TaxTMI 
TaxTMI 
2018 (11) TMI 714
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....o investigate service tax evasion cases of all the branches of the petitioner, subject matter of letter F.No. DGCEI/LZU/NBCC/190/2015 dated 28th October, 2015. 3. The petitioner has also prayed for quashing of notice/summons dated 21st January, 2016 and 28th January,2016 for production of documents and details issued by the Asst. Director, Director General of Central Excise Intelligence, Regional Meerut Unit on the ground that they are unwarranted and arbitrary. 4. For convenience we have referred to the Directorate General of Central Excise Intelligence in this judgment as DGCEI. 5. The petitioner corporation was and is primarily engaged in carrying out civil work and construction for various departments of the government and public sector undertakings all over India. The petitioner has not opted for centralized registration for the purpose of service tax. The petitioner has 88 service tax registrations in different Commissionerates and consequently files and submits separate service tax returns as per the registrations. 6. Petitioner's unit in Greater Noida was subjected to audit by Additional Commissioner (Audit), Central Excise, Noida for the period between April, 2....
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....impugned letter dated 3rd December, 2015, the Assistant Director (Investigation), DGCEI has conveyed and authorised the Additional Director General, Lucknow to investigate the case of service tax evasion by all branches of the petitioner. The investigation and enquiry are specific to the PMC Charge. The impugned letter dated 3rd December,2015 was issued for unified detailed enquiry on the PMC Charge by the Additional Director General, Lucknow after approval of the Director General. The respondents submit that centralised investigation is necessary and justified as multiple investigations all over the country on the same issue and question would result in inconvenience, harassment and wastage of time and resources. 9. As per the petitioner Chapter V of the Fin Act as amended from time to time relating to service tax does not permit centralized enquiry and investigation except where search has been conducted or arrest has been made under Section 90 of the Fin Act. Section 14 of the Central Excise Act, 1944 (hereinafter referred to as CE Act) states that summons could be issued by an officer making an enquiry. Therefore, summons cannot be issued by an officer not permitted to condu....
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....pugned letter dated 03.12.2015 is based on any materials and sustainable in law? d. Whether the Finance Act has provision for reassessment/reinvestigation for the same very period for which investigation/audit/issuance of SCN/Adjudication of SCNs have already been done, if so what is the scope and parameter of the same in the absence of any provisions in law? e. Whether the officers of DGCEI are permitted to proceed on the change of opinion, if so what are the parameter in the absence of any review power under the law? f. Whether in the facts and circumstances, the DGCEI investigation and issuance of summons is arbitrary, malicious and motivated?" 11. On the present writ petition being filed, a Division Bench vide order dated 10th February, 2016 had stayed further proceedings pursuant to summons dated 21st and 28th January, 2016. This stay order was made absolute vide order dated 26th April, 2016. Respondent-DGCEI had thereupon filed C.M. No. 21029/2016 requiring the petitioner to furnish information/documents set out in the application. This application was disposed of, vide order dated 27th May, 2015 referring to the stay order passed with reference to the summons wit....
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....oner, Respondent No. 3 has been invoking Section 14 of the Central Excise Act, 1944 ('Act'). Section 14 (1) of the CE Act talks of a 'duly empowered Central Excise Officer' having the power to issue such summons to a person to give evidence or produce documents "in any enquiry which such officer is making for any of the purposes of this Act." The question raised, therefore, is that where in fact no enquiry is being undertaken against the Petitioner, is it permissible to issue it summons under Section 14 of the CE Act? 5. The third issue relates to the Service Tax Rules, 1994 ('ST Rules'). Rule 5A (1) of the ST Rules permits "an officer authorized by the Principal Commissioner or Commissioner" to have access to any premises registered under these rules for the purpose of carrying out any scrutiny, verification and checks as may be necessary. The Petitioner has raised the question whether there is any such authorization in favour of the Assistant Commissioner and/or Senior Intelligence Officer Commissioner in the Meerut Unit of the ST Department to demand access to the records of the Petitioner pertaining to the projects undertaken by it throughout the coun....
