2005 (3) TMI 18 - HC - Service Tax

Maintainability of Writ appellant had failed to prove the total illegality in issuance of Show Cause Notice. In case a prima facie case has been made out in the SCN, the appellant should opt for regular adjudication proceedings. In routine matters, writ can not be accepted.

Issues Involved:
1. Whether the auditors of the company can be subjected to action under Section 9(i)(bbb) of the Central Excises and Salt Act, 1944, read with Rule 209A of the Central Excise Rules.
2. The maintainability of the writ petitions challenging the show cause notices.
3. The jurisdiction of the authority to issue the show cause notices.
4. The adequacy of the show cause notices in complying with the legal requirements of Rule 209A.

Issue-wise Detailed Analysis:

1. Action Against Auditors Under Section 9(i)(bbb) and Rule 209A:
The primary question was whether the auditors, in their professional capacity, could be held liable under Section 9(i)(bbb) of the Act and Rule 209A of the Rules. The court noted that the allegations in the show cause notices did not establish that the auditors had "handled" or "dealt with" the excisable goods. The statutory provisions require that the person charged must have dealt with the excisable goods with knowledge or reason to believe that the goods were liable for confiscation. The court found that the show cause notices lacked this essential element, rendering them non-compliant with the statutory requirements.

2. Maintainability of Writ Petitions:
The court addressed the preliminary objection raised by the Revenue regarding the maintainability of the writ petitions. It was argued that the petitions should be dismissed as the petitioners had an alternative remedy through departmental adjudication. However, the court held that when a show cause notice is "totally non est in the eye of law" due to lack of jurisdiction, the High Court can entertain the writ petition. The court cited several Supreme Court judgments to support this view, emphasizing that writ petitions can be entertained in exceptional circumstances where the show cause notice is fundamentally flawed.

3. Jurisdiction to Issue Show Cause Notices:
The court examined whether the authorities had the jurisdiction to issue the show cause notices. It was determined that the notices were issued without jurisdiction as they did not meet the legal requirements under Section 9(i)(bbb) and Rule 209A. The court reiterated that the statutory provisions necessitate that the person must have dealt with the excisable goods with the requisite knowledge, which was not established in the notices.

4. Adequacy of Show Cause Notices:
The court scrutinized the contents of the show cause notices and found them deficient. The notices failed to demonstrate that the auditors had dealt with the excisable goods with knowledge of their liability for confiscation. The court emphasized that the allegations must be specific and detailed to form a valid cause of action. The court also rejected the Revenue's attempt to supplement the notices with additional affidavits, citing the principle that the validity of a notice must be judged based on the reasons stated within the notice itself.

Conclusion:
The court concluded that the show cause notices were fundamentally flawed and lacked jurisdiction. The notices did not meet the statutory requirements, and the auditors could not be presumed to have handled the excisable goods merely by performing their professional duties. Consequently, the court quashed the show cause notices and allowed the writ petitions, making the rule absolute with no order as to costs.

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