Dismissal of Writ Petition Over Show Cause Notice Without Pre-Consultation

The High Court dismissed the writ petition challenging a show cause notice issued to multiple individuals without pre-consultation as required by CBEC circulars. The Court held that the circulars were not binding and did not affect the jurisdiction of the notice. Emphasizing that circulars are not binding on courts, the Court directed the noticees to respond to the allegations on merit, declining to interfere with the show cause proceedings. No costs were awarded in this matter.

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Issues:
Challenge to show cause notice based on lack of pre-consultation as per CBEC Water Circular Dated 10.03.2017.

Analysis:
The petitioner challenged the show cause notice dated 23.10.2019 on the basis that it was issued to multiple individuals due to common directors and partners without pre-consultation as required by CBEC Water Circular. The petitioner argued that the notice contradicted CBEC Master Circular No.1053/2/2017-CX, which mandates pre-consultation for amounts exceeding 50 lakhs. The petitioner cited previous court decisions such as TUBE INVESTMENT OF INDIA LTD. Vs. UNION OF INDIA and HITACHI POWER EUROPE GMBH Vs. C.B.I. & C, supporting the requirement of pre-consultation. Additionally, reference was made to the decision of the Delhi High Court in AMADEUS INDIA PVT.LTD. Vs. PR.COMMR.OF C.EX., S.T. & CENTRAL TAX and BACK OFFICE IT SOLUTIONS PVT. LTD Vs. UNION OF INDIA & ORS., further strengthening the argument to quash the impugned notice.

The High Court considered the arguments presented and noted that the impugned show cause notice was issued to all co-noticees based on a combined demand for service tax. The Court highlighted that the circulars referred to by the petitioner were not binding on the Court and were not envisaged under the Finance Act, 1994. The Court emphasized that the purpose of the Master Circular was to encourage parties to pay outstanding amounts to avoid lengthy proceedings, but this did not render the show cause proceedings illegal or without jurisdiction. Citing the decision of the Supreme Court in COMMISSIONER OF CENTRAL EXCISE Vs. RATTAN MELTING AND WIRE INDUSTRIES, the Court affirmed that circulars are not binding on the Courts. The Court concluded that the impugned show cause notice was issued by a competent authority under the Finance Act, 1994, and directed the noticees to respond to the allegations on merit.

In light of the above analysis, the Court declined to interfere with the show cause proceedings and dismissed the writ petition, instructing the noticees to file their individual replies to the show cause notices. The Court ruled that there would be no order as to costs in this matter.

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