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....lar, the Court would like the DG-to file a proper reply to para10 of the petition. The affidavit of DG should be accompanied by all the circulars, notifications, orders and any other documents that are relevant to the questions that have been raised in the petition. The DG should explain in his affidavit the basis for the statement in the letter, dated 3rd December, 2015 addressed by the DGCEI at New Delhi to the Additional Director General of the Lucknow Zonal Unit that the there is "service tax evasion by all branches of NBCC."If there is any material in support of such a statement that should be enclosed along with the affidavit of DG. 10. The affidavit of the DG will be filed not later than four weeks from today with an advance copy to learned counsel for the Petitioner. The Petitioner is permitted to file a rejoinder thereto before the next date. 11. A senior official of DGCEI will remain present in the Court on the next date with all the relevant records. Liston22th August, 2017." 13. Thereupon additional affidavit was filed by the Respondents. 14. Contentions raised and to be decided are primarily two-fold. Firstly, whether the respondents can centralize investig....
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....m time to time shall apply so far as may be in relation to service tax as they apply in relation to duty of excise. Sections 12E and 14 in addition to other provisions of the CE Act have been made applicable. Conspicuously provisions of the Income Tax Act have not been made applicable to service tax. We have made this observation as some of arguments by the petitioner proceed and are predicated on the procedure and principles applicable to the income tax proceeding, notwithstanding the difference in the statutory scheme and procedure prescribed under the Fin Act read-with and as per CE Act. The Fin Act and CE Act do not have provisions akin and similar to issue of notices under Sections 142(1) and 143(2) of the Income Tax Act for taking up service returns for verification and scrutiny assessment followed by an order of assessment under Section 143(3) of the Income Tax Act. In the Income Tax Act each assessment year is separate and self-contained period which is assessed to tax. Income Tax Act is return-centric and assessment is made year-wise. When income for an assessment year has escaped assessment and notice for scrutiny/regular assessment under section 143(2) of the Income Tax ....
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....isions of the Income-tax Act referred to in paragraph 16 above. 18. Section 73 of the Fin Act prescribes the procedure and is the complete code for recovery of service tax not or short levied or paid or erroneously refunded to a person. Sub-sections 1, 1A, 1B, 2, 2A,3,4,4B,5 and 6 of Section 73 of the Fin Act as amended and applicable w.e.f. 14th May, 2016 reads as under: "73. Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded. - (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, Central Excise Officer may, within thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of - (a) fraud; or (b) collusion; or (c) wilful mis-statement; ....
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....the rules made thereunder with intent to evade payment of service tax; has not been established against the person chargeable with the service tax, to whom the notice was issued, the Central Excise Officer shall determine the service tax payable by such person for the period of thirty months, as if the notice was issued for the offences for which limitation of thirty months applies under sub-section (1). [ * * * ] (3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the [Central Excise Officer] of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid : Provided that the Central Excise Officer may determine the amount of short-payment ....
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....o which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made there under, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.]" 19. Sub-section 1 of Section 73 of the Fin Act states that the Central Excise Officer may within thirty months from the relevant date serve a notice on the person where service tax has not been levied, paid or short levied or short paid or is erroneously refunded. The expression 'relevant date' has been defined in Sub-section 6. Notice under Sub-section 1 to Section 73 of the Fin Act should state the reasons and grounds for the claim for recovery alleging non levy, payment or erroneous refund of service tax an....
