2024 (11) TMI 527 - HC - Service Tax

Notice issued for re-initiating the adjudication proceedings in respect of the Show Cause Notice as barred by limitation u/s 73 (4B) (a) and (b) of the Finance Act, 1994 - HELD THAT - As there has been a gross delay on the part of the respondents in proceeding with the impugned SCN. As noted above, the concerned authority had taken no steps after 21.10.2009 till transferring of the case in the Call Book on 16.12.2015. Thus, even if it is accepted which this Court does not that the Call Book procedure is permissible in law, the delay in adjudication of the present case clearly exceeds a reasonable period. Therefore, reinitiation of the proceedings are required to be set aside. Section 73 of the Act as applicable prior to 06.08.2014 did not provide any specified time for determining the service tax payable. By virtue of Finance (No. 2) Act, 2014, Sub-section (4B) was introduced in Section 73 of the Act with effect from 06.08.2014. By virtue of Section 73 (4B) of the Act, the Adjudicating Authority is required to determine the amount of service tax due within a period of six months or one year from the date of notice as the case may be. However, there does not mean that the adjudication of Show Cause Notices issued prior to 06.08.2014, could remain open indefinitely. It is settled law that in absence of any specific time period prescribed for conclusion of proceedings, the same are required to be concluded within a reasonable period. In Union of India v. Citedal Fine Pharmaceuticals 1989 (7) TMI 100 - SUPREME COURT had rejected the challenge to Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 as unreasonable and violative of Article 14 of the Constitution of India, inter alia, on the ground that it did not provide for any period of limitation for recovery of duty. In Sanghvi Reconditioners (P.) Ltd. v. Union of India 2017 (12) TMI 906 - BOMBAY HIGH COURT had held that larger public interest requires the Revenue and its officials to adjudicate the Show Cause Notice as expeditiously and within a reasonable period of time. In the present case, it is apparent that the Show Cause Notice dated 24.10.2008 (the impugned SCN) has not been adjudicated within a reasonable period of time. More than 14 years have elapsed since issuance of the impugned SCN. It is also relevant to note that part of the demand sought to be raised pertain to a period more than twenty years prior to date of the impugned SCN. Clearly, the adjudication proceedings are now barred by limitation.The impugned notice dated 21.08.2023 is set aside. The respondents are restrained from proceeding with the initial impugned SCN.

Summary

Issues:
1. Impugning the Notice for re-initiating adjudication proceedings.
2. Barred by limitation under Section 73 (4B) (a) and (b) of the Finance Act, 1994.
3. Delay in adjudication of the Show Cause Notice.
4. Application of Section 73 (4B) of the Act.
5. Reasonable period for concluding proceedings.
6. Precedents on reasonable period for adjudication.
7. Adjudication proceedings barred by limitation.

Analysis:

The petitioner challenged the Notice re-initiating adjudication proceedings based on the Show Cause Notice dated 24.10.2008, contending that the proceedings were time-barred under Section 73 (4B) (a) and (b) of the Finance Act, 1994. The impugned SCN proposed a service tax demand for a specified period, and despite responses and hearings, no further action was taken post a hearing on 21.10.2009. The respondents explained the delay citing a transfer to the Call Book. However, the Court noted a significant delay from the last hearing in 2009 to the transfer in 2015, deeming it unreasonable and exceeding permissible limits.

The Court highlighted Section 73 (4B) of the Act, requiring the Adjudicating Authority to determine service tax due within specified timeframes. It emphasized that even for Show Cause Notices issued pre-2014, proceedings cannot remain open indefinitely. Citing legal precedents, including State of Punjab v. Bhatinda District Coop. Milk Producers Union Ltd., the Court reiterated the necessity of concluding proceedings within a reasonable period, considering statutory rights and liabilities.

Referring to Union of India v. Citedal Fine Pharmaceuticals and Sanghvi Reconditioners (P.) Ltd. v. Union of India, the Court stressed the importance of timely adjudication in the interest of justice and larger public interest. In this case, the Court noted a delay of over 14 years since the impugned SCN, with demands dating back over twenty years, leading to a clear bar by limitation. The Court relied on previous decisions such as Nanu Ram Goyal v. Commissioner of CGST and Sunder System Pvt. Ltd. v. Union of India to set aside the impugned notice and restrain further proceedings on the initial SCN.

Ultimately, the Court allowed the petition, setting aside the impugned notice and restraining the respondents from proceeding with the initial SCN. All pending applications were disposed of accordingly.