2026 (5) TMI 1515

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....'s largest and the world's second-largest zinclead miner, operating lead-zinc mines, smelters, sulphuric acid plants, and captive power plants. The run-of-the-mine ore is crushed and processed to produce zinc and lead concentrates, along with tailings. The Petitioner undertakes mining and manufacture of such concentrates under Chapter 26 of the Central Excise Tariff Act, 1985, from mines at Mochia, Balaria, Baroi, and Zawarmala. 2.1 The concentrates contain impurities, which are removed during smelting outside the mining lease area. The Petitioner holds the requisite Central Excise and Service Tax registrations and has regularly filed returns as per law. It has been paying Service Tax on mining royalty to the State of Rajasthan under Section 68(2) of the Act, read with the Service Tax Rules and relevant notifications, under the reverse charge mechanism. 2.2 Respondent No. 2 issued an impugned show cause notice dated 22.10.2021 proposing a Service Tax demand of Rs. 5,56,60,637/- for April 2016 to June 2017, alleging violation of Sections 67, 68, and 70 of the Act read with Rules 6 and 7 of the Service Tax Rules, on the ground of suppression of the value of mining royalty on zi....

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....nt that the requirement of pre-consultation is generally inapplicable in cases where the extended period of limitation has been invoked on allegations of suppression of facts, misstatement, or fraud, particularly in matters arising out of investigation by the intelligence wing. Therefore, the challenge raised by the petitioner on the ground of absence of pre-SCN consultation is misconceived and unsustainable in law. 4.2 Learned counsel for the respondent submits, that the petitioner has prematurely invoked the writ jurisdiction of this Hon'ble Court without exhausting the statutory remedy available under law. It is contended that a Show Cause Notice is merely a proposal and does not determine any rights or liabilities, and the petitioner is bound to submit its reply and participate in adjudication before the competent authority, i.e., respondent No.3. It is further urged that interference under Article 226 is unwarranted at this stage, particularly when the notice is not without jurisdiction. 4.3 It is further argued by the learned counsel for the respondent that the petitioner has an efficacious alternative statutory remedy, and on this ground alone, the writ petition deserv....

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....n cases where the SCN invokes the extended period of limitation by alleging suppression of facts or fraud, as is typically done in matters investigated by the intelligence wing. 8. From the aforesaid, it is abundantly clear that a candid stand has been taken by the respondent that not only was the service of pre-show cause notice dispensed with, but an attempt has also been made to justify such recourse on the ground that the Circular dated 10.03.2017, issued by the competent authority of the Ministry to all Principal Chief Commissioners, is not mandatory but merely directory in nature. 9. A perusal of the circular dated 10.03.2017 issued by Department of Revenue, however, reflects otherwise. Relevant clause 5 of the circular is reproduced herein below: "5.0 Consultation with the noticee before issue of Show Cause Notice: Board has made pre show cause notice consultation by the Principal Commissioner/ Commissioner prior to issue of show cause notice in cases involving demands of duty above Rs. 50 lakhs (except for preventive/ offence related SCN's) 'mandatory' vide instruction issued from F No. 1080/09/DLA/MISC/15 dated 21st December 2015. Such consultat....

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....andatory-procedural requirement of issuing pre-show cause notice, we reject the argument that in the present case, the revenue was exempt from the pre SCN by directly issuing SCN. 14. In fact, in similar circumstances, the Gujarat High Court, in a Division Bench judgment, L & T Hydrocarbons Engineering Ltd. v. Union of India, (supra) has held as under: "83. In view of the Circular No. 1053/2/2017-CX., dated 10th March 2017, it is clear that the Board had made the pre-show cause notice consultation mandatory for the Principal Commissioner/Commissioner prior to the issuance of show cause notice in cases involving the demands of duty above Rs.50 lakh. Such consultation is required to be done by the adjudicating authority with the assessee as an important step towards reducing the necessity of issuing show cause notice. xxx xxx xxx 127. Our final conclusions may be summarized as under: [a] The Revenue is not correct in its stance that in the case on hand, the pre show cause notice consultation was not necessary as the impugned show cause notice is for preventive/related to an offence. Just because, the origin of the show cause notice is the intell....