2020 (9) TMI 596 - HC - Service Tax

Court orders provision of Scrutiny Report in Writ Petition challenge

The court allowed the Writ Petition challenging the denial of the Scrutiny Report to the petitioner by the first respondent. Emphasizing the petitioner's ... Right to supply of relied-on documents - access to Scrutiny/Verification Report - adjudicating authority cannot delegate adjudicatory power - personal hearing and opportunity to file final reply - adjudication process should not be stalledRight to supply of relied-on documents - access to Scrutiny/Verification Report - adjudicating authority cannot delegate adjudicatory power - personal hearing and opportunity to file final reply - The petitioner is entitled to be furnished with a copy of the Scrutiny/Verification Report prepared by the third respondent which the first respondent proposes to rely upon in adjudication. - HELD THAT: - The Court found that the verification exercise and the Scrutiny Report were undertaken after the petitioner had filed an interim reply to the show cause notice and that the first respondent intended to rely on that report. The adjudicating authority cannot delegate its adjudicatory power so as to deny the party access to a document which will be relied upon to pass an adverse order. Refusal to furnish the report would cause prejudice and could lead to the quashing of any subsequent adverse order solely on that ground. The Court distinguished earlier authority relied upon by the respondents on the basis that in that case the demand for relied-on documents was made at the show-cause stage, whereas in the present case the report was prepared subsequently; accordingly, furnishing the report will not prejudice the department but will avoid multiplicity of proceedings. The Court accordingly directed that the report be supplied and that the petitioner be permitted to file a final reply and participate in the personal hearing within a specified short period, while observing that the petitioner must cooperate so adjudication can be concluded expeditiously.The impugned order is quashed; the first respondent is directed to furnish the Scrutiny/Verification Report to the petitioner and the petitioner shall file its final reply and participate in the personal hearing within four weeks, after which adjudication shall proceed.Final Conclusion: Writ petition allowed; direction issued to provide the Scrutiny/Verification Report to the petitioner and to permit filing of final reply and personal hearing within four weeks; impugned order quashed; no order as to costs. Issues:1. Challenge to the decision of the first respondent denying the petitioner a copy of the Scrutiny Report prepared by the third respondent.2. The contention regarding the verification exercise being an integral part of the adjudication process.3. Examination of whether the first respondent can delegate adjudicating power to a third party.4. Consideration of the impact of not providing the Scrutiny Report to the petitioner on the adjudication process.Analysis:The Writ Petitioner, an assessee registered with the first respondent, challenged the show cause notice issued to them, demanding a significant sum under Section 73(1) of the Finance Act, 1994. The petitioner requested a copy of the Scrutiny Report prepared by the third respondent to submit a consolidated reply and participate in the personal hearing. The first respondent denied this request, leading to the Writ Petition challenging this decision.The respondents argued that all documents referred to in the show cause notice were made available to the petitioner, and the verification process by the third respondent was integral to the adjudication process. Citing a previous judgment, the respondents contended that the petitioner cannot stall adjudication proceedings based on document availability.Upon careful consideration, the court acknowledged the importance of not stalling the adjudication process but emphasized the petitioner's right to access the Scrutiny Report. The court clarified that the verification exercise by a third party cannot be considered an integral part of adjudication, as the first respondent is the independent adjudicating authority. Highlighting the necessity of providing the Scrutiny Report to avoid prejudicing the petitioner and preventing future legal challenges, the court quashed the order denying the report and directed the first respondent to furnish it to the petitioner.In conclusion, the Writ Petition was allowed, and the first respondent was directed to provide the Scrutiny Report to the petitioner. The petitioner agreed to cooperate with the adjudication process promptly. No costs were awarded, and connected Miscellaneous Petitions were closed, ensuring a fair resolution to the dispute.