2013 (4) TMI 21 - HC - Service Tax

Show cause notice challenged - violation of principle of natural justice - Opportunity of being heard - as per assessee the authority concerned has already made up mind and this notice has been issued only to project that opportunity of hearing is sought to be given to the petitioner before passing the same order for which decision has been taken by the authority and it has been communicated in the show cause notice itself - Held that - From the entire notice, it appears that the authority issuing notice appears to have tried to convince himself more, instead of putting questions to the assessee. The dispute is only with respect to interpretation of two contracts entered into between the parties petitioner on one side and other two parties- Aravali Power Company Private Limited and Damodar Valley Corporation on the other. They may be composite and inextricable related contract forming one transaction or may not be. Those contracts may be turnkey project contract or may not be. The evidence may justify forming either of the opinion, for which a party, if wants to take a decision fairly, then he is supposed to give not only an opportunity of hearing to other party but also is required to show that the action of even initiation of proceedings is fair and without any predetermination of mind. The paragraphs running in several pages of SCN created an impression that one of the highest officers has been targeted, who himself in the earlier occasion made it clear to the Department that the person who is the competent officer and who is in know of the fact has already deposed before the authority. The purpose can be served by showing that the reasons indicated in the notice are only to make the assessee aware of the facts and the legal issues which he is required to answer. It is very unfortunate that the respondent-Department s Officer-in-charge in reply affidavit went to the extent of stating that the contracts have been entered into by the petitioners not under free and genuine consent and have been entered into (due to or under) pressure/undue influence of the customers. It appears that the respondents, on facts, on point of law, on the basis of conduct of the company, on the basis of the conduct of its officers and on the interpretation of the contract, tried to say that the stand which has been taken by the petitioner before the Commissioner, who issued the notice, is absolutely wrong on fact and in law and bona fidely. Such notice cannot be treated to be a notice to show cause in any manner. It is only a consequence of predetermined mind of the Officers issuing the notice and is fortified more seriously by the counter affidavit filed by the Officerin- charge of the respondents. As decided in Oryx Fisheries Private Limited fully 2010 (10) TMI 660 - SUPREME COURT OF INDIA if on a reasonable reading of a show cause notice a person of ordinary prudence gets the feeling that his reply to the show cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show cause notice does not commence a fair procedure especially when it is issued in a quasi-judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence. In this case, the authority failed to keep an open mind and has shown his closed mind to the petitioner and it is a clear case where the principle of natural justice must not only be done but it must eminently appear to be done has been violated. Hon ble Supreme Court in the case of Siemens Ltd. 2006 (12) TMI 203 - SUPREME COURT OF INDIA stated Ordinarily writ court may not exercise discretion in entertaining the writ petition questioning the notice of show cause , in certain circumstance, writ petition can be entertained and one of the situations may be of premeditation and the writ petition is maintainable - Show cause notice set aside. However, since the show cause notice is set aside based on the above grounds, permission granted to the authority to issue a fresh show cause notice to the petitioner.

Issues Involved:
1. Challenge to the show cause notice dated 15th October, 2012.
2. Violation of principles of natural justice.
3. Predetermined mind of the authority issuing the notice.
4. Maintainability of the writ petition against the show cause notice.

Detailed Analysis:

1. Challenge to the Show Cause Notice:
The petitioner challenged the show cause notice dated 15th October, 2012, issued by the Commissioner, Central Excise & Service Tax, Jamshedpur, on the grounds that it was issued with a predetermined mind and was merely a formality to project an opportunity of hearing. The petitioner argued that the authority had already made a decision, which was communicated in the notice itself.

2. Violation of Principles of Natural Justice:
The petitioner contended that the show cause notice violated the principles of natural justice. The petitioner's counsel relied on the judgments in Siemens Ltd. Vs. State of Maharashtra & Ors. and Oryx Fisheries Private Limited Vs. Union of India & Others, asserting that a show cause notice issued after a decision has already been taken by the authority can be challenged via a writ petition. The court noted that for a fair procedure, the authority must keep an open mind and not issue notices that give an impression of a prejudged opinion.

3. Predetermined Mind of the Authority Issuing the Notice:
The court examined whether the show cause notice reflected a predetermined mind. The petitioner highlighted various paragraphs of the notice that indicated the authority had already formed an opinion on the matter. For instance, the notice stated that the petitioner had "consciously misdeclared the taxable value" and had "acted in collusion with officials to evade service tax." The court found that the language used in the notice and the subsequent reply affidavit from the department confirmed the predetermined mind of the authority, making the notice unfair and in violation of natural justice.

4. Maintainability of the Writ Petition Against the Show Cause Notice:
The respondent-department argued that the writ petition was not maintainable, citing several judgments, including Titaghur Paper Mills Co. Ltd. Vs. State of Orissa and Assistant Collector of Central Excise Vs. Dunlop India Ltd. They contended that the petitioner had an alternative remedy available and that writ jurisdiction is ordinarily not available where orders are appealable. However, the court noted that exceptions exist where the writ petition is maintainable, such as cases involving violation of natural justice or predetermined decisions. The court referred to Siemens Ltd. and Oryx Fisheries Private Limited, where it was held that a writ petition is maintainable if the show cause notice is issued with premeditation.

Conclusion:
The court concluded that the show cause notice dated 15th October, 2012, was issued with a predetermined mind and violated the principles of natural justice. The notice was quashed, and the authority was permitted to issue a fresh show cause notice without being influenced by the previous notice or the reply affidavit. The court also directed that the matter should be heard by a different officer to ensure fairness. The petitioners were allowed to take all defenses in the new proceedings.

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