THE GAUHATI HIGH COURT v. UNION OF INDIA AND 3 ORS

HON’BLE MR. JUSTICE DEVASHIS BARUAH Advocates for the petitioner(s) : Mr. RS Mishra Advocates for the respondent(s) : Mr. SC Keyal, Senior Advocate & Standing Counsel, GST Mr. K Jain Date on which Judgment is reserved: NA Date of Pronouncement of Judgment : 16.07.2026 Whether the Pronouncement is of the : Yes Operative Part of the Judgment Whether the Full Judgment has been : NO Pronounced JUDGMENT & ORDER(ORAL) Heard Mr. RS Mishra, the learned counsel appearing on behalf of the petitioner. Also heard Mr. SC Keyal, the learned Senior Counsel, Page No.# 3/9 as well as Standing Counsel, CGST assisted by Mr. K Jain, the learned counsel, who appears on behalf of the respondent Nos.2, 3 and 4.

2. The present petition has been filed by the petitioner challenging the Order-in-Original bearing No.26/JC/ADJ/ST/COMMR/DIB/2022-23 dated 24.03.2023 (hereinafter referred to as ‘the impugned order’) solely on the ground that the said impugned order was passed by the respondent No.3 without issuance of notice as is mandatorily required under Section 73(1) of the Finance Act 1994. BRIEF FACTS OF THE CASE:

3. The petitioner herein is a partnership firm registered under the Finance Act 1994, and was issued a registration number bearing service tax registration No.ADCFS7829LSD001.

4. It is the case of the petitioner that on 13.04.2023, the petitioner was served with the impugned order whereby an amount of Rs.1,27,71,113/- was demanded as the service tax for the financial year 2016-17 under sub-section (2) of Section 73 of the Finance Act

1994. In addition to that, interest in terms with Section 75 of the Finance Act 1994, read with Section 174 of the Central Goods and Service Tax Act, 2017 was also imposed. The petitioner was also imposed a penalty equal to the amount of service tax so demanded under Section 78 of the Finance Act 1994, with an option to pay 25% of the penalty imposed, if the entire amount of the service tax Page No.# 4/9 demanded, along with the interest was paid within a period of 30 days from the date of communication of the impugned order. In addition to that, the petitioner was imposed other penalties of Rs.11,600/- and Rs.40,000/- under Section 77 and Section 70 of the Finance Act 1994, respectively.

5. The sole basis on which the present writ petition was filed is that the said impugned order was passed behind the back of the petitioner and without issuance of the show cause notice as is required under Section 73(1) of the Finance Act, 1994.

6. This Court duly takes note of that by an order dated 26.03.2023, the learned Coordinate Bench of this Court, while issuing notice, categorically observed that no coercive action shall be taken against the petitioner.

7. The records reveal that the respondents have filed their affidavit- in-opposition. In the said affidavit-in-opposition, the respondents have categorically stated various aspects on merits. But taking into consideration that the sole ground on which the present writ petition has been filed i.e. non-service of notice under Section 73(1) of the Finance Act 1994, it is relevant to take note of paragraph No.12 of the said affidavit-in-opposition, wherein it is mentioned that the show cause notice dated 07.10.2021 was issued to the petitioner and was served through speed post bearing consignment No.ES882582409IN. Page No.# 5/9 However, it is relevant to take note of that though it is mentioned that the service of the show cause notice was made through speed post, neither the tracking information that the service of the show cause notice that has been effected, has been placed before this Court nor the postal receipt as well as the acknowledgement, if any, by the petitioner have been placed. It is also relevant to mention that the respondents have also not enclosed the show cause notice purportedly issued to the affidavit-in-opposition. It may not be out of place to observe that when this Court enquired with the learned Senior Counsel for the respondents as to whether he was furnished with the show cause notice, the same could not be placed before this Court.

