The Jharkhand High Court has held that the circulars or instructions issued by the Central Board of Indirect Taxes and Customs (CBIC) are legally binding and violation of the same can trigger legal action against the service tax department. The Commissioner was directed to take a fresh decision after giving an opportunity of hearing as the impugned order has been passed against the prescribed period as indicated in the Circular.
M/s LMB Sons, the Petitioner is primarily engaged in the business of renting immovable property and was registered under the provisions of the Finance Act, 1994 was regularly filing its service tax returns and had duly paid its service tax liabilities.
Respondent No. 2 searched the office premises of the Petitioner. Respondent No.3 issued a Demand cum Notice to Show Cause to the Petitioner for the period April 2014 to June 2017 by invoking an extended period of limitation and imposing a service tax liability of Rs.1,23,52,604/for the period 2014-15 to 2017-18 (Upto June 2017) and had also proposed to impose penalties.
The petitioner had filed its reply to the allegation of the Respondent Department. Thereafter, Respondent No.4, after a substantial delay, had passed the Order-in-Original adjudicating Demand cum Show Cause Notice.
The petitioner stated that the Impugned Order was provided to the Petitioner and the same is ex-facie bad in law as has been passed beyond the period of limitation prescribed under Section 73 (4B) of the Finance Act, 1994 and the Instruction issued by the Central Board of Indirect Taxes and Customs.
Mr. Rahul Lamba, counsel for the petitioner contended that the impugned proceedings have been made for alleged suppression of facts under Proviso to Section 73(1) of the Finance Act, 1994 by invoking the extended period of limitation of five years for initiation of proceedings, but the Order-in-Original does not reflect any finding as to the willful suppression of facts or fraud for invoking the extended period of limitation.
The Order-in-Original has been passed after a delay of 02 months and 11 days from the last date of personal hearing and, therefore, is in the teeth of the Circular dated 10.03.2017 which has been reiterated in the later Circular dated 18.11.2021.
Mr. P.A.S.Pati, counsel for respondent No.4 submitted that the adjudication order issued against SCN is valid and sustainable as the order is issued against the same SCN which were provided to the petitioner. The petitioner was fully aware of this SCN dated 23.10.2019 issued to them, as they have always replied to the letters issued for fixing personal hearing dates and also submitted a defence reply against the same SCN.
It was admitted that the Impugned Order/ Adjudication Order was not communicated to the Petitioner within one month from the closure of the personal hearing and there are no reasons recorded by the Respondent for the delay in communicating the Impugned Order beyond the stipulated period of one month after closure of the personal hearing.
Since there was no prior notice served to the Petitioner for the alleged personal hearings on 20.01.2022 and 08.03.2022, both the alleged personal hearings are in contravention of Clause 14.3 of the said Circular. Thus, both the alleged personal hearings cannot be considered to be valid personal hearings. The last personal hearing, as provided in the Impugned Order, for which notice was served to the Petitioner was on 23.12.2021.
The bench comprising Justice Rongon Mukhopadhyay and Justice Deepak Roshan remitted the matter back to respondent No.4 to pass a fresh order after giving the opportunity of a personal hearing to the petitioner and pass a fresh order.
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