hence, he was held liable to penalty under sections 76, 77 and 78 of act of 1994 - petitioner aggrieved by said order filed appeal - appellate authority confirmed order - hence, present petition challenging above said order - held, according to judicial principle writ jurisdiction of high court cannot be exercised unless aggrieved party had exhausted all alternative remedy - in instant case adverse order had been passed against petitioner y service tax authority - petitioner had remedy of appeal under act of 1994 - therefore it should have filed appeal under act of 1994 before coming to present court - petition accordingly dismissed - labour & services pay scale:[tarun chatterjee & r.m. lodha,jj] fixation - orissa service code (1939), rule 74(b) promotion - government servant, by virtue of rule 74(b), gets higher pay than what he was getting immediately before his promotion - circular dated 19.3.1983 modifying earlier circular dated 18.6.1982 resulting in reduction of pay of employee on promotion held, it is not legal. statutory rules cannot be altered or amended by such executive orders or circulars or instructions nor can they replace statutory rules. - 200 for every day during which the period failed to pay the service tax or @2% of such tax per month whichever is higher starting with the first day after the due date till the date of actual payment of the outstanding amount, as well as, a further penalty of rs. ray also contends that even if it is pleaded by the petitioner that it seeks to invoke jurisdiction under article 227 of the constitution of india, it is well settled in law that the power of superintendence of the high court under article 227 being extraordinary has to be exercised most sparingly and only in appropriate cases. 16. we have recorded the aforesaid contentions merely to highlight the fact that clearly this is a case where there are clear dispute of facts involved for determination.indrajit mahanty, jj.1. the orissa state beverages corporation ltd. the petitioner herein is a government of orissa undertaking and has sought to challenge the order dated 10.9.2008 (annexure-1) passed by the commissioner, central excise, customs and service tax, bhubaneswar.2. the brief facts of the case are that a show cause notice was issued to the petitioner-corporation alleging that the petitioner had engaged in rendering taxable 'storage and warehousing service' during the period from 1.10.2002 to 30.6.2003 and 'business auxiliary service' w.e.f. 1.7.2003 by managing depots with sufficient space for storage of the goods of the suppliers providing support for loading/unloading/ staking of the goods of the suppliers in the depots managing the inventory of the goods, providing security arrangements for the goods, selling the goods on behalf of the suppliers and ensuring payments as per the agreed rates from the sale proceeds to the suppliers.3. it was further alleged that that the petitioner had been providing such service without registration and was not paying service tax leviable thereon and therefore, the said service tax not paid became liable for recovery under proviso to section 73(1) of the finance act, 1994 along with interest under the provisions of section 75 of the said act. it was further alleged that the petitioner had violated the provisions of sections 68, 69 and 70 of the finance act, 1994 read with rules 4, 6 and 7 of the service tax rules, 1994 and, therefore, the petitioner is liable to penalty under sections 76, 77 and 78 of the said act.4. the petitioner in response to the show cause notice contended that they were purchasing goods on payment of cst against c-form and the title of the goods was transferred to them when the goods are received at the depots. the petitioner alleged that they sell the goods to the retailers on payment of vat/sales tax and in transaction of the property, no service tax is involved and, therefore, they are not liable to pay any service tax.5. in the light of the aforesaid controversy, the principal issue that arises for consideration in the case was the determination of the nature of transaction between the supplier and the petitioner and to also consider as to whether their inter-se transaction was a 'sale' in terms of the sale of goods act, 1930 or a 'service.' as defined under the finance act, 1994.6. the commissioner of central excise, customs and service tax, bhubaneswar upon discussing all the factual aspects of the case and most importantly considering various clauses of the contract entered between the petitioner with their suppliers came to conclude that the ownership of the goods remains always with the suppliers till the sale was effected by the petitioner to the retailers and therefore, no sale in terms of section 4(1) of the sale of goods act, 1930 took place between the petitioner and its suppliers.7. consequently, the commissioner came to hold that the petitioner has provided services to the supplier of goods by managing depots with sufficient space for storage of the