SCNs Must be Adjudicated Within Reasonable Time as Mandated u/s 73(4)(B) of Finance Act; Bombay High Court Upholds Principle of “Lex Dilationes Abhorret” [Read Order]
SCNs – Time – Mandated – Finance -Act-Bombay- High- Court – Principle-Lex- Dilationes- Abhorret-TAXSCAN
SCNs – Time – Mandated – Finance -Act-Bombay- High- Court – Principle-Lex- Dilationes- Abhorret-TAXSCAN
The High Court of Bombay has held that Show Cause Notices (SCNs) must be adjudicated by the proper officers within a reasonable time frame, as mandated by Section 73(4)(B) of the Finance Act. The court upheld the principle that “Lex Dilationes Abhorret” – the law abhors delay.
The bench seriously viewed and criticised the inordinate delay on the part of the adjudicating officer to adjudicate the SCN and held that the same is prejudicial to the assessee and the law itself.
The Writ Petition was filed by UPL Limited, a company incorporated under the Companies Act, 1956. The petitioner, represented by Mr. Prakash Shah, Mr. Jas Sanghavi and Mr. Yash Prakash challenged the delayed adjudication of an SCN issued by the Commissioner of Central Goods and Services Tax, Mumbai, alleging non-payment of service tax on the import of services related to banking and financial services and professional fees under Management Consultancy Services. The SCN dated October 21, 2010, had remained pending for over a decade.
The bench expressed its concern over the lackadaisical approach of tax authorities in not adjudicating SCNs within a reasonable time. The bench noted that similar cases of delayed adjudication had been reaching the court, suggesting a systemic issue within the tax department.
Section 73(4)(B) of the Finance Act, as inserted by the Finance Act 2014, imposes mandatory time limits on tax authorities for determining the amount of service tax due. It requires tax authorities to complete adjudication within six months from the date of the SCN or within one year if it is possible to do so. This statutory mandate is intended to prevent indefinite delays in the adjudication process.
The bench emphasised that tax authorities should strictly adhere to the timelines prescribed by the law. The court stressed that there is a definite legislative intent behind these time limits, and any deviation from them is detrimental not only to taxpayers but also to the government’s revenue collection.
Even without the specific provisions of Section 73(4)(B) of the Finance Act, the court reiterated the principle that SCNs must be adjudicated within a reasonable time, taking into account the specific facts and circumstances of each case.
The bench highlighted the adverse effects of prolonged delays in adjudication. It noted that such delays could prejudice the rights and interests of both the taxpayer and the government. Delays could lead to irreversible changes, the frustration of the adjudication process and potential abridgement of the taxpayer’s right to appeal.
The bench called for a robust approach by tax authorities in effectively adjudicating SCNs. It suggested that the Ministry of Finance should take a serious view of officers who do not diligently discharge their duties and cause unnecessary delays in adjudication, which ultimately affects public revenue.
The court also highlighted the importance of tax authorities issuing timely notices of hearings to taxpayers. It expressed skepticism about certain claims made by tax authorities regarding scheduled hearings without supporting documentation and stressed the need for transparency and due process.
In conclusion, the bench comprising Justices G. S. Kulkarni and Jitendra Jain stressed the significance of timely adjudication of notices and proceedings initiated by the proper officers and compelled the tax authorities to comply with statutory time limits and to act diligently in their responsibilities.
The bench upheld the principle of “Lex Dilationes Abhorret”, meaning “The law abhors delay”. The maxim means that unnecessary delays in the administration of justice dilute the quality of that justice and is a Latin equivalent to “justice delayed is justice denied”. The expeditious proceedings not only uphold the quality of justice but also ensure that parties seeking redress receive it in a timely manner. The unnecessary delays in the administration of justice will not be tolerated, and it may even warrant moratory damages or, in extreme cases, a default judgment to protect the rights of the injured party.
To Read the full text of the Order CLICK HERE
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