2024 (7) TMI 316 - HC - Service Tax

Validity of SCN - mandatory requirement of the pre-notice consultation - recovery of service tax. It is the case of the petitioner that before issuance of the show cause notice for the demand exceeding Rs. 50,00,000/-, the respondent Department is in breach of mandatory condition of pre-notice consultation laid down by the Government vide para No. 5 of the Master Circular dated 10th March, 2017. HELD THAT - It is noticed that during pendency of this petition, the order dated 14.03.2024 is clear to the effect that the respondent authorities were directed to undergo the process of the pre consultation keeping the impugned show cause notice in abeyance on record before the next date of hearing meaning thereby that the respondent authorities were supposed to pass an order on or before 18.04.2024. Despite above, order passed by this Court on 14.03.2024, respondent authorities fixed the hearing 03.04.2024 beyond the time period granted by this Court to complete the pre-notice consultation on or before 18.04.2024 and considering the fact that the hearing is fixed on 23.4.2024, this Court granted an indulgence to adjourn the matter for two months. However, till today, no such order is passed by the respondent authority. The impugned show cause notice is hereby quashed and set aside with liberty to the respondent authority to pass appropriate order within the pre-notice consultation conducted on 23.04.2024, and thereafter, may initiate the proceedings if required if the same is within the period of limitation. Petition disposed off.

Summary

Issues:
1. Validity of the show cause notice issued by the respondent authorities for recovery of service tax.
2. Compliance with the mandatory requirement of pre-notice consultation as per the Master Circular dated 10th March 2017.
3. Adequate opportunity for consultation prior to the issuance of the show cause notice.
4. Jurisdiction of the Court to quash the order and direct the authority to deal with the matter afresh.

Analysis:
Issue 1: The petitioner sought relief against the show cause notice issued by the respondent authorities for the recovery of service tax amounting to Rs. 59,87,560 for the financial years 2014-15 to 2016-17. The petitioner contended that the notice was issued without complying with the mandatory pre-notice consultation requirement as per the Master Circular dated 10th March 2017.

Issue 2: The Court noted that the impugned show cause notice was issued without following the mandatory requirements of the Master Circular, which necessitated pre-show cause notice consultation for cases involving demands exceeding Rs. 50,00,000. The Court directed the respondent authorities to undergo the pre-consultation process before the next hearing date and maintain the show cause notice in abeyance.

Issue 3: The petitioner argued that despite the Court's order directing the respondent authorities to complete the pre-notice consultation by a specified date, no order was passed within the stipulated time frame. The Court referred to a previous case where the failure to grant adequate consultation prior to the issuance of a show cause notice led to the notice being quashed and set aside. The Court emphasized the importance of providing a reasonable opportunity for consultation before issuing such notices.

Issue 4: The Court exercised its jurisdiction to quash the impugned show cause notice due to the lack of adequate consultation before its issuance. It directed the respondent authority to conduct a fresh pre-show cause notice consultation and issue the show cause notice only after being satisfied with the consultation process. The Court clarified that the petitioner should cooperate fully and not raise the issue of limitation regarding the demand made by the respondent authority within the prescribed time limit.

In conclusion, the petition was disposed of, and the impugned show cause notice was quashed with liberty given to the respondent authority to pass an appropriate order within the conducted pre-notice consultation. The Court emphasized the importance of following procedural requirements and providing parties with adequate opportunities for consultation before taking enforcement actions.