Shifting Of Commissionerates, Re-Organisation Of Office, Not A Valid Justification For Inordinate Delay In SCN Adjudication: Bombay High Court

The Bombay High Court has held that the belated hearing of the show cause notice would amount to a violation of the principles of natural justice.

"Merely for the reason that there was shifting of the Commissionerates and reorganisation of its office, there would be no reason to abdicate and/or not comply with the obligations under the Act to promptly and/or expeditiously adjudicate the show cause notice, to be taken to its logical conclusion," the bench of Justice G.S. Kulkarni and Justice Jitendra Jain observed.

The petitioner/assessee was engaged in the construction of a residential complex. The petitioner is a construction contractor undertaking work in the SEZ. It received a refundable deposit.

The department termed the refundable deposit an advance and sought to levy a service tax on it. An investigation started in 2009 and culminated in a show-cause notice dated March 16, 2012. The petitioner filed a detailed reply on January 24, 2013. No action was taken by the department. In the meantime, on April 18, 2015, the petitioner was amalgamated.

The notice for a personal hearing was sent after almost 10 years of seeking to adjudicate the show cause notice. The petitioner challenged show cause notice and notice for a personal hearing, contending that delay in adjudication vitiates the proceedings.

The petitioner contended that there is no warrant for the adjudicating authority to adjudicate the show cause notice after an unreasonable delay of more than 10 years.

The department stated that the delay has occurred due to the shifting of the Commissionerate and Re-Organization of the field formations and therefore the same would be a justifiable delay so as to adjudicate the show cause notice.

The court held that Section 73(4) itself provides that a determination must take place within six months or one year from the date of issuance of the show cause notice. The maximum time limit for the issuance of a show-cause notice is 5 years.

"It is well said that time and tide wait for no one. It cannot be overlooked that the pendency of the show cause notice not only weighs against the legal rights and interests of the assessee, but also, in a given situation, may adversely affect the interest of the revenue if prompt adjudication of the show cause notice is not undertaken, the reason being a lapse of time, and certainly, a long lapse of time is likely to cause irreversible changes frustrating the whole adjudication," the court said.

Case Title: Coventry Estates Pvt. Ltd. Versus The Joint Commissioner CGST and Central Excise

Case No.: Writ Petition No. 4082 Of 2022

Date: 25/07/2023

Counsel For Petitioner: Bharat Raichandani

Counsel For Respondent: Karan Adik

Click Here To Read The Order