2025 (2) TMI 316 - HC - Service Tax

Violation of the principles of natural justice - inordinate and unexplained delay of more than 14 to 20 years in adjudicating the SCN - HELD THAT - When the department decided to transfer these Show Cause Notices to the call book the same was not even intimated to the Petitioner and that they were kept pending because the issue involved in the Show Cause Notices was pending for a decision before this Court. In these facts and circumstances it is found that the explanation given for this inordinate delay does not hold any merit. What is also interesting to note is that the decision in the case of Homa Engineering Works 2007 (5) TMI 52 - CESTAT, MUMBAI was rendered by the CESTAT sometime in the year 2007 and the decision in the case of M/s Mazgaon Dock Ltd 2008 (4) TMI 121 - CESTAT MUMBAI was rendered on 26th April 2008. Despite this atleast as far as the first two Show Cause Notices were concerned there was no impediment in adjudicating the same on the so called ground that the issue in the said Show Cause Notices was already decided against the department and from which an Appeal was pending before this Court. The facts of this case clearly show that the department has done nothing to adjudicate the six show causes notices issued to the Petitioner ranging from 14 to 20 years after the issuance of the said Show Cause Notices. The Show Cause Notices deserve to be quashed and set aside solely on the ground that there has been an inordinate delay without any proper explanation in adjudicating the said Show Cause Notices. There are several judgments passed by this Court that have quashed Show Cause Notices when there has been an inordinate delay (without justification) in adjudicating the same and taken to its logical conclusion. As mentioned earlier in the facts of the present case the Show Cause Notices were issued as far back as ranging from 14 to 20 years and thereafter nothing was done other than transferring them to the call book and that too without intimating the Petitioner. In these circumstances the SCN allowed to stand. Conclusion - The Show Cause Notices issued between 2004 and 2011 were to be quashed due to the unjustifiable delay in adjudication and the failure to inform the Petitioner about the transfer to the call book. SCN quashed - petition allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered by the Court was whether the inordinate and unexplained delay of 14 to 20 years in adjudicating the Show Cause Notices violated the principles of natural justice, thereby warranting their quashing.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents: The legal framework primarily involved the principles of natural justice, which require timely adjudication of disputes to ensure fairness. The Court referred to precedents, including decisions in the cases of RDC Concrete India Ltd & Anr v/s Union of India & Ors and Raymond Ltd v/s Union of India, which emphasized the necessity of informing parties about the status of Show Cause Notices and the implications of transferring them to the call book without notice.

Court's Interpretation and Reasoning: The Court interpreted the delay in adjudicating the Show Cause Notices as a breach of natural justice. The Court noted that the department's explanation for the delay, which involved pending appeals in similar cases, did not justify the lack of action over such an extended period. The Court emphasized that the department failed to inform the Petitioner about the transfer of the Show Cause Notices to the call book, which further compounded the breach of natural justice.

Key Evidence and Findings: The evidence highlighted included the timeline of the Show Cause Notices, the responses filed by the Petitioner, and the department's affidavit explaining the delay. The Court found that despite the Petitioner's timely responses and reliance on favorable CESTAT decisions, the department took no action for 14 to 20 years. The Court also noted the lack of communication regarding the transfer of the Notices to the call book.

Application of Law to Facts: Applying the principles of natural justice, the Court concluded that the delay in adjudicating the Show Cause Notices was unjustifiable. The Court found that the department's failure to inform the Petitioner about the status of the Notices and the prolonged inaction led to a reasonable expectation that the proceedings were abandoned, which was contrary to fair trial principles.

Treatment of Competing Arguments: The department argued that the delay was due to pending appeals in similar cases, which justified the transfer of the Notices to the call book. However, the Court rejected this argument, emphasizing that the department's failure to inform the Petitioner of the transfer and the prolonged delay without action rendered the explanation inadequate.

Conclusions: The Court concluded that the inordinate and unexplained delay in adjudicating the Show Cause Notices violated the principles of natural justice. Consequently, the Notices were quashed and set aside.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Court referenced the decision in RDC Concrete India Ltd & Anr v/s Union of India & Ors, stating, "Even in the absence of any circular, the fact that the show cause notice is not being adjudicated on account of transfer to the call book same ought to have been informed to the Petitioners by following the principle of natural justice."

Core Principles Established: The Court reinforced the principle that prolonged delays in adjudicating Show Cause Notices without adequate explanation and without informing the concerned parties violate natural justice. It established that the department must communicate the status of such Notices to prevent unfair surprise and prejudice.

Final Determinations on Each Issue: The Court determined that the Show Cause Notices issued between 2004 and 2011 were to be quashed due to the unjustifiable delay in adjudication and the failure to inform the Petitioner about the transfer to the call book. The Court made the rule absolute, quashing the Notices and ruling that there would be no order as to costs.