2024 (3) TMI 18 - HC - Service Tax

Invocation of Extended period of Limitation - SCN is ex facie beyond the prescribed limitation as provided for under proviso to Section 37C(2) of the Central Excise Act, 1944, as the same has been issued beyond the period of five years or not - HELD THAT - Considering the fact that the show cause notice was issued on 25 April 2022, the basis for which even assuming is the date of the petitioner s filing of the Service Tax return on 25 April 2017, as per the provisions of Section 37C(2) of the Central Excise Act, what would be relevant is the delivery of the show cause notice which was admittedly on 28 April 2022. Prima facie, the show cause notice appears to have been received by the petitioner on 28 April 2022, which is certainly not within five years as per the proviso below Section 73 of the Finance Act, 1994 would mandate, so as to fall within such extended period of limitation. On this it is not found that there would be any serious disputed question of fact, on which a finding on evidence would be required to be recorded - If the law provides that the show cause notice is rendered bad, if either not issued or received by assessee as provided under the said provision (Section 73), then certainly the issue would become a jurisdictional issue and any adjudication of the same would be unwarranted. This apart, there are other issues as to whether, in the facts of the present case, the respondent could have invoked the reverse charge mechanism, so as to tax the petitioner retrospectively on the transaction which had taken place between TTL and Aqua, both of which were Mauritius based companies and beyond the territorial jurisdiction of the respondent Nos. 2 3 - For aforesaid reasons, the petition would require a final hearing. Pending the hearing and final disposal of this petition, the impugned show cause notice shall remain stayed.

Summary

Issues involved:
The challenge to a show cause notice invoking extended period of limitation under the Finance Act, 1994 and Central Excise Act, 1944; Jurisdictional issues regarding the territorial authority to issue the notice and the application of reverse charge mechanism.

Extended period of limitation challenge:
The petitioner contested a show cause notice dated 25 April 2022, invoking the extended period of limitation under the proviso below section 73 of the Finance Act, 1994. The petitioner argued that the notice exceeded the prescribed limitation of five years under Section 37C(2) of the Central Excise Act, 1944. The petitioner highlighted the delivery date of the notice on 28 April 2022, beyond the expiration of the limitation period, as per postal documents (Exhibit K-2), asserting that the notice was time-barred.

Territorial jurisdiction and reverse charge mechanism issues:
Apart from the limitation challenge, the petitioner raised concerns regarding the territorial jurisdiction of the issuing authority and the application of the reverse charge mechanism. The petitioner contended that there was an error in applying the reverse charge mechanism to a transaction between companies from Mauritius, namely TTL and Aqua, under a Business Purchase Agreement. The petitioner questioned the legality of taxing the transaction retrospectively and challenged the authority's jurisdiction in this matter.

Court's observations and decision:
Upon hearing arguments from both parties, the Court opined that the petitioner's limitation challenge had merit. The Court noted that the delivery date of the show cause notice on 28 April 2022 fell outside the five-year limitation period prescribed by the Finance Act, 1994. The Court found no substantial disputed questions of fact requiring further evidence. Additionally, the Court highlighted that if a show cause notice is not issued or received as per the statutory provisions, it could raise jurisdictional concerns, rendering any adjudication unwarranted.

Final ruling and directions:
Consequently, the Court decided that the petition warranted a final hearing and issued a stay on the impugned show cause notice pending further proceedings. The respondents were directed to file a final reply within six weeks, with the petitioner granted liberty to request an early hearing post the submission of the reply.