2023 (10) TMI 449 - HC - Service Tax

Legality and validity of the impugned show cause notice - legality and validity of notice of personal hearing - delayed adjudication after lapse of more than 7 years which is contrary to provisions of Sub-section (4B) of Section 73 of erstwhile Chapter V of the Finance Act, 1994 - HELD THAT - It transpires that the impugned show cause notice was issued vide letter dated 24.12.2014, thereafter the petitioner filed its reply to the said notice vide letter dated 04.10.2016 and the respondent No. 2 fixed the matter for personal hearing on 05.10.2016, on which date the petitioner duly appeared and made submissions. Thereupon, the adjudication of impugned show cause notice was kept in suspended animation for more than 7 years and now again the petitioner received a notice for personal hearing dated 21.06.2022 for adjudication of the show cause notice dated 24.12.2014. It further transpires that Section 73(4B) provides for determination of service tax liability and adjudication of the show cause notices within period of six months, where it is possible to do so in case where the show cause notice is issued under the main section 73(1) involving no suppression of facts etc. and within a period of one year where the show cause notice is issued under proviso to Section 73(1) of Chapter V of the Finance Act, 1994, where it is possible to do so - Sub-Section (4B) was inserted in Section 73 of Chapter V of the Finance Act, 1994 w.e.f. 06.08.2014 by Finance (No. 2) Act, 2014. Similar provisions exist under Section 11A (11) of the Central Excise Act, 1944 and Section 28(9) the Customs Act, 1962. The period of limitation of 6 months or 1 year under Section 73(4B) of the Chapter V of the Finance Act, 1994 be extended to more than seven years as is done in the instant case. In the case of KM SHARMA VERSUS INCOME TAX OFFICER 2002 (4) TMI 7 - SUPREME COURT it is held by the Hon ble Apex Court that the provisions of a fiscal statute more particularly one regulating the period of limitation must receive a strict construction as the law of limitation is intended to give certainty and finality to legal proceedings. In the case of SIDDHI VINAYAK SYNTEX PVT LTD. VERSUS VERSUS UNION OF INDIA 2 2017 (3) TMI 1534 - GUJARAT HIGH COURT it is held by the Hon ble Gujrat High Court that delay in deciding the proceedings without bringing it to the notice of the Petitioner that the case was transferred to the call book and was therefore pending causes immense prejudice and hence revival of proceedings after long gap without disclosing any reason of delay is in complete breach of the principles of natural justice. Alternatively, where no time limit has been prescribed the action should be completed within a reasonable time period. The reasonable time period U/s 73 is 5 years under Chapter V of the Finance Act 1994. In the instant case the matter is pending adjudication for more than 7 years - In the instant case period of more than 7 years from the issuance of impugned Show Cause Notice on 24-12-2014 cannot be said to be reasonable period for taking up/concluding adjudication proceedings. Section 73(1)/ 73(4) of Chapter V of the Finance Act, 1994 provides 5 years as a maximum period which in any case should be taken as reasonable period within which the adjudication should be completed. At this stage, it is worth mentioning that the objection of the Revenue with regards to alternative remedy and/or the judgments cited by the Revenue is not applicable in the instant case, inasmuch as, in the case at hand, now it would not be possible for the petitioner to defend its case effectively by culling out relevant records, evidences, producing its witness etc. thus, remitting the matter back would cause serious prejudices to the petitioner at this belated stage. There are no hesitation in quashing the impugned show-cause notice dated 24.12.2014 (Annexure-1) and impugned notice dated 06.06.2022 (Annexure-2) and the same are hereby quashed and set aside - the instant application stands allowed.

Summary

Issues Involved:

1. Legality and validity of the impugned Show Cause Notice dated 24.12.2014.
2. Legality and validity of the notice of personal hearing dated 06.06.2022.
3. Delay in adjudication and its compliance with the statutory time limits and principles of natural justice.

Summary:

1. Legality and Validity of the Impugned Show Cause Notice Dated 24.12.2014:

The petitioner challenged the impugned Show Cause Notice dated 24.12.2014 on the grounds of delayed adjudication beyond the reasonable period of limitation, which offends Article 14 of the Constitution of India. The petitioner argued that the delay of more than 7 years in adjudicating the notice is contrary to the provisions of Sub-section (4B) of Section 73 of the Finance Act, 1994, which mandates a limit of six months to one year for completing adjudication proceedings "where it is possible to do so."

2. Legality and Validity of the Notice of Personal Hearing Dated 06.06.2022:

The petitioner received a notice of personal hearing dated 06.06.2022, fixing the hearing on 21.06.2022 for adjudication of the impugned Show Cause Notice dated 24.12.2014. The petitioner contended that the entire proceeding was kept in suspended animation for more than seven years without any reasonable explanation, causing prejudice and violating Article 14 of the Constitution.

3. Delay in Adjudication and Compliance with Statutory Time Limits and Principles of Natural Justice:

The petitioner argued that the words "where it is possible to do so" under Section 73(4B) do not extend the time limit perpetually but are intended for extraordinary situations only. The delay in adjudication causes prejudice to parties and is contrary to Article 14. The petitioner cited several judgments to support the contention that the time limit for adjudication must be strictly adhered to unless there are reasonable grounds for delay.

The respondent argued that the adjudication of the case is a quasi-judicial function, and there was no statutory time limit prescribed for passing the Adjudication Order. The delay was due to administrative constraints and changes in indirect taxation laws. The respondent cited judgments to support the view that the writ application is premature and that the petitioner has alternative remedies under the Finance Act, 1994.

Court's Analysis and Conclusion:

The court observed that Section 73(4B) provides for adjudication of show cause notices within six months to one year "where it is possible to do so." The words "where it is possible to do so" are elastic only when there are reasonable grounds beyond the control of the adjudicating authority. The court held that the legislative intent behind inserting Sub-Section (4B) is to ensure adjudication within a reasonable time frame unless an extraordinary situation arises. The court noted that similar provisions exist under the Central Excise Act, 1944, and the Customs Act, 1962.

The court emphasized that the law of limitation is intended to give certainty and finality to legal proceedings and to avoid indefinite litigation. The court cited several judgments to support the view that the period of limitation must receive strict construction.

The court concluded that the delay of more than 7 years in adjudicating the impugned Show Cause Notice is unreasonable, arbitrary, and violates Article 14 of the Constitution. The court quashed the impugned Show Cause Notice dated 24.12.2014 and the notice of personal hearing dated 06.06.2022.

Result:

The instant application stands allowed, and the impugned Show Cause Notice dated 24.12.2014 and the notice of personal hearing dated 06.06.2022 are quashed and set aside. Pending I.A., if any, is also closed.