2023 (1) TMI 743 - HC - Service Tax

Validity of adjudication of SCN after much delay - inordinate delay - grant of centralized service tax registration - Divisional Officer was obliged to send intimation to the respective jurisdictional Service Tax office-in-charge of the erstwhile branch to transfer the relevant records to its office for taking further action and to update the records, but despite the same, the files pertaining to the said show cause cum demand notice were not transferred to the Respondent No.2 - notice of hearing was issued around eleven years after the date of the said show cause cum demand notice - HELD THAT - The Respondents have not acted in the manner as required by law. True that, while the Respondents right in law to initiate proceedings for violation of the provisions of the Act can never by disputed, at the same time, they do not have the unfettered right to choose a time to conclude the said proceedings as per their own whims and fancies. Action on the part of a constituent of State has to be with responsibility and not caprice - The words reasonable period call for a flexible rather than a rigid construction having regard to the facts of each case, but the period in excess of eleven years as claimed by the Petitioner or even seven years, if we were to consider the period from 8 May 2013, when the Petitioner informed the Respondent Authority that it had obtained Centralized Registration, without the Respondents sufficiently explaining as to what prevented them from concluding the proceedings except their own delay, in our view is nothing but unreasonable and the reasons stated in the affidavit-in-reply cannot be accepted. Respondents having delayed the transfer of proceedings from Delhi to Mumbai and not even having bothered to themselves do the same upon the Centralized Registration by the Petitioner on 9 September 2010 and even after the Petitioner informed of the same on 8 May 2013, without any satisfactory explanation for this delay, adjudication of the Show Cause cum Demand Notice No.59 of 2009 dated 12 October 2009, which ought to have been culminated within a reasonable time has not been done and adjudicating the same now after an inordinate and unreasonable lapse of time would be detrimental and cause severe prejudice to the Petitioner. The impugned show cause cum demand notice dated 12 October 2009 cannot be carried forward after such an inordinate delay - Petition allowed.

Summary

Issues Involved:
1. Validity of the Show Cause cum Demand Notice due to inordinate delay in adjudication.
2. Transfer of records post-centralized service tax registration.
3. Impact of delay on the Petitioner's ability to respond and avail amnesty schemes.

Detailed Analysis:

1. Validity of the Show Cause cum Demand Notice due to inordinate delay in adjudication:

The Petitioner, APL (India) Pvt. Ltd., received a Show Cause cum Demand Notice dated 12 October 2009 for the period 2004-05 to 2007-08, demanding service tax and associated penalties. The Petitioner argued that the adjudication of this notice, initiated almost eleven years later, is ex-facie invalid, illegal, untenable, and unsustainable in law. The Court noted that Section 73(4B) of the Finance Act, 1994, prescribes a period of one year to complete adjudication where possible. The Court referenced previous judgments, including Parle International Ltd. vs. Union of India and Sushitex Exports (India) Ltd. vs. Union of India, which set aside proceedings due to unreasonable delays. The Court concluded that the eleven-year delay, without sufficient explanation, rendered the proceedings unreasonable and prejudicial to the Petitioner.

2. Transfer of records post-centralized service tax registration:

Post the centralized service tax registration on 9 September 2010, it was the duty of the Divisional Officer to transfer relevant records to the new jurisdiction. Despite the Petitioner informing the authorities on 8 May 2013 about the centralized registration and requesting the transfer of files, the records were only transferred on 24 January 2019. The Court found that the Respondents failed to act promptly and responsibly in transferring the records, which contributed to the delay in adjudication.

3. Impact of delay on the Petitioner's ability to respond and avail amnesty schemes:

The Petitioner highlighted significant challenges in collating relevant documents due to the substantial lapse of time, changes in management, and the impact of the Covid-19 pandemic. The delay also resulted in the Petitioner missing opportunities to avail amnesty schemes. The Court acknowledged these points, emphasizing that the Respondents' inaction and delay severely prejudiced the Petitioner's interests.

Conclusion:

The Court quashed and set aside the Show Cause cum Demand Notice dated 12 October 2009, concluding that the inordinate and unreasonable delay in adjudication was detrimental to the Petitioner. The Petition was allowed, with each party bearing its own costs.