Facts of the Case

The petitioner was the District Roads and Buildings Officer/Executive Officer of the Roads and Buildings Department, Medchal-Malkajgiri Division, State of Telangana. The petitioner approached the High Court under Article 226 of the Constitution of India challenging the legality and validity of the Order-in-Original dated 25 July 2019 passed by the Assistant Commissioner, Central Tax, Central Excise and Service Tax.

The tax authorities found that the petitioner, being a State Government department engaged in activities relating to State Government roads and buildings and services connected therewith, was not registered with the Service Tax Department and had not made Service Tax payment, though the department treated it as a service provider.

On the basis of intelligence gathered, the authorities found that the Roads and Buildings Department, Medchal-Malkajgiri Division, was receiving payments described as road-cutting restoration charges from various parties in connection with the grant of right of way for laying optic fibre cables through Government land under its jurisdiction. According to the tax authorities, Service Tax was not being paid in respect of the activity. After investigation, a show cause notice was issued by invoking the extended period of limitation.

The adjudicating authority classified the activity of allowing right of way for laying optic fibre cables by granting road-cutting permission as a taxable service under the category of “Renting of Immovable Property Service.” For the period from April 2016 to June 2017, the authority demanded Service Tax of Rs. 22,32,464, together with applicable education cesses, ordered late fee of Rs. 60,000, directed payment of applicable interest, imposed a penalty of Rs. 2,23,246, and further imposed a penalty of Rs. 10,000.

A consequential recovery communication dated 17 March 2021 was also issued to the State Bank of India, directing deduction/payment of amounts from the departmental accounts or amounts accruing in favour of the petitioner.

The Court recorded that the Order-in-Original dated 25 July 2019 was admittedly appealable. However, no statutory appeal was filed. The writ petition was instituted only long after expiry of the limitation period prescribed for filing the appeal.

Issues Involved

The principal issues arising before the High Court were whether a writ petition under Article 226 could be entertained against an appealable Order-in-Original after the statutory limitation period for filing an appeal had expired; whether the Service Tax demand arising from right-of-way and road-cutting permissions for laying optic fibre cables could be challenged directly in writ jurisdiction; whether the consequential recovery action against the petitioner’s bank account warranted interference; and what effect should follow from the petitioner’s failure to identify the officials responsible for not filing the statutory appeal despite repeated directions of the Court.

Petitioner’s Arguments

The petitioner challenged the Order-in-Original dated 25 July 2019 and the consequential recovery proceedings as illegal and arbitrary. The challenge questioned the levy of Service Tax in relation to amounts received for right-of-way and road-cutting permissions connected with laying optic fibre cables through Government land.

The petitioner’s side acknowledged before the Court that, because of lapse on the part of certain officials, an appeal had not been filed against the Order-in-Original and the limitation period had long expired.

Regarding the recovery notice dated 17 March 2021, the petitioner submitted that it was unaware of the notice because no copy had been marked to it; according to the submission recorded by the Court, the notice was a communication between the tax authority and the State Bank of India.

It was further submitted that, unless interim protection was granted, the petitioner’s account could be subjected to attachment/recovery action.

Respondents’ Arguments

The respondents were represented before the High Court, and the Court considered the matter in the context of the undisputed availability of a statutory appellate remedy against the Order-in-Original.

The decisive procedural position recorded by the Court was that the impugned Order-in-Original was an appealable order, no appeal had been filed, and the writ petition had been instituted long after expiry of the statutory limitation period.

The respondents’ position was also considered against the background of the Court’s earlier conditional interim order, under which protection from recovery was linked to specified conditions, including deposit of part of the tax and disclosure of the officials responsible for failure to file the appeal.

Court Order / Findings

The High Court noted that the Order-in-Original dated 25 July 2019 was admittedly appealable, but no appeal had been filed. The writ petition was filed long after expiry of the limitation period for filing the statutory appeal.

Earlier, on 25 March 2022, the High Court had issued notice and granted conditional protection. The Court had directed the petitioner to inform it about the officials responsible for not filing the appeal and the steps taken against them. The petitioner was also directed to deposit 25% of the tax levied under the impugned Order-in-Original within thirty days. Upon such deposit, respondents Nos. 2 to 4 were directed not to act upon the recovery notice dated 17 March 2021.

The petitioner, however, did not furnish the names of the officials responsible for the failure to file the appeal. On 10 October 2022, the Court made it clear that if the relevant information was not furnished by the next date, it might consider recalling the earlier order dated 25 March 2022. Even when the matter was subsequently called, the petitioner’s counsel could not furnish the names of the responsible State Government officials.

In view of these developments, and particularly considering that the writ petition had been filed long after expiry of the limitation period for filing the statutory appeal, the High Court held that it was not inclined to entertain the writ petition.

Accordingly, the Court:

  • recalled its interim order dated 25 March 2022;
  • dismissed the writ petition;
  • directed that a copy of the order be furnished to the Chief Secretary to the Government of Telangana;
  • closed pending miscellaneous applications; and
  • made no order as to costs.

Important Clarification

This decision is significant primarily on the question of maintainability of a writ petition after failure to pursue the statutory appellate remedy within limitation. The High Court did not grant substantive relief against the Service Tax demand and did not set aside the Order-in-Original.

A particularly important distinction is that the dismissal should not be presented as a final High Court adjudication affirming, on merits, that every right-of-way permission or every road-cutting restoration charge necessarily constitutes “Renting of Immovable Property Service.” The Court’s operative reason for declining interference was procedural: the adjudication order was appealable, no appeal had been filed, the limitation period had long expired, and the petitioner had also failed to comply with the Court’s repeated direction to identify the officials responsible for not filing the appeal.

Therefore, the legally accurate takeaway is that the High Court declined to entertain the belated writ challenge, rather than conclusively deciding the underlying Service Tax classification controversy on merits.

Sections Involved

Article 226 of the Constitution of India — Writ jurisdiction of the High Court.

Section 65B(44) of the Finance Act, 1994 — Definition of “service” under the negative-list regime, as referred to in the adjudication.

Section 65B(51) of the Finance Act, 1994 — Statutory provision referred to in the classification adopted in the Order-in-Original.

Section 66E(a) of the Finance Act, 1994 — Declared service relating to renting of immovable property.

Section 69 of the Finance Act, 1994 — Registration-related provision referred to in the factual background of the proceedings.

Section 70 of the Finance Act, 1994 — Service Tax return obligation, read with Rule 7C of the Service Tax Rules, 1994, in relation to late fee.

Section 73(2) of the Finance Act, 1994 — Determination/demand of Service Tax following adjudication.

Section 75 of the Finance Act, 1994 — Interest on delayed payment of Service Tax.

Section 76 of the Finance Act, 1994 — Penalty imposed for non-payment of Service Tax.

Section 77(2) of the Finance Act, 1994 — General penalty for contravention of statutory provisions/rules.

Section 174 of the Central Goods and Services Tax Act, 2017 — Saving and repeal provision relied upon in continuation of proceedings concerning the pre-GST Service Tax regime.

Rule 7C of the Service Tax Rules, 1994 — Late fee concerning delayed/non-filing of prescribed returns.

Section 151 of the Code of Civil Procedure, 1908 — Invoked in the interlocutory application seeking stay of recovery.

Link to Download the Order  https://mytaxexpert.co.in/uploads/1783318208_1054compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.