2024 (12) TMI 1145 - HC - Service Tax

Revenue cannot reinitiate adjudication proceedings after nine years under Section 73(4B) Finance Act

Delhi HC quashed a hearing notice issued after nine years, ruling that reinitiation of adjudication proceedings was time-barred under Section 73(4B) of ... Reinitiation of adjudication proceedings after a gap of nine years is time-barred u/s 73 (4B) of the Finance Act or not - jurisdiction to issue SCN - issuance of the impugned hearing notice by an officer under the CGST Act is valid or not - HELD THAT:- There is a merit in the contention of the learned counsel for the petitioner that the Revenue / respondents were in knowledge about the proceedings being dropped against the petitioner in respect of the earlier two show cause notices, and also the fact that the appeal of the Revenue had already been dismissed by the learned CESTAT vide judgment dated 15.09.2022 [2022 (9) TMI 853 - CESTAT NEW DELHI], i.e. about two years prior to issuance of impugned hearing notice dated 18.09.2024. This Court is of the view that Section 73 (4B) was framed and introduced in the Finance Act to ensure effective administration of taxation. While there cannot be denying that the taxation forms the backbone of a nation's economy, any inordinate delay by the Revenue itself in prosecuting its own cases cannot be construed in their favour by stretching the period of limitation to nine years especially when the provision requires the proceedings to be concluded within six months / one year - De hors the aforesaid findings, even if one accepts that the time period of six months/one year as mentioned in Section 73 (4B) of the Finance Act is only suggestive, it would be unreasonable to hold that the same can be extended till a period of nine years in the given facts and circumstances of the case. The Revenue’s contention that it was justified in keeping the proceedings in this case, in abeyance because an appeal pertaining to similar issue was pending before the learned CESTAT, is unmerited. The filing of an appeal in another case qua the petitioner, though on identical issue, and its pendency before the learned CESTAT cannot be held as a valid reason for not conducting the proceedings in the present case, after a show cause notice has already been issued, within the time frame as laid down in Section 73 (4B) of the Finance Act. Even if the said appeal was pending, the proceedings in this case could have continued and order(s) could have been passed, and if aggrieved, the Revenue could have again approached the learned CESTAT by way of an appeal. There are no reason for the delay caused in the present case in not concluding the hearing qua the impugned show cause notice dated 21.04.2015 within the stipulated time period, and for issuing the impugned hearing notice dated 18.09.2024 after a period of nine years - it is apposite to quash and set aside the impugned hearing notice dated 18.09.2024 issued by respondent no. 5. Petition disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:(i) Whether the adjudication proceedings initiated by the Revenue, based on the show cause notice dated 21.04.2015, are time-barred under Section 73 (4B) of the Finance Act due to the issuance of a hearing notice after a gap of nine years.(ii) Whether the officer issuing the impugned hearing notice had the jurisdiction to do so under the Finance Act, given the transition to the CGST Act.2. ISSUE-WISE DETAILED ANALYSISIssue (i): Time-barred Adjudication ProceedingsRelevant Legal Framework and Precedents:The relevant legal framework is Section 73 (4B) of the Finance Act, which stipulates that the Central Excise Officer must determine the amount of service tax due within six months or one year from the date of the notice, where it is possible to do so. The court referenced precedents such as Sunder System Pvt. Ltd. v. Union of India and Siddhi Vinayak Syntex Pvt. Ltd. v. Union of India, which emphasize the importance of adhering to statutory time limits.Court's Interpretation and Reasoning:The court interpreted Section 73 (4B) as a provision intended to ensure timely adjudication of tax matters. The phrase 'where it is possible to do so' was not seen as a carte blanche for indefinite delays. The court emphasized that even if no specific time frame is prescribed, actions must be completed within a reasonable time.Key Evidence and Findings:The court noted that the impugned show cause notice was issued on 21.04.2015, and the hearing was concluded on 19.10.2015. However, no order was passed, and the matter was not transferred to the call book. The Revenue's appeal on similar issues was dismissed by the CESTAT on 15.09.2022, yet the hearing notice was issued only on 18.09.2024.Application of Law to Facts:The court applied Section 73 (4B) to the facts, finding that the delay of nine years was unreasonable and not justified by the statutory language or intent. The court also considered the instructions from the Ministry of Finance, which emphasized adherence to time limits.Treatment of Competing Arguments:The petitioner argued that the proceedings were time-barred, referencing the statutory time limits and previous judgments. The Revenue contended that the time limits were suggestive and that the proceedings were kept in abeyance pending a related appeal. The court found the petitioner's arguments more persuasive.Conclusions:The court concluded that the adjudication proceedings were indeed time-barred, as the delay was unjustified and contrary to the statutory framework.Issue (ii): Jurisdiction of the OfficerRelevant Legal Framework and Precedents:The jurisdictional issue was considered in light of the transition from the Finance Act to the CGST Act. The court referenced the relevant sections of both acts and the notifications issued under them.Court's Interpretation and Reasoning:The court did not make a definitive ruling on this issue, as it was rendered moot by the finding that the proceedings were time-barred. However, the court acknowledged the petitioner's argument that the officer under the CGST Act may not have had jurisdiction under the Finance Act.Conclusions:The court chose not to adjudicate this issue, given the decision on the time-barred nature of the proceedings.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning:'A statute or the language of a statute / provision cannot be read to go against its very intent. The intent of Section 73 (4B) of the Finance Act was also made clear by the instructions... wherein the paragraph 4.2 provided as under:... Board desires that the time limits mentioned in relevant Acts must be adhered to.'Core Principles Established:The court established that statutory time limits for adjudication must be adhered to unless there are compelling reasons for delay. The phrase 'where it is possible to do so' does not allow for indefinite postponement of proceedings.Final Determinations on Each Issue:The court quashed the impugned hearing notice dated 18.09.2024, finding the proceedings time-barred. The jurisdictional issue was not adjudicated due to the resolution of the primary issue.The judgment underscores the importance of timely adjudication in tax matters and clarifies the interpretation of statutory time limits under the Finance Act.