goods of the suppliers, providing support for loading/unloading/staking of goods of the suppliers in the depots, managing the inventory of the goods, providing security arrangements of the goods, selling the goods on behalf of suppliers and ensuring payments as per the agreed rates from the sale proceeds to the suppliers. therefore, the commissioner concluded that the 'services' provided by the petitioner were appropriately covered under the definition and scope of 'storage and warehousing service' for the period from october, 2002 to june, 2003 and 'business auxiliary service' w.e.f. 1.7.2003.8. having come to the aforesaid conclusion, the commissioner confirmed levy of service tax of rs. 11,73,22,786 and education cess of rs. 18,51,104, totaling the amount to rs. 11,91,73,890 on the petitioner-corporation under the proviso to section 73(1) of the finance act, 1994, along with interest payable under section 75 of the said act. apart from the above, the petitioner was also imposed with a penalty equal to rs. 200 for every day during which the period failed to pay the service tax or @ 2% of such tax per month whichever is higher starting with the first day after the due date till the date of actual payment of the outstanding amount, as well as, a further penalty of rs. 1000 under section 77 of the finance act, 1994. the commissioner has further imposed a penalty of rs. 11,91,73,890 of the petitioner under section 78 of the finance act, 1994 and directed that if the service tax amount and the education cess along with interest was deposited within 30 days of the order the penalty imposed under section 78 of the finance act, 1994 shall stand reduced to rs. 2,67,93,473 provided further that the reduced penalty is also deposited within 30 days from the communication of that order.9. mr. p.k. ray, learned counsel appearing for the commissioner, central excise, customs and service tax, bhubaneswar submitted that the writ application is not maintainable since admittedly disputed question of facts arise for a decision which can be adjudicated by the authorities under the act and therefore, the high court should not exercise its power under article 226 of the constitution of india. in this regard mr. ray submitted that (customs, excise & service tax appellate tribunal) cestat is an alternative and efficacious forum for the petitioner-corporation to seek redressal of its grievances since it also authorizes to pass interim orders on filing of appeal. learned counsel further submitted that the jurisdiction of a high court under article 226 of the constitution should not be exercised as cloak of an appeal in disguise, when the statute itself contemplates a procedure of adjudication and further if any question of law is arisen it is within the competence of the appellate court to consider the necessity for making a reference on any question of law for adjudication. in this respect mr. ray, placed reliance on the judgment of the hon'ble supreme court in the case of c.c.t., orissa and ors. v. indian explosives limited reported in : air2008sc1631 , whereby hon'ble supreme court came to hold as follows:the high court seems to have completely lost sight of the parameters highlighted by this court in a large number of cases relating to exhaustion of alternative remedy....mr. ray also contends that even if it is pleaded by the petitioner that it seeks to invoke jurisdiction under article 227 of the constitution of india, it is well settled in law that the power of superintendence of the high court under article 227 being extraordinary has to be exercised most sparingly and only in appropriate cases. in the case of bathutmal raichand oswal v. laxmibai r. tarta reported in : air1975sc1297 , the hon'ble supreme court said that the high court could not exercise the jurisdiction under article 227, interfere with the findings of fact recorded by the subordinate court or tribunal and that its function was limited to seeing that the subordinate court or tribunal functioned within the limits of its authority and that it could not correct mere errors of fact by examining the evidence of reappreciating it. the court in the said judgment further said that 'the jurisdiction under article 227 could not be exercised, as the cloak of an appeal in disguise.'in the fight of the aforesaid circumstance, learned counsel for the revenue submitted that the writ application should be dismissed and is not maintainable since alternative efficacious remedy lies to the cestat and since the petitioner has essentially raised issues relating to disputed question of facts for adjudication and therefore, the writ application neither under article 226 nor under article 227 could be maintainable.10. mr. padhi, learned sr. counsel appearing for the petitioner-corporation submitted that though alternative remedy by way of appeal was available, the petitioner has filed this writ application since the hon'ble high court had already entertained seven other writ applications (disposed of by this