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.... assessee/ person on whom notice under Sub-section 1 has been served, determine and decide the amount of servicetax due or erroneously refunded. Thereupon, the person would be liable to pay the amount determined. Thus Section 73(2) of the Fin Act postulates passing of an adjudication or assessment order by the Central Excise Officer only and only after a show cause notice in terms of sub-section (1) to Section 73 of the Fin Act has been issued. Sub-section 2A states that if the appellate forum/Court holds that the extended period of five years under the proviso to Section 73(1) of the Fin Act is not applicable, service tax shall be payable by such person for a period of thirty months. Sub-section 4B to Section 73 of the Fin Act fixes the time or limitation period within which the Central Excise Officer has to adjudicate and decide the show cause notice. The time period fixed under Clause A or B is six months and one year, respectively. Limitation period for passing of the adjudication order, described as Order-in-Original, starts from the date of notice under Subsection 1 to Section 73 of the Fin Act. 21. Section 73(3) of the Fin Act permits any assessee to voluntarily on own as....
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....n served with the show cause notice and final determination by the order in original. Issue of show cause notice is a condition precedent to raising an enforceable demand. This ratio has been followed and elucidated in other judgments of the Supreme Court in Commissioner of Central Excise, Vishakhapatnam Vs. Mehta & Co. (2011) 4 SCC 435, and Union of India &Ors. Vs. Madhumilan SyntexPvt. Ltd &Anr. (1988) 3 SCC 348. In New Decent Footwear Industries Vs. Union of India (2002)150 ELT 71 (Del.), a Division Bench of this court referring to the proviso to Sub-section (1) of Section 11A of the CE Act had held that the Central Excise Officer to take recourse to the extended period as per the proviso must bring on record sufficient material to prove existence of the jurisdictional facts for the said purpose. In the absence of assertion of jurisdictional facts, proceedings can be considered to be without jurisdiction. The sequitur is that Section 73 of the Fin Act like Section 11A of the CE Act postulates that the authorities are empowered to conduct investigation, collect and examine documents, record statements etc. before they form their opinion whether or not to issue show cause notice u....
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....ions issued for production of documents, etc. The expression 'best judgment assessment' in tax enactments refers to fair estimate and reasonable determination of the taxable amount made by the Assessing Officer, when it is not possible to compute the taxable amount on the basis of records and material made available. It is a type of assessment authorized by law in the absence of full and complete details and material. 'Best judgment assessment' need not be exact and precise, albeit an objective and fair assessment of the taxable amount based upon the material and evidence available and gathered. This provision cannot be equated with and read as a provision prescribing and authorizing a separate and alternative procedure for adjudication under Section 73 of the Fin Act. Section 72 does not authorise Central Excise Officer to take up returns for service tax for scrutiny assessment and pass an adjudicatory order, except possibly in cases where refund is claimed. This is not only clear from the expression 'best of his judgment' used in the heading and main part of Section 72, but also when we harmoniously read this Section with Section 73 which prescribes a detailed procedure with limi....
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....quiries under this Act.- (1) Any Central Excise Officer duly empowered by the Central Government in this behalf shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making for any of the purposes of this Act. A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned. (2) All persons so summoned shall be bound to attend, either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required: Provided that the exemptions under sections 132 and 133 of the Code of Civil Procedure (5 of 1908) shall be applicable to requisitions for attendance under this section. (3) Every such inquiry as aforesaid shall be deemed to be a "judicial proceeding" within the meaning o....
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....f notice under Section 14 of the CE Act. Notice or summons under Section 14 of the CE Act can be issued by the Central Excise Officer when required and necessary for any enquiry relating to service tax. 29. We should not be understood as accepting or stating that notice or summons under Section 14 of the CE Act can be issued without any cause, reason or justification. Any power given cannot be abused and exercised in an arbitrary manner or for ulterior motives. Motivated and capricious deviations in exercise of power under Section 14 of the CE Act can always be checked by the Court. The respondents have themselves stated that they have not liberally or wantonly exercised the said power. This has been done rarely and in select cases. 30. At this stage, it would be relevant to deal with the contention of the petitioner that the respondents have the power to conduct Special Audit under Section 72A of the Fin Act and access and visit the premises registered with the Service Tax Department under Rule 5A of the Rules. The petitioner referring to Rule 5A had stated that they would have no objection to an authorised officer from the Commissionerate having access to the premises regis....
