Research › Search › Judgment

Gujarat High Court · body

2024 DIGILAW 1420 (GUJ)

Dinesh Ramavatar Sharma v. Union Of India

2024-06-26

BHARGAV D.KARIA, NIRAL R.MEHTA

body2024
ORDER : BHARGAV D. KARIA, J. 1. Learned advocate Mr. Paresh Dave has tendered the draft amendment. The same is allowed in terms of the draft. To be carried out forthwith. 2. Heard learned advocate Mr. Paresh Dave for the petitioner and learned advocate Mr. Nikunt K. Raval for the respondent. 3. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs:- “17(A) That Your Lordships may be pleased to issue a Writ of Prohibition or any other appropriate writ, direction or order completely and permanently prohibiting the Respondents herein from taking any action against the Petitioner pursuant to proceeding of Show Cause Notice File No.STC/15-36/O&A/2020 dated 28.09.2020. (B) That Your Lordships may be pleased to issue a Writ of Mandamus or any other appropriate writ, order or direction quashing and setting aside Show Cause Notice File No. STC/15-36/O&A/2020 dated 28.09.2020. (C) Pending hearing and final disposal of the present petition, Your Lordship may be pleased to stay further proceedings of Show Cause Notice File No. STC/15-36/ O&A/2020 dated 28.09.2020. (D) An ex-parte ad-interim relief in terms of para 17(C) above may be kindly be granted. (E) Any other further relief as may be deemed fit in the facts and circumstances of the case may also please be granted.” 4. Brief facts of the case are as under:- 4.1 The petitioner is working in construction project such as clearing ground for foundations and fabricating steel sheds using pipes, poles & iron sheets as well as gates & railing. During the course of their business, the petitioner has been fabricating and erecting iron & steel objects such as gates, sheds, railing ramps and so on. 4.2 The petitioner has been keeping the ledger and books of account as well as paying income tax on the money he has earned from his business operations. 4.3 It is the case of the petitioner that he was not registered with the Central Excise and Service Tax department prior to period of 01st July, 2017 because he was under the impression that only income tax would be assessed on his business activities. 4.4 Thereafter on 17.08.2020, Superintendent Central Goods & Service Tax – respondent authority issued summons to the petitioner. 4.4 Thereafter on 17.08.2020, Superintendent Central Goods & Service Tax – respondent authority issued summons to the petitioner. 4.5 It is the case of the petitioner that on 28.09.2020, Additional Commissioner, Central Excise & GST issued show cause notice for recovery of Rs.59,87,560/- as service tax for financial year 2014-15 to financial year 2016-17. 4.6 It is the case of the petitioner that before issuance of the show cause notice for the demand exceeding Rs.50,00,000/-, the respondent – Department is in breach of mandatory condition of pre-notice consultation laid down by the Government vide para No.5 of the Master Circular dated 10th March, 2017. 5. Learned advocate Mr. Paresh Dave for the petitioner referred to and relied upon decision in case of Dharamshil Agencies v. Union of India in Special Civil Application No.8255 of 2019 and submitted that the show cause notice may be quashed and set aside and matter may be remanded back to the respondent authorities for mandatory requirement of the pre-notice consultation. Considering such submissions, this Court passed the following order on 14.03.2024:- “[1] Heard learned advocate Mr. Paresh Dave for the petitioner, learned advocate Mr. Ankit Shah for the respondent No.1 and learned advocate Mr. Nikunt Raval for the respondent No.2. [2] The principal grievance raised in this petition is not abiding by the requirement of the pre-show cause notice consultation as provided in Master Circular dated 10th March 2017, as demand of duty involves more than Rs.50,00,000/-. [3] The impugned show-cause notice in this petition is issued without following the mandatory requirements of the Master Circular. [4] Learned advocates for both the sides referred to and relied upon the decision of this Court in the case of Dharamshil Agencies Versus Union of India reported in 2021(7) TMI 1064. [5] It was also pointed out by learned advocates for both the sides that the matter is also subjudice before the Hon’ble Supreme Court with regard to the issue of limitation if the impugned show cause notice is quashed and set aside by this Court. [6] Considering the above submissions, the respondent authorities are directed to undergo the process of pre- consultation keeping the impugned show cause notice in abeyance on record before the next date of hearing. Such exercise shall be completed within four weeks. [7] Stand over to 18th April 2024” 6. [6] Considering the above submissions, the respondent authorities are directed to undergo the process of pre- consultation keeping the impugned show cause notice in abeyance on record before the next date of hearing. Such exercise shall be completed within four weeks. [7] Stand over to 18th April 2024” 6. On 18.04.2024, time was sought on behalf of the respondent stating that the hearing of pre notice consultation is fixed on 23rd April, 2024. Therefore, the matter was adjourned today i.e. on 26th June 2024. 