common judgment) in which the suppliers have sought for a declaration denying their liability to pay service tax and various interim orders have been passed by this court. it is further contended that the decision of the cestat would not be conclusive and since the other seven connected writ applications are pending consideration before this court and there was a likelihood of conflict of orders between the decision of the learned tribunal and this court. mr. padhi, further submitted that while it was permissible for the o.s.b.c. to file an appeal, yet the suppliers (who are the petitioners in seven writ applications) would not have a locus standi to file an appeal before the appellate tribunal. in conclusion mr. padhi submitted that since the basic facts are not in dispute and the issue is as to whether the petitioner was providing any service to the suppliers and therefore liable under the provisions of the service tax as enumerated under the finance apt, 1994 remains to be adjudicated.11. we have gone through the pleadings of the parties. whereas the petitioner vehemently contends that the transaction, i.e., between the petitioner-corporation and the liquor suppliers was a sale transaction, the revenue on the other hand contend the same to be a service and consequently have raised demand of service tax and penalty thereon.12. various documents have been appended by the petitioner to the writ application and most important is the notification dated 30.1.2001 issued by the government of orissa, excise department whereby the state of orissa in exercise of the powers conferred by section 20-a of the bihar and orissa excise act, 1915, appointed the 1st day of february, 2001 as the date on and from which the right to carry on wholesale trade and distribution of foreign liquor in the state shall solely vest in the state government and also specified that the 'orissa state beverages corporation ltd.,' shall have the exclusive right and privilege of importing, exporting and carrying on the wholesale trade and distribution of foreign liquor in the state on behalf of the state government for the whole of the state of orissa, and no other person shall be entitled to any privilege or licence for importing, exporting and supplying the same in wholesale, or distributing the same in any part of the state. therefore, there can be no doubt that the petitioner-corporation was created for the aforesaid purpose by a notification issued by the government of orissa, excise department.13. the petitioner-corporation upon its creation has entered into agreements with the suppliers of foreign liquor, a sample copy thereof is annexed as annexure-7 to the writ application, in which it has described itself as 'procurement agent' and under clause 2 terms of payment, various terms have been noted therein which stipulates that, it is the responsibility of the manufacture and not the corporation to effect the sales and that the role of the corporation shall be that of a 'facilitator' only. it further stipulates therein that the payment would be made normally after 45th day from the date of receipt of the stocks and subject to the condition that the stocks are sold out within the period of 45 days and the payment shall be restricted to the actual quantities sold.14. apart from the above, the revenue has appended a number of documents of the petitioner-corporation, such as copies of the income tax returns filed by the petitioner-corporation under annexure a/1 to a/25 to the counter affidavit filed by the opposite parties. the 4th annual report 2003-2004 of the orissa beverages corporation limited under annexure-b/1, wherein the corporation has stated that there are 'no purchase vouchers maintained by the petitioner-corporation considering the nature of business of the corporation,' and the same has also been taken note of the fact by the auditor's of the petitioner-corporation, who has noted in the said report that the company does not have stock of finished goods, stores, spare parts and raw materials of its own. so far as inventory is concerned, the auditor note states that in terms of the agreement between the petitioner-corporation and the supplier, the 'stocks held in the godowns of the company are the stock of the supplier' and the company will only can earn margin on sales made on behalf of the suppliers and most importantly it also further notes as follows, that 'the sales made on behalf of the supplier during the year is credited to the respective suppliers account,' after adjusting the sales tax, entry tax, company's margin and cash discount, if any. the final audit report notes that the corporation earns revenue on commissions on sale on completion of sale of goods on behalf of the supplier and are recorded net off sales tax and surcharge, if any. the said annual report also does not indicate any earning or profit and loss of the business but only notes earning on account of the 'commission on sales.'15. apart from the above, the revenue has relied upon certain