- 1 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15TH DAY OF SEPTEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE M.NAGAPRASANNA WRIT PETITION NO. 31408 OF 2024 (T-RES) BETWEEN: M/S. ONLINE ENGINEER INDIA DEVELOPMENT CENTER PRIVATE LIMITED (A REGISTERED PRIVATE LIMITED COMPANY) C-410/5/6, NEELADRI MAHAL APARTMENTS, JAYAMAHAL EXTENSION, BANGALORE - 560 046 (REPRESENTED BY ITS MANAGING DIRECTOR, SMT. VIJAYASHREE ANIL URS W/O ANIL URS …PETITIONER (BY SRI. CHIDANANDA URS B.G.,ADVOCATE) AND: 1. THE COMMISSIONER OF CENTRAL TAX (APPEALS-II) 4TH FLOOR, ABOVE BMTC BUS STAND DOMLUR OLD AIRPORT ROAD Digitally signed by SANJEEVINI J KARISHETTY Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 BANGALORE - 560 071. 2. THE ASSISTANT COMMISSIONER OF CENTRAL TAX OFFICE OF THE AC OF CENTRAL TAX DIVISION NO.3, 5TH FLOOR, NO.29/2 BASAVESHWARA BUILDING, CRESCENT ROAD BANGALORE - 560 001. 3. THE DEPUTY COMMISSIONER OF CENTRAL TAX (PREVENTIVE) BANGALORE NORTH COMMISSIONERATE, HMT BHAVAN, GANGA NAGAR BENGALURU - 560 032. …RESPONDENTS (BY SRI. ARAVIND V. CHAVAN, ADVOCATE) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER PASSED BY R1 IN OIA NO. 208 209/24-25 CT DATED 30.08.2024 WHICH IS HEREWITH ENCLOSED AS ANNEXURE-A WHICH IS WITHOUT JURISDICTION AND OPPOSED TO LEGISLATIVE INTENT AND ETC., THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: - 3 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA ORAL ORDER The petitioner is before this Court seeking the following prayers: "i. Quash the impugned order passed by Respondent No.1 in OIA No.208209/2024-25 CT dated 30.08.2024 which is herewith enclosed as Annexure "A" which is without jurisdiction and opposed to legislative intent; and ii. Quash the order passed by the Assistant Commissioner of Central Tax, Respondent No.2, in OIO No.37/2023-24 Adjn.ND.3 dated 27.10.2023 which is herewith enclosed as Annexure "C". iii. Quash the show cause notice issued by the Respondent No.3 dated 31.12.2020 in No.56514/2020 in File No.GEXCOM/AE/VRFN/TPD/383/2020-AE-COMMR- CGST-BENGALURU(N) which is herewith enclosed as Annexure "G". iv. Pass any other order to give any other direction as this Honorable Court deems fit and appropriate in the circumstances of the case." 2. Heard Shri Chidananda Urs B.G., learned counsel appearing for the petitioner and Shri Aravind V. Chavan, learned counsel appearing for the respondents and have perused the material on record. 3. The learned counsel appearing for the petitioner submits that the issue in the lis is akin to what is decided by - 4 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 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 CENTRAL TAX AND ANOTHER, disposed on 03.07.2024. He would submit that several of the petition was disposed in the same terms. 4. The learned counsel appearing for the Revenue would not dispute the position. 5. I, therefore deem it appropriate to notice what the Co-ordinate Bench has held 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 CENTRAL TAX AND ANOTHER, disposed on 03.07.2024, which reads as follows: “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. 3. The details of the writ petitions and the stages are as follows: Challenge to Show-cause Notice Challenge to Orders-in-Original Column No.1 Column No.2 - 5 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 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 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 - 6 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 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 4. 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. 5. 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 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: "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: 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. 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 - 7 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 provisions contained in the Finance Act, 1994 and the rules made thereunder. 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. 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. 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. 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 - 8 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 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-In- Original 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. 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 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. 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. 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 - 9 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 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. 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: - Table-1 BANGALORE ZONE - DATA 01 02 03 04 05 06 07 Commissi onerate's No. of cases received from CBDT No. of cases dropped prior to issuance of SCN No. of cases where SCNs were issued No.of Cases where SCNs were dropped No. of cases where SCNs were Confirmed No. of 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 - 10 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 Total 49,665 21,549 28,116 8,816 19,300 587 Summary of the same is produced below: Table-2 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 Cause Notice. 587 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. 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. 11. I therefore submit that this Hon'ble High Court may direct the petitioners to appear before the quasi- - 11 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 judicial authorities as the petitions are premature and a robust appellate remedy is provided by the Law. 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". 6. Learned Senior Counsel Sri.V.Raghuraman has also filed a note in response to the proposal and the same is taken on record. 7. 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. 8. 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 notice which would be done within a period of three months. 9. 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. 10. The officers while disposing off the petitions to keep in mind the following: 1) Whether petitioners do not qualify under Section 65B(44) of the Finance Act, 1994 ? 2) Whether services are covered under negative list ? 3) 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? - 12 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 4) Whether the person is liable to remit service tax in terms of Rule 2 (1) (d) read with applicable notification? 5) Whether claims are barred by limitation in terms of the law laid down by the Apex Court ? 11. 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. 12. 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. 13. Accordingly, the following: ORDER 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. 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-in- Original 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. 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 - 13 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 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. Wherever demands have been made pursuant to the impugned orders, such proceedings are also set aside.” 6. In the light of the submissions so made, the petition deserves to be disposed in the same terms as is done by the Co-ordinate Bench in the judgment quoted supra. 7. For the aforesaid reasons, the following: ORDER (i) The writ petition is allowed. (ii) Xxxx (iii) The impugned order dated 30.08.2024 bearing OIA No.208-209/2024-25 CT, passed against the petitioner, vide ANNEXURE - "A" passed by Respondent No.1, stands quashed. Page No.13 is retyped and replaced vide court order dated 24.02.2026 - 14 - HC-KAR NC: 2025:KHC:36576 WP No. 31408 of 2024 (iv) The impugned order dated 27.10.2023 bearing No. OIO No.37/2023-24 Adjn.ND.3 passed by Respondent No.2, vide Annexure - "C" stands quashed. (v) 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 TRUST supra. (vi) The petitioner is at liberty to file his pleadings within a reasonable time as may be fixed by the concerned Officer of the Revenue. Ordered accordingly. Sd/- (M.NAGAPRASANNA) JUDGE JY List No.: 1 Sl No.: 95 CT: BHK