7. Learned advocate Mr. Paresh Dave for the petitioner submitted that the respondent authorities have conducted the pre notice consultation on 23.04.2024 and the petitioner has filed a detailed submission pursuant to such notice. 8. Learned advocate Mr. Nikunt R. Raval for the respondent submitted upon instructions that respondents have not passed any order on pre-notice consultation because the present petition is pending. 9. In view of the above, we notice that during pendency of this petition, the order dated 14.03.2024 is clear to the effect that the respondent authorities were directed to undergo the process of the pre consultation keeping the impugned show cause notice in abeyance on record before the next date of hearing meaning thereby that the respondent authorities were supposed to pass an order on or before 18.04.2024. Despite above, order passed by this Court on 14.03.2024, respondent authorities fixed the hearing 03.04.2024 beyond the time period granted by this Court to complete the pre-notice consultation on or before 18.04.2024 and considering the fact that the hearing is fixed on 23.4.2024, this Court granted an indulgence to adjourn the matter for two months. However, till today, no such order is passed by the respondent authority. In such circumstances, in the decision in case of Dharamshil Agencies (supra) it is held as under:- “7. At the outset, it may be noted that as per the settled legal position, the Circulars issued by the Board are binding to and have to be adhered to by the respondent authorities. The Board had earlier issued circulars and instructions on the show-cause notices and issued the master circular dated 10.3.2017 (Annexure-E) consolidating the earlier circulars to ensure clarity and ease of reference. The Board had earlier issued circulars and instructions on the show-cause notices and issued the master circular dated 10.3.2017 (Annexure-E) consolidating the earlier circulars to ensure clarity and ease of reference. It has been mentioned in the said master circular that the said circular was issued as an effort to compile relevant legal and statutory provisions, circulars of the past and to rescind the circulars which had lost relevance. Paragraph 5 of the said Circular deals with the consultation with the noticee before issue of show- cause notice. The said paragraph being relevant reads as under:- “5. 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/office related SCN’s) mandatory vide instruction issued from F. No.1080/09/ DLA/MISC/15, dated 21 st December 2015. Such consultation shall be done by the adjudicating authority with the assessee concerned. This is an important step towards trade facilitation and promoting voluntary compliance and to reduce the necessity of issuing show cause notice.” 8. In view of the afore-stated Circular, it is clear that the Board had made issuance of preshow-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 lac and that such consultation was to be done by the adjudicating authority with the assessee as an important step towards the trade facilitation and for promoting necessary compliance, as also to reduce the necessity of issuing show-cause notice. Despite such mandatory requirement of the pre-show-cause notice consultation at the instance of the respondent authority, in utter disregard of the said mandate, and without considering the laudable object behind issuing such circular, the respondents issued the impugned pre-show-cause notice consultation dated 12.4.2019 delivering the same to the petitioner assessee at 13.55 hours and calling upon them to remain present before the respondent No.2 at 16.00 hours. The petitioners having requested for reasonable time for the effective consultation, without considering the said request, the respondent No.2 issued the show-cause notice on the same day i.e. on 12.4.2019. Such a high-handed action on the part of the respondent No.2, not only deserves to be deprecated but to be seriously viewed. 9. The petitioners having requested for reasonable time for the effective consultation, without considering the said request, the respondent No.2 issued the show-cause notice on the same day i.e. on 12.4.2019. Such a high-handed action on the part of the respondent No.2, not only deserves to be deprecated but to be seriously viewed. 