2020 (9) TMI 596 - HC - Service Tax

Principles of Natural Justice - petitioner took the stand that certain documents are to be provided by the respondents so that they could submit a consolidated reply to the show cause notice - first respondent however decided that the petitioner is not entitled to the said copy of the report and fixed the personal hearing on 29.07.2019 - HELD THAT - The adjudication process cannot be stalled. But then, in the case on hand, the petitioner's demand is for the supply of a copy of the Scrutiny report prepared by the third respondent. It is admitted in the counter affidavit itself that verification exercise was undertaken - the contention of the learned Standing Counsel cannot be agreed with, that the verification exercise undertaken by the third respondent is an integral part of the adjudication process. It cannot be. The first respondent is an independent adjudicating authority. He cannot delegate his adjudicating power to any one. It is true that the decision of the Honourable Division Bench appears to in favour of the Department. But then, in that case, demand for supply of relied-on documents was made at the show cause notice stage itself. The case on hand is having a different flavour. The Scrutiny report was prepared after the submission of interim reply to the show cause notice. If the report in question is not furnished to the petitioner and if an adverse order based on the said report is passed, then the adjudication would be set aside on that sole ground. Therefore, by furnishing a copy of the report, the department is not going to suffer any prejudice, on the other hand, it will avoid multiplicity of proceedings. The first respondent is directed to make available the Scrutiny report submitted by the third respondent to the petitioner herein - Petition allowed.

Summary

Issues:
1. Challenge to the decision of the first respondent denying the petitioner a copy of the Scrutiny Report prepared by the third respondent.
2. The contention regarding the verification exercise being an integral part of the adjudication process.
3. Examination of whether the first respondent can delegate adjudicating power to a third party.
4. Consideration of the impact of not providing the Scrutiny Report to the petitioner on the adjudication process.

Analysis:
The Writ Petitioner, an assessee registered with the first respondent, challenged the show cause notice issued to them, demanding a significant sum under Section 73(1) of the Finance Act, 1994. The petitioner requested a copy of the Scrutiny Report prepared by the third respondent to submit a consolidated reply and participate in the personal hearing. The first respondent denied this request, leading to the Writ Petition challenging this decision.

The respondents argued that all documents referred to in the show cause notice were made available to the petitioner, and the verification process by the third respondent was integral to the adjudication process. Citing a previous judgment, the respondents contended that the petitioner cannot stall adjudication proceedings based on document availability.

Upon careful consideration, the court acknowledged the importance of not stalling the adjudication process but emphasized the petitioner's right to access the Scrutiny Report. The court clarified that the verification exercise by a third party cannot be considered an integral part of adjudication, as the first respondent is the independent adjudicating authority. Highlighting the necessity of providing the Scrutiny Report to avoid prejudicing the petitioner and preventing future legal challenges, the court quashed the order denying the report and directed the first respondent to furnish it to the petitioner.

In conclusion, the Writ Petition was allowed, and the first respondent was directed to provide the Scrutiny Report to the petitioner. The petitioner agreed to cooperate with the adjudication process promptly. No costs were awarded, and connected Miscellaneous Petitions were closed, ensuring a fair resolution to the dispute.