2024 (3) TMI 408 - HC - Service Tax

Inordinate delay in adjudication of show cause notices (SCN) - delay for a period of almost 12 years - Short payment of service tax - non-inclusion of Ocean Freight and other allied charges in the value of taxable service - HELD THAT - The Respondents have not explained as to why, after issuing the show cause notices in 2009, 2010 and 2011, they could not complete the adjudication for a period of more than 12 years. It is the case of the Petitioner that, from 2013 to 2020, Respondent No. 2 did not take any steps for adjudication of the show cause notices. In response thereto, the Respondents have referred to letters being issued in 2015 and in 2017. Despite the Petitioner putting the Respondents to the strict proof of proving that these letters had been issued to the Petitioner, the Respondents have not produced the said letters nor proved that the Petitioner had received those letters. In the absence of any such proof having been furnished by the Respondents, the statement in the Petition that, from 2013 to 2020, Respondent No. 2 did not take any steps for adjudication of the said show cause notices, have to be accepted - the delay in completion of the adjudication of the show cause notices for a period of almost 12 years cannot be attributed to the Petitioner. Further, in the absence of any explanation from the Respondents for the said delay, the impugned show cause notices are required to be quashed and set aside. The Petitioner is also justified in relying upon the decision of the Coordinate Bench of this Court in Writ Petition No. 468 of 2021 dated 21st August, 2023, (of which, one of us, G.S. Kulkarni, J, was a member) 2023 (8) TMI 1050 - BOMBAY HIGH COURT in its own case, where on similar facts, the show cause notices were quashed on the ground of delay in adjudication of the show cause notices. Petition allowed.

Summary

Issues Involved:
1. Inordinate delay in adjudication of show cause notices.
2. Validity and legality of the show cause notices due to delay.
3. Principles of natural justice and authority of law.

Summary:

Inordinate Delay in Adjudication of Show Cause Notices:
The Petitioner, formerly known as APL (India) Pvt. Ltd., received four show cause notices from the Commissioner of Service Tax, Chennai, alleging short-payment of service tax by not including Ocean Freight and other allied charges in the value of taxable service. The notices were issued between 2009 and 2011. Despite the Petitioner's replies and the transfer of jurisdiction to the Commissioner, Service Tax-II, Mumbai, no adjudication was completed for over 12 years. The Petitioner highlighted the significant challenges faced due to the lapse of time and changes in management, making it difficult to collate relevant documents. The Respondents failed to provide a satisfactory explanation for the delay, and the Court noted that the Respondents did not produce proof of letters allegedly sent in 2015 and 2017 for personal hearings.

Validity and Legality of the Show Cause Notices Due to Delay:
The Court observed that the Respondents did not adhere to the timelines prescribed under Section 73(4B) of the Finance Act, 1994, which mandates the determination of service tax within six months to one year from the date of notice. The inordinate delay of almost 12 years in adjudication was deemed prejudicial to the Petitioner, causing irreparable harm and prejudice. The Court emphasized that such delays nullify the noticee's rights and are contrary to the principles of natural justice.

Principles of Natural Justice and Authority of Law:
The Court referred to previous decisions, including Coventry Estate Pvt. Ltd. vs. The Joint Commissioner CGST and Central Excise & Anr., which highlighted the importance of timely adjudication to avoid uncertainty and prejudice to the assessee. The Court concluded that the delay in adjudication rendered the show cause notices ex-facie invalid, illegal, and unsustainable in law. Consequently, the impugned show cause notices were quashed and set aside.

Conclusion:
The Petition was allowed in terms of prayer clause (a), quashing the show cause notices due to the inordinate delay in adjudication. The rule was made absolute, and the Writ Petition was disposed of with no order as to costs.