In Writ Petition No. 4082 of 2022 -BOM HC- Bombay High Court rejects shifting of Commissionerate as justification for delayed show cause notice adjudication
Justice G. S. Kulkarni & Justice Jitendra Jain [25-07-2023]

Read Order: Coventry Estates Pvt. Ltd. v. The Joint Commissioner CGST and Central Excise & Anr.

Chahat Varma

New Delhi, August 11, 2023: In a recent decision, the Bombay High Court has ruled in favour of Coventry Estates Pvt. Ltd. (formerly known as S and H Services Pvt. Ltd.), providing relief in a case involving a prolonged delay in the adjudication of a show cause notice related to service tax liability.

Factual background of the case was that the petitioner, was engaged in constructing a residential complex and had a contract with Sunny Vista Pvt. Ltd. for constructing 10 towers in a Special Economic Zone. The main contention of the petitioner was that the adjudicating authority had no valid reason to proceed with the show cause notice after an unjustifiably long delay of over 10 years. The petitioner argued that such a prolonged delay in adjudicating the notice was severely prejudicial to their rights and fairness.

The bench comprising of Justice G. S. Kulkarni and Justice Jitendra Jain emphasized that Section 73(4B)(a) and (b) of the Finance Act, 1994, impose a clear obligation on the Central Excise Officer to determine the amount of service tax due within specific time frames after issuing a notice. The officer is expected to determine the amount within six months from the date of notice or within one year from the date of notice, depending on the circumstances. This provision establishes a set period within which the service tax assessment should take place. The bench stated that the officer adjudicating the show cause notice must strictly adhere to these prescribed timelines as defined by the Act.

The bench opined that a significant delay in the adjudication of a show cause notice, result in the denial of fairness, judiciousness, and non-arbitrariness, as well as the failure to fulfil the expectation of applying the principles of natural justice effectively.

The bench placed reliance on ATA Freight Line (i) Pvt. Ltd v. Union of India and Ors [LQ/BomHC/2022/535], where it was established that the Revenue cannot be permitted to adjudicate a show cause notice that was issued a decade ago solely based on the absence of a statutory time limitation for concluding such proceedings.

The bench strongly disagreed with the notion that the shifting of Commissionerate or office reorganization could serve as a valid reason to evade the responsibility of promptly and efficiently adjudicating a show cause notice to its logical conclusion. The bench emphasized that such reasons could not be accepted as justifications, let alone lawful ones. In fact, the bench stated that accepting such justifications would be tantamount to defeating the statutory provisions.