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....rivacy, albeit and rather strangely in the present case the petitioner is not objecting to such verification and access under Rule 5A and states that it should be resorted to and exercised. Similarly the power to direct Special Audit under Section 72A of the Fin Act is certainly more intrusive and compelling. These arguments have to be rejected as power under Section 14 of the CE Act and other powers relating to investigation and enquires cohabit and exist together and also independently. It may not be appropriate to exercise power under Rule 5A, when direction to produce documents and furnish information would be appropriate and suffice. 32. At the same-time we would also observe that the stand of the respondents that Rule 5A(1) is for periodic checks and not for specific investigation or inquiry is wrong and unacceptable. Authorities can certainly resort to Rule 5A(1) in cases where access to the registered premises is required for specific investigation and enquiry. They can exercise power under Rule 5A of the Rules when necessary and justified. We also find it incongruous for the respondents to assert that verification or inspection in terms of Rule 5A(1) would cause inconve....
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.... In the said case, the summons issued by the Director General were challenged on the ground of lack of jurisdiction for the summons did not specify the grounds for holding enquiry. No enquiry was pending and the 'assessment' had been completed. It was argued that there was no provision for re-opening. In such circumstances, authorities could not have asked for documents or papers. Issue of summons, it was asserted was illegal and would cause harassment. Interpreting Section 14 of the CE Act and after referring to Section 2(b) of the CE Act, it was observed that the Assistant Director need not disclose material which had necessitated holding of inquiry and issue of summons. Section 14 of the CE Act gives authority and power to Assistant Director to ask for evidence and production of documents. Relevant observations and ratio elucidated reads:- "8. Thus it would appear that the Asstt. Director by virtue of he being a Central Excise Officer having been conferred with all the powers of a Central Excise Officer is conducting an inquiry for the purpose of the Act and as such is empowered to summon any person for giving evidence or for production of documents. The notification also mak....
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....80) E.L.T. 745 (Mad.), the Court had dealt with and interpreted Section 40 of the Foreign Exchange Regulation Act, 1973, empowering any Gazetted Officer of Enforcement with the power to summon any person whose attendance was necessary either to give evidence or to produce a document during the course of any investigation or proceeding under the Act. It was held that non-mentioning of the nature of investigation and purpose of requiring documents would not vitiate the summons. In the context whether unfettered discretionary powers could be given to the authority, the Court observed that the action of issuing summons could be challenged even if there was no need and requirement to record reasons to believe. In such cases, the authority when challenged must produce relevant evidence or basis for issuing summons before the Court. Judgment of the Supreme Court in Barium Chemicals Ltd. and Ors. Vs. A.J. Rana and Ors., AIR 1972 SC 591, was distinguished in view of difference in language and the wordings of Section 19 (2) of the Foreign Exchange Regulation Act, 1947. It was also observed that there was no vagueness in respect of the documents called for in the said case. 39. In Rainbow ....
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....cluding an officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) with any of the powers of a Central Excise Officer under this Act;" 41. In Duncan Agro Industries Limited Vs. Union of India, 1989 (39) E.L.T. 211 (Del.), it was observed that Central Excise Officer as defined in Section 2(b) of the CE Act would mean any officer of the Central Excise Department mentioned in the sub-section or any person, including an officer of the State Government invested by the Central Board of Excise and Customs ('the Board' for short) with any of the powers of a Central Excise Officer. The aforesaid definition is wide and broad. Rule 4 of the Central Excise Rules relates to appointment of officers and provides that the Board could appoint such persons as it thinks fit to be a Central Excise Officer or to exercise all or any of the powers conferred under the Rules on such officer. 42. Rule 3 of the Rules reads:- "3. Appointment of officers "The Central Board of Excise and Customs may appoint such Central Excise Officers as it thinks fit for exercising the powers under Cha....
