2023 (3) TMI 1014 - HC - Service Tax

Time Limitation - Refund of entire amount of tax so deposited during investigation of the case - it is alleged that the petitioner had neither discharged the due service tax liability nor filed ST-E return for the period 01.04.2013 to 30.09.2013, which was required to be filed on or before 25.10.2013 - petitioner was issued shows cause notice on 17.08.2015 and thereafter, after a gap of 05 years, he was called for personal hearing. If notices could not be served upon the petitioner w.e.f 31.08.2017, then the proceedings of recovery can be kept pending or not. HELD THAT - This aspect has been examined by various Courts and reference at this stage can be made to STATE OF PUNJAB VERSUS BHATINDA DISTRICT CO-OP. MILK P. UNION LTD. 2007 (10) TMI 300 - SUPREME COURT wherein the question was what should be the reasonable period for reopening an order of assessment under the Punjab General Sales Tax Act . The appeal was dismissed and it was held that when no period of limitation is prescribed, statutory authority must exercise its jurisdiction within reasonable period. In the facts of the present case, even if details of Annexure R-1 is to be taken into account, it is not in dispute that the petitioner was not served after 31.08.2017. So the respondents were required to finalise the show cause notice within a period of one year as per clause (b) of sub Section 4-B of Section 73 of Act 1994. The writ petition is allowed and show cause notice dated 17.08.2015 is quashed on the ground of limitation.

Issues Involved:
1. Quashing of show cause notice dated 17.08.2015.
2. Refund of the tax amount deposited during the investigation.
3. Adjudication proceedings becoming time-barred due to limitation period.
4. Inordinate delay in adjudication proceedings.

Issue-wise Detailed Analysis:

1. Quashing of Show Cause Notice Dated 17.08.2015:
The petitioner challenged the show cause notice dated 17.08.2015, which proposed a demand for service tax amounting to Rs.1,36,15,534/- and the appropriation of Rs.1,26,46,601/- already deposited by the petitioner. The petitioner argued that the adjudication proceeding had become time-barred as per clause (b) of sub-section (4B) of Section 73 of the Finance Act, 1994, which mandates that the Central Excise Officer should determine the amount of service tax due within one year from the date of the notice, where applicable. The Court referred to the statutory provision and various precedents to conclude that the notice issued on 17.08.2015 was indeed time-barred, as the adjudication was not completed within the stipulated period.

2. Refund of the Tax Amount Deposited During the Investigation:
The petitioner sought the refund of the entire amount of tax deposited during the investigation, amounting to Rs.1,26,46,061/-. The Court did not specifically address this issue in the judgment, focusing instead on the procedural lapse regarding the timing of the adjudication. However, the quashing of the show cause notice on the ground of limitation implicitly supports the petitioner's claim for a refund, as the basis for the tax demand was invalidated.

3. Adjudication Proceedings Becoming Time-barred Due to Limitation Period:
The petitioner argued that the adjudication proceedings had become time-barred due to the limitation period of one year for adjudication from the date of the show cause notice, as provided under clause (b) of sub-section (4B) of Section 73 of the Finance Act, 1994. The Court examined the statutory provision and various judicial precedents, including the Supreme Court's judgment in State of Punjab vs. Bhatinda District Co-op Milk P. Union Ltd, which emphasized that statutory authorities must exercise their jurisdiction within a reasonable period. The Court concluded that the proceedings were indeed time-barred, as the adjudication was not completed within the stipulated one-year period.

4. Inordinate Delay in Adjudication Proceedings:
The petitioner highlighted the inordinate delay of more than five years in the adjudication proceedings, arguing that even if the indirect tax statute does not provide a specific time limitation, a reasonable period for adjudication is five years, as established by the Hon'ble Supreme Court. The Court noted that the notices for personal hearing were issued after a significant delay, and the petitioner was not served after 31.08.2017. The Court referred to various judgments, including those of the Delhi High Court in Sunder System Pvt. Ltd vs. Union of India and the Gujarat High Court in Serve Pharmaceuticals vs. Union of India, which emphasized the necessity of concluding adjudication within a reasonable time. The Court applied these principles to the present case, concluding that the inordinate delay rendered the proceedings invalid.

Conclusion:
The writ petition was allowed, and the show cause notice dated 17.08.2015 was quashed on the ground of limitation. The Court's decision was based on the statutory requirement to complete adjudication within a specified period and the unreasonable delay in the proceedings, which violated the principles established by higher judicial authorities.

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