8. This Court also duly takes note of the affidavit-in-reply filed by the petitioner, wherein at paragraph No.11, the aspect pertaining to receipt of the show cause notice had been denied by stating inter alia that the said show cause notice was not received. ANALYSIS AND DETERMINATION:

9. Section 73(1) of the Finance Act 1994 is a provision relating to recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. In sub-section (1) of Section 73, it is stipulated that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Page No.# 6/9 Central Excise Officer may, within 30 months from the relevant date, serve notice on the person chargeable with service tax which have not been levied or paid, or which have been short-levied or short-paid, or the person to whom such tax refunded has erroneously been made, requiring him to show cause why the noticee, should not pay the amount specified in the notice. The first proviso to sub-section (1) of Section 73 stipulates that in respect to cases where any service tax have not been levied or paid, or has been short-levied or short-paid, or erroneously refunded by reason of fraud or collusion or willful mis- statement or suppression of facts or contravention of any of the provisions of Chapter V of the Finance Act, 1994 or the Rules made therein under with an intent to evade payment of service tax by the person chargeable with service tax or his agent, the provisions of sub- section shall have effect as if the words ‘30 months’ which have been mentioned in the main sub-section (1) of Section 73 shall stand substituted by the words ‘5(five) years’. In other words, in the case where service tax has not been levied or paid, or has been short- levied or short-paid, or erroneously refunded by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter V, or the Rules made therein under with an intent to evade payment of service tax, the period of limitation for issuance of the notice is 5(five) years.

10. It is also relevant to take note of the Explanation to Sub-section Page No.# 7/9 (1) of Section 73, which stipulates that where service of notice is stayed by an order of the Court, the period of such stay shall be excluded in computing the aforesaid period of 30 months or five years as the case may be.

11. In the instant case, neither the respondent authorities have placed any material to show that the purported show cause notice was served upon the petitioner nor even produced the show cause notice which was purportedly issued before this Court. It is the specific case of the petitioner that the petitioner had not received the show cause notice dated 07.10.2021 or any other correspondence thereafter as have been mentioned in the impugned order. It is the burden of the Respondent Authorities to show that the show cause notice was served upon the petitioner where it is alleged that no show cause notice was served.

12. This Court has also perused the impugned order, and from a perusal of the impugned order, it is the case of the respondents that the petitioner is trying to escape from payment of service tax from their end by suppressing the material facts from the Department with an intention to evade payment of service tax, and, therefore, had employed the first proviso to Section 73(1) of the Finance Act, 1994, whereby the period of limitation for issuance of the show cause notice stood extended by 5(five) years from the relevant date. Page No.# 8/9

13. Considering that the respondents completely failed to prove that the show cause notice was served upon the petitioner or even issued to the petitioner, the impugned Order-in-Original dated 24.03.2023 cannot be sustained in law.

14. Taking into consideration that the petitioner had assailed the impugned Order-in-Original dated 24.03.2023 only on the ground of non-receipt of the show cause notice dated 07.10.2021 and there is no denial to the issuance of the show cause notice dated 07.10.2021, this Court is of the opinion that the period from the date of the said show cause notice i.e. 07.10.2021 till date is required to be excluded while computing the period of limitation for issuance of show cause notice.

15. Accordingly, the instant writ petition stands disposed of with the following observations and directions: (i). The impugned Order-in-Original dated 24.03.2023 being in violation to the provisions of Section 73(1) of the Finance Act 1994 is set aside and quashed. (ii). The setting aside and quashing of the impugned Order-in- Original dated 24.03.2023 by this Court shall not preclude the Central Excise Officer, to issue a fresh show cause notice to the petitioner, thereby granting the petitioner an opportunity to show cause, why proceedings under Section 73(1) of the Finance Act, Page No.# 9/9 1994, which includes proceedings under the first proviso to Sub- Section (1) of Section 73 of the Finance Act, 1994. (iii). The period from 07.10.2021 till date be excluded while computing the period of limitation, for the purpose of taking steps in terms with Section 73(1), read with Section 73(4 B) of the Finance Act 1994. (iv). No costs. Comparing Assistant JUDGE