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....nsent or when not raised within reasonable time by applying principle of estoppel. No assessee has a vested right to be assessed at a particular location and 'venue'. 43. Consequently, it follows and we hold that the Board has wide discretion in power while fixing the local limit assigned to a Central Excise Officer. Local limit can be pan or all India. This position must be accepted as in cases of centralized registrations all India jurisdiction is exercised. Argument and contention that use of the expression 'local limit' impliedly excludes all India jurisdiction is without foundation and fallacious. The provision permits and allows the Board to fix 'local limits' and does not bar and prevent the Board from conferring all India jurisdiction. The Board is equally empowered to authorize centralised or pan India investigations to be undertaken by the Central Excise Officers. This may indeed be desirable and necessary to curtail delay, facilitate complete and detailed investigation at one location rather than multiple investigations and enquiries which would be overlapping. Multiple enquiries would be inconvenient and cause harassment to many-a-assessee specially when similar or i....
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....to appoint and invest under Section-2(b) read with Rule 4. It empowers the Board to appoint such persons as it thinks fit to be Central Excise Officers and to invest them with the powers under the Act and the Rules. In exercise of those powers, the Board has invested the Director (Audit) with the power of a Collector of Central Excise with territorial jurisdiction extended to all over India. Mr. Ramaswamy, the learned Addl. Solicitor General, has invited our attention to the averments made in the counter-affidavit as to the considerations of assigning the case between two competent Collectors. It is stated that the object of assigning the cases to the Director (Audit) is that since he is vested with All India jurisdiction, it will be convenient and expedient in public interest both for the petitioners as well as for the department to have the case adjudicated by him at one place as in the present case the petitioner's activities are spread over many other places than the State of Andhra Pradesh. There is no requirement of law that the exercise of administrative power has necessarily to be canalised or guided. In the context of modern conditions and the complexity of the situati....
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....make represervation and only thereafter the list is finalised, the process would be cumbersome and time consuming. In this process it will be difficult for the committee to prepare and finalise the select list within a reasonable period of time and the very purpose of preparing the select list would be defeated. Scheme of the Regulations therefore clearly warrants exclusion of principle of audi alteram partem. No vested legal right of a member of the State Civil Service who after being considered is not included in the select list, is adversely affected. Non-inclusion in the select list does not take away any right of a member of the State Civil Service that may have accrued to him as a Government servant, therefore no opportunity is necessary to be afforded to him for making representation against the proposed supersession." The statutory rules do not compel a notice on assignment of cases. It appears from the record that the assignment of the cases to the Director (Audit) was motivated with the purpose of centralising the various cases of the petitioners scattered over a number of Col-lectorates of Central Excise because of the petitioner's business being spread over many ....
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....extraneous consideration. Distinction between existence of power, and exercise of power was emphasised. 46. The petitioner has relied upon judgment of a Division Bench of Andhra Pradesh High Court in Sri Balaji Rice Company versus Commercial Tax Officer No. 1, Nallore and Others reported as (1984) 55 STC 292 (AP). The said judgment relates to Andhra Pradesh General Sales Tax Act and Section 4 thereof, which states that officers shall perform functions within such local limits as the State Government or any authority or officer empowered may assign. In the context of statutory provision and with reference to the Rules, the Division Bench had observed that the expression "within such local limits as assigned" would not empower the officer to function and exercise such power throughout the State of Andhra Pradesh for making the assessments under the Act. It was held that the statute did not postulate jurisdiction over whole State of Andhra Pradesh as the provision was designed to avoid inconvenience and hardship to the dealers outside and beyond their local limits where they were registered. Thus, while Section 4 permits fixing of territorial limits, the same should be less than th....
