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2021 Supreme(Del) 2332
IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Talwant Singh, JJ.
Back Office It Solutions Private Limited - Appellant
Versus
Union Of India & Ors - Respondent
W.P.(C) No. 5766 of 2019; Cm Appl (Civil Miscellaneous Application) No. 25101 of 2019
Decided On : 05-04-2021
Puneet Agrawal, Advocate, Deepak Anand, Advocate, Purvi Sinha, Advocate, Hemlata Rawat, Advocate, Apoorv Kurup, Advocate, Abhishek Khanna, Advocate, Satish Aggarwala, Advocate, Gagan Vaswani, Advocate, Jasneet Jolly, Advocate, Sonu Bhatnagar, Advocate, Venus Mehrotra, Advocate, Anushree Narain, Advocate, Mallika Joshi, Advocate, Vaibhav Joshi, Advocate
The judgment emphasized the mandatory nature of circulars issued by statutory authorities, their binding nature on tax administrators, and the importance of voluntary compliance and reducing disputes.
Headnote:
Show Cause Notice - Adherence to Provisions of 2015 Instruction and 2017 Master Circular - [Service Tax, Consultation, Show Cause Notice] - [F.No. 1080/09DLA/MISC/15/757, Master Circular No. 1053/02/2017-CX] - The court discussed the mandatory consultation with the assessee before issuance of a show cause notice as per the 2017 Master Circular and the exceptions to the pre-show cause notice consultation. The court emphasized the importance of circulars issued by statutory authorities and their binding nature on the tax administrators. The judgment highlighted the need for voluntary compliance and reducing disputes, and the court's decision was influenced by the observations of a coordinate bench in a similar case.
Fact of the Case:
The petitioner-company sought relief for the failure of the contesting respondents to adhere to the provisions of the 2015 instruction and the 2017 Master Circular. The contesting respondents issued a show cause notice to the petitioner-company for non-payment of Service Tax. The petitioner-company contended that it was not exigible to service tax as it was exporting accounting services to entities outside India.
Finding of the Court:
The court found that the contesting respondents were required to have a pre-show cause notice consultation with the petitioner-company, which was not done in the instant matter. The court remanded the matter to the contesting respondents with directions for a pre-show cause notice consultation and pending consideration before the Supreme Court regarding limitation.
Issues: The main issue was whether the services offered by the petitioner-company to entities outside India fell within the ambit of the Finance Act. The court also addressed the issue of limitation pending consideration before the Supreme Court.
Ratio Decidendi: The court emphasized the mandatory nature of the pre-show cause notice consultation as per the 2017 Master Circular and the importance of circulars issued by statutory authorities. The court's decision was influenced by the need for voluntary compliance and reducing disputes, as well as the observations of a coordinate bench in a similar case.
Final Decision: The writ petition was disposed of with directions for a pre-show cause notice consultation and pending consideration before the Supreme Court regarding limitation.
JUDGMENT
Rajiv Shakdher, J. - Mr. Puneet Agrawal, who appears on behalf of the petitioner-company, says that, although several grievances and resultant reliefs have been sought, in the instant writ petition, for the moment, the grievance and consequent relief sought, is confined to the failure on the part of the contesting respondents [i.e., respondent nos. 2, 4 and 5] to scrupulously adhere to the provisions of the instruction dated 21.12.2015 bearing F. No. 1080/09DLA/MISC/15/757 [in short "2015 instruction"] and the Master Circular dated 10.03.2017 [in short "2017 Master Circular"], issued by Central Board of Excise & Customs, Department of Revenue, Ministry of Finance, Government of India [presently, known as "Central Board of Indirect Taxes & Customs"]
1.1. According to Mr. Puneet Agrawal, the impugned show cause notice cannot survive given the provision contained in paragraph 5 of the 2017 Master Circular [and the pari materia provision made in the 2015 instruction] for mandatory consultation with the assessee before issuance of a show cause notice.
2. It is, thus, Mr. Puneet Agrawal's submission that in terms of paragraph 5 of the 2017 Master Circular, the contesting respondents were mandatorily required to have a pre-show cause notice consultation with the petitioner-company.
2.1 It is submitted that since a pre-show cause notice consultation was not held, in terms of the judgment of the coordinate bench of this court, rendered in Amadeus India Pvt. Ltd. vs. Principal Commissioner, Central Excise, Service Tax and Central Tax Commissionerate,2019 SCCOnlineDel 8437, the impugned show cause notice dated 23.04.2019 deserves to be quashed.
2.2 It is also Mr. Puneet Agrawal's submission that the only exception to the pre-show cause notice consultation is that either the case set up is one concerning preventive action or should be relatable to an offence committed by the noticee.
2.3. Mr. Puneet Agrawal contends that the petitioner company's case falls in neither category.
3. Mr. Satish Aggarwala, who appears on behalf of respondent nos. 2, 4 and 5, i.e., the contesting respondents, contends that the petitioner's case falls in the first exception, which relates to preventive action and therefore, the 2017 Master Circular has no applicability in the instant case.
3.1 In this context, Mr. Satish Aggarwala has drawn our attention to paragraph 3 of the counter-affidavit, which is, extracted hereafter:
"3. At the outset, it is submitted that reliance on the case of M/s Amadeus India Pvt. Ltd. Vs. Principal Commissioner by this Hon'ble Court in W.P. (C) No.914/2019 is not correct. In this regard, attention is invited to Instruction No. 1080/09/DLA/MISC/15/75 dated 21.12.2015 (Annexure-B) issued by Member & Spl. Secretary to GOI (L & J/IT) CBEC (now CBIC), where in para 5' under the heading 'Preventive Action', the following was provided "Pre show cause notice consultation with the Principal Commissioners and Commissioners is being made mandatory prior to issue of SCN (Show Cause Notice) in the case of demands of duty above Rs. 50 lakhs (except for preventive/offence related SCN's).
(emphasis added)
Furthermore, Master Circular No. 1053/02/2017-CX dated 10.03.2017 (Annexure-C) vide its Para 5.0 provided "Consultation with the notice 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 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".
In the instant case, intelligence was gathered and developed by the officers of DGGI, JZU, Jaipur that M/s. Back Office IT Solutions P
