2018 (11) TMI 714 - HC - Service Tax

Jurisdiction - power of DGCEI to conduct inquiry/investigation - issuance of summons to be preceded by an enquiry - service tax evasion by all branches of NBCC - power of DG, DGCEI direction to investigate against Petitioner on all India basis - Scope of Rule 5A of the Service Tax Rules, 1994 - change of opinion. Held that - There could be more than one show cause notice over-lapping the same period of time for distinct issues and subject matters. The Fin Act does not bar and prohibit different show cause notices on different issues, facts and subject matter. Each show cause notice being independent has to be adjudicated and decided. Once decided the decision under Section 73(2) of the Fin Act would be binding unless challenged and questioned as per procedure prescribed. Repeated or multiple show cause notices under Section 73(1) of the Fin Act can result in harassment and inconvenience and also reflect on the governance and administration of the Fin Act. Every attempt should be made to issue consolidated show cause notices even on divergent issues and subject matters. In addition, because of delay and limitation period prescribed under Section 73(1) of the Fin Act recoveries could lapse. Pendency of proceeding of recovery under Section 73(1) of the Fin Act or any other statutory proceedings is not a condition precedent for issue of notice under Section 14 of the CE Act. Notice or summons under Section 14 of the CE Act can be issued by the Central Excise Officer when required and necessary for any enquiry relating to service tax. Rule 5A no doubt vests and authorises the Central Excise Officers with power to access registered premises of a person for scrutiny, verification and check but this would not show that the Central Excise Officer does not have power and cannot take recourse to investigation and issue summons for collection of evidence and documents under Section 14 of the CE Act. The power conferred in the form of Section 14 of the CE Act, like conduct of Special Audit under Section 72A or access to the registered premises under Rule 5A(1) have the same object and purpose i.e. empower the Central Excise Officer to ascertain facts and also collect material and evidence - Similarly the power to direct Special Audit under Section 72A of the Fin Act is certainly more intrusive and compelling. These arguments have to be rejected as power under Section 14 of the CE Act and other powers relating to investigation and enquires cohabit and exist together and also independently. It may not be appropriate to exercise power under Rule 5A, when direction to produce documents and furnish information would be appropriate and suffice. Whether officers of DGCEI are Central Excise Officers and have all India jurisdiction? - Held that - The question of jurisdiction relates to the subject matter i.e. jurisdiction of an officer to exercise power. A person who is not the Central Excise Officer, lacks subject matter jurisdiction and consequently any action, act or order would suffer from lack of jurisdiction in a sense that it cannot be waived. Lack of jurisdiction by way of subject matter can be challenged at any time, even in the execution proceedings and cannot be waived by consent. Lack of jurisdiction by venue can be waived by consent or when not raised within reasonable time by applying principle of estoppel. No assessee has a vested right to be assessed at a particular location and venue - the Board has wide discretion in power while fixing the local limit assigned to a Central Excise Officer. Local limit can be pan or all India. This position must be accepted as in cases of centralized registrations all India jurisdiction is exercised. We leave it to the Central Excise Officer to decide how to go about and proceed while deciding and exercising discretion whether or not he or she would invoke the power under Rule 5A(1) or seek enforcement of directions by production of documents and papers by recourse to Section 14 of the CE Act. While deciding on the said option, due regard would be given to any representation or submission made by the petitioner-assessee. Further, in case papers and documents can be supplied by post or other means or by hand, the said option should be given. Repeated notices, one after the other, should be avoided unless for some reason examination of earlier documents requires furnishing of further particulars and papers. Central Excise Officers of DGCEI have all India jurisdiction and can issue notices and enquire into the matters relating to servicetax against any assessee/ person even if the said person or assessee is registered with one or multiple Commissionerates. Notice under Section 14 of the CE Act i.e. Central Excise Act can be issued even if proceedings under Section 73 of the Fin Act i.e. Finance Act, 1994 are not pending. However the notice should relate to matters and issues relating to provisions of services and imposition of service tax - The petitioner should comply with the notices issued or would be issued by the Central Excise Officers, DGCEI to furnish evidence and documents pertaining to the PMC charge i.e. Project Management Consultancy Charge in respect of Commissionerate/ registration except those subject matter of show cause notice dated 13th March, 2015 issued by the Commissionerate of Central Excise and Service Tax, Patna. Petition dismissed.

