2010 (7) TMI 911 - HC - VAT and Sales Tax

Whether having regard to the fact that the impugned order is only a showcause notice, a writ petition would not lie? Held that - In view of the binding authority, we are not inclined to entertain the writ petition at this stage. It is always open to the petitioner to submit explanation and to participate in the adjudication by the respondent. By reason of the show-cause notice the petitioner was required to submit explanation within thirty days from the date of receipt of the impugned notice dated April 1, 2010. Keeping in view the principle of fairness, we deem it proper to extend the time by another six weeks from today for the petitioner to submit explanation. If the petitioner fails to submit explanation within the time now granted, it shall be open to the respondent to adjudicate the matter and pass orders in accordance with law.

Summary

Issues:
1. Alleged failure to pay service tax for the assessment year 2006-07.
2. Jurisdiction of the court to quash a show-cause notice.
3. Legal implications of entertaining a writ petition challenging a show-cause notice.
4. Adjudication process following the issuance of a show-cause notice.

Analysis:
1. The petitioner, a firm engaged in tobacco-related activities, faced allegations of not paying service tax for the assessment year 2006-07. The respondent conducted an inquiry based on gathered intelligence and issued a show-cause notice to the petitioner, calling for an explanation regarding the alleged contravention of relevant statutory provisions. The petitioner had not yet submitted their explanation at the time of the court proceedings.

2. The court referred to legal precedents to determine the jurisdictional aspect of quashing a show-cause notice. Citing the State of Uttar Pradesh v. Shri Brahma Datt Sharma case, the court emphasized the importance of allowing the concerned party to respond to the notice before judicial intervention. The court highlighted that interference before the completion of the adjudication process would be premature.

3. The court discussed the legal implications of entertaining a writ petition challenging a show-cause notice, as seen in various judgments. Referring to Union of India v. Bajaj Tempo Limited, the court emphasized the necessity for the party to reply to the show-cause notice to enable the authorities to make factual findings before further legal recourse. The court noted that challenging the legality of a show-cause notice should not stall the investigative process unless it lacks jurisdiction.

4. Following the legal principles established in Commissioner of Customs & Central Excise v. Charminar Nonwovens Ltd., the court directed the petitioner to submit their explanation within an extended timeframe. The court stressed the importance of participating in the adjudication process and complying with the statutory requirements. Failure to provide an explanation within the granted time would empower the respondent to proceed with adjudication and pass orders in accordance with the law.

In conclusion, the court disposed of the writ petition without costs, emphasizing the need for the petitioner to engage in the adjudication process by submitting a timely explanation. The judgment underscored the significance of following due process and participating in the legal proceedings as required by law.