Service tax show cause notices quashed after 12-year delay in adjudication proceedings

Bombay HC quashed show cause notices issued in 2009-2011 concerning short payment of service tax due to non-inclusion of ocean freight and allied charges in taxable service value. The court found inordinate delay of almost 12 years in adjudication, with respondents failing to take steps from 2013-2020 and unable to prove correspondence with petitioner. Without adequate explanation for delay, the court held notices must be quashed, following precedent from coordinate bench decision in similar circumstances.

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Issues Involved:
1. Inordinate delay in adjudication of show cause notices.
2. Validity and legality of the show cause notices due to delay.
3. Principles of natural justice and authority of law.

Summary:

Inordinate Delay in Adjudication of Show Cause Notices:
The Petitioner, formerly known as APL (India) Pvt. Ltd., received four show cause notices from the Commissioner of Service Tax, Chennai, alleging short-payment of service tax by not including Ocean Freight and other allied charges in the value of taxable service. The notices were issued between 2009 and 2011. Despite the Petitioner's replies and the transfer of jurisdiction to the Commissioner, Service Tax-II, Mumbai, no adjudication was completed for over 12 years. The Petitioner highlighted the significant challenges faced due to the lapse of time and changes in management, making it difficult to collate relevant documents. The Respondents failed to provide a satisfactory explanation for the delay, and the Court noted that the Respondents did not produce proof of letters allegedly sent in 2015 and 2017 for personal hearings.

Validity and Legality of the Show Cause Notices Due to Delay:
The Court observed that the Respondents did not adhere to the timelines prescribed under Section 73(4B) of the Finance Act, 1994, which mandates the determination of service tax within six months to one year from the date of notice. The inordinate delay of almost 12 years in adjudication was deemed prejudicial to the Petitioner, causing irreparable harm and prejudice. The Court emphasized that such delays nullify the noticee's rights and are contrary to the principles of natural justice.

Principles of Natural Justice and Authority of Law:
The Court referred to previous decisions, including Coventry Estate Pvt. Ltd. vs. The Joint Commissioner CGST and Central Excise & Anr., which highlighted the importance of timely adjudication to avoid uncertainty and prejudice to the assessee. The Court concluded that the delay in adjudication rendered the show cause notices ex-facie invalid, illegal, and unsustainable in law. Consequently, the impugned show cause notices were quashed and set aside.

Conclusion:
The Petition was allowed in terms of prayer clause (a), quashing the show cause notices due to the inordinate delay in adjudication. The rule was made absolute, and the Writ Petition was disposed of with no order as to costs.

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