In a recent case the Bombay High Court quashed the Show Cause Notice (SCN) which was issued by Goods and Service Tax (GST) Commissioner which was without following statutory time mandate under section 73(4)(B) of Central Goods and Service Tax (CGST Act), 2017.
UPL Limited, the petitioner challenged the lackadaisical approach of respondent no.2- Commissioner of Central Excise in not adjudicating the show cause notice issued 13 years back dated 21 October, 2010 is prayed to be quashed and set aside on the ground that the law would not permit such delayed adjudication of the show cause notice.
A show cause notice in question was issued to the petitioner by respondent no.2 about twelve years back i.e. on 21 October, 2010, 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. The petitioner was called upon to show cause as to why Service Tax amounting to Rs. 7,79,52,151/- as set out in Annexure A to the said show cause notice, should not be demanded and recovered from it under the proviso to Section 73(1) of the Finance Act, as also interest and penalty levied as set out in the show cause notice.
The petitioner responded to the show cause notice by its letter dated 10 November, 2010 and requested 8 weeks time to collate all the papers and submit its reply, as also requested for a personal hearing. Such a request was again made on 18 January, 2011. The petitioner by its letter dated 18 February, 2011 requested respondent no.2 to provide break-up of the annual cumulative amount of value of taxable services as set out in Annexure-A to the show cause notice in relation to the service tax allegedly payable on import of Management Consultancy Service, f
The petitioner informed respondent no.2 that it had deposited an amount of Rs. 83,49,786/- in respect of service tax and interest under the banking and financial services, under protest. Since August 2011 to February 2016, nothing was done by the department and this was certainly a period prior to the GST regime being set into motion. In fact, nothing precluded respondent no.2 to call upon the petitioner and pass final orders on the show cause notice for such period of almost 5 years from August 2011 to February 2016.
In any event such can never be an explanation for a prolonged delay of almost more than 11 years for respondent no.2-Commissioner of Central GST, Mumbai not to adjudicate the show cause notice. It is also seen from the reply that there is not a semblance of justification which has been set out which would persuade us to accept that such long delay of 5 years in the first tranche and another 5 years delay in second tranche i.e. period from 2011-16 totaling to more than 10 years, was justified in the facts and circumstances of the case.
It was observed that the provisions of Section 73 and more particularly the provisions of sub-section (4)(B) which were inserted by the Finance Act 2014 being the statutory mandate was staring at respondent no.2 during the pendency of the show cause notice not to conclude the proceedings of the show cause notice.
The Court viewed that the conduct of respondent no.2 was totally overlooking the mandate of such legal requirement.
A division bench comprising Justice G S Kulkarni and Justice Jitendra Jain observed that
“even in absence of the provisions of sub-section (4)(B) of Section 73, respondent no.2 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 the facts of each case. However, as observed by us in our decision in Coventry Estates Pvt. Ltd. Versus The Joint Commissioner CGST and Central Excise & Anr. (supra), reasonable time would not be an egregious, unjustified and unexplained inordinate delay. Having perused the reply affidavit, we find that no justification whatsoever is given by the Deputy Commissioner in Commissioner not adjudicating the show cause notice.”
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