2023 (8) TMI 1153 - HC - Service Tax

Delayed adjudication of show cause notice (about 12 years) - Interpretation of Section 73(4B) of FA, 1994 - HELD THAT - From a plain reading of the provisions of Section 73(4B) and more particularly, in the context of the legislative intent in introducing sub- section (4B), such contention as urged by the respondent cannot be accepted that there is no mandate on the concerned officer of the department to decide the show cause notices expeditiously, and / or the timelines which are set out in sub-section (4B) would be required to be held to be merely directory, as the provision would make an allowance for a belated adjudication of the show cause notice. The legislature providing that the determination be made within six months from the date of the notice as provided for in clause (a) of sub-section (4B) is concerned, cannot be read to nullify or attaching no weightage to the timelines so prescribed. It can however, be acceptable that a reasonable / plausible delay beyond six months may in a given case be justified depending on the facts and circumstances of the case, for reasons which do not make it possible for the adjudicating officer to conclude the proceedings of the show cause notice. When the legislature uses the words where it is possible to do so in clauses (a) and (b), the legislature is conscious of some free play which is required to be made available to the adjudicating officer. However, such limited relaxation cannot be intended to mean that it would defeat the sanctity and purpose for which the period of six months and one year has been set out to clause (a) and (b) of sub-section (4B) - The word where it is possible to do so thus cannot be read to defeat the timelines of six months and one year as set out in clauses (a) and (b) of sub-section (4B). Also these words cannot be construed to mean that by use of such words a complete freedom is available to the adjudicating officer to adjudicate the show cause notice at his own sweet will, much less, with such inordinate delay as in the present case which is of almost more than 12 years. There are no acceptable reason in facts or in law, which would make it possible for respondent no. 2, in such circumstances, namely, of two statutory events of merger and amalgamation having taken place, to subrogate the petitioner for IDFC Ltd. for adjudicating the show cause notice nor can the petitioner effectively participate in the belated adjudication of such show cause notice, by having a reasonable chance of defending the same in the absence of any material available to the petitioner, as noted by us above, even assuming the original noticee was to exist. Petition allowed.

Summary

Issues Involved:
1. Delayed adjudication of show cause notice.
2. Legality of adjudicating a show cause notice issued to a non-existent entity.
3. Compliance with Section 73(4B) of the Finance Act, 1994.
4. Justification for delay in adjudication by the respondent.

Summary:

1. Delayed Adjudication of Show Cause Notice:
The petitioner challenged the delayed adjudication of a show cause notice dated 12 March 2010, which was issued by the Commissioner of Service Tax, Mumbai. The court observed that "time and tide wait for none" and emphasized that prolonged pendency of a show cause notice adversely affects both the legal rights of the assessee and the public interest in revenue collection. The court noted that the original noticee, IDFC Ltd., had undergone significant restructuring and mergers, resulting in the creation of a new entity, IDFC First Bank Ltd., the petitioner in this case. The court found the delay of almost 12 years in adjudicating the notice to be unreasonable and unjustified.

2. Legality of Adjudicating a Show Cause Notice Issued to a Non-Existent Entity:
The court highlighted that the petitioner, IDFC First Bank Ltd., was not the original noticee and was unaware of the existence of the show cause notice until 29 March 2022. The court found it "ill-conceivable" that the original entity, IDFC Ltd., which ceased to exist in 2015, could be resurrected merely for adjudicating the show cause notice. The court deemed it impermissible for the respondent to adjudicate the notice after such a long lapse of time and against a different legal entity.

3. Compliance with Section 73(4B) of the Finance Act, 1994:
The court examined the provisions of Section 73(4B) of the Finance Act, 1994, which mandates that the Central Excise Officer "shall determine the amount of service tax due" within specified timelines. The court rejected the respondent's contention that the timelines were merely directory and emphasized that the legislative intent was to ensure expeditious adjudication. The court stated that any delay beyond the prescribed timelines must be reasonable and justifiable, which was not the case here.

4. Justification for Delay in Adjudication by the Respondent:
The respondent provided various justifications for the delay, including multiple adjournments requested by IDFC Ltd. and administrative changes within the department. However, the court found these justifications inadequate and unacceptable. The court noted that there was no plausible reason for the inaction from May 2015 to June 2022. The court criticized the respondent's approach, stating that it led to a situation where the notice could not be taken forward as the original noticee had ceased to exist.

Conclusion:
The court concluded that the long lapse of time had caused irreversible changes, making it impossible for the respondent to adjudicate the show cause notice. The court found that the notice had stood frustrated by the inaction of the respondent and quashed and set aside the show cause notice. The petition was allowed, and the rule was made absolute with no costs.