Summary

Issues Involved:

1. Jurisdiction of DGCEI to conduct centralized inquiry/investigation under the Finance Act, 1994.
2. Validity of issuance of summons under Section 14 of the Central Excise Act, 1944.
3. Legality of DGCEI’s direction for an all-India investigation on service tax evasion.
4. Provisions for reassessment/reinvestigation under the Finance Act, 1994.
5. Validity of DGCEI officers proceeding based on a change of opinion.
6. Allegations of arbitrariness, malice, and motivation in the DGCEI’s investigation and issuance of summons.

Detailed Analysis:

1. Jurisdiction of DGCEI to Conduct Centralized Inquiry/Investigation:

The court examined whether the DGCEI is empowered to conduct centralized inquiries and investigations under the Finance Act, 1994. It was concluded that the DGCEI has the authority to centralize investigations with all-India jurisdiction. This centralization is deemed necessary to avoid multiple investigations across different Commissionerates, which would result in inconvenience and harassment. The Board has the discretion to assign all-India jurisdiction to Central Excise Officers, which includes the DGCEI, thus facilitating a unified and detailed inquiry.

2. Validity of Issuance of Summons under Section 14 of the Central Excise Act, 1944:

The court held that summons under Section 14 of the Central Excise Act can be issued even if no proceedings under Section 73 of the Finance Act, 1994, are pending. The term "inquiry" in Section 14 is not restricted to post-notice scenarios but includes pre-notice investigations to collect evidence and ascertain facts. This interpretation aligns with the procedural requirements for initiating recovery proceedings under Section 73 of the Finance Act.

3. Legality of DGCEI’s Direction for an All-India Investigation on Service Tax Evasion:

The court found that the DGCEI’s direction for an all-India investigation into service tax evasion by all branches of the petitioner is legally sustainable. The investigation was centralized to address the issue of service tax liability on Project Management Consultancy Charges (PMC Charges) uniformly across different registrations. The court emphasized that such centralization is justified to prevent inconvenience and resource wastage due to multiple investigations on the same issue.

4. Provisions for Reassessment/Reinvestigation under the Finance Act, 1994:

The court clarified that the Finance Act, 1994, does not bar multiple show cause notices for different issues and subject matters over the same period. Each show cause notice must be adjudicated independently. However, repeated or multiple notices should be avoided to prevent harassment and ensure efficient governance. The procedure for reassessment and recovery of service tax is governed by Section 73 of the Finance Act, which mandates a show cause notice specifying the grounds and amount for recovery.

5. Validity of DGCEI Officers Proceeding Based on a Change of Opinion:

The court did not find any express provision in the Finance Act, 1994, that restricts DGCEI officers from proceeding based on a change of opinion. The officers are authorized to conduct inquiries and issue summons to collect evidence and ascertain facts necessary for the enforcement of service tax provisions. The court emphasized that the exercise of such powers must be justified and not arbitrary or for ulterior motives.

6. Allegations of Arbitrariness, Malice, and Motivation in the DGCEI’s Investigation and Issuance of Summons:

The court addressed the petitioner’s allegations of arbitrariness, malice, and motivation in the DGCEI’s investigation and issuance of summons. It was observed that the power to issue summons under Section 14 of the Central Excise Act must not be exercised in an arbitrary manner or for ulterior motives. The court advised the respondents to refrain from using threatening language in notices and to consider the convenience of the assessee while exercising their powers.

Conclusion:

The writ petition was dismissed, with the court upholding the DGCEI’s jurisdiction to conduct centralized investigations and issue summons under Section 14 of the Central Excise Act. The interim orders restraining DGCEI from conducting investigations were vacated, except for matters already covered by the show cause notice issued by the Patna Commissionerate. The period during which the stay order was in effect was excluded for computing the limitation period for issuing show cause notices under Section 73(1) of the Finance Act. The court did not examine the scope and ambit of Notification No. 25/12-ST, leaving the issue of chargeability of service tax on PMC Charges open for future adjudication.