2023 (8) TMI 352 - HC - Service Tax

Belated adjudication of SCN - Recovery of Service Tax - Authority acting under Section 73 of the Finance Act, 1994 to keep the SCN in a cold storage for such a long period - justification as furnished by the department is acceptable or or not - whether the law would permit adjudication of such a belated adjudication of the show cause notice? HELD THAT - It is opined that there has to be a holistic approach and reading of the provisions of Section 73, when it concerns the obligation and repository of the power to be exercised by the concerned officer to recover service tax, in adjudicating any show cause notice, issued against an assessee considering the raison d etre of the provision. It is hence expected that the approach and expectation from the officer adjudicating the show cause notice would be to strictly adhere to the timelines prescribed by provisions of the Act, as there is a definite purpose and intention of the legislature to prescribe such time limits, either under Section 73(4B) of six months and one year respectively or of five years under Section 73(1). In the facts of the present case, such requirement and obligation the law would mandate is completely overlooked by the officer responsible for adjudicating the show cause notice. We are not shown any provision, which in any manner would permit any authority to condone such inordinate delay on the part of the adjudicating officer to adjudicate show cause notice. There can be none, as the legislature has clearly intended to avoid uncertainty, which otherwise can emerge. Thus, what would become applicable are the settled principles of law as laid down in catena of judgments, that the period within which such adjudication should happen is as mandated by law and in any case it needs to be done within a reasonable period from the issuance of the show cause notice. Further, whether such period is a reasonable period would depend upon the facts and circumstances of each case. An inordinate delay is seriously prejudicial to the assessee and the law itself would manifest to weed out any uncertainty on adjudication of a show cause notice, and that too keeping the same pending for such a long period itself is not what is conducive. A substantial delay and inaction on the part of the department to adjudicate the show cause notice would seriously nullify the noticee s rights causing irreparable harm and prejudice to the noticee. A protracted administrative delay would not only prejudicially affect but also defeat substantive rights of the noticee. In certain circumstances, even a short delay can be intolerable not only to the department but also to the noticee. In such cases, the measure and test of delay would be required to be considered in the facts of the case. This would however not mean that an egregions delay can at all be justified. Petition allowed.

Summary

Issues Involved:
1. Reasonableness of delay in adjudicating the show cause notice.
2. Justification of the delay provided by the department.
3. Legal permissibility of belated adjudication of the show cause notice.

Summary:

Issue 1: Reasonableness of Delay in Adjudicating the Show Cause Notice
The petitioner argued that the adjudication of the show cause notice after an inordinate delay of more than 10 years is severely prejudicial to their rights. The court noted that Section 73(4B) of the Finance Act, 1994 prescribes a time frame for adjudication, which is six months to one year from the date of notice. The court emphasized that the statutory provisions mandate prompt adjudication to avoid uncertainty and prejudice to the assessee. The court concluded that the delay in adjudicating the show cause notice was unreasonable and contrary to the legislative intent.

Issue 2: Justification of the Delay Provided by the Department
The department justified the delay citing the shifting of the Commissionerate and re-organization of field formations. The court found this justification unconvincing and insufficient to condone the inordinate delay. The court held that the reasons provided did not absolve the department from its obligation to adjudicate the show cause notice promptly. The court emphasized that accepting such justification would defeat the statutory provisions and the principles of natural justice.

Issue 3: Legal Permissibility of Belated Adjudication of the Show Cause Notice
The court referred to several precedents where it was held that show cause notices should not be adjudicated after an unreasonable delay. The court noted that a protracted delay in adjudication is prejudicial to the assessee and violates principles of fairness and natural justice. The court highlighted that the delay could adversely affect the assessee's rights, including the right to appeal. The court rejected the department's contention that the petitioner had acquiesced to the delay by seeking adjournments, stating that the petitioner's request for adjournment did not justify the delay in adjudication.

Conclusion:
The court allowed the petition, quashing the impugned show cause notice dated 16 March 2012 due to the inordinate and unjustifiable delay in its adjudication. The court made the rule absolute and did not impose any costs.