2025 (3) TMI 1249 - HC - Service Tax

Inordinate delay and failure on the part of the tax authorities to conclude the adjudication proceedings within a reasonable period of time - Violation of principles of natural justice - HELD THAT - Section 73 of the Act empowers the taxing authorities to issue SCN(s) to the assessee chargeable with service tax which has not been levied or paid or short-levied or short-paid or erroneously refunded. After issuance of the SCN Section 73(4B) of the Act casts a duty upon the authorities to determine the due amount of service tax within six months/ one year where it is possible to do so from the date of notice. This court in Vos Technologies India 2024 (12) TMI 624 - DELHI HIGH COURT had the opportunity to consider the effect of inordinate delay and failure on the part of the tax authorities to conclude the adjudication proceedings within a reasonable period of time the Finance Act 1994 and the Central Goods And Services Act 2017) and held that such delay/ failure to act within a reasonable period of time constituted sufficient ground to quash such proceedings. This Court also held that the authorities are bound and obliged in law to make endeavors to conclude adjudication with due expedition. There is no apparent reason given for the inordinate delay in adjudication. In Vos Technologies India this Court categorically held that matters having financial liabilities or penal consequences cannot be kept unresolved for years; and the phrase where it is possible to do so cannot be a license to keep matters pending for years. The flexibility provided by the legislation is not meant to be misused or construed as sanctioning indolence. The statutory leverage cannot be brought into play routinely and in an unfettered manner for years without any due justification or explanation. Conclusion - The authorities are bound and obliged in law to make endeavors to conclude adjudication with due expedition. There is no apparent reason given for the inordinate delay in adjudication. The impugned SCNs dated 18.10.2013 21.05.2014 07.09.2015 13.10.2016 and 01.03.2018 and the impugned order dated 23.08.2024 issued by the Respondent are hereby quashed - Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this judgment include:

• Whether the inordinate delay in adjudicating the Show Cause Notices (SCNs) issued between 2013 and 2018, culminating in the impugned order dated 23.08.2024, violates procedural fairness and the Principles of Natural Justice.
• Whether the delay in adjudication, attributed to the tax authorities, constitutes a sufficient ground to quash the proceedings and the impugned order.
• Whether the Respondent's actions contravene the legal principles established in the Court's previous judgment in Vos Technologies India, regarding the timely conclusion of adjudication proceedings.

ISSUE-WISE DETAILED ANALYSIS

1. Delay in Adjudication and Principles of Natural Justice

• Relevant Legal Framework and Precedents: Section 73 of the Finance Act, 1994, mandates that service tax authorities issue SCNs within a stipulated timeframe and determine the due amount of service tax within six months to one year from the date of notice, where possible. The Court's decision in Vos Technologies India emphasized the necessity of concluding adjudication within a reasonable period.
• Court's Interpretation and Reasoning: The Court interpreted the statutory requirement of concluding adjudication "where it is possible to do so" as necessitating prompt and reasonable action by the authorities. The Court found that the Respondent failed to provide a valid reason for the delay, which spanned from 6 to 10 years.
• Key Evidence and Findings: The Court noted the timeline of SCNs issued and the corresponding delays in adjudication, highlighting the lack of any insurmountable constraints that could justify the delay.
• Application of Law to Facts: The Court applied the principles from Vos Technologies India, finding that the Respondent's delay in adjudication without valid justification violated the principles of natural justice and procedural fairness.
• Treatment of Competing Arguments: The Respondent attempted to justify the delay, but the Court found these arguments unconvincing, emphasizing the absence of any legitimate impediments to timely adjudication.
• Conclusions: The Court concluded that the inordinate delay in adjudication, without valid justification, constituted a violation of procedural fairness, warranting the quashing of the SCNs and the impugned order.

2. Application of Vos Technologies India Judgment

• Relevant Legal Framework and Precedents: The Court in Vos Technologies India held that delays in adjudication without reasonable cause could lead to the annulment of proceedings. The judgment emphasized the need for authorities to act with due expedition in financial and penal matters.
• Court's Interpretation and Reasoning: The Court reiterated the principles from Vos Technologies India, emphasizing that statutory provisions allowing flexibility in adjudication timelines are not licenses for indolence or lethargy.
• Key Evidence and Findings: The Court found that the Respondent failed to demonstrate any insurmountable constraints that prevented timely adjudication, as required by the principles established in Vos Technologies India.
• Application of Law to Facts: The Court applied the principles from Vos Technologies India to the current case, finding that the Respondent's actions were inconsistent with the requirement for timely adjudication.
• Treatment of Competing Arguments: The Court dismissed the Respondent's justifications for the delay, noting that the legislative intent was to ensure timely resolution of disputes.
• Conclusions: The Court concluded that the principles from Vos Technologies India applied to the present case, leading to the quashing of the SCNs and the impugned order.

SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: The Court held that "matters having financial liabilities or penal consequences cannot be kept unresolved for years; and the phrase 'where it is possible to do so' cannot be a license to keep matters pending for years."
• Core Principles Established: The Court reaffirmed the principle that statutory provisions allowing flexibility in adjudication timelines must be exercised with due diligence and expedition, not as a pretext for delay.
• Final Determinations on Each Issue: The Court quashed the impugned SCNs and the order dated 23.08.2024, finding that the Respondent's delay in adjudication violated procedural fairness and the principles established in Vos Technologies India.