answers given by the suppliers on the statutory queries made by it and one of the suppliers namely, m/s. jagatjit industries limited had answered the following questions:q. no. 11: it is observed from th9 agreement made between osbc and your company that the aosbc acts as a facilitator only in the sale of liquor in orissa (si.no.2.a(iii) of the agreement). what are the facilities or services being provided to you by osbc?ans. we are getting the facilities of storage, inventory management, security and also of the imfl under cover of their invoices. q. no. 12: in terms of para 2.e of the agreement made between osbc you, if the stock are not sold within 180 days, the said stock is either to be taken back by the supplier at his own cost or the suppliers has to pay rs. 1 per month per case. in this context, have you paid any such penal charges to osbc and if yes, what are those?ans. yes we have paid such appeal charges known as demurrage charges to osbc as and when they raised the debit notes in this regard. a copy of the said debit note is produced.q.no.13: what right do you have on the imfl stocks which are delivered to the depots of osbc?ans. we have the right to verify the stocks as and when required or at regular intervals.q.no.15: who bears the transit insurance and the insurance of the stocks lying at the osbc depots?ans. our company boars the cost of insurance in both the above cases.16. we have recorded the aforesaid contentions merely to highlight the fact that clearly this is a case where there are clear dispute of facts involved for determination. we are afraid, we cannot agree with the learned counsel for the corporation, and are of the view that there exists clear disputed question of facts involved for the purpose of adjudicating in the present case.17. the further plea of the corporation is that although alternative remedy by way of filing appeal was available, but since seven other writ applications have been entertained by this court and interim orders have been passed, it become necessary for them also to participate therein, lest there be a conflict decision between the tribunal and the high court is concerned. we are afraid that such a plea cannot be accepted. it is a fact that seven other writ applications being numbered as w.p.(c) nos. 7991, 6138, 260, 7159, 7986, 9776 and 5536 of 2008 have been filed by different suppliers seeking declaration of the nature of their contract entered into with the corporation. it is also a fact that these suppliers not being registered -under the service tax act cannot by them-selves file appeals before the customs, excise & service tax appellate tribunal. but the fact remains that, the petitioner-corporation is a registered assessee under the service tax act and in terms of its obligation as an assessee under the service tax act, is required to deduct service tax from the payment made by it. such a supplier who may have a grievance against the deduction made by the petitioner-corporation is bound in law to the determination made by the statutory authority and any challenge therefrom. in such case, it is always open to such parties to either intervene in an appeal filed by the assessee and there is also the possibility for the assessee-corporation to implead all the suppliers, as necessary parties to an appeal which it may file before the cestat since the suppliers are likely to be affected by the outcome of the appeal and also for leading evidence on the nature of their inter se agreement.18. therefore, in conclusion, while we refrain from giving any finding on the issues raised before us on merit, yet uphold the objection raised by the revenue on account of alternative remedy and hold that in the present case, since there are disputed questions to be determined and further as alternative and efficacious remedy is available to the petitioner by way of filing appeal before the cestat, we uphold the objection of the revenue on the question of maintainability and hold the present writ petition as not maintainable. before parting since, interim orders of stay had been granted in this case in order to enable the petitioner to file an appeal before the cestat, we direct the continuance of the interim order for a further period of six weeks from the date of judgment, within which period the petitioner-corporation, if so advised, may prefer an appeal before the cestat and seek interim directions. it shall be open to the petitioner-corporation to file appropriate application before the appellate authority to implead the suppliers as necessary parties in the proceeding and the same shall be considered in accordance with law. nothing stated in this order shall be construed as a determination of any question or issue raised on merits and the tribunal shall be free to deal with the appeal on the basis of the pleading of the parties without in any manner being influenced by this judgment.19. with the aforesaid observation and direction the writ application is dismissed.l. mohapatra, j.20. i agree.