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....noticed above, the show cause notice dated 13th March, 2015 issued by the Patna Commissionerate is on the same issue and relates to alleged evasion of service tax under the head "consultancy fee" payable as PMC Charge. Identical/similar issue has been raised by the Noida Commissionerate pursuant to audit report. Interestingly, the petitioner in their letter dated 31st August, 2015 had asked the Noida Commissionerate to stop investigation as the issue was being investigated by DGCEI. Perceptively, the petitioner has changed their stand. It is also the case of the respondents that the petitioner in spite of show cause notice issued by the Patna Commissionerate has not furnished and given appropriate reply and comments. We need not go into the said aspect. However, it is clear that the respondents have been asking for and have written several letters seeking information in respect of PMC Charges. 49. We do not agree with the Petitioner's assertion that centralisation of investigation would lead to harassment and inconvenience. Normally, it would be desirable that investigation are centralised when identical and similar issues in case of an assessee arise for consideration in dif....
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.... DGCEI for non-payment of service tax on the PMC charge. The assertion made is that the said Commissionerates could not have asked for this information as the present writ petition is pending and that too for the purpose of investigation being conducted by DGCEI. Reliance is placed upon the interim order passed by this Court in the present writ petition vide orders dated 10th February, 2016, 26th April, 2016, 5th July, 2017 and 21st December, 2017. Another assertion made in the application relates to the letter issued by the Chief Commissioner, Service Tax-I, New Delhi under Rule 5(2) for the audit conducted for the periods 2010-2011 to 2014-15 and 2015-16 to 31st June, 2017. Petitioner submits that they have not been furnished copy of the audit report in violation and defiance of Circular dated 22nd September, 2014. It is also stated that show cause notices dated 21st May, 2014 and 17th April, 2015 issued under Section 73(1) of the Fin Act have culminated in adjudication by order-in-original dated 25th April, 2016 whereby the demand in respect of construction services was dropped. However, demand of Rs. 2.07 crores was confirmed in respect of manpower supply against which an appea....
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....stitution of litigation itself should not be permitted to confer an advantage on the party responsible for it. A party, which has enjoyed benefit of an interim order which is vacated on final decision, can be put to terms and should not protest when the Court passes a just and fair order. Accordingly, fresh assessment could be directed even when it is barred by limitation to set at naught the advantage which the party would derive by mere circumstance by filing a writ petition. Defect in issue of notice etc. would be at best the procedural flaw/lapse not affecting fundamental or subject matter jurisdiction of the Income Tax Officer to make the assessment. Reference was made to an earlier decision of the Supreme Court in Director of Inspection of Income Tax (Investigation), New Delhi Vs. Pooran Mal and Sons, (1974) 96 ITR 390 and Rajinder Nath Vs. Commissioner of Income Tax, (1979) 4 SCC 282. In Pooran Mal (supra), it was held as under:- "6. Even if the period of time fixed under Section 132(5) is held to be mandatory that was satisfied when the first order was made. Thereafter if any direction is given under Section 132(12) or by a court in writ proceedings, as in this case, we ....
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.... irrespective of the merits of the case." 55. In the given circumstances we would hold and treat the period between 10th February 2016 when the stay order was passed in respect of the summons dated 21st and 28th January, 2016 till the pronouncement of judgment should be excluded for the purpose of computing limitation and period specified for issue of show cause notice under Section 73(1) of Fin Act. This would be in terms of Explanation to Sub-Section 1 to Section 73 of the Fin Act. It would be just and fair in terms of the decision in Grindlay's Bank Ltd. (supra). Officers from DGCEI and Commissionerates who had issued notice under Section 14 of CE Act by the interim orders have been barred and prohibited from taking action in terms of the notices issued by them. The court must ensure that when the stay order is vacated no party should suffer on account of limitation because of the interim stay order. 56. In view of the aforesaid discussion, it is held as under: (i) Central Excise Officers of DGCEI have all India jurisdiction and can issue notices and enquire into the matters relating to servicetax against any assessee/ person even if the said person or assessee is regis....