The Patna High Court ruled that the Service Tax proceedings ought to be completed within one year from notice.
The Division bench of Chief Justice K. Vinod Chandran and Justice Harish Kumar said that without looking into whether the requirement of a fraud, collusion, willful mis-statement, suppression of facts or contravention of any of the provisions of the Chapter or the rules made thereunder, arise in the case of the petitioner; especially since the petitioner admits the notice to be within time and does not controvert the allegations in the notice, on merits, in this writ petition, which is filed only on the ground of the further delay in conclusion of proceedings.
The bench observed that Section 73 (4B) of Finance Act, 1994, only provides that wherever it is possible, the proceeding has to be completed within one year; which is not a statutory mandate as such. However, the expediency required, as projected in the above provision, which is the intention of the legislature, has to be understood in the true sense of its tenor and spirit.
The bench noted that after issuance of the notice on 19.04.2021 the first notice issued for hearing is on 21.09.2023.
The court further noted that the Supreme Court in Suo Motu Writ Petition, In Re: Cognizance For Extension of Limitation due to the pandemic situation, saved the limitation between 15.03.2020 till 28.02.2022. It was also directed that a proceeding which stood barred by limitation, could be initiated or concluded within ninety days from 01.03.2022. The Hon’ble Supreme Court also declared that if a longer period than 90 days is provided in a Statute, then that longer period will apply. Hence the proceeding issued by the show cause notice should have been proceeded with in the one year period after 01.03.2022.
Background
The petitioner challenged the delay in conclusion of proceedings under the Finance Act, 1994.
The show-cause notice is dated 19.04.2021 and relates to the period October, 2015 to June, 2017. A further notice was issued for hearing, only on 21.09.2023.
Submissions
The petitioner contended that Section 73(1) of the Finance Act, 1994 speaks of a limitation of thirty months from the relevant date; which date is the due date of filing returns; falling on the 10th of the month succeeding. In the present case, the period is October, 2015 to June, 2017 and the relevant date would be 10th of July, 2017. The proceedings were issued not under Section 73(1) but under the proviso which substitutes the words ‘thirty months’ in subsection (1) with the words ‘five years’.
The Petitioner contended that once proceedings are initiated; under Section 73 (4B) of the Finance Act, the proceedings should be completed within one year.
The Department contended that there is no mandate under Section 73 (4B) of the Finance Act that the proceedings should be closed within one year, but it is only a caution to the Assessing Officer that wherever possible it should be completed within that period.
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Conclusion
The bench after looking at the true import and spirit of the provision, which required expediency on the part of the Assessing Officer held that it has not been scrupulously complied with.
The bench remarked that it is not an absolute mandate that the proceedings should be completed within one year from the notice; but it requires the statutory authority to take all possible steps, so to do and conclude the proceedings within an year. No steps were taken in the entire one year period, which results in the frustration of the goal of expediency as required statutorily.
The bench, while allowing the petitions, quashed the proceedings initiated by the department against the Assessee.
Case title: M/s Kanak Automobiles Private Limited v/s The Union of India
Citation: Civil Writ Jurisdiction Case No.18398 of 2023
Counsel for the Petitioner: Abhishek Anand, Abhishek Garg, Yash Gaiha, Kanupriya, Advocates
Counsel for the Respondent: Dr. K.N. Singh, Additional Solicitor General Mr. Anshuman Singh, Sr. SC, CGST & CX
Date: 04-04-2024
