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of <h1>Pre-SCN consultation under para 5.0 CBEC Master Circular mandatory via s.83 Finance Act, s.37B Central Excise</h1> HC held that para 5.0 of the CBEC Master Circular dated 10 March 2017 mandates pre-SCN consultation, and that such instructions are binding on ... Pre SCN consultation - whether prior to issuing the impugned SCN dated 4th September 2018, the Office of the Principal Commissioner, Central Excise, Service Tax and Central Tax Commissionerate, Delhi South (the Respondent herein) ought to have held a pre-notice consultation with the Petitioner in terms of para 5.0 of ‘Master Circular’ dated 10th March, 2017 issued by the CBEC? HELD THAT:- The officers of the Respondent do not appear to have taken any conscious decision in regard to the requirement of the Master Circular. A pointed question was posed by the Court to Mr.Harpreet Singh whether prior to issuing the impugned SCN, a decision was taken by the Respondent in the light of para 5.0 of the Master Circular not to undertake the pre-notice consultation. After going through the notes in file, Mr. Harpreet Singh stated that there was no noting in the file to that effect - In other words, it appears that the Respondent completely ignored the Master Circular before proceeding to issue the impugned SCN. The mandatory character of the Master Circular can be traced to Section 83 of the Finance Act, 1994 which makes Section 37 B of the Central Excise Act, 1944 applicable in relation to service tax. In terms Section 37 B of the Central Excise Act, 1944 instructions issued by the CBEC would be binding on the officers of the Department - In the present case, the Court is satisfied that it was necessary in terms of para 5.0 of the Master Circular for the Respondent to have engaged with the Petitioner in a pre SCN consultation, particularly, since in the considered view of the Court neither of the exceptions specified in para 5.0 were attracted in the present case. Accordingly, without expressing any view on the merits of the case of either party in relation to the issues raised in the impugned SCN, the Court sets aside the impugned SCN dated 4th September, 2018 and relegates the parties to the stage prior to issuance of impugned SCN. Petition allowed. Issues:1. Whether pre-notice consultation was required before issuing the show cause noticeRs.2. Compliance with the Master Circular dated 10th March, 2017 by the Respondent.Issue 1: Pre-notice consultation requirement:The writ petition questioned the necessity of a pre-notice consultation by the Respondent with the Petitioner before issuing the impugned show cause notice (SCN) dated 4th September 2018. The Petitioner argued that as per the 'Master Circular' issued by the Central Board of Excise and Customs (CBEC), a pre-notice consultation was mandatory in cases involving demands of duty above Rs. 50 lakhs. The Respondent contended that the SCN was related to an offence and hence fell under the exceptions specified in the Master Circular.The Court analyzed the purpose of the Master Circular, emphasizing the need to narrow down disputes through consultation to facilitate a resolution. It noted that the exceptions for preventive or offence-related SCNs should not be applied liberally to render pre-notice consultation redundant. The Respondent's failure to engage in pre-notice consultation as mandated by the Master Circular was highlighted, indicating a disregard for the Circular's provisions.Issue 2: Compliance with the Master Circular:The Court delved into the legal framework underpinning the Master Circular, citing Section 83 of the Finance Act, 1994, which binds officers to follow CBEC instructions. It referenced precedents like the State of Tamil Nadu v. India Cements Ltd. (2011) and a judgment by the High Court of Judicature at Madras, emphasizing the binding nature of the Master Circular's provisions.The Court ultimately concluded that the Respondent's failure to conduct pre-notice consultation in accordance with the Master Circular warranted setting aside the impugned SCN. It directed the parties to engage in the pre-SCN stage, ensuring the Petitioner's representation and cooperation in addressing the issues raised in the communication preceding the SCN.In the absence of a decision on the merits of the case, the Court allowed the petition, disposing of the application without costs. The judgment underscored the importance of adherence to procedural requirements such as pre-notice consultation as outlined in the Master Circular to promote a collaborative approach in resolving tax disputes.
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