2022 (3) TMI 1615 - HC - Customs

Seeking to quash the Demand-cum-Show Cause Notice by asserting that the same is barred by limitation - HELD THAT - As per Section 73, unless payment is made in terms of sub-sections (3) and (4) there of, the proceedings for assessment would commence by issue of the show cause notice under sub-section (1) of Section 73 of the Finance Act. This is the procedure prescribed by the statute for recovery of service tax in cases of non- levy, non-payment, short levy, short payment and erroneous refund - Section 83 Chapter V of the Finance Act, 1994 empowers the Authority to invoke Section 14 of the Central Excise Act, 1944 which empowers the Officer to issue summons to any person to give evidence and produce documents. The summons can be issued to any person whose attendance the officer considers necessary. The power can be exercised to collect evidence or a document or any other thing in any inquiry which the officer is making for any purposes under the Act. In the present writ petition, the Petitioner has challenged Demand-cum-Show Cause Notice whereby the Adjudicating Authority has asked the assessee to produce evidence which may be relevant to rely in support of its defense. The said Authority also in order to afford opportunity called for explanation/objection and has disclosed proposed actions by specifying components of tax, interest and penalty. Such a Show Cause Notice having clearly spelt out reasons, no prejudice possibly be caused to the Petitioner in the event it is relegated to avail such opportunity by placing relevant material fact including its stance of limitation and the period and transactions covered under the SVLDRS, 2019. At this stage where Demand-cum-show cause notice has been issued to the Petitioner-Nagen Caterer, various aspects are found mentioned in the impugned Show Cause Notice as to why the Adjudicating Authority has sought to invoke the extended period of limitation in terms of proviso to sub-section (1) of Section 73 of the Finance Act which essentially relates to the facts and circumstances of the case. Of course, the Petitioner has the fullest opportunity to counter the same during the course of proceeding. It is possible for the Petitioner to seek for further time, if according to him the time given by the authority for filing the reply was required to be extended in order to enable him to collect some record. It cannot therefore be said that if detailed reasons for issuance of notice being absent in the Show Cause Notice, the same would be rendered invalid. The present case seems neither to be a case of lack of jurisdiction nor is there any allegation of violation of principles of natural justice. Even though point of limitation is raised as a matter of jurisdictional fact, the same being mixed question of fact and law, the Petitioner has ample opportunity to agitate such an issue before the Adjudicating Authority. Therefore, this Court feels entertainment of the writ petition at the stage of notice would be premature. The writ petition is dismissed, but the Petitioner is allowed a further period of four weeks from availability of the instant order to file reply/objection to the Show Cause Notice dated 22.04.2021 and also to participate in the proceeding.

Summary

Issues Involved:
1. Jurisdiction of the Adjudicating Authority to issue the Demand-cum-Show Cause Notice.
2. Applicability of the limitation period under Section 73(1) of the Finance Act, 1994.
3. Relevance of the Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS), 2019.
4. Validity of the Demand-cum-Show Cause Notice under the Finance Act, 1994.
5. Appropriateness of invoking writ jurisdiction under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Adjudicating Authority to issue the Demand-cum-Show Cause Notice:
The Petitioner argued that the Adjudicating Authority lacked jurisdiction to issue the Demand-cum-Show Cause Notice dated 22.04.2021, asserting that the notice was barred by limitation under Section 73(1) of the Finance Act, 1994. The Petitioner relied on the Supreme Court decisions in Calcutta Discount Co. Ltd. v. Income Tax Officer and East India Commercial Co. Ltd. v. Collector of Customs to support their claim. However, the Court observed that the Adjudicating Authority had issued the notice invoking the proviso to sub-section (1) of Section 73, which extends the limitation period to five years in cases involving fraud, collusion, wilful misstatement, suppression of facts, or contravention of the Act with intent to evade payment of service tax.

2. Applicability of the limitation period under Section 73(1) of the Finance Act, 1994:
The Petitioner contended that the normal limitation period of eighteen months should apply, as the case did not fall within the ingredients mentioned under the proviso to Section 73(1). However, the Court noted that the Finance Act, 2012, amended the limitation period from eighteen months to thirty months, and the extended period of five years applies in cases of fraud or suppression of facts. The Court emphasized that the Adjudicating Authority had the power to issue the notice within five years if the conditions of the proviso were met, and the Petitioner had the opportunity to contest these allegations during the adjudication process.

3. Relevance of the Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS), 2019:
The Petitioner argued that the Demand-cum-Show Cause Notice was illegal as it did not consider the effect of the Court's Order dated 06.04.2021 in the Petitioner's own case, which directed the issuance of SVLDRS-4 under the SVLDRS, 2019. The Petitioner claimed that the demand stood concluded by this order. However, the Revenue countered that the SVLDRS, 2019, related to different periods (2011-12 to 2015-16) and did not cover the periods mentioned in the impugned notice (2015-16 and 2016-17). The Court agreed with the Revenue's position, stating that the periods covered under SVLDRS, 2019, were distinct from those in the impugned notice, and the Petitioner could present this argument during the adjudication process.

4. Validity of the Demand-cum-Show Cause Notice under the Finance Act, 1994:
The Court examined the statutory provisions of Section 73 of the Finance Act, 1994, which outlines the procedure for recovery of service tax not levied or paid, short-levied or short-paid, or erroneously refunded. The Court noted that the Demand-cum-Show Cause Notice contained specific reasons for its issuance, including allegations of non-disclosure and non-filing of returns by the Petitioner. The notice provided the Petitioner with an opportunity to present evidence and explanations. The Court emphasized that the statutory scheme requires the issuance of a show cause notice, a response by the person served, and a final determination by the Adjudicating Authority. The Court concluded that the notice was valid and in accordance with the prescribed procedure.

5. Appropriateness of invoking writ jurisdiction under Article 226 of the Constitution of India:
The Court reiterated the principle that writ jurisdiction under Article 226 should not be invoked prematurely, especially when an alternative statutory remedy is available. The Court cited several Supreme Court decisions, including Union of India v. Coastal Container Transporters Association and Supreme Paper Mills Limited v. Assistant Commissioner of Commercial Taxes, which emphasized that writ petitions should not be entertained at the show cause notice stage unless there is a clear lack of jurisdiction or a violation of principles of natural justice. The Court held that the Petitioner had not demonstrated any exceptional circumstances warranting the exercise of writ jurisdiction and directed the Petitioner to avail the statutory remedy by responding to the show cause notice and participating in the adjudication process.

Conclusion:
The Court dismissed the writ petition, allowing the Petitioner an additional four weeks to file a reply/objection to the Demand-cum-Show Cause Notice dated 22.04.2021 and to participate in the adjudication process. The Court emphasized that the Adjudicating Authority should consider all representations and submissions made by the Petitioner and decide the matter strictly in accordance with the law. The Court refrained from expressing any opinion on the merits of the case, leaving all contentions open for consideration by the Adjudicating Authority.