17-Year Delay in Adjudication: Madras HC Quashes Service Tax SCN Despite Department’s Call Book Justification [Read Order]

In a recent decision, the Madras High Court quashed two service tax show cause notices after finding that there was an unjustified 17-year delay in adjudicating the matter. The court held that such a long delay, even though the case was referred to the call book, violated principles of fairness and could not be allowed to continue.

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DXC Technology, formerly known as Covansys India Pvt. Ltd., filed writ petitions challenging the show cause notices dated 29.09.2008 and 05.11.2008 issued for service tax demands relating to services rendered between 2003 and 2006. The petitioner argued that the department failed to act on these notices for nearly two decades and had not provided a valid reason for the delay.

The petitioner’s counsel also argued that the service provided by the company became taxable only from 16.05.2008 under the amended Finance Act, and that the demands were therefore not legally sustainable. They further submitted that similar proceedings initiated by the department in another region for a later period had already been dropped by the tribunal and upheld by the Allahabad High Court.

The department’s counsel responded that the delay occurred because the cases had been transferred to the call book in 2011, based on audit objections, and that adjudication was resumed following a policy direction issued in 2021. The counsel argued that the call book transfer was valid and that there was no arbitrary delay on their part.

The single bench led by Justice C. Saravanan observed that despite the case being placed in the call book, the delay of over 17 years without a convincing explanation was not acceptable. The court found that the continuation of proceedings after such a long gap was arbitrary and went against Article 14 of the Constitution, which guarantees equality before the law.

The court ruled that long-pending show cause notices with no valid justification for delay cannot be allowed to proceed. It quashed both the show cause notices and allowed the writ petitions. The court also closed all related miscellaneous petitions.

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