“If prompt adjudication of the show cause notice is not undertaken, such lapse of time and certainly a long lapse of time is likely to cause irreversible changes frustrating the whole adjudication.”
The Bombay High Court directed the Finance Ministry to take action against the officers who are involved in delaying the adjudication of the Show Cause Notices (SCN) and observed that they are playing with the Public Revenue.
UPL Limited submitted the Writ Petition highlighting the negligent attitude of The Commissioner of Central GST (Respondent 2) in failing to address the show cause notice that was issued 13 years ago. The petition sought to invalidate and reject the notice based on the argument that the law does not allow for such prolonged adjudication of the show cause notice.
The SCN was issued to the petitioner by the Commissioner of Central GST about 13 years back alleging non-payment of service tax on import of service on bank charges under banking and financial services and professional fee under Management Consultancy Services.
Subsequent to the various replies and procedures, nothing precluded the GST department to call upon the petitioner and pass final orders on the show cause notice for such a period of almost 5 years from August 2011 to February 2016. According to the petitioner, in law, this delay itself was sufficient to set aside the show cause notice.
The bench of Justice Jitendar Jain and Justice G.S. Kulkarni stated that “serious view in this regard is required to be taken by the Ministry of Finance in regard to the officers who are not diligently discharging such vital duties and who in fact are playing with the public revenue.”
The bench highlighted the decided case Coventry Estates Pvt. Ltd. Versus The Joint Commissioner CGST and Central Excise & Anr by the same court. The High Court observed that “lethargic approach of the concerned officer not to adjudicate show cause notice within the time frame as prescribed by law, would be an action on the part of the concerned officer contrary to law, who cannot be expected to violate the mandate of law.”
The High Court also instructed the Joint Secretary of the Ministry of Law and Justice stationed at Aayakar Bhavan to send a copy of the judgment of Coventry Estates Pvt. Ltd. to the Secretary of the Ministry of Finance with the present order to appraise him of a legal approach to be adopted by the adjudicating officers, who are vested with such substantial powers of issuing show cause notices and who are dealing with public revenue, so that a robust approach can be adopted in effectively adjudicating the show cause notices, unless such mechanism already exist.
There is a complete absence of any material, including in the affidavit, which could in any way substantiate the GST officers’ failure to adjudicate the show cause notice. There are no justifiable grounds to suggest that the officers were unable to undertake the adjudication within a reasonable time frame, especially as stipulated by sub-section (4)(B) of Section 73 Central Goods and Services Tax (CGST), stated the High Court Division bench.
Further stated that even in absence of the provisions of sub-section (4) (B) of Section 73,the officers could not have acted oblivious to the settled principle of law, that a show cause notice would be required to be adjudicated within a reasonable time depending on the facts of each case.
Relying upon the precedent set in the Coventry Estates Pvt. Ltd. case, the High Court invalidated both the show cause cum demand notice and the ongoing adjudication. Additionally, the division bench prohibited the GST officers from pursuing any subsequent actions or proceedings based on or stemming from the contested show cause cum demand notice, including the adjudication process.
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