Shifting Of Commissionerate Is No Reason To Delay Prompt Adjudication Of Show Cause Notice For Its Logical Conclusion: Bombay HC

The Bombay High Court recently 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.

The Division Bench comprising of Justice G. S. Kulkarni and Justice Jitendra Jain observed that “Merely because there was shifting of the Commissionerate and Re-Organization of its office would be no reason to abdicate and/or not comply with the obligations under the Act to promptly and/or expeditiously adjudicate the show cause notice, to be taken to its logical conclusion”.

Advocate Bharat Raichandani appeared for the Petitioner, whereas Advocate Karan Adik appeared for the Respondent.

The brief facts of the case were 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.

After considering the submission, the Bench 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 Bench explained that 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.

Elucidating that the 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 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.

Observing that the such reorganization would be tantamount to defeating the statutory provisions, the Bench elaborated 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.

Cause Title: Coventry Estates v. The Joint Commissioner CGST and Central Excise and Anr.

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