M/S. Novel Security Services vs. The Additional Director, Director General Directorate General Of Goods And Services Tax

Held

The Court held that the appellant was not entitled to the benefit of pre-show cause notice consultation as contemplated under the Master Circular dated 10.03.2017. The reasoning was that the appellant had made "every attempt" to stonewall the respondent's efforts to secure information and documents. Despite the show cause notice not being inherently preventive, an offence report was registered against the appellant. The Court emphasized that the benefit of the Master Circular cannot be a one-way street, and the appellant's non-cooperation negated their claim to its advantages. The Court found the Single Judge's order to be "thoroughly balanced" as it kept the show cause notice in abeyance, granted an opportunity for a personal hearing, and reserved liberty to the respondent to revive the notice if the appellant failed to establish deposit of recovered tax. Therefore, the Court found no need to interfere with the Single Judge's order. The ratio decidendi is that a taxpayer's non-cooperation and registration of an offence case can disentitle them from the mandatory pre-show cause notice consultation, even if the initial demand notice itself is not explicitly an 'offence-related' notice.

Facts

M/s Novel Security Services, a proprietary concern registered under the CGST Act, 2017, provided personnel for security services. The Directorate General of Goods and Services Tax Intelligence initiated an investigation into alleged failure to remit service tax. Following investigations and issuance of several notices, the respondent issued a show cause notice dated 22.04.2021 under Section 73 of the Finance Act, 1994, read with Section 174 of the CGST Act, 2017, for a service tax liability of Rs. 1,53,76,975/- for the period April 2015 to June 2017. The appellant challenged this notice before the Single Judge, arguing it violated the Master Circular dated 10.03.2017 and Circular dated 19.11.2020, which mandate pre-show cause notice consultation for demands above Rs. 50 Lakhs, unless it's an offence-related notice. The appellant contended the notice was not offence-related. The respondent argued the circular's exception applied. The Single Judge kept the show cause notice in abeyance, granted a personal hearing opportunity, and reserved liberty to revive the notice.

Key Issues

1. Whether the show cause notice dated 22.04.2021 issued by the respondent is in violation of the Master Circular dated 10.03.2017 and Circular dated 19.11.2020, which mandate pre-show cause notice consultation for demands exceeding Rs. 50 Lakhs, and if the exception for 'preventive/offence related show cause notices' is applicable in this case? Petitioner's arguments: The appellant contended that the Master Circular dated 10.03.2017 is binding and must be followed. They argued that the mere possibility of facing consequences for an 'offence' does not automatically render the show cause notice 'offence related' to deny the benefit of pre-show cause notice consultation. They relied on the Delhi High Court judgment in *Amadeus India Pvt. Ltd vs. Principal Commissioner, Central Excise, Service Tax and Central Tax Commissionerate*. Respondent's arguments: The respondent argued that the appellant was not entitled to the benefit of the circular as it was subject to the rider for 'preventive/offences relating to show cause notices'. They submitted that an offence case (No.OR/06/2021-22) was registered against the appellant due to non-cooperation in providing documents and suppression of receipts. They relied on the Supreme Court judgment in *Principal Commissioner, Central Excise, Service Tax and Central Tax Commissionerate Vs. Amadeus India Pvt. Ltd* and the Orissa High Court judgment in *Commissioner of Central Excise, Customs and Service Tax vs. Sanket Communications Pvt. Ltd.