JUDGMENT

Vibhu Bakhru, J. Mahanagar Telecom Nigam Ltd. (hereafter `MTNL') - a Government of India enterprise engaged in the business of providing telecom services to subscribers in Delhi and Mumbai - has filed the present petition impugning a show cause notice dated 22.05.2018 (hereafter `the impugned show cause notice') issued to it, as ex facie illegal and without jurisdiction.

2. MTNL also impugns Rule 3 of the Service Tax Rules, 1994 as being ultra vires Chapter V of the Finance Act, 1994 (hereafter `the Act'). In addition, MTNL also assails the Notification dated 10.02.2015 conferring jurisdiction on the Principal Director General, Directorate General of Central Excise Intelligence to assign show cause notices to Principal Commissioners Service Tax, Commissioners Service Tax, Principal Commissioners, and Commissioners of Central Excise to adjudicate the show cause notices issued by the Directorate General of Central Excise Intelligence.

3. MTNL is, essentially, aggrieved by the impugned show cause notice issued by respondent no.3 (Additional Director General, Director General of GST Intelligence) calling upon MTNL to show cause why service tax amounting to Rs.56,61,37,440/- (Rupees Fifty-six Crores Sixty-one Lacs Thirty-seven Thousand Four Hundred Forty Only) inclusive of cess, should not be recovered from it along with interest under Section 73(1) of the Act. Further, MTNL was also called upon to show cause why penalty not be imposed under Sections 76 to 78 of the Act.

4. The principal controversy involved in the present case is whether MTNL is liable to pay service tax on the compensation of Rs.458.04 crores received by it from the Government of India on surrender of spectrum - 800 MHz CDMA. The impugned show cause notice proceeds on the basis that the surrender of spectrum against compensation is a "declared service" under Section 66E(e) of the Act and is thus chargeable to service tax.

5. MTNL seeks to assail the impugned show cause notice, essentially, on four fronts. First, it claims that the show cause notice has been issued beyond the period stipulated under Section 73(1) of the Act. It claims that the extended period of limitation in terms of the proviso to Section 73(1) of the Act is unavailable as it has not made any willful misstatement or suppressed any material fact to evade service tax.

6. Second, it is contended that the impugned show cause notice has been issued without the mandatory pre-consultation.

7. Third, that the compensation received for surrender of frequency is not a taxable service under Section 66E(e) of the Act. The transactions regarding assignment to use radio frequency spectrum and subsequent transfers were specifically included as a declared service by insertion of Clause (j) in Section 66E of the Act by the Finance Act, 2016 with effect from 14.05.2016. MTNL claims that the insertion of a specific clause covering the service clearly establishes that it was not a declared service prior to enactment of the Finance Act, 2016.

8. Lastly, MTNL also seeks to challenge the jurisdiction of respondent no.3 in issuing the impugned show cause notice and its further assignment for adjudication to the concerned officer. And, to that end has also challenged Rule 3 of the Service Tax Rules, 1994, which empowers the Central Board of Excise and Customs to appoint such officers as it thinks fit for exercising the powers under the Act.

Factual Context

9. MTNL is a Government of India Enterprise. It was incorporated in the year 1986 as a company under the Companies Act, 1956, to provide telecommunication services in Delhi and Mumbai.

10. The Department of Telecommunication (hereafter `the DoT') granted license to MTNL to provide telecommunication services with effect from 01.04.1986 for an annual payment of Rs.101/-. Thereafter, on 10.10.1997, the Ministry of Telecommunication, Government of India amended the conditions of the license granted to MTNL and enabled it to provide Cellular Mobile Services