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IN THE HIGH COURT OF DELHI
Rajiv Shakdher, Talwant Singh, JJ.
Back Office It Solutions Private Limited - Appellant
Versus
Union of India - Respondent
W.P.(C) 5766 of 2019 & CM Appl. 25101 of 2019
Decided On : 05-04-2021
Mandatory consultation prior to issuing a show cause notice is required under the Master Circular, and failure to comply renders the notice invalid.
Headnote:(A) Master Circular dated 10.03.2017 - Instruction dated 21.12.2015 - Non-adherence to mandatory consultation provisions before issuance of show cause notice - The court ruled that the absence of a pre-show cause notice consultation mandated by the circular renders the notice invalid. (Paras 1.1, 2.1, 5.0, 6.6)
(B) Show Cause Notice - Preventive action - The court found that the case did not fall into the preventive exception as per the Master Circular, necessitating consultation prior to issuing the notice. (Paras 5.3, 6.1, 6.5)
(C) Jurisdiction - The court emphasized that the contesting authority must adhere to prescribed guidelines to ensure fairness and compliance with procedural norms. (Paras 6.6, 7.1)
Facts of the case:
This writ petition challenges the validity of a show cause notice for non-payment of service tax, citing violations of mandatory pre-notice consultation as required by the Master Circular instructions. The impugned notice was deemed inconsistent with procedural directives aimed at facilitating compliance.
Findings of Court:
The court concluded that proceedings initiated via the invalid notice must be addressed through proper pre-notice consultations, emphasizing adherence to procedural mandates.
Issues: The primary issues were whether the service was subject to consultation before the issuance of a show cause notice and if the notice could be considered valid despite procedural lapses.
Ratio Decidendi: The court's reasoning indicates that non-compliance with mandatory consultation provisions negates the legitimacy of the show cause notice, underscoring the critical nature of such procedural safeguards in tax administration.
Result: The writ petition is disposed of; the matter is remanded for pre-show cause notice consultation.
| Table of Content |
|---|
| 1. grievance about procedural non-compliance (Para 1) |
| 2. mandatory consultation before issuance of scn (Para 2) |
| 3. nature of services provided by petitioner (Para 4) |
| 4. clarification on exceptions to mandatory consultation (Para 5) |
| 5. contestation regarding applicability of tax rules (Para 6) |
| 6. requirement to conduct pre-show cause notice consultation (Para 7) |
| 7. disposition of writ petition (Para 8) |
JUDGMENT
Rajiv Shakdher, J. (Oral)--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 SCC Online Del 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 i
