CBIC Circulars Are Binding On Service Tax Dept, Violations Will Make Actions Illegal: Jharkhand High Court

The Jharkhand High Court has held that the circulars or instructions issued by the Central Board of Indirect Taxes and Customs (CBIC) are legally binding on the department, and their violation will make the actions of the respondent illegal and ex-facie bad in law.

The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan has observed that the Department has violated Clauses 14.10 of Master Circular No. 1053/02/2017-CX dated March 10, 2017, and Clause 4.3 of the Instructions dated November 18, 2021, issued by the CBIC, which provide the manner in which the adjudication order has to be passed by the Respondent Department. Both the Instruction and the Circular provide that the adjudication order must be communicated within one month from the closure of the personal hearing.

The court noted that the order is in clear contravention of the circulars since it was not communicated within one month from the closure of the personal hearing, and there are no recorded reasons for the delay in communicating the order beyond one month.

The petitioner/assessee is in the business of renting immovable property, was registered under the provisions of the Finance Act, 1994, and was regularly filing its service tax returns.

The search was conducted at the office premises of the petitioner. A demand-cum-notice to show cause was issued to the petitioner for the period April 2014 to June 2017 by invoking an extended period of limitation, imposing a service tax liability, and also proposing to impose penalties.

The petitioner had filed its reply to the allegation of the Respondent Department. The respondent, after a substantial delay, had passed the Order-in-Original adjudicating demand and Show Cause Notice.

The petitioner contended that an order was provided to the petitioner on May 27, 2022, and the same is ex-facie bad law. The order has been passed beyond the period of limitation prescribed under Section 73 (4B) of the Finance Act, 1994, and the Instruction dated November 18, 2021, issued by the CBIC.

The department contended that the petitioner was fully aware of the SCN issued to them, as they have always replied to the letters issued for fixing personal hearing dates and also submitted defence replies against the SCN.

The court held that if the law prescribes a manner in which a power has to be exercised, then such power can be exercised only in such a manner. No prior notice was served during personal hearings. Therefore, alleged personal hearings are in contravention of the Circular.

Counsel For Petitioner: Rahul Lamba, Aditya Khandelwal

Counsel For Respondent: P.A.S.Pati, Ranjana Mukherjee, Anil Kumar, Ratnesh Kumar

LL Citation: 2023 LiveLaw (Jha) 73

Case Title: M/s LMB Sons Versus UOI

Case No.: W.P.(T) No. 5364 of 2022

Click Here To Read The Order