9. Though it was sought to be canvassed by the learned Advocate Mr.Vyas for the respondents that the petitioners had sought time to see that the demand for the relevant period gets timebarred as the returns for the relevant period were filed on 15.4.2014 and the demand for the recovery of service tax could be made within the period of five years, which was to expire on 15.4.2019, the Court does not find any substance in the same. It was the respondent authorities who had not issued the pre-show-cause notice for consultation immediately after the final audit report issued on 28.2.2019, and they waited till the last date on 12.4.2019, knowing fully well that the period of five years was to expire on 15.4.2019. If the respondents did not take any steps on time, and issued the pre- show-cause notice for consultation on the last date as an eye-wash, it could not be said that the petitioner assessee had requested for time to prevent the respondent authorities from making demand of the service tax, which was to expire on 15.4.2019. Such a pre-consultation notice and the impugned show-cause notice issued on 12.4.2019, being in contravention of the circular dated 10.3.2017 issued by the Board, the same cannot be sustained and deserve to be quashed and set aside. 10. It is required to be noted that as such the demand made in the impugned show-cause notice was within the prescribed time limit. Now, since the said notice is sought to be set aside on the ground that adequate opportunity of hearing was not given to the petitioners for consultation prior to the issuance of the said notice, the petitioners cannot be permitted to take unfair advantage on the ground that the demand made in the notice had now become time-barred in view of the statutory provisions. A precise observations made by the Supreme Court in this regard in case of The Director of Inspection of Income-tax (Investigation), New Delhi (supra) be reproduced as under:- “6. ... A precise observations made by the Supreme Court in this regard in case of The Director of Inspection of Income-tax (Investigation), New Delhi (supra) be reproduced as under:- “6. ... The Court in exercising its powers under Article 226 has to mould the remedy to suit the facts of a case. If in a particular case a Court takes the view that the Income-tax Officer while passing an order under s. 132(5) did not give an adequate opportunity to the party concerned it should not be left with the only option of quashing it and putting the party at an advantage even though it may be satisfied that on the material before him the conclusion arrived at by the Income-tax Officer was correct or dismissing the petition because otherwise the party would get unfair advantage. The power to quash an order under Article 226 can be exercised not merely when the order sought to be quashed is one made without jurisdiction in which case there can be no room for the same authority to be directed to deal with it. But in the circumstances of a case the Court might take the view that another authority has the jurisdiction to deal with the matter and may direct that authority to deal with it or where the order of the authority which has the jurisdiction is vitiated by circumstances like failure to observe the principles of natural justice the Court may quash the order and direct the authority to dispose of the matter afresh after giving the aggrieved party a reasonable opportunity of putting forward its case. Otherwise, it would mean that where a Court quashes an order because the principles of natural justice have not been complied with it should not while passing that order permit the Tribunal or the authority to deal with it again irrespective of the merits of the case. ...” 11. In view of the above, without expressing any opinion on the merits of the demand raised in the impugned show-cause notice, the Court hereby sets aside the impugned notice dated 12.4.2019 (Annexure- D) on the ground that the petitioners were not granted an adequate opportunity for the consultation prior to the issuance of the said notice. The parties are relegated to the stage prior to the issuance of the impugned show-cause notice. The parties are relegated to the stage prior to the issuance of the impugned show-cause notice. The respondent No.2 will now issue afresh pre-show-cause notice for consultation in view of the Circular dated 10.3.2017 giving the petitioner a reasonable opportunity of making effective consultation, and the respondent No.2 shall issue the show-cause notice only on having been satisfied for issuance of the same. It is clarified that the petitioner shall extend full cooperation to the respondent authority by providing necessary information that may be asked for and shall not raise the issue of limitation in respect of the demand, if made, by the respondent authority, as the action of raising demand was taken by the respondent authority within the prescribed time limit, in view of the decision of the Supreme Court in case The Director of Inspection of Income-tax (Investigation), New Delhi (supra).” 10. In view of the above discussion, the impugned show cause notice is hereby quashed and set aside with liberty to the respondent authority to pass appropriate order within the pre-notice consultation conducted on 23.04.2024, and thereafter, may initiate the proceedings if required if the same is within the period of limitation. 11. Petition is accordingly disposed of. Notice is discharged.