Court rules burden of proving entitlement to exemption lies on petitioner; dismisses writ petition filed by M/s Anjani Kumar Singh challenging Service Tax and penalties imposed by CGST authorities
In a significant judgment dated August 28, 2026, the Patna High Court (Division Bench comprising Justices Rajeev Ranjan Prasad and Ramesh Chand Malviya) dismissed the writ petition filed by M/s Anjani Kumar Singh, a contractor engaged by the Food Corporation of India (FCI), challenging the imposition of Service Tax, interest, and penalties by the Additional Commissioner of CGST and Central Excise.
The petitioner had contested an order dated March 21, 2024, which held that the petitioner was liable to pay Service Tax amounting to Rs. 60,88,607/-, along with multiple penalties, on the ground that the contract services (loading, unloading, packing, storage, or warehousing of rice) were exempt under Notification No. 04/2014 dated February 17, 2014. The petitioner argued that the exemption notification applied to the gross value of the contract and thus the tax demand was illegal and without jurisdiction.
The Court meticulously examined the facts and the submissions made by both parties. The impugned order noted that although the petitioner submitted certain documents, including letters from the FCI Regional Office and written submissions claiming exemption, the petitioner failed to produce critical documents such as the work orders or agreements for the relevant financial years. The absence of these documents prevented the tax authorities from correlating the payments received with the services rendered and verifying the claim for exemption.
The Court reiterated the settled legal principle, as upheld by the Supreme Court in landmark decisions including Commissioner v. Hari Chand Shri Gopal (2010) and Mysore Metal Industries v. Collector of Customs (1988), that the burden of proving entitlement to tax exemption under a notification lies squarely on the person claiming such exemption. The Court also referred to the recent Supreme Court judgment in Commissioner of Customs (Import) v. Dilip Kumar & Company (2018), affirming that tax exemption cannot be granted suo-motu by the department in the absence of requisite evidence.
Further, the Court observed that the Food Corporation of India had clarified in a counter affidavit that the tender document specified the approved transportation rate as inclusive of all taxes, including GST. It was alleged that the petitioner had collected GST from clients but failed to deposit the same with the government, resulting in undue enrichment.
The petitioner's inability to produce the tender document or respond effectively to these allegations weakened their case. The Court noted that no rejoinder was filed by the petitioner to the FCI's counter affidavit and expressed concern over the withholding of relevant documents that could have been placed before the tax authorities or the Court.
In view of the above, the Patna High Court held that there was no merit in the petitioner's writ application. The Court declined to interfere with the impugned order passed by the tax authorities and dismissed the petition. However, the petitioner was granted liberty to pursue statutory remedies available under the law, including filing an appeal before the appropriate forum. The Court also directed that any question of limitation arising in such appeals should be considered with due regard to the time spent in the writ proceedings.
This decision underscores the judiciary's firm stance that tax exemptions must be substantiated by clear and cogent evidence and that the burden to prove eligibility cannot be shifted onto the authorities. Contractors and service providers are thus cautioned to maintain complete and accurate records to substantiate their claims for exemptions under tax laws.
Bottom Line:
Tax law - Burden of proving entitlement to tax exemption lies on the person claiming such exemption.
Statutory provision(s):
Finance Act, 1994 Section 73(2), Section 77(1)(a), Section 77(1)(c)(ii), Section 78; CGST Act, 2017 Section 174; Constitution of India Article 265
