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2025 (2) TMI 301 - HC - GSTTime limitation - Issuance of the show cause notice without pre-consultation - exemption from service tax for service provided by the petitioner under N/N. 25/2012 - proceedings were barred by limitation under Section 73 of the Finance Act 1994 - HELD THAT - What is the requirement to prove fraud and collusion is the intent to evade duty. How to gather this intention or judge it would remain a question of fact and this issue as to whether it is a case of fraud or wilful mis-statement collusion or is falling under any of the clauses (a) to (b) of the proviso to sub-Section (1) of Section 73 may be properly adjudicated by either the Adjudicating authority or the Appellate Authority with reference to the materials on the record. This Court would not usurp the powers of the Appellate Authority. This Court sitting under Article 226 of the Constitution of India would refrain itself as a matter of self-restraint in conducting an enquiry as to whether it is a case of fraud or not. It is left open to be considered by Appellate Authority. On a bare reading of sub-Section (1) of Section 73 that the period of limitation for serving a notice under this provision was 18 months at the relevant time but the proviso to sub-Section (1) carves out an exception and it clearly provides that in the cases falling under any one of the reasons stated under clauses (a) to (e) of the proviso the provisions of the sub-Section shall have effect as if for the words 18 months the words five years have been substituted. Since the initiation of proceeding itself has been done taking this case as one of evasion of tax the respondents have rightly argued that the period of limitation in this case would be five years - No doubt the legislative intent is that the Central Excise Commissioner shall determine the amount of service tax due under sub-Section (2) (a) within six months from the date of issue of notice where it is possible to do so in respect of cases falling under Sub-Section (1); (b) within one year from the date of notice where it is possible to do so in respect of cases falling under the proviso to sub-Section (1) the cluster of words where it is possible to do so clearly indicates that the legislatures were never of the view that a proceeding which would not be concluded within the period of limitation for whatever reasons would be closed by virtue of the expiry of the period of limitation alone. Section 74 (1) of CGST Act cannot be invoked merely on account of non-payment of GST without specific element of fraud or wilful mis-statement or suppression of facts to evade tax. It further provides that only in the cases where the investigation indicates that there is material evidence of fraud or wilful mis-statement or suppression of fact to evade tax on the part of the taxpayer provisions of Section 74 (1) of the CGST Act may be invoked for issuance of show cause notice and such evidence should also be made a part of the show cause notice. No fault may be found on the part of the competent authority in forming of a reasonable belief in absence of a response by the petitioner - it is not a fit case to interfere with the impugned order in original (Annexure P2 ) in exercise of the writ jurisdiction of this Court. Conclusion - i) The pre-show cause consultation requirement is not mandatory in cases involving allegations of tax evasion. ii) The extended limitation period under Section 73(1) applies when proceedings are initiated on grounds of evasion fraud or suppression of facts. The writ application was not maintainable due to the availability of an appellate remedy.
The judgment from the Patna High Court addresses a writ application challenging an order imposing service tax, interest, and penalties on the petitioner for the financial years 2015-16 and 2016-17. The petitioner sought to quash the order on several grounds, including the lack of a pre-show cause consultation, the applicability of an exemption notification, and the issue of limitation.
Issues Presented and Considered: The core legal questions considered were:
Issue-wise Detailed Analysis: 1. Pre-show Cause Consultation:
2. Applicability of Exemption Notification:
3. Limitation under Section 73:
4. Availability of Alternative Remedy:
Significant Holdings: The Court's significant holdings included:
The Court concluded that the writ application was not maintainable due to the availability of an appellate remedy. The petitioner was advised to file an appeal with the Commissioner (Appeal), CGST and CX, within a specified period. The Court also directed the Appellate Authority to consider the issue of limitation in light of the pendency of the writ application and the interim stay order.
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